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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20429Form 10-Q

|           |                                                                                          
|---------- | -----------------------------------------------------------------------------------------
|(Mark One) |                                                                                          
|x          | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934 
|          
|           | For the quarterly period ended September 30, 2002                                        
|          
|o          | TRANSITION REPORT PURSUANT TO SECTION 13 or 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
|          
|           | For the transition period from  to                                                       

STURGIS BANCORP, INC.

MICHIGAN
(State of incorporation or organization)

|                      |  |                                     
|--------------------- |  | ------------------------------------
|0-49613               |  | 38-3609814                          
|                      |  |                                     
|(Commission File No.) |  | (I.R.S. Employer Identification No.)

113-125 E. Chicago Road, Sturgis, Michigan 49091

(269) 651-9345



---

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange of 1934
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 o.

Indicate the number of shares outstanding of each of the issuers classes
of common stock, as of the latest practicable date.

|                              |                                  |  |           | 
|----------------------------- | -------------------------------- |  | --------- | 
|Class                         | Outstanding at November 13, 2002
|                              |                                 
|Common Stock, $1.00 par value |                                  |  | 2,838,819 | 

Transitional Small Business Disclosure Format (check one); Yes o No x

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TABLE OF CONTENTS



|                                         |                                                                                               |                                                                                                                |  |  |  |  |  | 
|---------------------------------------- | --------------------------------------------------------------------------------------------- | -------------------------------------------------------------------------------------------------------------- |  |  |  |  |  | 
|Part I. Financial Information           
|                                         | Item 1. Financial Statements                                                                 
|                                         |                                                                                               | Condensed Consolidated Statements of Financial Condition-September 30, 2002 (Unaudited) and December 31, 2001.
|                                         |                                                                                               | Condensed Consolidated Statements of IncomeThree Months Ended September 30, 2002 and 2001 (Unaudited).       
|                                         |                                                                                               | Condensed Consolidated Statements of Income-Nine Months Ended September 30, 2002 and 2001 (Unaudited)         
|                                         |                                                                                               | Condensed Consolidated Statements of Cash Flows-Nine Months Ended September 30, 2002 and 2001 (Unaudited).    
|                                         |                                                                                               | Notes to Condensed Consolidated Financial Statements                                                          
|                                         | Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
|                                         | Item 3. Quantitative and Qualitative Disclosures About Market Risk                           
|                                         | Item 4. Controls and Procedures                                                              
|Part II. Other Information              
|                                         | Item 1. Legal Proceedings                                                                    
|                                         | Item 2. Changes in Securities                                                                
|                                         | Item 6. Exhibits, Financial Statement Schedules, and Reports On Form 8-K                     
|Signatures                              
|Employment Agreement with Steven Gage   
|Certification of Chief Executive Officer
|Certification of Chief Financial Officer



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STURGIS BANCORP, INC. AND SUBSIDIARIES

INDEX

|                              |                                                                                               |                                                                                                               |    |          |   | 
|----------------------------- | --------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------- | -- | -------- | - | 
|                              |                                                                                               |                                                                                                               |    | Page No. |  
|                              |                                                                                               |                                                                                                               |    |          |  
|Part I. Financial Information |                                                                                               |                                                                                                               |    |         
|                             
|                              | Item 1. Financial Statements:                                                                 |                                                                                                               |    |          |  
|                             
|                              |                                                                                               | Condensed Consolidated Statements
of Financial ConditionSeptember 30, 2002 (Unaudited)
and December 31, 2001 |    |          | 4 | 
|                             
|                              |                                                                                               | Condensed Consolidated Statements
of IncomeThree Months Ended
September 30, 2002 and 2001 (Unaudited)        |    |          | 5 | 
|                             
|                              |                                                                                               | Condensed Consolidated Statements
of IncomeNine Months Ended
September 30, 2002 and 2001 (Unaudited)         |    |          | 6 | 
|                             
|                              |                                                                                               | Condensed Consolidated Statements
of Cash FlowsNine Months Ended
September 30, 2002 and 2001 (Unaudited)     |    |          | 7 | 
|                             
|                              |                                                                                               | Notes To Condensed Consolidated
Financial Statements                                                          |    |          | 8 | 
|                             
|                              | Item 2. Managements Discussion and Analysis of Financial Condition and Results
of Operations |                                                                                                               |    | 16       |  
|                             
|                              | Item 3. Quantitative and Qualitative Disclosures about Market Risk                            |                                                                                                               |    | 25       |  
|                             
|                              | Item 4. Controls and Procedures                                                               |                                                                                                               |    | 26       |  
|                             
|Part II. Other Information    |                                                                                               |                                                                                                               |    |         
|                             
|                              | Item 1. Legal Proceedings                                                                     |                                                                                                               |    | 27       |  
|                             
|                              | Item 2. Changes in Securities                                                                 |                                                                                                               |    | 27       |  
|                             
|                              | Item 6. Exhibits and Reports on Form 8-K                                                      |                                                                                                               |    | 27       |  
|                             
|Signatures                    |                                                                                               |                                                                                                               | 29 |         

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PART I. FINANCIAL INFORMATION

Throughout this Form 10-Q, Sturgis Bancorp, Inc. will be referred to as Bancorp
and Sturgis Bank and Trust Company and its subsidiaries will be referred to as
the Bank. Bancorp is a financial holding company under the Bank Holding
Company Act of 1956, as amended. The Bank is a wholly owned subsidiary of
Bancorp.

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##### Table of Contents






ITEM 1. FINANCIAL STATEMENTS




STURGIS BANCORP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

|                                          |                                                          |                     |                                                                                                       |                                            |             |               |             |            |              |           |             | 
|----------------------------------------- | -------------------------------------------------------- | ------------------- | ----------------------------------------------------------------------------------------------------- | ------------------------------------------ | ----------- | ------------- | ----------- | ---------- | ------------ | --------- | ----------- | 
|                                          |                                                          |                     |                                                                                                       |                                            |             | September 30, |             |            | December 31, |          
|                                          |                                                          |                     |                                                                                                       |                                            |             | 2002          |             |            | 2001         |          
|                                          |                                                          |                     |                                                                                                       |                                            |             |               |             |            |              |          
|                                          |                                                          |                     |                                                                                                       |                                            |             | (Unaudited)   |             |            |              |           |            
|                                          |                                                          |                     |                                                                                                       | ASSETS                                     |             |               |             |            |              |           |             | 
|Cash and due from banks                   |                                                          | $                   | 11,319,713                                                                                            |                                            |             | $             | 10,629,027  |           
|Interest-bearing deposits in banks        |                                                          |                     | 26,606,641                                                                                            |                                            |             |               | 15,042,616  |           
|Securities  Available-for-sale           |                                                          |                     | 1,303,831                                                                                             |                                            |             |               | 259,735     |           
|Securities  Held-to-maturity             |                                                          |                     | 12,698,867                                                                                            |                                            |             |               | 3,904,413   |           
|Federal Home Loan Bank stock, at cost     |                                                          |                     | 4,115,400                                                                                             |                                            |             |               | 4,115,400   |           
|Loans held for sale                       |                                                          |                     | 3,554,531                                                                                             |                                            |             |               | 4,414,906   |           
|Loans, net                                |                                                          |                     | 221,432,003                                                                                           |                                            |             |               | 219,113,940 |           
|Real estate owned                         |                                                          |                     | 823,104                                                                                               |                                            |             |               | 451,173     |           
|Bank owned life insurance                 |                                                          |                     | 6,251,046                                                                                             |                                            |             |               | 6,002,959   |           
|Accrued interest receivable               |                                                          |                     | 1,856,017                                                                                             |                                            |             |               | 1,724,681   |           
|Investment in limited partnership         |                                                          |                     | 210,580                                                                                               |                                            |             |               | 224,080     |           
|Premises and equipment, net               |                                                          |                     | 6,317,159                                                                                             |                                            |             |               | 6,370,160   |           
|Goodwill, net of accumulated amortization |                                                          |                     | 5,109,419                                                                                             |                                            |             |               | 5,109,419   |           
|Other intangible assets                   |                                                          |                     | 1,664,536                                                                                             |                                            |             |               | 1,281,208   |           
|Other assets                              |                                                          |                     | 1,005,893                                                                                             |                                            |             |               | 1,145,555   |           
|                                          |                                                          |                     |                                                                                                       |                                            |             |              
|                                          |                                                          |                     |                                                                                                       | Total assets                               |             | $             | 304,268,740 |            |              | $         | 279,789,272 | 
|                                          |                                                          |                     |                                                                                                       |                                            |             |              
|                                          |                                                          |                     |                                                                                                       | LIABILITIES AND STOCKHOLDERS EQUITY       |             |               |             |            |              |           |             | 
|Liabilities:                              |                                                          |                     |                                                                                                       |                                            |             |               |             |           
|                                          | Deposit accounts:                                        |                     |                                                                                                       |                                            |             |               |             |            |             
|                                          |                                                          | Noninterest-bearing |                                                                                                       | $                                          | 15,188,762  |               |             | $          | 10,862,894   |          
|                                          |                                                          | Interest-bearing    |                                                                                                       |                                            | 192,465,290 |               |             |            | 168,266,933  |          
|                                          | Borrowings from Federal Home Loan Bank                   |                     |                                                                                                       | 67,051,190                                 |             |               |             | 70,076,863 |             
|                                          | Deferred federal income taxes                            |                     |                                                                                                       | 292,083                                    |             |               |             | 248,333    |             
|                                          | Accrued interest payable                                 |                     |                                                                                                       | 877,203                                    |             |               |             | 993,783    |             
|                                          | Other liabilities                                        |                     |                                                                                                       | 767,519                                    |             |               |             | 843,532    |             
|                                          |                                                          |                     |                                                                                                       |                                            |             |              
|                                          |                                                          |                     |                                                                                                       | Total liabilities                          |             |               | 276,642,047 |            |              |           | 251,292,338 | 
|Stockholders equity:                     |                                                          |                     |                                                                                                       |                                            |             |               |             |           
|                                          | Common stock  $1 par value: Authorized 4,000,000 shares |                     |                                                                                                       |                                            |             |               |             |            |             
|                                          |                                                          |                     | Issued and outstanding  2,872,349 shares at Sept. 30,
2002 and 3,101,534 shares at December 31, 2001 |                                            |             | 2,872,349     |             |            |              | 3,101,534 |            
|                                          | Additional paid-in capital                               |                     |                                                                                                       | 18,430,023                                 |             |               |             | 20,435,912 |             
|                                          | Retained earnings                                        |                     |                                                                                                       | 6,324,321                                  |             |               |             | 4,959,488  |             
|                                          |                                                          |                     |                                                                                                       |                                            |             |              
|                                          |                                                          |                     |                                                                                                       | Total stockholders equity                 |             |               | 27,626,693  |            |              |           | 28,496,934  | 
|                                          |                                                          |                     |                                                                                                       |                                            |             |              
|                                          |                                                          |                     |                                                                                                       | Total liabilities and stockholders equity |             | $             | 304,268,740 |            |              | $         | 279,789,272 | 
|                                          |                                                          |                     |                                                                                                       |                                            |             |              

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STURGIS BANCORP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME

|                                 |                                                     |                                                |           |                    |           |   |           |           |           | 
|-------------------------------- | --------------------------------------------------- | ---------------------------------------------- | --------- | ------------------ | --------- | - | --------- | --------- | --------- | 
|                                 |                                                     |                                                |           | Three Months Ended |          
|                                 |                                                     |                                                |           | September 30,      |          
|                                 |                                                     |                                                |           | 2002               |           |   | 2001      |          
|                                 |                                                     |                                                |           |                    |           |   |           |          
|                                 |                                                     |                                                |           | (Unaudited)        |          
|Interest income                  |                                                     | $                                              | 4,416,668 |                    |           | $ | 4,962,617 |          
|Interest expense                 |                                                     |                                                | 2,155,329 |                    |           |   | 2,537,644 |          
|                                 |                                                     |                                                |           |                    |           |  
|                                 | Net interest income                                 |                                                |           | 2,261,339          |           |   |           | 2,424,973 |          
|Provision for loan losses        |                                                     |                                                | 248,635   |                    |           |   | 151,881   |          
|                                 |                                                     |                                                |           |                    |           |  
|                                 | Net interest income after provision for loan losses |                                                |           | 2,012,704          |           |   |           | 2,273,092 |          
|Noninterest income:              |                                                     |                                                |           |                    |           |   |           |          
|                                 | Service charges and other fees                      |                                                |           | 393,716            |           |   |           | 402,332   |          
|                                 | Commission income                                   |                                                |           | 222,852            |           |   |           | 194,850   |          
|                                 | Mortgage banking activities                         |                                                |           | 425,634            |           |   |           | 408,859   |          
|                                 | Trust fee income                                    |                                                |           | 113,337            |           |   |           | 106,124   |          
|                                 | Increase in cash surrender value of life insurance  |                                                |           | 84,089             |           |   |           |          |          
|                                 | Other income                                        |                                                |           | 28,326             |           |   |           | 26,483    |          
|                                 |                                                     |                                                |           |                    |           |  
|                                 |                                                     | Total noninterest income                       |           |                    | 1,267,954 |   |           |           | 1,138,648 | 
|Other expenses:                  |                                                     |                                                |           |                    |           |   |           |          
|                                 | Salaries and employee benefits                      |                                                |           | 1,157,548          |           |   |           | 1,049,368 |          
|                                 | Office occupancy and equipment                      |                                                |           | 336,581            |           |   |           | 349,868   |          
|                                 | Deposit insurance premiums                          |                                                |           | 8,218              |           |   |           | 8,368     |          
|                                 | Deposit account expenses                            |                                                |           | 52,559             |           |   |           | 49,915    |          
|                                 | Service bureau expense                              |                                                |           | 156,348            |           |   |           | 151,102   |          
|                                 | Professional fees and services                      |                                                |           | 74,221             |           |   |           | 62,154    |          
|                                 | Amortization of intangibles                         |                                                |           |                   |           |   |           | 144,472   |          
|                                 | Other                                               |                                                |           | 441,354            |           |   |           | 435,283   |          
|                                 |                                                     |                                                |           |                    |           |  
|                                 |                                                     | Total other expenses                           |           |                    | 2,226,829 |   |           |           | 2,250,530 | 
|                                 |                                                     | Income before provision for federal income tax |           |                    | 1,053,829 |   |           |           | 1,161,210 | 
|Provision for federal income tax |                                                     |                                                | 336,141   |                    |           |   | 381,723   |          
|                                 |                                                     |                                                |           |                    |           |  
|                                 |                                                     | Net income                                     |           | $                  | 717,688   |   |           | $         | 779,487   | 
|                                 |                                                     |                                                |           |                    |           |  
|Basic earnings per share         |                                                     | $                                              | 0.24      |                    |           | $ | 0.25      |          
|Diluted earnings per share       |                                                     | $                                              | 0.24      |                    |           | $ | 0.25      |          
|Dividends declared per share     |                                                     | $                                              | 0.07      |                    |           | $ | 0.07      |          

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STURGIS BANCORP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME

|                                 |                                                     |                                                |            |                   |           |  |  |  |  |   |            |           |           | 
|-------------------------------- | --------------------------------------------------- | ---------------------------------------------- | ---------- | ----------------- | --------- |  |  |  |  | - | ---------- | --------- | --------- | 
|                                 |                                                     |                                                |            | Nine Months Ended |          
|                                 |                                                     |                                                |            | September 30,     |          
|                                 |                                                     |                                                |            | 2002              |           |  |  |  |  |   | 2001       |          
|                                 |                                                     |                                                |            |                   |           |  |  |  |  |   |            |          
|                                 |                                                     |                                                |            | (Unaudited)       |          
|Interest income                  |                                                     | $                                              | 13,116,140 |                   |           |  |  |  |  | $ | 15,194,199 |          
|Interest expense                 |                                                     |                                                | 6,328,852  |                   |           |  |  |  |  |   | 8,089,681  |          
|                                 |                                                     |                                                |            |                   |           |  |  |  | 
|                                 | Net interest income                                 |                                                |            | 6,787,288         |           |  |  |  |  |   |            | 7,104,518 |          
|Provision for loan losses        |                                                     |                                                | 1,063,892  |                   |           |  |  |  |  |   | 419,979    |          
|                                 |                                                     |                                                |            |                   |           |  |  |  | 
|                                 | Net interest income after provision for loan losses |                                                |            | 5,723,396         |           |  |  |  |  |   |            | 6,684,539 |          
|Noninterest income:              |                                                     |                                                |            |                   |           |  |  |  |  |   |            |          
|                                 | Service charges and other fees                      |                                                |            | 1,135,094         |           |  |  |  |  |   |            | 1,230,424 |          
|                                 | Commission income                                   |                                                |            | 715,504           |           |  |  |  |  |   |            | 586,779   |          
|                                 | Mortgage banking activities                         |                                                |            | 1,284,935         |           |  |  |  |  |   |            | 981,665   |          
|                                 | Trust fee income                                    |                                                |            | 364,114           |           |  |  |  |  |   |            | 392,070   |          
|                                 | Increase in cash surrender value of life insurance  |                                                |            | 248,087           |           |  |  |  |  |   |            |          |          
|                                 | Other income                                        |                                                |            | 51,952            |           |  |  |  |  |   |            | 30,303    |          
|                                 |                                                     |                                                |            |                   |           |  |  |  | 
|                                 |                                                     | Total noninterest income                       |            |                   | 3,799,686 |  |  |  |  |   |            |           | 3,221,241 | 
|Other expenses:                  |                                                     |                                                |            |                   |           |  |  |  |  |   |            |          
|                                 | Salaries and employee benefits                      |                                                |            | 3,455,508         |           |  |  |  |  |   |            | 3,126,758 |          
|                                 | Office occupancy and equipment                      |                                                |            | 963,859           |           |  |  |  |  |   |            | 1,103,818 |          
|                                 | Deposit insurance premiums                          |                                                |            | 24,234            |           |  |  |  |  |   |            | 25,189    |          
|                                 | Deposit account expenses                            |                                                |            | 147,162           |           |  |  |  |  |   |            | 167,353   |          
|                                 | Service bureau expense                              |                                                |            | 471,607           |           |  |  |  |  |   |            | 422,748   |          
|                                 | Professional fees and services                      |                                                |            | 274,358           |           |  |  |  |  |   |            | 202,035   |          
|                                 | Amortization of intangibles                         |                                                |            |                  |           |  |  |  |  |   |            | 431,164   |          
|                                 | Other                                               |                                                |            | 1,335,971         |           |  |  |  |  |   |            | 1,248,820 |          
|                                 |                                                     |                                                |            |                   |           |  |  |  | 
|                                 |                                                     | Total other expenses                           |            |                   | 6,672,699 |  |  |  |  |   |            |           | 6,727,885 | 
|                                 |                                                     | Income before provision for federal income tax |            |                   | 2,850,382 |  |  |  |  |   |            |           | 3,177,895 | 
|Provision for federal income tax |                                                     |                                                | 854,410    |                   |           |  |  |  |  |   | 1,045,502  |          
|                                 |                                                     |                                                |            |                   |           |  |  |  | 
|                                 |                                                     | Net income                                     |            | $                 | 1,995,972 |  |  |  |  |   |            | $         | 2,132,393 | 
|                                 |                                                     |                                                |            |                   |           |  |  |  | 
|Basic earnings per share         |                                                     | $                                              | 0.67       |                   |           |  |  |  |  | $ | 0.69       |          
|Diluted earnings per share       |                                                     | $                                              | 0.67       |                   |           |  |  |  |  | $ | 0.69       |          
|Dividends declared per share     |                                                     | $                                              | 0.21       |                   |           |  |  |  |  | $ | 0.19       |          

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CONSOLIDATED STATEMENTS OF CASH FLOWS

|                                |                                                          |                                            |            |                   |             |   |            |             |             |  
|------------------------------- | -------------------------------------------------------- | ------------------------------------------ | ---------- | ----------------- | ----------- | - | ---------- | ----------- | ----------- | -
|                                |                                                          |                                            |            | Nine Months Ended |            
|                                |                                                          |                                            |            | September 30      |            
|                                |                                                          |                                            |            |                   |            
|                                |                                                          |                                            |            | 2002              |             |   | 2001       |            
|                                |                                                          |                                            |            |                   |             |   |            |            
|OPERATING ACTIVITIES:           |                                                          | (Unaudited)                                |            |                   | (Unaudited) |  
|                                | Net Income                                               |                                            |            | 1,995,972         |             |   |            | 2,132,393   |            
|                                | Depreciation                                             |                                            |            | 445,152           |             |   |            | 521,242     |            
|                                | Amortization of goodwill                                 |                                            |            |                  |             |   |            | 431,164     |            
|                                | Amortization/accretion on securities                     |                                            |            | 37,508            |             |   |            | 1,384       |            
|                                | Gain on sale of loans                                    |                                            |            | (721,197          | )           |   |            | (472,091    | )          
|                                | Proceeds from the sale of loans held for sale            |                                            |            | 61,498,898        |             |   |            | 48,916,334  |            
|                                | Loans originated for sale                                |                                            |            | (59,917,326       | )           |   |            | (48,833,643 | )          
|                                | Loss on sale of fixed assets                             |                                            |            |                  |             |   |            | 74,210      |            
|                                | Loss of equity of limited partnership                    |                                            |            | 13,500            |             |   |            | 13,500      |            
|                                | Income from bank owned life insurance                    |                                            |            | (248,087          | )           |   |            |            |            
|                                | Provision for loan losses                                |                                            |            | 1,063,892         |             |   |            | 419,979     |            
|                                | Decrease (increase) in accrued interest/other assets     |                                            |            | 362,017           |             |   |            | (564,658    | )          
|                                | Increase in other liabilities                            |                                            |            | (69,168           | )           |   |            | (1,323,351  | )          
|                                |                                                          |                                            |            |                   |             |   |           
|                                |                                                          | NET CASH PROVIDED BY OPERATING ACTIVITIES: |            |                   | 4,461,161   |   |            |             | 1,316,463   |  
|INVESTING ACTIVITIES:           |                                                          |                                            |            |                   |             |   |            |            
|                                | Net increase in interest-bearing deposits in banks       |                                            |            | (11,564,025       | )           |   |            | (15,124,477 | )          
|                                | Proceeds from maturities of securities held-to-maturity  |                                            |            | 1,105,000         |             |   |            | 4,585,000   |            
|                                | Purchases of securities held-to-maturity                 |                                            |            | (10,213,698       | )           |   |            | (1,425,000  | )          
|                                | Principal reductions securities held-to-maturity         |                                            |            | 276,735           |             |   |            | 177,541     |            
|                                | Purchase of Federal Home Loan Bank stock                 |                                            |            |                  |             |   |            | (617,900    | )          
|                                | Purchase of other securities                             |                                            |            | (1,044,096        | )           |   |            | (2,051,120  | )          
|                                | Net decrease (increase) in loans                         |                                            |            | (4,490,903        | )           |   |            | 3,326,611   |            
|                                | Purchase of premises and equipment                       |                                            |            | (392,151          | )           |   |            | (83,342     | )          
|                                | Proceeds from sale of fixed assets                       |                                            |            |                  |             |   |            | 275,000     |            
|                                |                                                          |                                            |            |                   |             |   |           
|                                |                                                          | NET CASH USED IN INVESTING ACTIVITIES:     |            |                   | (26,323,138 | ) |            |             | (10,937,687 | )
|FINANCING                       |                                                          |                                            |            |                   |             |   |            |            
|                                | Net increase in demand, now and savings account deposits |                                            |            | 7,831,776         |             |   |            | 8,117,944   |            
|                                | Net increase in time deposits                            |                                            |            | 20,692,450        |             |   |            | 11,521      |            
|                                | Payments to FHLB                                         |                                            |            | (26,401,560       | )           |   |            | (22,049,706 | )          
|                                | Advances from FHLB                                       |                                            |            | 23,375,887        |             |   |            | 21,000,000  |            
|                                | (Decrease) increase in advances for taxes and insurance  |                                            |            | (79,677           | )           |   |            | 324,751     |            
|                                | Stock redemption                                         |                                            |            | (2,235,074        | )           |   |            |            |            
|                                | Cash dividends                                           |                                            |            | (631,139          | )           |   |            | (589,292    | )          
|                                |                                                          |                                            |            |                   |             |   |           
|                                |                                                          | NET CASH PROVIDED BY FINANCING ACTIVITIES: |            |                   | 22,552,663  |   |            |             | 6,815,218   |  
|NET INCREASE (DECREASE) IN CASH |                                                          |                                            | 690,686    |                   |             |   | (2,806,006 | )          
|BALANCE BEGINNING OF PERIOD:    |                                                          | $                                          | 10,629,027 |                   |             | $ | 11,697,647 |            
|                                |                                                          |                                            |            |                   |             |   |           
|BALANCE END OF PERIOD:          |                                                          | $                                          | 11,319,713 |                   |             | $ | 8,891,641  |            
|                                |                                                          |                                            |            |                   |             |   |           

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STURGIS BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

Note A: FINANCIAL STATEMENTS.

The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of Management, all
adjustments (consisting only of normal recurring accruals) considered necessary
for a fair presentation have been included. Operating results for the
nine-month period ended September 30, 2002 are not necessarily indicative of
the results that may be expected for the year ended December 31, 2002. For
further information, refer to the consolidated financial statements and
footnotes thereto included in the Bancorps Annual Report on Form 10-K for the
year ended December 31, 2001.

Note B: ORGANIZATION AND ACCOUNTING POLICIES.

The following is a summary of the significant accounting policies followed in
the preparation of the consolidated financial statements of Sturgis Bancorp and
subsidiaries (individually and collectively referred to as Bancorp).

Organization

Bancorp is chartered as a financial holding company. Bancorps primary asset
is Sturgis Bank & Trust Company (Bank), a Michigan savings bank. The Bank,
as a state-chartered stock savings bank and as a member of the Federal Home
Loan Bank System (FHLB), is required to maintain an investment in the capital
stock of the FHLB.

The Federal Deposit Insurance Corporation (FDIC) insures deposit accounts
within certain limitations. A premium is required by the FDIC for the insurance of
such accounts.

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STURGIS BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited), Continued.

Note B: ORGANIZATION AND ACCOUNTING POLICIES, Continued.

Principles of Consolidation

The consolidated financial statements include the accounts of Bancorp, the Bank
and all wholly-owned subsidiaries. All significant intercompany accounts and
transactions are eliminated in consolidation.

Use of Estimates in the Preparation of Financial Statements

The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of income and expenses during the reporting period.
Actual results could differ from those estimates.

The allowance for loan losses is a material estimate that is particularly
susceptible to change in the near term. While management uses available
information to recognize losses on loans, future additions to the allowance or
write-downs may be necessary based on changes in economic conditions. In
addition, various regulatory agencies, as an integral part of their examination
process, periodically review the allowance for loan losses. Such agencies
could require Bancorp to recognize additions to the allowance or write-downs
based on their judgment of information available to them at the time of their
examination.

Securities

Debt securities that management has the positive intent and ability to hold to
maturity are classified as held to maturity and recorded at amortized cost.
Securities not classified as held to maturity or trading are classified as
available for sale and recorded at fair value, with unrealized gains and
losses excluded from earnings and reported as other comprehensive income.

Purchase premiums and discounts are recognized in interest income using the
interest method over the terms of the securities. Declines in the fair value
of held to maturity and available for sale securities below their cost that are
deemed to be other than temporary are reflected in earnings as realized losses.
Gains and losses on the sale of securities are recorded on the trade date.

Loans

Substantially all of Bancorps loan activity is with customers located in
southwestern and southcentral lower Michigan with a major concentration in
single-family residential lending.

Generally, loans are collateralized by real estate. Bancorp expects loans to
be repaid from cash flow or proceeds from the sale of selected assets of the
borrower. Bancorps policy for requiring collateral is dependent upon
managements credit evaluation of the borrower.

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STURGIS BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited), Continued.

Note B: ORGANIZATION AND ACCOUNTING POLICIES, Continued.

Interest on loans is accrued and credited to income based upon the principal
amount outstanding. The accrual of interest income is generally discontinued
when a loan becomes 90 days past due as to principal or interest or when, in
the opinion of management, full collection of principal or interest is
unlikely. When a loan is in non-accrual status, interest income is recognized
only to the extent of cash received and when the full collection of principal
is not in doubt. Management may elect to continue the accrual of interest when
the estimated fair value of collateral is sufficient to cover the principal
balance and accrued interest.

Loan origination fees and certain direct loan origination costs are deferred
and the net amount amortized as an adjustment of the related loan yield over
the contractual life of the loans. Amortization of deferred amounts is
suspended when a loan becomes non-accrual.

Loans Held for Sale

The Bank sells a portion of its mortgage loan production into the secondary
market. Loans held for sale are carried at the lower of cost or market until
sold. Whenever loan cost exceeds market value on a net aggregate basis, a
valuation allowance is recorded.

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
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.

Office Properties and Equipment

Office properties and equipment are carried at cost, less accumulated
depreciation. Depreciation is computed on the straight-line method based on
the estimated useful lives of the related assets.

Real Estate Owned

Real estate owned includes properties acquired through foreclosure proceedings
or by acceptance of a deed in lieu of foreclosure. Real estate owned is
recorded at the lower of its cost or the estimated fair market value (as
determined by recent appraisals) less estimated selling costs. Any write-down
of the loan balance to estimated fair market value (less estimated selling
costs) when the property is foreclosed is charged to the allowance for loan
losses. Subsequent market write-downs, operating expenses and gains or losses
on disposition of real estate owned are charged to current earnings.

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STURGIS BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited), Continued.

Note B: ORGANIZATION AND ACCOUNTING POLICIES, Continued.

Investment In Limited Partnership

First Michiana Development Corporation, a wholly-owned subsidiary of the Bank,
has an investment in a Michigan limited partnership, which is structured to
generate low-income housing tax credits. The investment is accounted for using
the equity method whereby Bancorp annually records its proportionate share of
partnership losses as an adjustment to the carrying value of the investment.

Goodwill

Until adoption of FAS 142 in January of 2002, goodwill was amortized using
accelerated methods over fifteen years. Beginning in January of 2002, the Bank
no longer amortizes goodwill in accordance with FAS 142. On an ongoing basis,
management assesses the recoverability of the goodwill. If an assessment of the
goodwill indicates that its recoverability is impaired, a charge to expense is
recorded for the amount of the impairment.

Mortgage Servicing Rights

Servicing assets are recognized as separate assets when rights are acquired
through purchase or through sale of financial assets. Capitalized servicing
rights are amortized into noninterest income in proportion to, and over the
period of, the estimated future net servicing income of the underlying
financial assets. Servicing assets are evaluated for impairment based upon the
fair value of the rights as compared to amortized cost. Impairment is
determined by stratifying rights by predominant characteristics, such as
interest rates and terms. Fair value is determined using prices for similar
assets with similar characteristics, when available, or based upon discounted
cash flows using market-based assumptions. Impairment is recognized through a
valuation allowance for an individual stratum, to the extent that fair value is
less than the capitalized amount for the stratum. There was no valuation
allowance associated with capitalized servicing rights at September 30, 2002 or
December 31, 2001.

Federal Income Taxes

Deferred tax assets and liabilities are recognized for temporary differences
between the financial statement carrying amounts of existing assets and
liabilities and their respective tax bases. Deferred tax assets and liabilities
are measured using enacted tax rates expected to apply to taxable income in the
years in which those temporary differences are expected to be recovered or
settled. Valuation allowances are established, when necessary, to reduce
deferred tax assets to the amount expected to be realized.

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STURGIS BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited), Continued.

Note B: ORGANIZATION AND ACCOUNTING POLICIES, Continued.

Bancorp has qualified under provisions of the Internal Revenue Code, which
permits it to deduct from taxable income a provision for bad debts in excess of
such provision charged to income in the consolidated financial statements.
Accordingly, retained earnings at September 30, 2002 includes approximately
$918,000 for which no provision for federal income taxes has been made.
Unrecognized deferred tax on this amount is approximately $312,000. If, in the
future, this portion of retained earnings is used for any purpose other than to
absorb bad debt losses, federal income taxes would be imposed at the then
applicable rates.

Statement of Cash Flows

For the purposes of the consolidated statements of cash flows, Bancorp
considers all highly liquid investments purchased with an original maturity of
three months or less to be cash equivalents.

|                                            |                                   |                                        |              |  |                   |           |  |  |         |           | 
|------------------------------------------- | --------------------------------- | -------------------------------------- | ------------ |  | ----------------- | --------- |  |  | ------- | --------- | 
|                                            |                                   |                                        |              |  | Nine Months Ended |          
|                                            |                                   |                                        |              |  | September 30,     |          
|Supplemental cash flow information:         |                                   | 2002                                   |              |  | 2001              |          
|                                            | Cash paid during the periods for: |                                        |              |  |                   |           |  |  |        
|                                            |                                   |                                        | Interest     |  | $                 | 6,445,432 |  |  | $       | 8,155,945 | 
|                                            |                                   |                                        | Income taxes |  |                   | 791,071   |  |  |         | 1,325,136 | 
|Noncash investing and financing activities: |                                   |                                        |              |  |                   |           |  | 
|                                            |                                   | Loans transferred to real estate owned |              |  | 1,108,949         |           |  |  | 593,968 |          
|                                            |                                   | Tax benefit of stock options exercised |              |  |                  |           |  |  |        |          

Earnings Per Share

Basic earnings per share is computed by dividing net income by the weighted
average number of shares of common stock outstanding. Accordingly, for the
three and nine month periods ended September 30, 2002 the weighted average
number of common shares used in the computation of basic earnings per share was
2,929,611 and 2,987,758, respectively. The weighted average number of common
shares for the three and nine month periods ended September 30, 2001 was
3,101,534.

Diluted earnings per share is computed by dividing net income by the weighted
average number of shares of common stock outstanding plus the dilutive effect
of outstanding stock options. For the three and nine month periods ended
September 30, 2002 the weighted average number of common shares used in the
computation of diluted earnings per share was 2,932,999 and 2,989,773,
respectively. The weighted average number of common shares for the three and
nine month periods ended September 30, 2001 was 3,101,534.

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STURGIS BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited), Continued.

Note B: ORGANIZATION AND ACCOUNTING POLICIES, Concluded.

Recent Accounting Pronouncements

In June 2001, Statement of Financial Accounting Standards No. 142 (FAS 142),
Goodwill and Other Intangible Assetswas issued and is effective for fiscal
years beginning after December 15, 2001. Under FAS 142, identifiable intangible
assets that meet certain criteria will continue to be amortized over their
estimated useful lives. However, goodwill and non-identifiable intangible
assets will no longer be amortized. Instead, these assets will be evaluated for
impairment on an annual basis. If an asset is deemed to be impaired, the asset
will be written down through an adjustment to current earnings. As a result of
adopting FAS 142, Bancorp will no longer be amortizing goodwill.

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STURGIS BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited), Continued.

Note C: LOANS RECEIVABLE, NET.

A summary of the balances of loans follows:

|                                |                                  |                                         |                       |             |               |             |             |              |             |             | 
|------------------------------- | -------------------------------- | --------------------------------------- | --------------------- | ----------- | ------------- | ----------- | ----------- | ------------ | ----------- | ----------- | 
|                                |                                  |                                         |                       |             | September 30, |             |             | December 31, |            
|                                |                                  |                                         |                       |             | 2002          |             |             | 2001         |            
|                                |                                  |                                         |                       |             |               |             |             |              |            
|                                |                                  |                                         |                       |             | (Unaudited)   |             |             |              |             |            
|Mortgage loans on real estate:  |                                  |                                         |                       |             |               |             |             |             
|                                | Residential 1-4 family           |                                         | $                     | 140,564,791 |               |             | $           | 151,766,803  |            
|                                | Commercial                       |                                         |                       | 48,926,328  |               |             |             | 34,872,863   |            
|                                | Construction loans  residential |                                         |                       | 7,804,726   |               |             |             | 7,931,916    |            
|                                | Construction loans  commercial  |                                         |                       | 3,721,000   |               |             |             | 440,000      |            
|                                |                                  |                                         |                       |             |               |             |            
|                                |                                  |                                         | 201,016,845           |             |               |             | 195,011,582 |             
|Commercial nonmortgage loans    |                                  |                                         | 14,513,310            |             |               |             | 12,906,602  |             
|Consumer and installment loans: |                                  |                                         |                       |             |               |             |             |             
|                                | Loans secured by deposits        |                                         |                       | 464,943     |               |             |             | 571,739      |            
|                                | Other consumer and installment   |                                         |                       | 12,816,416  |               |             |             | 15,299,376   |            
|                                |                                  |                                         |                       |             |               |             |            
|                                |                                  |                                         | 13,281,359            |             |               |             | 15,871,115  |             
|                                |                                  |                                         |                       |             |               |             |            
|                                |                                  | Subtotal                                |                       |             | 228,811,514   |             |             |              | 223,789,299 |            
|                                | Less:                            |                                         |                       |             |               |             |             |              |            
|                                |                                  | Allowance for possible loan losses      |                       |             | 1,803,434     |             |             |              | 1,300,000   |            
|                                |                                  | Unearned interest                       |                       |             | 19,125        |             |             |              | 26,013      |            
|                                |                                  | Undisbursed portion of loans in process |                       |             | 5,571,571     |             |             |              | 3,257,555   |            
|                                |                                  | Deferred loan fees                      |                       |             | (14,619       | )           |             |              | 91,791      |            
|                                |                                  |                                         |                       |             |               |             |            
|                                |                                  |                                         | Loans receivable, net |             | $             | 221,432,003 |             |              | $           | 219,113,940 | 
|                                |                                  |                                         |                       |             |               |             |            

Note D: DEPOSITS.

Interest-bearing deposits are summarized
as follows:

|                               |                   |                                 |            |               |             |   |              |            |             | 
|------------------------------ | ----------------- | ------------------------------- | ---------- | ------------- | ----------- | - | ------------ | ---------- | ----------- | 
|                               |                   |                                 |            | September 30, |             |   | December 31, |           
|                               |                   |                                 |            | 2002          |             |   | 2001         |           
|                               |                   |                                 |            |               |             |   |              |           
|                               |                   |                                 |            | (Unaudited)   |             |   |              |            |            
|Passbook and statement savings |                   | $                               | 41,473,342 |               |             | $ | 38,075,301   |           
|NOW accounts                   |                   |                                 | 49,514,787 |               |             |   | 49,406,921   |           
|Time:                          |                   |                                 |            |               |             |   |              |           
|                               | $100,000 and over |                                 |            | 34,862,168    |             |   |              | 15,096,975 |            
|                               | Under $100,000    |                                 |            | 66,614,993    |             |   |              | 65,687,736 |            
|                               |                   |                                 |            |               |             |  
|                               |                   | Total interest-bearing deposits |            | $             | 192,465,290 |   |              | $          | 168,266,933 | 
|                               |                   |                                 |            |               |             |  

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STURGIS BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited), Concluded.

Note E: ADVANCES FROM FEDERAL HOME LOAN BANK.

Advances from the Federal Home Loan Bank of Indianapolis (FHLB) are
collateralized by FHLB stock, all non-employee residential mortgage loans,
certain U.S. Treasury and agency securities and mortgage-backed securities
issued or guaranteed by the Federal Home Loan Mortgage Corporation, the Federal
National Mortgage Association or the Government National Mortgage Association.

Bancorp had $67.1 million and $70.1 million in advances from FHLB at September
30, 2002 and December 31, 2001, respectively. Interest rates range from 2.20%
to 7.34% with maturities ranging from October 2002 to February 2012.

Annual principal payments of FHLB advances are as follows:

|                     |      |        |            |            |            |          |      |      |      |  
|-------------------- | ---- | ------ | ---------- | ---------- | ---------- | -------- | ---- | ---- | ---- | -
|Twelve Months Ending |      |        |            |            |            | Weighted |     
|September 30,        |      | Amount |            |            | Rate       |         
|                     |      |        |            |            |            |         
|                     | 2003 |        | $          | 13,019,167 |            |          |      | 4.08 | %   
|                     | 2004 |        |            | 7,128,740  |            |          |      | 6.43 | %   
|                     | 2005 |        |            | 2,557,211  |            |          |      | 6.73 | %   
|                     | 2006 |        |            | 3,346,072  |            |          |      | 5.70 | %   
|                     | 2007 |        |            |           |            |          |      |      |     
|2008 and thereafter  |      |        | 41,000,000 |            |            |          | 4.75 | %   
|                     |      |        |            |            |            |          |     
|                     |      | Total  |            | $          | 67,051,190 |          |      |      | 4.92 | %
|                     |      |        |            |            |            |          |     

Note F: CASH DIVIDENDS

Bancorp paid a cash dividend of $.07 per share on its issued and outstanding
common stock on September 13, 2002 to shareholders of record of August 15, 2002. Total
dividends paid on September 13, 2002 were $206,469.

Bancorp paid a cash dividend of $.07 per share on its issued and outstanding
common stock on June 17, 2002 to shareholders of record of May 17, 2002. Total dividends paid
on June 17, 2002 were $207,562.

Bancorp paid a cash dividend of $.07 per share on its issued and outstanding
common stock on March 29, 2002 to shareholders of record as of February 28,
2002. Total dividends paid on March 29, 2002 were $217,107.

Note G: EMPLOYEE BENEFIT PLANS

The Bank has a Defined Contribution Plan and Trust/401(k). The plan permits
eligible employees to contribute a percentage of their compensation with the
Bank contributing 25% of the employees pre-tax contribution, not to exceed 10%
of the employees total compensation, as defined in the agreement. The plan
also permits the Bank to make discretionary contributions.

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ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

Forward Looking Statements

This report contains statements that constitute forward-looking statements.
These statements appear in several places in this report and include statements
regarding intent, belief, outlook, objectives, efforts, estimates or
expectations of Bancorp, primarily with respect to future events and the future
financial performance of the Bancorp. Any such forward-looking statements are
not guarantees of future events or performance and involve risks and
uncertainties, and actual results may differ materially from those in the
forward-looking statement. Factors that could cause a difference between an
ultimate actual outcome and a preceding forward-looking statement include, but
are not limited to, changes in interest rates and interest rate relationships;
demand for products and services; the degree of competition by traditional and
non-traditional competitors; changes in banking laws and regulations; changes
in tax laws; changes in prices, levies, and assessments; the impact of
technological advances; government and regulatory policy changes; the outcome
of any pending and future litigation and contingencies; trends in consumer
behavior and ability to repay loans; and changes of the world, national and
local economies. The Bancorp undertakes no obligation to update, amend or
clarify forward-looking statements as a result of new information, future
events, or otherwise.

Financial Condition

Assets.Bancorps total assets at September 30, 2002 were $304.3 million
compared to $279.8 million at December 31, 2001, an increase of $24.5 million
or 8.7%.

Loans held for sale.The decrease of $0.9 million in loans held for sale
from December 31, 2001 to September 30, 2002 is due to the timing of loan
sales. Loans held for sale typically are sold within two weeks of origination.

Loans.Bancorps net loans increased to $221.4 million at September 30,
2002 from $219.1 million at December 31, 2001. This increase was primarily due
to growth in commercial mortgage loans, which offset the effect of unusually
high residential mortgage loan refinances. Adjustable-rate mortgage loans were
refinanced into fixed-rate mortgages to lock in low rates. Bancorp sells
long-term, fixed-rate, residential mortgages in the secondary market, so the
residential mortgage loans decreased to $140.6 million at September 30, 2002
from $151.8 million at December 31, 2001. The composition of Bancorps loan
portfolio continued to shift from residential mortgages to commercial
mortgages. The commercial mortgage portfolio increased to $48.9 million, or
21.4% of gross loans, at September 30, 2002, compared to $34.9 million, or
15.6% of gross loans, at December 31, 2001. During the first nine months of
2002 and 2001, Bancorp sold residential originations of fixed-rate mortgages
with terms of 10 years or greater into the secondary market. The demand for
fixed-rate mortgage loans was higher in 2002 than 2001 due to lower interest
rates. The proceeds from the sale of loans (fixed-rate, residential mortgages)
were $61.5 million and $48.9 million for the nine months ended September 30,
2002 and 2001, respectively. The mortgage loans originated for sale ($59.9
million during the nine months ended September 30, 2002 and $48.8 million
during the nine months ended September 30, 2001) were primarily funded by the
secondary mortgage market sales. At September 30, 2002, total outstanding loan
commitments were $12.6 million and $20.0 million on fixed and variable-rate
loans, respectively. The Bank will fund these loan commitments with
interest-bearing deposits, other short-term investments, maturing assets, and
additional FHLB borrowings, if needed. The

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decision to sell fixed-rate mortgages with original maturities of 10 years or
greater protects Bancorp from the interest rate risk inherent in holding these
longer fixed-rate loans and provides a source of liquidity to fund loan demand.

Mortgage loans serviced for others increased by $26.8 million to $161.6
million at September 30, 2002 from $134.8 million at December 31, 2001. The
entire servicing portfolio consists of loans originated by the Bank and sold in
the secondary mortgage market with servicing retained by Bancorp. Bancorp has
not purchased any mortgage servicing rights.

Allowance for loan losses.The Bank makes provisions for loan losses in
accordance with the changes in the credit risk of the loan portfolio. The
provisions are based on the historic loss experience of the Bank, adjusted for
the increasing credit risk inherent in the growing commercial loan portfolio.
The Bank makes general provisions by loan category; residential mortgages,
nonresidential mortgages, commercial loans, home equity loans, second
mortgages, consumer loans and deposit account loans. Commercial loans and
nonresidential mortgages are graded on an 8-point scale, based on the credit
quality. Loan grades are reviewed at least annually. The grade of the loan
determines the allowance for losses. Loans graded 6 or higher are reviewed for
specific reserves, determined by managements assessment of risk.

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The Bank maintains general reserves against possible loan losses,
calculated as a percentage of total loans based on historic loss experience.
The following table provides an analysis of the allowance for loan losses:

|                                                                                          |                                      |                   |           |                   |         |   |                                 |         |         |      |         |         |         |   |         |         |         | 
|----------------------------------------------------------------------------------------- | ------------------------------------ | ----------------- | --------- | ----------------- | ------- | - | ------------------------------- | ------- | ------- | ---- | ------- | ------- | ------- | - | ------- | ------- | ------- | 
|                                                                                          |                                      |                   |           | Nine Months Ended |         |   | For the year ended December 31, |        
|                                                                                          |                                      |                   |           | Sept. 30, 2002    |         |   | 2001                            |         |         | 2000 |         |         | 1999    |  
|                                                                                          |                                      |                   |           |                   |         |   |                                 |         |         |      |         |         |         |  
|Balance at the beginning of the period                                                    |                                      |                   | 1,300,000 |                   |         | $ | 803,744                         |         |         | $    | 730,000 |         |         | $ | 686,896 |        
|Charge-offs:                                                                              |                                      |                   |           |                   |         |   |                                 |         |         |      |         |         |         |   |         |        
|                                                                                          | Residential mortgages                |                   |           | 324,769           |         |   |                                 | 226,230 |         |      |         | 117,403 |         |   |         | 15,000  |        
|                                                                                          | Commercial mortgages                 |                   |           | 9,942             |         |   |                                 | 42,900  |         |      |         |        |         |   |         |        |        
|                                                                                          | Construction loans  residential     |                   |           |                  |         |   |                                 |        |         |      |         |        |         |   |         |        |        
|                                                                                          | Construction loans  commercial      |                   |           |                  |         |   |                                 |        |         |      |         |        |         |   |         |        |        
|                                                                                          | Commercial nonmortgage loans         |                   |           | 180,718           |         |   |                                 | 175,675 |         |      |         | 25,061  |         |   |         |        |        
|                                                                                          | Loans secured by deposits            |                   |           |                  |         |   |                                 |        |         |      |         |        |         |   |         |        |        
|                                                                                          | Other consumer and installment loans |                   |           | 89,642            |         |   |                                 | 162,412 |         |      |         | 188,219 |         |   |         | 127,890 |        
|                                                                                          |                                      |                   |           |                   |         |   |                                 |         |         |      |         |        
|                                                                                          |                                      | Total charge-offs |           |                   | 605,071 |   |                                 |         | 607,217 |      |         |         | 330,683 |   |         |         | 142,890 | 
|Recoveries                                                                                |                                      |                   |           |                   |         |   |                                 |         |         |      |         |         |         |   |         |        
|                                                                                          | Residential mortgages                |                   |           |                  |         |   |                                 | 21,344  |         |      |         | 54,261  |         |   |         | 3,000   |        
|                                                                                          | Commercial mortgages                 |                   |           |                  |         |   |                                 |        |         |      |         |        |         |   |         |        |        
|                                                                                          | Construction loans  residential     |                   |           |                  |         |   |                                 |        |         |      |         |        |         |   |         |        |        
|                                                                                          | Construction loans  commercial      |                   |           |                  |         |   |                                 |        |         |      |         |        |         |   |         |        |        
|                                                                                          | Commercial nonmortgage loans         |                   |           | 16,548            |         |   |                                 | 3,021   |         |      |         | 2,044   |         |   |         |        |        
|                                                                                          | Loans secured by deposits            |                   |           |                  |         |   |                                 |        |         |      |         |        |         |   |         |        |        
|                                                                                          | Other consumer and installment loans |                   |           | 28,065            |         |   |                                 | 22,914  |         |      |         | 39,122  |         |   |         | 78,994  |        
|                                                                                          |                                      |                   |           |                   |         |   |                                 |         |         |      |         |        
|                                                                                          |                                      | Total recoveries  |           |                   | 44,613  |   |                                 |         | 47,279  |      |         |         | 95,427  |   |         |         | 81,994  | 
|Net charge-offs                                                                           |                                      |                   | 560,458   |                   |         |   | 559,938                         |         |         |      | 235,256 |         |         |   | 60,896  |        
|Provision for loan losses                                                                 |                                      |                   | 1,063,892 |                   |         |   | 1,056,194                       |         |         |      | 309,000 |         |         |   | 104,000 |        
|                                                                                          |                                      |                   |           |                   |         |   |                                 |         |         |      |         |        
|Balance at the end of the period                                                          |                                      | $                 | 1,803,434 |                   |         | $ | 1,300,000                       |         |         | $    | 803,744 |         |         | $ | 730,000 |        
|                                                                                          |                                      |                   |           |                   |         |   |                                 |         |         |      |         |        
|Ratio of net charge-offs during the period to
Average loans outstanding during the period |                                      |                   | 0.26      | %                 |         |   | 0.25                            | %       |         |      | 0.11    | %       |         |   | 0.03    | %      
|Allowance for loan losses to total loans                                                  |                                      |                   | 0.79      | %                 |         |   | 0.58                            | %       |         |      | 0.36    | %       |         |   | 0.35    | %      
|Nonperforming assets to total assets                                                      |                                      |                   | 1.63      | %                 |         |   | 1.55                            | %       |         |      | 0.86    | %       |         |   | 0.80    | %      
|Allowance for loan losses to nonperforming assets                                         |                                      |                   | 36.47     | %                 |         |   | 29.91                           | %       |         |      | 34.50   | %       |         |   | 36.50   | %      

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The following table shows the allocation of the allowance for loan losses
at the dates indicated by loan type:

|                                 |                                 |   |                    |           |  |                   |             |        |                   |   |         |                   |  |             |        |        |   |             |         |         |             |  |       |             |   |   |         |             |  |  |       |        |  
|-------------------------------- | ------------------------------- | - | ------------------ | --------- |  | ----------------- | ----------- | ------ | ----------------- | - | ------- | ----------------- |  | ----------- | ------ | ------ | - | ----------- | ------- | ------- | ----------- |  | ----- | ----------- | - | - | ------- | ----------- |  |  | ----- | ------ | -
|                                 |                                 |   | September 30, 2002 |           |  | December 31, 2001 |             |        | December 31, 2000 |   |         | December 31, 1999 | 
|                                 |                                 |   |                    |           |  |                   |             |        |                   |   |         |                   | 
|                                 |                                 |   |                    |           |  |                   | Percent of  |        |                   |   |         |                   |  | Percent of  |        |        |   |             |         |         | Percent of  |  |       |             |   |   |         | Percent of  | 
|                                 |                                 |   |                    |           |  |                   | Loans in    |        |                   |   |         |                   |  | Loans in    |        |        |   |             |         |         | Loans in    |  |       |             |   |   |         | Loans in    | 
|                                 |                                 |   |                    |           |  |                   | Each        |        |                   |   |         |                   |  | Each        |        |        |   |             |         |         | Each        |  |       |             |   |   |         | Each        | 
|                                 |                                 |   |                    |           |  |                   | Category to |        |                   |   |         |                   |  | Category to |        |        |   |             |         |         | Category to |  |       |             |   |   |         | Category to | 
|                                 |                                 |   | Amount             |           |  | Total Loans       |             |        | Amount            |   |         | Total Loans       |  |             | Amount |        |   | Total Loans |         |         | Amount      |  |       | Total Loans |  
|                                 |                                 |   |                    |           |  |                   |             |        |                   |   |         |                   |  |             |        |        |   |             |         |         |             |  |       |             |  
|Residential mortgages            |                                 | $ | 395,199            |           |  |                   | 60.15       | %      |                   | $ | 304,503 |                   |  |             | 67.13  | %      |   | $           | 391,768 |         |             |  | 71.96 | %           |   | $ | 358,027 |             |  |  | 73.33 | %     
|Commercial mortgages             |                                 |   | 554,659            |           |  |                   | 22.10       | %      |                   |   | 470,459 |                   |  |             | 15.92  | %      |   |             | 189,927 |         |             |  | 11.73 | %           |   |   | 92,273  |             |  |  | 9.60  | %     
|Construction loans  residential |                                 |   | 12,313             |           |  |                   | 3.52        | %      |                   |   | 35,014  |                   |  |             | 3.62   | %      |   |             | 23,871  |         |             |  | 2.14  | %           |   |   |        |             |  |  | 3.43  | %     
|Construction loans  commercial  |                                 |   | 42,184             |           |  |                   | 1.68        | %      |                   |   |        |                   |  |             | 0.20   | %      |   |             |        |         |             |  | 0.14  | %           |   |   |        |             |  |  | 0.13  | %     
|Commercial nonmortgage loans     |                                 |   | 149,101            |           |  |                   | 6.55        | %      |                   |   | 165,188 |                   |  |             | 5.89   | %      |   |             | 92,594  |         |             |  | 5.72  | %           |   |   | 125,077 |             |  |  | 5.61  | %     
|Loans secured by deposits        |                                 |   |                   |           |  |                   | 0.21        | %      |                   |   |        |                   |  |             | 0.26   | %      |   |             |        |         |             |  | 0.19  | %           |   |   |        |             |  |  | 0.08  | %     
|Other consumer and installment   |                                 |   | 649,978            |           |  |                   | 5.79        | %      |                   |   | 324,836 |                   |  |             | 6.98   | %      |   |             | 105,584 |         |             |  | 8.14  | %           |   |   | 154,623 |             |  |  | 7.82  | %     
|                                 |                                 |   |                    |           |  |                   |             |        |                   |   |         |                   |  |             |        |        |   |             |         |         |             |  |       |            
|                                 | Total allowance for loan losses |   | $                  | 1,803,434 |  |                   |             | 100.00 | %                 |   | $       | 1,300,000         |  |             |        | 100.00 | % |             | $       | 803,744 |             |  |       | 100.00      | % |   | $       | 730,000     |  |  |       | 100.00 | %
|                                 |                                 |   |                    |           |  |                   |             |        |                   |   |         |                   |  |             |        |        |   |             |         |         |             |  |       |            

Loans in nonaccrual status at September 30, 2002 consisted primarily of
residential and commercial real estate loans, for which foreclosure has begun
or full collection of the loan is questionable. The following table presents
the aggregate amount of troubled loan categories as of the date indicated:

|                                         |                            |   |                |           |  |      |           |           |      |   |              |           |  |   |           |           | 
|---------------------------------------- | -------------------------- | - | -------------- | --------- |  | ---- | --------- | --------- | ---- | - | ------------ | --------- |  | - | --------- | --------- | 
|                                         |                            |   |                |           |  |      |           |           |      |   | December 31, |           |  |   |           |          
|                                         |                            |   | Sept. 30, 2002 |           |  | 2001 |           |           | 2000 |   |              | 1999      | 
|                                         |                            |   |                |           |  |      |           |           |      |   |              |           | 
|Past due - 90 days or greater            |                            | $ | 1,115,762      |           |  | $    | 1,073,625 |           |      | $ | 1,314,288    |           |  | $ | 1,142,680 |          
|Nonaccrual loans                         |                            |   | 3,006,479      |           |  |      | 2,821,965 |           |      |   | 911,610      |           |  |   | 487,574   |          
|Real estate owned                        |                            |   | 823,104        |           |  |      | 451,173   |           |      |   | 103,500      |           |  |   | 369,952   |          
|                                         |                            |   |                |           |  |      |           |           |      |   |              |          
|                                         | Total nonperforming assets |   |                | 4,945,345 |  |      |           | 4,346,763 |      |   |              | 2,329,398 |  |   |           | 2,000,206 | 
|Restructured assets                      |                            |   | 1,372,363      |           |  |      | 1,381,920 |           |      |   | 1,030,858    |           |  |   | 514,746   |          
|                                         |                            |   |                |           |  |      |           |           |      |   |              |          
|                                         | Total troubled assets      |   | $              | 6,317,708 |  |      | $         | 5,728,683 |      |   | $            | 3,360,256 |  |   | $         | 2,514,952 | 
|                                         |                            |   |                |           |  |      |           |           |      |   |              |          
|Ratio of troubled assets to
total loans  |                            |   | 2.76           | %         |  |      | 2.56      | %         |      |   | 1.50         | %         |  |   | 1.22      | %        
|                                         |                            |   |                |           |  |      |           |           |      |   |              |          
|Ratio of troubled assets to
total assets |                            |   | 2.08           | %         |  |      | 2.05      | %         |      |   | 1.24         | %         |  |   | 1.00      | %        
|                                         |                            |   |                |           |  |      |           |           |      |   |              |          

Interest-bearing Deposits in Banks.Interest-bearing deposits in banks
were $26.6 million at September 30, 2002, compared to $15.0 million at December
31, 2001, an increase of $11.6 million. During the nine months ended September
30, 2002, growth in deposits provided funds for increased overnight investments
at FHLB and investments in $100,000 certificates of deposit in domestic
financial institutions.

Securities Available-for-sale.Securities available-for-sale were $1.3
million at September 30, 2002, compared to $259,735 at December 31, 2001, an
increase of $1.0 million. This increase is primarily due to Bancorps purchase
of shares in a mutual fund investing in adjustable-rate mortgages.

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Securities Held-to-Maturity.Investment securities consisting of U.S.
Treasury and agency securities, municipal obligations, and mortgage-backed
securities were $12.7 million at September 30, 2002 compared to $3.9 million at
December 31, 2001, an increase of $8.8 million. This increase was due to the
purchase of municipal securities, Small Business Administration pool securities
and trust preferred securities.

Goodwill, net of Accumulated Amortization.Goodwill, net of accumulated
amortization was $5.1 million at September 30, 2002 and at December 31, 2001.
Because the Bank adopted FAS 142 effective January 2002, the Bank recognized no
amortization expense for the nine months ended September 30, 2002 (see
Goodwill disclosure in Accounting Policies). The Bank recorded amortization
expense of $431,164 for the nine months ended September 30, 2001.

Deposits and Borrowed Funds.Deposits were $207.7 million at September 30,
2002 compared to $179.1 million at December 31, 2001, an increase of $28.5
million or 15.9%. The increase is primarily in certificates of deposit. The
Bank positioned itself to increase net interest income in a rising interest
rate environment by extending liability maturities in the historically low
interest rate market.

The Banks certificates of deposit increased from $80.8 million at
December 31, 2001 to $101.5 million at September 30, 2002. Bancorp accepted
brokered certificates of deposit of $7.0 million. The Bank will continue to
manage the rates offered on its time deposits and use borrowed funds when that
strategy enhances net interest income.

The Bank had $67.1 million and $70.1 million in advances from FHLB at
September 30, 2002 and December 31, 2001, respectively. Interest rates range
from 2.20% to 7.34% with maturities ranging from October 2002 to February 2012.

Liquidity

Bancorp maintains certain levels of liquid assets (the most liquid of
which are cash and cash equivalents and investment securities) in order to meet
demands from loan commitments, savings withdrawals and other obligations.
Bancorp manages liquidity by maintaining a portion of its liquid assets in
overnight accounts and by keeping various maturities in its portfolio of
investment securities. The primary sources of liquidity are loan repayments
and sales, maturing investments, deposit accounts, and FHLB borrowings.

For the nine months ended September 30, 2002, net cash increased $691,000.
For the nine months ended September 30, 2001, net cash decreased by $2.8
million. Comparing the cash flows for the two periods, the $3.1 million
increase in cash provided by operating activities primarily relates to other
liabilities. The $15.4 million increase in cash used in investing activities
resulted primarily from the net changes in interest-bearing deposits in
FDIC-insured financial institutions, investment activity and loans. The $15.7
million increase in cash provided by financing activities is due to deposit
growth, payments of borrowings from FHLB and stock redemption.

Capital Resources

The stockholders equity of Bancorp was $27.6 million at September 30,
2002 compared to $28.5 million at December 31, 2001, a decrease of $870,241 or
3.1%. During January 2002, the Board of Bancorp approved a program to
repurchase up to 10 percent of Bancorps issued and

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outstanding common stock in the open market and in privately negotiated
transactions. Through September 30, 2002, Bancorp had redeemed 229,185 shares
at a total redemption price of approximately $2.2 million. The program
authorizes purchases of an additional 80,968 shares at market prices. If
purchased at the closing price of September 30, 2002, the additional repurchase
would be approximately $820,000.

The Federal Reserve Board (FRB) has adopted risk-based capital
guidelines applicable to Bancorp. These guidelines require that financial
holding companies, such as Bancorp, maintain capital commensurate with both on
and off balance sheet credit risks of their operations. Under the guidelines,
a financial holding company must have a minimum ratio of total capital to
risk-weighted assets of 8.0%.

In addition, a financial holding company must maintain a minimum ratio of
Tier 1 capital equal to 4.0% of risk-weighted assets. Tier 1 capital includes
common stockholders equity, qualifying perpetual preferred stock and minority
interest in equity accounts of consolidated subsidiaries less goodwill.

As a supplement to the risk-based capital requirements, the FRB has also
adopted leverage capital ratio requirements. The leverage ratio requirements
establish a minimum ratio of Tier 1 capital to total assets, less goodwill, of
3% for the most highly rated financial holding companies. All other financial
holding companies are required to maintain additional Tier 1 capital yielding a
leverage ratio of 4%-5%, depending on the particular circumstances and risk
profile of the institution.

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The following table summarizes the capital ratios of Bancorp at September
30, 2002 and the Bank at December 31, 2001 (prior to the formation of Bancorp):

|                 |  |                |  |  |      |                    |     |   |                   |   |      |  
|---------------- |  | -------------- |  |  | ---- | ------------------ | --- | - | ----------------- | - | ---- | -
|                 |  |                |  |  |      | September 30, 2002 |     |   | December 31, 2001 |  
|                 |  |                |  |  |      |                    |     |   |                   |  
|Equity to assets |  |                |  |  |      |                    | 9.1 | % |                   |   | 10.2 | %
|Tier I leverage  |  |                |  |  |      |                    | 7.8 | % |                   |   | 8.6  | %
|Risk-based:      |  | Tier I Capital |  |  | 11.1 | %                  |     |   | 12.6              | %
|                 |  | Total Capital  |  |  | 12.0 | %                  |     |   | 13.3              | %

Results of Operations

Bancorp reported net income of $717,688 or $0.24 per share for the three
months ended September 30, 2002 compared to net income of $779,487 or $0.25
per share for the three months ended September 30, 2001. Bancorp reported net
income of $1,995,972 or $0.67 per share for the nine months ended September 30,
2002 compared to net income of $2,132,393 or $0.69 per share for the nine
months ended September 30, 2001.

Net Interest Income

Three Months Ended September 30, 2002 Compared to Three Months Ended
September 30, 2001. Net interest income decreased $163,634 to $2.3 million
from $2.4 million. This decrease was caused by the changes in the average
interest-earning assets and interest-paying liabilities. Average
interest-earning assets increased $11.4 million to $268.5 million for the three
months ended September 30, 2002, compared to $257.1 million for the three
months ended September 30, 2001. Average interest-paying liabilities increased
$17.9 million to $265.0 million for the three months ended September 31, 2002
from $247.1 million for the three months ended September 30, 2001. The
decrease in market interest rates to historically low levels also contributed
to the decrease in net interest income.

Nine Months Ended September 30, 2002 Compared to Nine Months Ended
September 30, 2001. Net interest income decreased $317,230 to $6.8 million
from $7.1 million. This decrease was caused by the changes in the average
interest-earning assets and interest-paying liabilities. Average
interest-earning assets increased $4.3 million to $258.3 million for the nine
months ended September 30, 2002, compared to $254.0 million for the nine months
ended September 30, 2001. Average interest-paying liabilities increased $10.0
million to $256.1 million for the nine months ended September 30, 2002 from
$246.1 million for the nine months ended September 30, 2001. The decrease in
market interest rates to historically low levels also contributed to the
decrease in net interest income.

Provision for Loan Losses

Three Months Ended September 30, 2002 Compared to Three Months Ended
September 30, 2001.The provision for loan losses was $248,635 for the quarter
ended September 30, 2002 and $151,881 for the quarter ended September 30, 2001.
The increase is due to the depressed economy, which has increased past due and
classified loans, and Bancorps gradually changing portfolio to include more
commercial loans. The provision for loan losses was based upon managements
assessment of relevant factors, including types and amounts of non-performing
loans, historical and anticipated loss experience on such types of loans, and
current and projected economic conditions.

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Nine Months Ended September 30, 2002 Compared to Nine Months Ended
September 30, 2001.The provision for loan losses was $1,063,892 for the nine
months ended September 30, 2002 and $419,979 for the nine months ended
September 30, 2001. The increase is due to the depressed economy, which has
increased past due and classified loans, and Bancorps gradually changing
portfolio to include more commercial loans.

The provision for loan losses, net of charge-offs and recoveries, for the
nine months ended September 30, 2002 increases the allowance as a percentage of
total loans from 0.58% at December 31, 2001 to 0.79% at September 30, 2002.

Noninterest Income

Three Months Ended September 30, 2002 Compared to Three Months Ended
September 30, 2001.Noninterest income was $1.3 million for the three months
ended September 30, 2002 compared to $1.1 million for the three months ended
September 30, 2001, an increase of $129,306 or 11.4%. Several components of
noninterest income lead to the overall change between the three month periods
ended September 30, 2002 and 2001. Income from mortgage banking activities
(net) was $425,634 for the three months ended September 30, 2002 and $408,859
for the three months ended September 30, 2001. This increase is due to the
increase in loan sales during the third quarter of 2002 compared to the third
quarter of 2001. Commission income was $222,852 for the three months ended
September 30, 2002 as compared to $194,850 for the three months ended September
30, 2001. This increase is due to growth in account relationships at Oakleaf
Financial Services, Inc., the Banks wholly owned investment subsidiary.
During the three months ended September 30, 2002, Bancorp recognized an
increase in cash surrender value of life insurance totaling $84,089 as compared
to $0 for the same period in the prior year related to insurance policies on
key personnel that were purchased in December 2001.

Nine Months Ended September 30, 2002 Compared to Nine Months Ended
September 30, 2001.Noninterest income was $3.8 million for the nine months
ended September 30, 2002 compared to $3.2 million for the nine months ended
September 30, 2001, an increase of $578,445 or 18.0%. The major component of
this increase was mortgage banking activities, net of amortization of
originated mortgage servicing rights. Income from mortgage banking activities
(net) was $1,284,935 for the nine months ended September 30, 2002 and $981,665
for the nine months ended September 30, 2001. This increase is due to the
increase in loan sales, caused by the lower interest rates on fixed-rate
residential mortgages. Other significant changes in noninterest income for the
nine months ended September 30, 2002 as compared to the nine months ended
September 30, 2001 include an increase in commission income of $128,725 and an
increase in cash surrender value of life insurance totaling $248,087. The
reasons for these changes are the same as noted above for the three months
ended September 30, 2002 and 2001.

Noninterest Expense

Three Months Ended September 30, 2002 Compared to Three Months Ended
September 30, 2001. Noninterest expense was $2.2 million for the three months
ended September 30, 2002 compared to $2.3 million for the three months ended
September 30, 2001, a decrease of $23,701. Amortization expense was not
recognized in 2002, due to adoption of FAS 142. Amortization expense for the
three months ended September 30, 2001 was $144,472. Salaries and employee
benefits increased by $108,180 due to staffing changes, salary adjustments and
cost of living increases that took effect January 2002.

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Nine Months Ended September 30, 2002 Compared to Nine Months Ended
September 30, 2001. Noninterest expense was $6.7 million for the nine months
ended September 30, 2002 compared to $6.7 million for the nine months ended
September 30, 2001, a decrease of $55,186. Amortization expense was not
recognized in 2002, due to adoption of FAS 142. Amortization expense for the
nine months ended September 30, 2001 was $431,164. The largest component of
noninterest expense is salaries and employee benefits which increased $328,750
due to staffing changes, salary adjustments and cost of living increases that
took effect January 2002.

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The information concerning quantitative and qualitative disclosures about
market risk contained under the captions Asset/Liability Management and
Effect of Interest Rate Fluctuations on pages 13 through 17 (inclusive) of
Sturgis Bank & Trusts Annual Report to Shareholders for the year ended
December 31, 2001 is herein incorporated by reference. Such Annual Report was
previously filed as Exhibit 13.1 to Sturgis Bank & Trusts Annual Report on
Form 10-K for the year ended December 31, 2001. This Form 10-K was filed by
Sturgis Bancorp, Inc. as the successor issuer to Sturgis Bank & Trust Company
pursuant to paragraph (g) of Rule 12g-3 under the Securities Exchange Act of
1934.

Copies of the Banks filings with the FDIC under the Securities Exchange
Act of 1934 can be obtained from Sturgis Bank & Trust Company by contacting
Leonard L. Eishen at Sturgis Bank & Trust Company, 113-125 E. Chicago Road,
Sturgis, Michigan 49091, telephone number (269) 651-9345 or, for a nominal fee,
from Ms. Marcia Fields at the FDIC, telephone number (202) 898-8913 or fax
number (202) 898-3909. Filings of Bancorp can be obtained from Bancorp by
contacting Leonard L. Eishen at Sturgis Bancorp, Inc., 113-125 E. Chicago Road,
Sturgis, Michigan 49091, telephone number (269) 651-9345 or through the
Securities and Exchange Commission Edgar System at www.sec.gov.

Asset/Liability Management

The primary component of Bancorps earnings is net interest income.
Bancorps asset/liability management strategy is to maximize net interest
income over time by reducing the impact of fluctuating interest rates. This is
accomplished by matching the mix and maturities of its assets and liabilities.
At the same time Bancorps asset/liability strategies for managing interest
rate risk must also accommodate customer demands for particular types of
deposit and loan products. Bancorp uses various asset/liability management
techniques in an attempt to maintain a profitable mix of financial assets and
liabilities, provide deposit and loan products that meet the needs of its
market area, and maintain control over interest rate risk resulting from
changes in interest rates.

Strategies employed by Bancorp to manage the rate sensitivity of its
assets include origination of adjustable rate mortgage and consumer loans and
purchase of adjustable rate and short-term fixed rate investments. Bancorp
also attempts to reduce the rate sensitivity of its liabilities by emphasizing
core deposits, which are less sensitive to changes in interest rates,
attracting longer term certificates of deposits when the market permits, and
using long term Federal Home Loan Bancorp advances when such rates are
competitive. Management will continue to monitor the impact of its borrowings
and lending policies on Bancorps sensitivity to interest rate fluctuations.

Bancorp faces market risk to the extent that both earnings and the fair
values of its financial instruments are affected by changes in interest rates.
Bancorp manages this risk with static GAP analysis and simulation modeling.
Throughout the first nine months of 2002, the results of these measurement
techniques were within Bancorps policy guidelines for rising interest-rate
scenarios. Bancorp does not believe that there have been material changes in
the nature of Bancorps primary market risk exposures, including the categories
of market risk to which Bancorp is exposed and the particular markets that
present the primary risk of loss to Bancorp. As of the date of this Form 10-Q
Quarterly Report, Bancorp does not know of or expect any material change in the
general nature of its primary market risk exposure in the near term.

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The methods by which Bancorp manages its primary market risk exposures, as
described in the sections of its annual report incorporated by reference in
response to this item, have not changed materially during the current year. As
of the date of this Form 10-Q Quarterly Report, Bancorp does not expect to
change those methods in the near term. However, Bancorp may change those
methods in the future to adapt to changes in circumstances or to implement new
techniques.

Bancorps market risk exposure is mainly comprised of its vulnerability to
interest rate risk. Prevailing interest rates and interest rate relationships
in the future will be primarily determined by market factors, which are outside
of Bancorps control. All information provided in response to this item
consists of forward-looking statements. Reference is made to the section
captioned Forward Looking Statements at the end of Managements Discussion
and Analysis of Financial Condition and Results of Operations in this Form 10-Q
Quarterly Report for a discussion of the limitations on Bancorps
responsibility for such statements.




ITEM 4. CONTROLS AND PROCEDURES

EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES

Bancorps chief executive officer and chief financial officer have
concluded that Bancorps disclosure controls (as defined in Exchange Act Rule
13a-14(c)) are sufficiently effective to ensure that the information required
to be disclosed by Bancorp in the reports it files under the Exchange Act is
gathered, analyzed and disclosed with adequate timeliness, accuracy and
completeness, based on an evaluation of such controls and procedures conducted
within 90 days prior to the date hereof.

CHANGES IN INTERNAL CONTROLS

There have been no significant changes in Bancorps internal controls or
in other factors that could significantly affect these controls subsequent to
the date of the evaluation referred to above.

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PART II. OTHER INFORMATION




ITEM 1. LEGAL PROCEEDINGS

There are no material legal proceedings other than the ordinary routine
proceedings of Bancorp.




ITEM 2. CHANGES IN SECURITIES

The information contained in the section captioned Market Information in the
2001 Annual Report to Stockholders is incorporated herein by reference. Such
Annual Report was previously filed as Exhibit 13.1 to Sturgis Bank & Trusts
Annual Report on Form 10-K for the year ended December 31, 2001. This Form
10-K was filed by Sturgis Bancorp, Inc. as the successor issuer to Sturgis Bank
& Trust Company pursuant to paragraph (g) of Rule 12g-3 under the Securities
Exchange Act of 1934. In addition to the information incorporated by
reference, there have been no sales of unregistered securities by Bancorp
during the nine months ended September 30, 2002.




ITEM 6. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

| |                     |             |      |  |  |                                                                          |  |    
| | ------------------- | ----------- | ---- |  |  | ------------------------------------------------------------------------ |  | ---
| | (a) Exhibit Listing |             |      | 
| | Exhibit Number      | Description |      | 
| |                     |             | 2.1  |  |  | Plan of Reorganization and Merger Agreement (1)                          |  |    
| |                     |             |      |  |  |                                                                          |  |    
| |                     |             | 2.2  |  |  | Consolidation Agreement (1)                                              |  |    
| |                     |             |      |  |  |                                                                          |  |    
| |                     |             | 3.1  |  |  | Articles of Incorporation of Sturgis Bancorp, Inc. (1)                   |  |    
| |                     |             |      |  |  |                                                                          |  |    
| |                     |             | 3.2  |  |  | Bylaws of Sturgis Bancorp, Inc. (1)                                      |  |    
| |                     |             |      |  |  |                                                                          |  |    
| |                     |             | 10.1 |  |  | Sturgis Federal Savings Bank Non-Employee Director Stock Option
Plan (2) |  |    
| |                     |             |      |  |  |                                                                          |  |    
| |                     |             | 10.2 |  |  | Sturgis Federal Savings Bank Director Stock Option Plan (2)              |  |    
| |                     |             |      |  |  |                                                                          |  |    
| |                     |             | 10.3 |  |  | Sturgis Federal Savings Bank Employee Stock Option Plan (3)              |  |    
| |                     |             |      |  |  |                                                                          |  |    
| |                     |             | 10.4 |  |  | Employment Agreement with Eric L. Eishen (4)                             |  |    
| |                     |             |      |  |  |                                                                          |  |    
| |                     |             | 10.5 |  |  | Employment Agreement with Brian P. Hoggatt (4)                           |  |    
| |                     |             |      |  |  |                                                                          |  |    
| |                     |             | 10.6 |  |  | Employment Agreement with David E. Watters (4)                           |  |    
| |                     |             |      |  |  |                                                                          |  |    
| |                     |             | 10.7 |  |  | Employment Agreement with Ronald W. Scheske (4)                          |  |    
| |                     |             |      |  |  |                                                                          |  |    
| |                     |             | 10.8 |  |  | Employment Agreement with Steven Gage                                    |  | E-1
| |                     |             |      |  |  |                                                                          |  |    
| |                     |             | 13.1 |  |  | Annual Report to Stockholders (5)                                        |  |    
| |                     |             |      |  |  |                                                                          |  |    
| |                     |             | 21   |  |  | Subsidiaries of Registrant (5)                                           |  |    
| |                     |             |      |  |  |                                                                          |  |    

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| |  |  |      |  |  |                                                                                                                                   |  | 
| |  |  | ---- |  |  | --------------------------------------------------------------------------------------------------------------------------------- |  | 
| |  |  | 23   |  |  | Consents of Independent Auditors (5)                                                                                              |  | 
| |  |  |      |  |  |                                                                                                                                   |  | 
| |  |  | 99.1 |  |  | Certification of the CEO Pursuant to 18 U.S.C. Section 1350,
as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |  | 
| |  |  |      |  |  |                                                                                                                                   |  | 
| |  |  | 99.2 |  |  | Certification of the CFO Pursuant to 18 U.S.C. Section 1350,
as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |  | 



| | (1) |  | Incorporated by reference from the Proxy Statement dated November
21, 2001 of Sturgis Bank & Trust Company.                      
| | --- |  | ---------------------------------------------------------------------------------------------------------------------------------
|
| | (2) |  | Incorporated by reference from 1994 Form 10-KSB of Sturgis Federal
Savings Bank, the predecessor of Sturgis Bank & Trust Company.
|
| | (3) |  | Incorporated by reference from 1995 Form 10-KSB of Sturgis Federal
Savings Bank, the predecessor of Sturgis Bank & Trust Company.
|
| | (4) |  | Incorporated by reference from Form 10-Q of Sturgis Bancorp, Inc.
for the quarter ended June 30, 2002                            
|
| | (5) |  | Incorporated by reference from 2001 Form 10-K for Sturgis Bancorp,
Inc.                                                          

(b) Reports on Form 8-K

During the first quarter of 2002, there was one report filed on Form 8-K, on
February 4, 2002, announcing the deemed registration of the Bancorp stock under
Section 12(g) of the Securities Exchange Act of 1934 pursuant to Rule 12g-3(a).
Bancorp filed no reports on Form 8-K during the quarters ended June 30, 2002
and September 30, 2002.

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##### Table of Contents






SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.

|     |  |                   |  |                                                                              
|---- |  | ----------------- |  | -----------------------------------------------------------------------------
|     |  |                   |  | STURGIS BANCORP, INC.
(Registrant)                                           
|    
|Date |  | November 13, 2002 |  | /s/ Leonard L. EishenLeonard L. Eishen, President
and Chief Executive Officer
|    
|Date |  | November 13, 2002 |  | /s/ Brian P. HoggattBrian P. Hoggatt, Chief Financial Officer                

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I, Leonard L. Eishen, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Sturgis Bancorp, Inc.

2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;

3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;

4. The registrants other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this quarterly report is being prepared;

b) evaluated the effectiveness of the registrants disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the Evaluation Date); and

c) presented in this quarterly report our conclusions about the effectiveness
of the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;

5. The registrants other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrants auditors and the audit
committee of registrants board of directors (or persons performing the
equivalent functions):

a) all significant deficiencies in the design or operation of internal controls
which could adversely affect the registrants ability to record, process,
summarize and report financial data and have identified for the registrants
auditors any material weaknesses in internal controls; and

b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrants internal controls;
and

6. The registrants other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.

|     |  |                   |  |                                                                           
|---- |  | ----------------- |  | --------------------------------------------------------------------------
|Date |  | November 13, 2002 |  | /s/ Leonard L. EishenLeonard L. Eishen, President,
Chief Executive Officer

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I, Brian P. Hoggatt, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Sturgis Bancorp, Inc.

2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;

3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;

4. The registrants other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this quarterly report is being prepared;

b) evaluated the effectiveness of the registrants disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the Evaluation Date); and

c) presented in this quarterly report our conclusions about the effectiveness
of the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;

5. The registrants other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrants auditors and the audit
committee of registrants board of directors (or persons performing the
equivalent functions):

a) all significant deficiencies in the design or operation of internal controls
which could adversely affect the registrants ability to record, process,
summarize and report financial data and have identified for the registrants
auditors any material weaknesses in internal controls; and

b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrants internal controls;
and

6. The registrants other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.

|     |  |                   |  |                                                              
|---- |  | ----------------- |  | -------------------------------------------------------------
|Date |  | November 13, 2002 |  | /s/ Brian P. HoggattBrian P. Hoggatt, Chief Financial Officer

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EXHIBIT INDEX

| |                |  |             |  |  |                                                                                                                                   |  |    
| | -------------- |  | ----------- |  |  | --------------------------------------------------------------------------------------------------------------------------------- |  | ---
| | Exhibit Number |  | Description |  | 
| |                |  | 2.1         |  |  | Plan of Reorganization and Merger Agreement (1)                                                                                   |  |    
| |                |  |             |  |  |                                                                                                                                   |  |    
| |                |  | 2.2         |  |  | Consolidation Agreement (1)                                                                                                       |  |    
| |                |  |             |  |  |                                                                                                                                   |  |    
| |                |  | 3.1         |  |  | Articles of Incorporation of Sturgis Bancorp, Inc. (1)                                                                            |  |    
| |                |  |             |  |  |                                                                                                                                   |  |    
| |                |  | 3.2         |  |  | Bylaws of Sturgis Bancorp, Inc. (1)                                                                                               |  |    
| |                |  |             |  |  |                                                                                                                                   |  |    
| |                |  | 10.1        |  |  | Sturgis Federal Savings Bank Non-Employee Director Stock Option
Plan (2)                                                          |  |    
| |                |  |             |  |  |                                                                                                                                   |  |    
| |                |  | 10.2        |  |  | Sturgis Federal Savings Bank Director Stock Option Plan (2)                                                                       |  |    
| |                |  |             |  |  |                                                                                                                                   |  |    
| |                |  | 10.3        |  |  | Sturgis Federal Savings Bank Employee Stock Option Plan (3)                                                                       |  |    
| |                |  |             |  |  |                                                                                                                                   |  |    
| |                |  | 10.4        |  |  | Employment Agreement with Eric L. Eishen (4)                                                                                      |  |    
| |                |  |             |  |  |                                                                                                                                   |  |    
| |                |  | 10.5        |  |  | Employment Agreement with Brian P. Hoggatt (4)                                                                                    |  |    
| |                |  |             |  |  |                                                                                                                                   |  |    
| |                |  | 10.6        |  |  | Employment Agreement with David E. Watters (4)                                                                                    |  |    
| |                |  |             |  |  |                                                                                                                                   |  |    
| |                |  | 10.7        |  |  | Employment Agreement with Ronald W. Scheske (4)                                                                                   |  |    
| |                |  |             |  |  |                                                                                                                                   |  |    
| |                |  | 10.8        |  |  | Employment Agreement with Steven Gage                                                                                             |  | E-1
| |                |  |             |  |  |                                                                                                                                   |  |    
| |                |  | 13.1        |  |  | Annual Report to Stockholders (5)                                                                                                 |  |    
| |                |  |             |  |  |                                                                                                                                   |  |    
| |                |  | 21          |  |  | Subsidiaries of Registrant (5)                                                                                                    |  |    
| |                |  |             |  |  |                                                                                                                                   |  |    
| |                |  | 23          |  |  | Consents of Independent Auditors (5)                                                                                              |  |    
| |                |  |             |  |  |                                                                                                                                   |  |    
| |                |  | 99.1        |  |  | Certification of the CEO Pursuant to 18 U.S.C. Section 1350,
as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |  |    
| |                |  |             |  |  |                                                                                                                                   |  |    
| |                |  | 99.2        |  |  | Certification of the CFO Pursuant to 18 U.S.C. Section 1350,
as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |  |    



| | (1) |  | Incorporated by reference from the Proxy Statement dated November
21, 2001 of Sturgis Bank & Trust Company.                      
| | --- |  | ---------------------------------------------------------------------------------------------------------------------------------
|
| | (2) |  | Incorporated by reference from 1994 Form 10-KSB of Sturgis Federal
Savings Bank, the predecessor of Sturgis Bank & Trust Company.
|
| | (3) |  | Incorporated by reference from 1995 Form 10-KSB of Sturgis Federal
Savings Bank, the predecessor of Sturgis Bank & Trust Company.

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| | (4) |  | Incorporated by reference from Form 10-Q of Sturgis Bancorp, Inc.
for the quarter ended June 30, 2002
| | --- |  | -----------------------------------------------------------------------------------------------------
|
| | (5) |  | Incorporated by reference from 2001 Form 10-K for Sturgis Bancorp,
Inc.                              

-33-