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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 June 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.
(Exact name of registrant as specified in its charter)

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
(Address of principal executive offices)

(269) 651-9345
(Issuers telephone number)



---

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 August 9, 2002
|                              |                              
|Common Stock, $1.00 par value |                               |  | 2,950,064 | 

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June 30, 2002 (Unaudited) and December 31, 2001
|                                                 |                                                                                               | Condensed Consolidated Statements of IncomeThree Months Ended June 30, 2002 and 2001 (Unaudited)       
|                                                 |                                                                                               | Condensed Consolidated Statements of IncomeSix Months Ended June 30, 2002 and 2001 (Unaudited)         
|                                                 |                                                                                               | Consolidated Statements of Cash FlowsSix Months Ended June 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                           
|Part II. Other Information                      
|                                                 | Item 1. Legal Proceedings                                                                    
|                                                 | Item 2. Changes in Securities                                                                
|                                                 | Item 4. Submission of Matters to a Vote of Security Holders                                  
|                                                 | Item 6. Exhibits and Reports on Form 8-K                                                     
|Signatures                                      
|EX-10.4 Employment Agreement - Eric L. Eishen   
|EX-10.5 Employment Agreement - Brian P. Hoggatt 
|EX-10.6 Employment Agreement - David E. Watters 
|EX-10.7 Employment Agreement - Ronald W. Scheske
|EX-99.1 Certification of Chief Executive Officer
|EX-99.2 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                                      |    |    | 4 |         
|                              |                                                             | of Financial Condition-June 30, 2002 (Unaudited)
and December 31, 2001 |    |    |   |         
|                             
|                              |                                                             | Condensed Consolidated Statements                                      |    |    | 5 |         
|                              |                                                             | of IncomeThree Months Ended
June 30, 2002 and 2001 (Unaudited)        |    |    |   |         
|                             
|                              |                                                             | Condensed Consolidated Statements                                      |    |    | 6 |         
|                              |                                                             | of Income-Six Months Ended
June 30, 2002 and 2001 (Unaudited)          |    |    |   |         
|                             
|                              |                                                             | Condensed Consolidated Statements                                      |    |    | 7 |         
|                              |                                                             | of Cash Flows-Six Months Ended
June 30, 2002 and 2001 (Unaudited)      |    |    |   |         
|                             
|                              |                                                             | Notes To Condensed Consolidated                                        |    |    | 8 |         
|                              |                                                             | Financial Statements                                                   |    |    |   |         
|                             
|                              | Item 2. Managements Discussion and Analysis                |                                                                        |    | 17 |  
|                              |                                                             | of Financial Condition and Results
of Operations                       |    |    |   |         
|                             
|                              | Item 3. Quantitative and Qualitative Disclosures            |                                                                        |    | 24 |  
|                              |                                                             | about Market Risk                                                      |    |    |   |         
|                             
|Part II. Other Information    |                                                             |                                                                        |    |   
|                             
|                              | Item 1. Legal Proceedings                                   |                                                                        |    | 26 |  
|                             
|                              | Item 2. Changes in Securities                               |                                                                        |    | 26 |  
|                             
|                              | Item 4. Submission of Matters to a Vote of Security Holders |                                                                        |    | 26 |  
|                             
|                              | Item 6. Exhibits and Reports on Form 8-K                    |                                                                        |    | 26 |  
|Signatures                    |                                                             |                                                                        | 28 |   

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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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ITEM 1. FINANCIAL STATEMENTS

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

|                                          |                                                                                                                                                               |                     |                                            |            |             |             |             |            |              |             |  | 
|----------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------- | ------------------------------------------ | ---------- | ----------- | ----------- | ----------- | ---------- | ------------ | ----------- |  | 
|                                          |                                                                                                                                                               |                     |                                            |            |             | June 30,    |             |            | December 31, |            
|                                          |                                                                                                                                                               |                     |                                            |            |             | 2002        |             |            | 2001         |            
|                                          |                                                                                                                                                               |                     |                                            |            |             |             |             |            |              |            
|                                          |                                                                                                                                                               |                     |                                            |            |             | (Unaudited) |             |            |              |             | 
|ASSETS                                    |                                                                                                                                                               |                     |                                            |            |             |             |             |           
|Cash and due from banks                   |                                                                                                                                                               | $                   | 10,088,983                                 |            |             | $           | 10,629,027  |           
|Interest-bearing deposits in banks        |                                                                                                                                                               |                     | 36,523,438                                 |            |             |             | 15,042,616  |           
|Securities  Available-for-sale           |                                                                                                                                                               |                     | 1,594,308                                  |            |             |             | 259,735     |           
|Securities  Held-to-maturity             |                                                                                                                                                               |                     | 12,861,818                                 |            |             |             | 3,904,413   |           
|Federal Home Loan Bank stock, at cost     |                                                                                                                                                               |                     | 4,115,400                                  |            |             |             | 4,115,400   |           
|Loans held for sale                       |                                                                                                                                                               |                     | 611,136                                    |            |             |             | 4,414,906   |           
|Loans, net                                |                                                                                                                                                               |                     | 211,979,401                                |            |             |             | 219,113,940 |           
|Real estate owned                         |                                                                                                                                                               |                     | 848,874                                    |            |             |             | 451,173     |           
|Bank owned life insurance                 |                                                                                                                                                               |                     | 6,166,957                                  |            |             |             | 6,002,959   |           
|Accrued interest receivable               |                                                                                                                                                               |                     | 1,797,057                                  |            |             |             | 1,724,681   |           
|Investment in limited partnership         |                                                                                                                                                               |                     | 215,080                                    |            |             |             | 224,080     |           
|Premises and equipment, net               |                                                                                                                                                               |                     | 6,293,018                                  |            |             |             | 6,370,160   |           
|Goodwill, net of accumulated amortization |                                                                                                                                                               |                     | 5,109,419                                  |            |             |             | 5,109,419   |           
|Other intangible assets                   |                                                                                                                                                               |                     | 1,633,370                                  |            |             |             | 1,281,208   |           
|Other assets                              |                                                                                                                                                               |                     | 1,122,744                                  |            |             |             | 1,145,555   |           
|                                          |                                                                                                                                                               |                     |                                            |            |             |            
|                                          |                                                                                                                                                               |                     | Total assets                               |            | $           | 300,961,003 |             |            | $            | 279,789,272 | 
|                                          |                                                                                                                                                               |                     |                                            |            |             |            
|LIABILITIES AND STOCKHOLDERS EQUITY      |                                                                                                                                                               |                     |                                            |            |             |             |             |           
|Liabilities:                              |                                                                                                                                                               |                     |                                            |            |             |             |             |           
|                                          | Deposit accounts:                                                                                                                                             |                     |                                            |            |             |             |             |            |             
|                                          |                                                                                                                                                               | Noninterest-bearing |                                            | $          | 10,689,588  |             |             | $          | 9,335,727    |            
|                                          |                                                                                                                                                               | Interest-bearing    |                                            |            | 190,423,721 |             |             |            | 168,266,933  |            
|                                          | Borrowings from Federal Home Loan Bank                                                                                                                        |                     |                                            | 65,692,071 |             |             |             | 70,076,863 |             
|                                          | Deferred federal income taxes                                                                                                                                 |                     |                                            | 277,500    |             |             |             | 248,333    |             
|                                          | Accrued interest payable                                                                                                                                      |                     |                                            | 844,599    |             |             |             | 993,783    |             
|                                          | Other liabilities                                                                                                                                             |                     |                                            | 4,999,820  |             |             |             | 2,370,699  |             
|                                          |                                                                                                                                                               |                     |                                            |            |             |            
|                                          |                                                                                                                                                               |                     | Total liabilities                          |            |             | 272,927,299 |             |            |              | 251,292,338 | 
|                                          |                                                                                                                                                               |                     |                                            |            |             |            
|Stockholders equity:                     |                                                                                                                                                               |                     |                                            |            |             |             |             |           
|                                          | Common stock  $1 par value: Authorized 4,000,000 shares
Issued and outstanding - 2,958,764 shares at June 30,
2002 and 3,101,534 shares at December 31, 2001 |                     |                                            | 2,958,764  |             |             |             | 3,101,534  |             
|                                          | Additional paid-in capital                                                                                                                                    |                     |                                            | 19,261,725 |             |             |             | 20,435,912 |             
|                                          | Retained earnings                                                                                                                                             |                     |                                            | 5,813,215  |             |             |             | 4,959,488  |             
|                                          |                                                                                                                                                               |                     |                                            |            |             |            
|                                          |                                                                                                                                                               |                     | Total stockholders equity                 |            |             | 28,033,704  |             |            |              | 28,496,934  | 
|                                          |                                                                                                                                                               |                     |                                            |            |             |            
|                                          |                                                                                                                                                               |                     | Total liabilities and stockholders equity |            | $           | 300,961,003 |             |            | $            | 279,789,272 | 
|                                          |                                                                                                                                                               |                     |                                            |            |             |            

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

|                                 |                                                     |                                                |           |                    |           |   |           |           |           | 
|-------------------------------- | --------------------------------------------------- | ---------------------------------------------- | --------- | ------------------ | --------- | - | --------- | --------- | --------- | 
|                                 |                                                     |                                                |           | Three Months Ended |          
|                                 |                                                     |                                                |           | June 30,           |          
|                                 |                                                     |                                                |           |                    |          
|                                 |                                                     |                                                |           | 2002               |           |   | 2001      |          
|                                 |                                                     |                                                |           |                    |           |   |           |          
|                                 |                                                     |                                                |           | (Unaudited)        |          
|Interest income                  |                                                     | $                                              | 4,293,422 |                    |           | $ | 5,184,735 |          
|Interest expense                 |                                                     |                                                | 2,038,574 |                    |           |   | 2,752,812 |          
|                                 |                                                     |                                                |           |                    |           |  
|                                 | Net interest income                                 |                                                |           | 2,254,848          |           |   |           | 2,431,923 |          
|Provision for loan losses        |                                                     |                                                | 235,125   |                    |           |   | 193,098   |          
|                                 |                                                     |                                                |           |                    |           |  
|                                 | Net interest income after provision for loan losses |                                                |           | 2,019,722          |           |   |           | 2,238,825 |          
|Noninterest income:              |                                                     |                                                |           |                    |           |   |           |          
|                                 | Service charges and other fees                      |                                                |           | 372,278            |           |   |           | 408,037   |          
|                                 | Commission income                                   |                                                |           | 282,656            |           |   |           | 197,465   |          
|                                 | Mortgage banking activities                         |                                                |           | 274,659            |           |   |           | 389,009   |          
|                                 | Trust fee income                                    |                                                |           | 93,239             |           |   |           | 140,702   |          
|                                 | Increase in cash surrender value of life insurance  |                                                |           | 75,231             |           |   |           |          |          
|                                 | Other income/(loss)                                 |                                                |           | 18,956             |           |   |           | (4,336    | )        
|                                 |                                                     |                                                |           |                    |           |  
|                                 |                                                     | Total noninterest income                       |           |                    | 1,117,019 |   |           |           | 1,130,877 | 
|Other expenses:                  |                                                     |                                                |           |                    |           |   |           |          
|                                 | Salaries and employee benefits                      |                                                |           | 1,182,377          |           |   |           | 1,025,914 |          
|                                 | Office occupancy and equipment                      |                                                |           | 313,851            |           |   |           | 385,588   |          
|                                 | Deposit insurance premiums                          |                                                |           | 7,861              |           |   |           | 8,193     |          
|                                 | Deposit account expenses                            |                                                |           | 46,267             |           |   |           | 56,265    |          
|                                 | Service bureau expense                              |                                                |           | 157,206            |           |   |           | 134,770   |          
|                                 | Professional fees and services                      |                                                |           | 113,012            |           |   |           | 65,014    |          
|                                 | Amortization of intangibles                         |                                                |           |                   |           |   |           | 143,733   |          
|                                 | Other                                               |                                                |           | 470,498            |           |   |           | 379,654   |          
|                                 |                                                     |                                                |           |                    |           |  
|                                 |                                                     | Total other expenses                           |           |                    | 2,291,072 |   |           |           | 2,199,131 | 
|                                 |                                                     | Income before provision for federal income tax |           |                    | 845,670   |   |           |           | 1,170,571 | 
|Provision for federal income tax |                                                     |                                                | 239,385   |                    |           |   | 386,604   |          
|                                 |                                                     |                                                |           |                    |           |  
|                                 |                                                     | Net income                                     |           | $                  | 606,285   |   |           | $         | 783,967   | 
|                                 |                                                     |                                                |           |                    |           |  
|Basic earnings per share         |                                                     | $                                              | 0.20      |                    |           | $ | 0.25      |          
|Diluted earnings per share       |                                                     | $                                              | 0.20      |                    |           | $ | 0.25      |          
|Dividends declared per share     |                                                     | $                                              | 0.07      |                    |           | $ | 0.06      |          

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

|                                 |                                                     |                                                |           |                  |           |   |            |           |           | 
|-------------------------------- | --------------------------------------------------- | ---------------------------------------------- | --------- | ---------------- | --------- | - | ---------- | --------- | --------- | 
|                                 |                                                     |                                                |           | Six Months Ended |          
|                                 |                                                     |                                                |           | June 30,         |          
|                                 |                                                     |                                                |           |                  |          
|                                 |                                                     |                                                |           | 2002             |           |   | 2001       |          
|                                 |                                                     |                                                |           |                  |           |   |            |          
|                                 |                                                     |                                                |           | (Unaudited)      |          
|Interest income                  |                                                     | $                                              | 8,699,471 |                  |           | $ | 10,231,582 |          
|Interest expense                 |                                                     |                                                | 4,173,523 |                  |           |   | 5,552,037  |          
|                                 |                                                     |                                                |           |                  |           |  
|                                 | Net interest income                                 |                                                |           | 4,525,948        |           |   |            | 4,679,545 |          
|Provision for loan losses        |                                                     |                                                | 815,257   |                  |           |   | 268,098    |          
|                                 |                                                     |                                                |           |                  |           |  
|                                 | Net interest income after provision for loan losses |                                                |           | 3,710,691        |           |   |            | 4,411,447 |          
|Noninterest income:              |                                                     |                                                |           |                  |           |   |            |          
|                                 | Service charges and other fees                      |                                                |           | 741,378          |           |   |            | 828,092   |          
|                                 | Commission income                                   |                                                |           | 492,652          |           |   |            | 391,928   |          
|                                 | Mortgage banking activities                         |                                                |           | 859,301          |           |   |            | 572,806   |          
|                                 | Trust fee income                                    |                                                |           | 250,777          |           |   |            | 285,947   |          
|                                 | Increase in cash surrender value of life insurance  |                                                |           | 163,998          |           |   |            |          |          
|                                 | Other income/(loss)                                 |                                                |           | 23,625           |           |   |            | 3,820     |          
|                                 |                                                     |                                                |           |                  |           |  
|                                 |                                                     | Total noninterest income                       |           |                  | 2,531,731 |   |            |           | 2,082,593 | 
|Other expenses:                  |                                                     |                                                |           |                  |           |   |            |          
|                                 | Salaries and employee benefits                      |                                                |           | 2,297,960        |           |   |            | 2,077,390 |          
|                                 | Office occupancy and equipment                      |                                                |           | 627,301          |           |   |            | 753,949   |          
|                                 | Deposit insurance premiums                          |                                                |           | 16,016           |           |   |            | 16,820    |          
|                                 | Deposit account expenses                            |                                                |           | 94,603           |           |   |            | 117,438   |          
|                                 | Service bureau expense                              |                                                |           | 315,259          |           |   |            | 271,646   |          
|                                 | Professional fees and services                      |                                                |           | 200,136          |           |   |            | 139,882   |          
|                                 | Amortization of intangibles                         |                                                |           |                 |           |   |            | 286,692   |          
|                                 | Other                                               |                                                |           | 894,594          |           |   |            | 813,539   |          
|                                 |                                                     |                                                |           |                  |           |  
|                                 |                                                     | Total other expenses                           |           |                  | 4,445,869 |   |            |           | 4,477,356 | 
|                                 |                                                     | Income before provision for federal income tax |           |                  | 1,796,553 |   |            |           | 2,016,684 | 
|Provision for federal income tax |                                                     |                                                | 518,269   |                  |           |   | 663,779    |          
|                                 |                                                     |                                                |           |                  |           |  
|                                 |                                                     | Net income                                     |           | $                | 1,278,284 |   |            | $         | 1,352,905 | 
|                                 |                                                     |                                                |           |                  |           |  
|Basic earnings per share         |                                                     | $                                              | 0.42      |                  |           | $ | 0.44       |          
|Diluted earnings per share       |                                                     | $                                              | 0.42      |                  |           | $ | 0.44       |          
|Dividends declared per share     |                                                     | $                                              | 0.14      |                  |           | $ | 0.12       |          

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STURGIS BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS

|                                |                                                          |                                            |            |                  |             |   |            |             |             |  
|------------------------------- | -------------------------------------------------------- | ------------------------------------------ | ---------- | ---------------- | ----------- | - | ---------- | ----------- | ----------- | -
|                                |                                                          |                                            |            | Six Months Ended |            
|                                |                                                          |                                            |            | June 30          |            
|                                |                                                          |                                            |            |                  |            
|                                |                                                          |                                            |            | 2002             |             |   | 2001       |            
|                                |                                                          |                                            |            |                  |             |   |            |            
|                                |                                                          |                                            |            | (Unaudited)      |            
|OPERATING ACTIVITIES:           |                                                          |                                            |            |                  |             |   |            |            
|                                | Net Income                                               |                                            |            | 1,278,284        |             |   |            | 1,352,905   |            
|                                | Depreciation                                             |                                            |            | 294,484          |             |   |            | 353,228     |            
|                                | Amortization of goodwill                                 |                                            |            |                 |             |   |            | 286,692     |            
|                                | Amort/accretion on securities                            |                                            |            | 13,574           |             |   |            | (447        | )          
|                                | Gain on sale of loans                                    |                                            |            | (429,214         | )           |   |            | (262,053    | )          
|                                | Proceeds from the sale of loans held for sale            |                                            |            | 38,289,024       |             |   |            | 29,877,124  |            
|                                | Loans originated for sale                                |                                            |            | (34,056,040      | )           |   |            | (31,535,620 | )          
|                                | Loss on sale of fixed assets                             |                                            |            |                 |             |   |            | 75,818      |            
|                                | Loss of equity of limited partnership                    |                                            |            | 9,000            |             |   |            | 9,000       |            
|                                | Income from bank owned life insurance                    |                                            |            | (163,998         | )           |   |            |            |            
|                                | Provision for loan losses                                |                                            |            | 815,287          |             |   |            | 268,098     |            
|                                | Increase in accrued interest/other assets                |                                            |            | (799,428         | )           |   |            | (490,002    | )          
|                                | Increase in other liabilities                            |                                            |            | 2,135,126        |             |   |            | 3,295,928   |            
|                                |                                                          |                                            |            |                  |             |   |           
|                                |                                                          | NET CASH PROVIDED BY OPERATING ACTIVITIES: |            |                  | 7,386,099   |   |            |             | 3,230,671   |  
|INVESTING ACTIVITIES:           |                                                          |                                            |            |                  |             |   |            |            
|                                | Net increase in interest-bearing deposits in banks       |                                            |            | (21,480,822      | )           |   |            | (5,719,988  | )          
|                                | 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 of mortgage-backed securities       |                                            |            | 137,719          |             |   |            | 114,872     |            
|                                | Purchase of Federal Home Loan Bank stock                 |                                            |            |                 |             |   |            | (617,900    | )          
|                                | Purchases of available for sale securities               |                                            |            | (1,334,573       | )           |   |            | (16,971,600 | )          
|                                | Net decrease in loans                                    |                                            |            | 6,319,252        |             |   |            | 4,246,272   |            
|                                | Purchase of premises and equipment                       |                                            |            | (217,342         | )           |   |            | (149,843    | )          
|                                | Proceeds from sale of fixed assets                       |                                            |            |                 |             |   |            | 275,000     |            
|                                |                                                          |                                            |            |                  |             |   |           
|                                |                                                          | NET CASH USED IN INVESTING ACTIVITIES:     |            |                  | (25,684,464 | ) |            |             | (15,663,187 | )
|FINANCING                       |                                                          |                                            |            |                  |             |   |            |            
|                                | Net increase in demand, now and savings account deposits |                                            |            | 4,613,937        |             |   |            | 4,373,782   |            
|                                | Net increase in time deposits                            |                                            |            | 18,896,712       |             |   |            | 2,754,075   |            
|                                | Payments to FHLB                                         |                                            |            | (20,401,560      | )           |   |            | (12,049,706 | )          
|                                | Advances from FHLB                                       |                                            |            | 16,016,768       |             |   |            | 16,000,000  |            
|                                | Increase in advances for taxes and insurance             |                                            |            | 373,978          |             |   |            | 455,772     |            
|                                | Stock redemption                                         |                                            |            | (1,316,846       | )           |   |            |            |            
|                                | Cash dividends                                           |                                            |            | (424,668         | )           |   |            | (372,184    | )          
|                                |                                                          |                                            |            |                  |             |   |           
|                                |                                                          | NET CASH PROVIDED BY FINANCING ACTIVITIES: |            |                  | 17,758,321  |   |            |             | 11,161,739  |  
|                                |                                                          |                                            |            |                  |             |   |           
|NET INCREASE (DECREASE) IN CASH |                                                          |                                            | (540,044   | )                |             |   | (1,270,777 | )          
|BALANCE BEGINNING OF PERIOD:    |                                                          | $                                          | 10,629,027 |                  |             | $ | 11,697,647 |            
|                                |                                                          |                                            |            |                  |             |   |           
|BALANCE END OF PERIOD:          |                                                          | $                                          | 10,088,983 |                  |             | $ | 10,426,870 |            
|                                |                                                          |                                            |            |                  |             |   |           

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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 six
month period ended June 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 June 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 June 30, 2002 includes approximately $918,000
for which no provision for federal income taxes has been made. Unrecognized
deferred taxes 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.

|                                            |                                   |                                        |              |  |                  |           |  |  |         |           | 
|------------------------------------------- | --------------------------------- | -------------------------------------- | ------------ |  | ---------------- | --------- |  |  | ------- | --------- | 
|                                            |                                   |                                        |              |  | Six Months Ended |          
|                                            |                                   |                                        |              |  | June 30,         |          
|                                            |                                   |                                        |              |  |                  |          
|                                            |                                   | 2002                                   |              |  | 2001             |          
|                                            |                                   |                                        |              |  |                  |          
|Supplemental cash flow information:         |                                   |                                        |              |  |                  |           |  | 
|                                            | Cash paid during the periods for: |                                        |              |  |                  |           |  |  |        
|                                            |                                   |                                        | Interest     |  | $                | 4,322,707 |  |  | $       | 5,576,411 | 
|                                            |                                   |                                        | Income taxes |  |                  | 520,071   |  |  |         | 820,000   | 
|Noncash investing and financing activities: |                                   |                                        |              |  |                  |           |  | 
|                                            |                                   | Loans transferred to real estate owned |              |  | 504,812          |           |  |  | 460,755 |          
|                                            |                                   | 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 six month periods ended June 30, 2002 the weighted average number of
common shares used in the computation of basic earnings per share was 2,968,462
and 3,017,311, respectively. The weighted average number of common shares for
the three and six month periods ended June 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 six month periods ended June
30, 2002 the weighted average number of common shares used in the computation
of diluted earnings per share was 2,970,732 and 3,018,640, respectively. The
weighted average number of common shares for the three and six month periods
ended June 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:

|                                |                                  |                                         |                       |             |             |             |             |              |             |             | 
|------------------------------- | -------------------------------- | --------------------------------------- | --------------------- | ----------- | ----------- | ----------- | ----------- | ------------ | ----------- | ----------- | 
|                                |                                  |                                         |                       |             | June 30,    |             |             | December 31, |            
|                                |                                  |                                         |                       |             | 2002        |             |             | 2001         |            
|                                |                                  |                                         |                       |             |             |             |             |              |            
|                                |                                  |                                         |                       |             | (Unaudited) |             |             |              |             |            
|Mortgage loans on real estate:  |                                  |                                         |                       |             |             |             |             |             
|                                | Residential 1-4 family           |                                         | $                     | 142,596,743 |             |             | $           | 151,766,803  |            
|                                | Commercial                       |                                         |                       | 39,256,022  |             |             |             | 34,872,863   |            
|                                | Construction loans  residential |                                         |                       | 7,127,140   |             |             |             | 7,931,916    |            
|                                | Construction loans  commercial  |                                         |                       | 330,000     |             |             |             | 440,000      |            
|                                |                                  |                                         |                       |             |             |             |            
|                                |                                  |                                         | 189,309,905           |             |             |             | 195,011,582 |             
|Commercial nonmortgage loans    |                                  |                                         | 13,386,810            |             |             |             | 12,906,602  |             
|Consumer and installment loans: |                                  |                                         |                       |             |             |             |             |             
|                                | Loans secured by deposits        |                                         |                       | 510,003     |             |             |             | 571,739      |            
|                                | Other consumer and installment   |                                         |                       | 13,171,214  |             |             |             | 15,299,376   |            
|                                |                                  |                                         |                       |             |             |             |            
|                                |                                  |                                         | 13,681,217            |             |             |             | 15,871,115  |             
|                                |                                  |                                         |                       |             |             |             |            
|                                |                                  | Subtotal                                |                       |             | 216,377,932 |             |             |              | 223,789,299 |            
|                                | Less:                            |                                         |                       |             |             |             |             |              |            
|                                |                                  | Allowance for possible loan losses      |                       |             | 1,715,410   |             |             |              | 1,300,000   |            
|                                |                                  | Unearned interest                       |                       |             | 21,720      |             |             |              | 26,013      |            
|                                |                                  | Undisbursed portion of loans in process |                       |             | 2,680,410   |             |             |              | 3,257,555   |            
|                                |                                  | Deferred loan fees                      |                       |             | (27,009     | )           |             |              | 91,791      |            
|                                |                                  |                                         |                       |             |             |             |            
|                                |                                  |                                         | Loans receivable, net |             | $           | 211,979,401 |             |              | $           | 219,113,940 | 
|                                |                                  |                                         |                       |             |             |             |            

Note D: DEPOSITS.

Interest-bearing deposits are summarized as follows:

|                               |                   |                                 |            |             |             |   |              |            |             | 
|------------------------------ | ----------------- | ------------------------------- | ---------- | ----------- | ----------- | - | ------------ | ---------- | ----------- | 
|                               |                   |                                 |            | June 30,    |             |   | December 31, |           
|                               |                   |                                 |            | 2002        |             |   | 2001         |           
|                               |                   |                                 |            |             |             |   |              |           
|                               |                   |                                 |            | (Unaudited) |             |   |              |            |            
|Passbook and statement savings |                   | $                               | 39,944,140 |             |             | $ | 38,075,301   |           
|NOW accounts                   |                   |                                 | 50,798,158 |             |             |   | 49,406,921   |           
|Time:                          |                   |                                 |            |             |             |   |              |           
|                               | $100,000 and over |                                 |            | 32,015,043  |             |   |              | 15,096,975 |            
|                               | Under $100,000    |                                 |            | 67,666,380  |             |   |              | 65,687,736 |            
|                               |                   |                                 |            |             |             |  
|                               |                   | Total interest-bearing deposits |            | $           | 190,423,721 |   |              | $          | 168,266,933 | 
|                               |                   |                                 |            |             |             |  

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

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 $6,016,768 in short-term advances, including advances under a
separate line of credit with the FHLB at June 30, 2002 at an interest rate of
2.22%. Total short-term advances, including advances under a separate line of
credit with the FHLB, consisted of approximately $6,000,000 at December 31,
2001 at an interest rate of 5.12% with an average balance for the year of
approximately $9,468,255 and an average interest rate of 5%.

In addition to advances received under a master Advances, Pledge and Security
Agreement with the FHLB, the Bank also has an available line of credit with
the FHLB that provides for additional funds of up to $5,000,000 at June 30,
2002 and expires in March, 2003. Advances outstanding under the line of credit
bear interest at a rate of approximately 50 basis points over the rate paid by
the FHLB on their time deposits (an effective rate of 2.22% and 1.82% at June
30, 2002 and December 31, 2001, respectively).

Bancorp had $59,675,303 and $64,076,863 in long-term advances from FHLB at June
30, 2002 and December 31, 2001, respectively. Interest rates range from 4.20%
to 7.34% with maturities ranging from October 2002 to February 2012.

Annual principal payments of FHLB long-term advances are as follows:

|                     |      |        |            |           |            | 
|-------------------- | ---- | ------ | ---------- | --------- | ---------- | 
|Twelve Months Ending |      |        |            |          
|June 30,             |      | Amount |           
|                     |      |        |           
|                     | 2003 |        | $          | 5,643,280 |           
|                     | 2004 |        |            | 7,128,740 |           
|                     | 2005 |        |            | 2,557,211 |           
|                     | 2006 |        |            | 3,346,072 |           
|                     | 2007 |        |            |          |           
|2008 and thereafter  |      |        | 41,000,000 |          
|                     |      |        |           
|                     |      | Total  |            | $         | 59,675,303 | 
|                     |      |        |           

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

Note F: CASH DIVIDENDS

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 June 30, 2002 were $301.0 million
compared to $279.8 million at December 31, 2001, an increase of $21.2 million
or 7.6%.

Loans held for sale.The decrease of $3.8 million in loans held for sale
from December 31, 2001 to June 30, 2002 is due the slower pace of loan sale
activity on those dates. Loans held for sale typically are sold within two
weeks of origination.

Loans.Bancorps net loans decreased to $212.0 million at June 30, 2002
from $219.1 million at December 31, 2001. This decrease was due to unusually
high 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 net loans
decreased. The composition of Bancorps loan portfolio continued to shift from
residential mortgages to commercial mortgages. The commercial mortgage
portfolio increased to $39.3 million, or 18.4% of gross loans, at June 30,
2002, compared to $34.9 million, or 15.6% of gross loans, at December 31, 2001.
During the first six 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 $38.3 million and $29.9 million for
the six months ended June 30, 2002 and 2001, respectively. The mortgage loans
originated for sale ($34.1 million during the six months ended June 30, 2002
and $31.5 million during the six months ended June 30, 2001) were primarily
funded by the secondary mortgage market sales. Management does not anticipate
heavy refinance and sale activity to continue throughout the remainder of 2002.
At June 30, 2002, total outstanding loan commitments were $15.6 million and
$16.4 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
decision to sell fixed-rate mortgages with original maturities of 10 years or
greater protects Bancorp from the

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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 $21.7 million to $156.5
million at June 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.

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:

|                                                                                          |                                  |                   |           |               |          |   |                                 |          |          |      |          |          |          |   |         |          |          |  
|----------------------------------------------------------------------------------------- | -------------------------------- | ----------------- | --------- | ------------- | -------- | - | ------------------------------- | -------- | -------- | ---- | -------- | -------- | -------- | - | ------- | -------- | -------- | -
|                                                                                          |                                  |                   |           | Six Months    |          |   | For the year ended December 31, |         
|                                                                                          |                                  |                   |           | Ended         |          |   |                                 |         
|                                                                                          |                                  |                   |           | June 30, 2002 |          |   | 2001                            |          |          | 2000 |          |          | 1999     |  
|                                                                                          |                                  |                   |           |               |          |   |                                 |          |          |      |          |          |          |  
|Balance at the beginning of the period                                                    |                                  |                   | 1,300,000 |               |          | $ | 803,744                         |          |          | $    | 730,000  |          |          | $ | 686,896 |         
|Charge-offs:                                                                              |                                  |                   |           |               |          |   |                                 |          |          |      |          |          |          |   |         |         
|                                                                                          | Real estate  construction       |                   |           |              |          |   |                                 |         |          |      |          |         |          |   |         |         |         
|                                                                                          | Real estate  mortgage           |                   |           | (275,728      | )        |   |                                 | (269,130 | )        |      |          | (626,377 | )        |   |         | (15,000  | )       
|                                                                                          | Commercial and Installment loans |                   |           | (163,588      | )        |   |                                 | (338,087 | )        |      |          | (212,123 | )        |   |         | (127,890 | )       
|                                                                                          |                                  |                   |           |               |          |   |                                 |          |          |      |          |         
|                                                                                          |                                  | Total charge-offs |           |               | (439,316 | ) |                                 |          | (607,217 | )    |          |          | (838,500 | ) |         |          | (142,890 | )
|Recoveries:                                                                               |                                  |                   |           |               |          |   |                                 |          |          |      |          |          |          |   |         |         
|                                                                                          | Real estate  construction       |                   |           |              |          |   |                                 |         |          |      |          |         |          |   |         |         |         
|                                                                                          | Real estate  mortgage           |                   |           |              |          |   |                                 | 21,344   |          |      |          | 563,235  |          |   |         | 3,000    |         
|                                                                                          | Commercial and Installment loans |                   |           | 39,470        |          |   |                                 | 25,935   |          |      |          | 40,009   |          |   |         | 78,994   |         
|                                                                                          |                                  |                   |           |               |          |   |                                 |          |          |      |          |         
|                                                                                          |                                  | Total recoveries  |           |               | 39,470   |   |                                 |          | 47,279   |      |          |          | 603,244  |   |         |          | 81,994   |  
|Net charge-offs                                                                           |                                  |                   | (399,846  | )             |          |   | (559,938                        | )        |          |      | (235,256 | )        |          |   | (60,896 | )       
|Provision for loan losses                                                                 |                                  |                   | 815,257   |               |          |   | 1,056,194                       |          |          |      | 309,000  |          |          |   | 104,000 |         
|                                                                                          |                                  |                   |           |               |          |   |                                 |          |          |      |          |         
|Balance at the end of the period                                                          |                                  | $                 | 1,715,411 |               |          | $ | 1,300,000                       |          |          | $    | 803,744  |          |          | $ | 730,000 |         
|                                                                                          |                                  |                   |           |               |          |   |                                 |          |          |      |          |         
|Ratio of net charge-offs during the period to
average loans outstanding during the period |                                  |                   | 0.18      | %             |          |   | 0.25                            | %        |          |      | 0.11     | %        |          |   | 0.03    | %       
|Allowance for loan losses to total loans                                                  |                                  |                   | 0.81      | %             |          |   | 0.58                            | %        |          |      | 0.36     | %        |          |   | 0.35    | %       
|Nonperforming assets to total assets                                                      |                                  |                   | 1.74      | %             |          |   | 1.55                            | %        |          |      | 0.86     | %        |          |   | 0.80    | %       
|Allowance for loan losses to nonperforming assets                                         |                                  |                   | 32.75     | %             |          |   | 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:

|                           |                                 |  |               |           |  |                   |             |        |                   |  |         |                   |  |             |        |        |   |             |         |         |             |  |       |             |   |  |         |             |  |  |       |        |  
|-------------------------- | ------------------------------- |  | ------------- | --------- |  | ----------------- | ----------- | ------ | ----------------- |  | ------- | ----------------- |  | ----------- | ------ | ------ | - | ----------- | ------- | ------- | ----------- |  | ----- | ----------- | - |  | ------- | ----------- |  |  | ----- | ------ | -
|                           |                                 |  | June 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 |  
|                           |                                 |  |               |           |  |                   |             |        |                   |  |         |                   |  |             |        |        |   |             |         |         |             |  |       |             |  
|Real estate  construction |                                 |  | 61,569        |           |  |                   | 3.52        | %      |                   |  | 34,737  |                   |  |             | 2.33   | %      |   |             | 23,871  |         |             |  | 1.74  | %           |   |  |        |             |  |  | 2.36  | %     
|Real estate  mortgage     |                                 |  | 892,474       |           |  |                   | 85.79       | %      |                   |  | 762,112 |                   |  |             | 84.53  | %      |   |             | 373,397 |         |             |  | 84.22 | %           |   |  | 360,518 |             |  |  | 84.07 | %     
|Other loans                |                                 |  | 761,368       |           |  |                   | 10.69       | %      |                   |  | 503,150 |                   |  |             | 13.13  | %      |   |             | 406,476 |         |             |  | 14.04 | %           |   |  | 369,482 |             |  |  | 13.57 | %     
|                           |                                 |  |               |           |  |                   |             |        |                   |  |         |                   |  |             |        |        |   |             |         |         |             |  |       |            
|                           | Total allowance for loan losses |  | $             | 1,715,411 |  |                   |             | 100.00 | %                 |  | $       | 1,300,000         |  |             |        | 100.00 | % |             | $       | 803,744 |             |  |       | 100.00      | % |  | $       | 730,000     |  |  |       | 100.00 | %
|                           |                                 |  |               |           |  |                   |             |        |                   |  |         |                   |  |             |        |        |   |             |         |         |             |  |       |            

Loans in nonaccrual status at June 30, 2002 consisted 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 end of the period
indicated:

|                                         |                            |  |                  |           |  |                 |           |           |      |   |           |           |  |   |           |           | 
|---------------------------------------- | -------------------------- |  | ---------------- | --------- |  | --------------- | --------- | --------- | ---- | - | --------- | --------- |  | - | --------- | --------- | 
|                                         |                            |  |                  |           |  | At December 31, |          
|                                         |                            |  | Six Months Ended |           |  |                 |          
|                                         |                            |  | June 30, 2002    |           |  | 2001            |           |           | 2000 |   |           | 1999      | 
|                                         |                            |  |                  |           |  |                 |           |           |      |   |           |           | 
|Past due - 90 days or greater            |                            |  | 1,535,310        |           |  | $               | 1,073,625 |           |      | $ | 1,314,288 |           |  | $ | 1,142,680 |          
|Nonaccrual loans                         |                            |  | 2,854,291        |           |  |                 | 2,821,965 |           |      |   | 911,610   |           |  |   | 487,574   |          
|Real estate owned                        |                            |  | 848,874          |           |  |                 | 451,173   |           |      |   | 103,500   |           |  |   | 369,952   |          
|                                         |                            |  |                  |           |  |                 |           |           |      |   |           |          
|                                         | Total nonperforming assets |  |                  | 5,238,475 |  |                 |           | 4,346,763 |      |   |           | 2,329,398 |  |   |           | 2,000,206 | 
|Restructured assets                      |                            |  | 852,564          |           |  |                 | 1,381,920 |           |      |   | 1,030,858 |           |  |   | 514,746   |          
|                                         |                            |  |                  |           |  |                 |           |           |      |   |           |          
|                                         | Total troubled assets      |  | $                | 6,091,040 |  |                 | $         | 5,728,683 |      |   | $         | 3,360,256 |  |   | $         | 2,514,952 | 
|                                         |                            |  |                  |           |  |                 |           |           |      |   |           |          
|Ratio of troubled assets to
total loans  |                            |  | 2.87             | %         |  |                 | 2.61      | %         |      |   | 1.50      | %         |  |   | 1.22      | %        
|                                         |                            |  |                  |           |  |                 |           |           |      |   |           |          
|Ratio of troubled assets to
total assets |                            |  | 2.02             | %         |  |                 | 2.05      | %         |      |   | 1.24      | %         |  |   | 1.00      | %        
|                                         |                            |  |                  |           |  |                 |           |           |      |   |           |          

Interest-bearing Deposits in Banks.Interest-bearing deposits in banks
were $36.5 million at June 30, 2002, compared to $15.0 million at December 31,
2001, an increase of $21.5 million. During the six months ended June 30, 2002,
the strong refinancing (caused by lower residential mortgage rates) provided
funds for increased overnight investments at FHLB. In addition, Bancorp
invested in $100,000 certificates of deposit in domestic financial
institutions. These certificates of deposit were primarily funded with
increases in deposit accounts.

Securities Available-for-sale.Securities available-for-sale were $1.6
million at June 30, 2002, compared to $259,735 at December 31, 2001, an
increase of $1.3 million. This increase is primarily due to Bancorps purchase
of shares in a mutual fund investing in adjustable-rate mortgages.

Securities Held-to-Maturity.Investment securities consisting of U.S.
Treasury and agency securities, municipal obligations, and mortgage-backed
securities were $12.9 million at

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June 30, 2002 compared to $3.9 million at December 31, 2001, an increase of
$9.0 million. This increase was due to the purchase of municipal securities
and small business administration pool securities.

Goodwill, net of Accumulated Amortization.Goodwill, net of accumulated
amortization was $5.1 million at June 30, 2002 and at December 31, 2001.
Because the Bank adopted FAS 142 effective January 2002, the Bank recognized no
amortization expense for the six months ended June 30, 2002 (see Goodwill
disclosure in Accounting Policies). The Bank recorded amortization expense of
$286,692 for the six months ended June 30, 2001.

Deposits and Borrowed Funds.Deposits were $201.1 million at June 30, 2002
compared to $177.6 million at December 31, 2001, an increase of $23.5 million
or 13.2%. 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 $99.7 million at June 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 has an available line of credit with FHLB, which provides for
advances up to $5.0 million and matures on March 1, 2003. All borrowings from
FHLB are collateralized by FHLB stock, certain investment securities, and
substantially all mortgage loans. There was an advance on the line of credit
of $17,000 at June 30, 2002. There was no advance on the line of credit at
December 31, 2001.

Long-term advances were $59.7 million at June 30, 2002 compared to $64.1
million at December 31, 2001 a decrease of $4.4 million. Bancorp had short-term
advances of $6.0 million at June 30, 2002 and $6.0 million at December 31,
2001.

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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 six month periods ended June 30, 2002 and 2001, net cash decreased
by $540,000 and $1.3 million, respectively. Comparing the cash flows for the
two periods, the $4.2 million increase in cash provided by operating activities
primarily relates to loan sales and loans originated for sale. The $10.0
million increase in cash used in investing activities resulted primarily from
the net changes in short-term interest-bearing deposits in FDIC-insured
financial institutions and investment activity. The $6.6 million increase in
cash provided by financing activities is due to deposit growth, payments of
borrowings from FHLB and stock repurchase.

Bancorps liquidity ratio (liquid assets to net withdrawable deposits plus
short-term borrowings) was 23.39% at June 30, 2002 and 12.97% at December 31,
2001.

Capital Resources

The stockholders equity of Bancorp was $28.0 million at June 30, 2002
compared to $28.5 million at December 31, 2001, a decrease of $463,230 or 1.6%.
During January 2002, the Board of Bancorp approved a program to repurchase up
to 10 percent of Bancorps issued and outstanding common stock in the open
market and in privately negotiated transactions. Through June 30, 2002, Bancorp
has redeemed 142,770 shares at a total redemption price of approximately $1.3
million. The program authorizes purchases of an additional 167,383 shares at
market prices. If purchased at the closing price of June 30, 2002, the
additional repurchase would be approximately $1.8 million.

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 June 30,
2002 and the Bank at December 31, 2001 (prior to the formation of Bancorp):

|                 |  |                |  |  |      |               |     |   |                   |   |      |  
|---------------- |  | -------------- |  |  | ---- | ------------- | --- | - | ----------------- | - | ---- | -
|                 |  |                |  |  |      | June 30, 2002 |     |   | December 31, 2001 |  
|                 |  |                |  |  |      |               |     |   |                   |  
|Equity to assets |  |                |  |  |      |               | 9.3 | % |                   |   | 10.2 | %
|Tier I leverage  |  |                |  |  |      |               | 8.2 | % |                   |   | 8.6  | %
|Risk-based:      |  | Tier I Capital |  |  | 11.9 | %             |     |   | 12.6              | %
|                 |  | Total Capital  |  |  | 12.7 | %             |     |   | 13.3              | %

Results of Operations

Bancorp reported net income of $606,285 or $0.20 per share for the three
months ended June 30, 2002 compared to net income of $783,967 or $0.25 per
share for the three months ended June 30, 2001. Bancorp reported net income of
$1,278,284 or $0.42 per share for the six months ended June 30, 2002 compared
to net income of $1,352,905 or $0.44 per share for the six months ended June
30, 2001.

Net Interest Income

Three Months Ended June 30, 2002 Compared to Three Months Ended June 30,
2001. Net interest income decreased $177,075 to $2.2 million from $2.4
million. This decrease was caused by the decrease in average interest-earning
assets to $257.2 million for the three months ended June 30, 2002, compared to
$259.6 million for the three months ended June 20, 2001 and the increase in
average interest-paying liabilities to $255.3 million for the three months
ended June 30, 2002, compared to $252.5 million for the three months ended June
30, 2001. The decrease in market interest rates to historically low levels
also contributed to the decrease in net interest income.

Six Months Ended June 31, 2002 Compared to Six Months Ended June 30, 2001.
Net interest income decreased $153,597 to $4.5 million from $4.7 million. An
increase in average interest-earning assets to $254.1 million for the six
months ended June 30, 2002, compared to $252.5 million for the six months ended
June 20, 2001, partially offset the increase in interest-paying liabilities to
$252.6 million for the six months ended June 30, 2002, compared to $246.6
million for the six months ended June 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 June 30, 2002 Compared to Three Months Ended June 30,
2001.The provision for loan losses was $235,125 for the quarter ended June 30,
2002 and $193,098 for the quarter ended June 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.

Six Months Ended June 30, 2002 Compared to Six Months Ended June 30, 2001.
The provision for loan losses was $815,257 for the six months ended June 30,
2002 and $268,098 for

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the six months ended June 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
six months ended June 30, 2002 increases the allowance as a percentage of total
loans from 0.58% at December 31, 2001 to 0.81% at June 30, 2002.

Noninterest Income

Three Months Ended June 30, 2002 Compared to Three Months Ended June 30,
2001.Noninterest income was $1.1 million for the three months ended June 30,
2002 compared to $1.1 million for the three months ended June 30, 2001, a
decrease of $13,858 or 1.2%. Several components of noninterest income lead to
the overall change between the three month periods ended June 30, 2002 and
2001. Income from mortgage banking activities (net) was $274,659 for the three
months ended June 30, 2002 and $389,009 for the three months ended June 30,
2001. This decrease is due to the decrease in loan sales during the second
quarter of 2002 compared to the same time in 2001. Commission income was
$282,656 for the three months ended June 30, 2002 as compared to $197,465 for
the three months ended June 30, 2001. This increase is due to growth in
account relationships at Oalkeaf Financial Services, Inc., the Banks
wholly-owned investment subsidiary. Trust fee income decreased by $47,463 from
$140,702 for the three months ended June 30, 2001 to $93,239 for the three
months ended June 30, 2002 due to depressed market conditions. Finally, during
the three months ended June 30, 2002, Bancorp recognized an increase in cash
surrender value of life insurance totaling $75,231 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.

Six Months Ended June 30, 2002 Compared to Six Months Ended June 30, 2001.
Noninterest income was $2.5 million for the six months ended June 30, 2002
compared to $2.1 million for the six months ended June 30, 2001, an increase of
$449,138 or 21.6%. 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 $859,301 for the six months
ended June 30, 2002 and $572,806 for the six months ended June 30, 2001. This
increase is due to the increase in loan sales, caused by the lower interest
rates on fixed-rate residential mortgages. Management does not anticipate the
heavy refinance and sale activity to continue throughout the remainder of 2002.
Other significant changes in noninterest income for the six months ended June
30, 2002 as compared to the six months ended June 30, 2001 include an increase
in commission income of $100,724 and an increase in cash surrender value of
life insurance totaling $163,998. The reasons for these changes are the same
as noted above for the three month periods ended June 30, 2002 and 2001.

Noninterest Expense

Three Months Ended June 30, 2002 Compared to Three Months Ended June 30,
2001. Noninterest expense was $2.3 million for the three months ended June 30,
2002 compared to $2.2 million for the three months ended June 30, 2001, an
increase of $91,941. The primary components of this increase were salaries and
employee benefits and professional fees and services. The salaries and
employee benefits increased by $156,463 and professional fees and services
increased by $47,998. Goodwill amortization expense was not recognized in
2002, due to adoption of FAS 142. Amortization expense for the three months
ended June 30, 2001 was

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$143,733.

Six Months Ended June 30, 2002 Compared to Six Months Ended June 30, 2001.
Noninterest expense was $4.4 million for the six months ended June 30, 2002
compared to $4.5 million for the six months ended June 30, 2001, a decrease of
$31,487. The primary component of this decrease was amortization of
intangibles. Amortization expense was not recognized in 2002, due to adoption
of FAS 142. Amortization expense for the six months ended June 30, 2001 was
$286,692. The largest component of noninterest expense is salaries and
employee benefits. The increase of $220,570 in salaries and employee benefits
is due to salary adjustments and cost of living increases, which 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 (616) 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 (616) 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 three months of 2002, the results of these measurement
techniques were within Bancorps policy guidelines. 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.

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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 six months ended June 30, 2002.




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

The Annual Meeting of stockholders was held on April 30, 2002. Two matters
were voted at the Meeting.

Election of Directors

Mr. Raymond H. Dresser, Jr., Mr. Leonard L. Eishen and Mr. Lawrence A. Franks
were elected to the Board of Directors for three (3) year terms expiring in
2005. The certified shares for the election of Raymond H. Dresser, Jr., were
2,494,779. The certified shares for the election of Leonard L. Eishen were
2,497,441. The certified shares for the election of Lawrence A. Franks were
2,495,091. The other Directors whose terms of office continued after the
Meeting were Eric L. Eishen, Donald L. Frost, James A. Goethals, Gary J.
Malloy, and Philip G. Ward.

Ratification of the appointment of Independent Public Accountants

The Board of Directors appointed Plante & Moran, LLP as Independent Public
Accountants for the year ending December 31, 2002. The certified shares voted
at the Meeting ratified this appointment with 2,486,766 shares voting in favor
of the appointment, 9,932 shares voting against, and 130,055 shares abstaining.
The appointment was approved.




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)                   

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##### Table of Contents

\

|     |  |  |                                                                                                                                   |  |  | 
|---- |  |  | --------------------------------------------------------------------------------------------------------------------------------- |  |  | 
|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                                                                                         
|     |  |  |                                                                                                                                   |  |  | 
|10.5 |  |  | Employment Agreement with Brian P. Hoggatt                                                                                       
|     |  |  |                                                                                                                                   |  |  | 
|10.6 |  |  | Employment Agreement with David E. Watters                                                                                       
|     |  |  |                                                                                                                                   |  |  | 
|10.7 |  |  | Employment Agreement with Ronald W. Scheske                                                                                      
|     |  |  |                                                                                                                                   |  |  | 
|13.1 |  |  | Annual
Report to Stockholders (4)                                                                                                
|     |  |  |                                                                                                                                   |  |  | 
|21   |  |  | Subsidiaries of Registrant (4)                                                                                                   
|     |  |  |                                                                                                                                   |  |  | 
|23   |  |  | Consents of Independent Auditors (4)                                                                                             
|     |  |  |                                                                                                                                   |  |  | 
|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 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 quarter ended June 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 |  | August 13, 2002 |  | /s/ Leonard L. Eishen     Leonard
L. Eishen, President
     and Chief Executive Officer
|     |  |                 |  |                                                                                        
|Date |  | August 13, 2002 |  | /s/ Brian P.
Hoggatt     Brian P. Hoggatt, Secretary/Treasurer                         

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##### Table of Contents



Exhibit Index

|            |  |                                                                                                                                  
|----------- |  | ---------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Description                                                                                                                      
|            |  |                                                                                                                                  
|10.4        |  | Employment Agreement with Eric L. Eishen                                                                                         
|           
|10.5        |  | Employment Agreement with Brian P. Hoggatt                                                                                       
|           
|10.6        |  | Employment Agreement with David E. Watters                                                                                       
|           
|10.7        |  | Employment Agreement with Ronald W. Scheske                                                                                      
|           
|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