FORM 10-K
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                                ----------------


                [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

                   For the fiscal year ended December 31, 1998

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

               For the transition period from _______ to ________

                         Commission file number 0-22461

                          O.A.K. FINANCIAL CORPORATION
             (Exact name of registrant as specified in its charter)

               MICHIGAN                                      38-2817345      
    (State of other jurisdiction of                      (I.R.S. Employer
    incorporation or organization)                       Identification No.)

              2445 84th Street, S.W., Byron Center, Michigan 49315
               (Address of principal executive offices) (Zip Code)

       Registrant's telephone number, including area code: (616) 878-1591

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

           Securities registered pursuant to Section 12(g) of the Act:
                          Common Stock, $1.00 par value
                                (Title of Class)
                                   -----------

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 Act of 1934 during
the  preceding 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 ____

Indicate by check mark if disclosure of delinquent  filers  pursuant to Item 405
of Regulation  S-K is not contained  herein,  and will not be contained,  to the
best of Registrant's  knowledge,  in definitive proxy or information  statements
incorporated  by  reference in Part III of this Form 10-K or any  amendments  to
this Form 10-K. _X_

The  aggregate  market value of the voting and  non-voting  common stock held by
non-affiliates  of the  Registrant,  based on a per share  price of $50.00 as of
March 1, 1999, was approximately $76,829,950 (common stock, $1.00 par value). As
of March 1,  1999,  there were  outstanding  2,041,779  shares of the  Company's
Common Stock ($1.00 par value).

Documents Incorporated by Reference:
Portions of the Company's Proxy Statement for the Annual Meeting of Shareholders
to be held April 22, 1999 are  incorporated  by reference  into Part III of this
report.
<PAGE>
Item 1.  Business.

     O.A.K.   Financial   Corporation  (the  "Company"),   a  Michigan  business
corporation,  is a one bank holding  company,  which owns all of the outstanding
capital  stock of Byron  Center  State Bank (the  "Bank"),  a  Michigan  banking
corporation.  The Company was formed in 1988 for the purpose of acquiring all of
the common stock of the Bank in a  shareholder  approved  reorganization,  which
became effective October 13 of 1988.

     The  Bank  was  originally   organized  in  1921  as  a  Michigan   banking
corporation.  As of December 31, 1998, the Bank had  approximately 144 full-time
and part-time employees.  None of the Bank's employees are subject to collective
bargaining agreements.  The Company does not directly employ any personnel.  The
principal executive offices of the Company and the Bank are located at 2445 84th
Street, S.W., Byron Center, Michigan 49315. The Bank's main office is located in
Byron Center and it serves other  communities  with branch offices in Allendale,
Dorr, Grand Rapids, Grandville,  Hamilton,  Hudsonville,  Jamestown,  Moline and
Zeeland.  The Bank's  offices are located in Kent County,  Ottawa County and the
northern portion of Allegan County.

     The area in which the Bank's offices are located,  which is basically south
and west of the city of Grand Rapids,  has historically  been rural in character
but now has a growing  urban  population as the Grand Rapids  Metropolitan  Area
expands  south and  west.  The  populations  of the  cities in which the  Bank's
offices are located are  approximately as follows:  Byron Center - 1,000; Dorr -
1,450;  Grand  Rapids -  189,125;  Grandville  -  15,620;  Hudsonville  - 6,170;
Jamestown  - 300;  Moline - 800;  Hamilton - 600;  Zeeland - 6,000;  Allendale -
9,600.

Bank Services

     The Bank is a full service  bank  offering a wide range of  commercial  and
personal banking services.  These traditional consumer services include checking
accounts,  savings  accounts,  certificates of deposit,  commercial  loans, real
estate  loans,   installment  loans,   collections,   traveler's  checks,  night
depository,  safe deposit boxes and U.S. Savings Bonds. Currently, the Bank does
not offer trust services.  The Bank maintains  correspondent  relationships with
major banks in Detroit and Grand  Rapids,  pursuant to which the Bank engages in
federal  funds  sale and  purchase  transactions,  the  clearance  of checks and
certain foreign currency  transactions.  In addition, the Bank participates with
other financial  institutions to fund certain large commercial loans which would
exceed the Bank's legal lending limit if made solely by the Bank.

     The Bank's deposits are generated in the normal course of business, and the
loss of any one  depositor  would not have a  materially  adverse  effect on the
business of the Bank.  No material  portion of the Bank's loans is  concentrated
within a single  industry or group of related  industries.  As of  December  31,
1998,  the Bank's  certificates  of deposits  of  $100,000  or more  constituted
approximately  7% of total deposit  liabilities.  The Bank's deposits  originate
primarily  from its service area,  and the Bank does,  on a very limited  basis,
obtain large deposits from outside this area.

     The Bank's principal  sources of revenue are interest and fees on loans and
interest  on  investment  securities.  Interest  and fees on  loans  constituted
approximately 74.1% and 73.7% of total revenues for the years ended December 31,
1998, and December 31, 1997,  respectively.  Interest on investment  securities,
including   short-term   investments   and  federal   funds  sold,   constituted
approximately  14.7% and 18.6% of total revenues in 1998 and 1997. Revenues were
also generated from deposit service  charges,  sales of loans and securities and
other financial service fees.

     The Bank provides real estate,  consumer and commercial  loans to customers
in its market.  79.3 percent of the Bank's loan  portfolio is held in fixed rate
loans as of December 31, 1998. Most of these loans,  approximately 93.8%, mature
within five years of issuance.  Approximately  $13,842,000  of loans (or 6.2% of
the Bank's total loan portfolio) have fixed rates with maturities exceeding five
years. 44.4 percent of the Bank's interest-bearing deposits are held in savings,
NOW and MMDAs,  all of which are variable rate products.  Of the $101,118,000 in
certificates, approximately $74,853,000 mature within one year, with the balance
maturing within a five year period.

     Requests  to the Bank for  credit  are  considered  on the  basis of credit
worthiness of each applicant,  without  consideration to race, color,  religion,
national origin, sex, marital status,  physical handicap, age, or the receipt of
income  from  public  assistance   programs.   Consideration  is  given  to  the
applicant's capacity for repayment,  collateral, capital and alternative sources
of repayment.  Loan  applications are accepted at all the Bank's offices and are
approved within
                                       -1-
<PAGE>
the limits of each  lending  officer's  authority.  Loan  requests  in excess of
$750,000 are required to be presented to the Board of Directors or the Executive
Committee of the Board for its review and approval.

     As  described  in more  detail in Table 20 on page 28, the Bank's  ratio of
rate sensitive assets to rate sensitive liabilities as of December 31, 1998, was
a 20% positive  gap,  compared to a 23 % positive  gap at December 31, 1997.  As
indicated  on page 28, the entire  balance of  savings,  NOW,  and MMDAs are not
categorized as 0 to 3 months,  although they are variable rate products. Some of
these balances are core deposits which are not considered  rate sensitive  based
on the Bank's historical experiences.

     The Bank  sells  participations  in  commercial  loans  to other  financial
institutions  approved  by the Bank,  for the purpose of meeting  legal  lending
limit requirements or loan concentration considerations.  The Bank has also sold
student  loans and regularly  sells fixed rate and  conforming  adjustable  rate
residential  mortgages to the Federal Home Loan Mortgage  Corporation  ("Freddie
Mac").  Those  residential  real estate  mortgage loan requests that do not meet
Freddie Mac criteria are reviewed by the Bank for approval and, if approved, are
retained  in the Bank's  loan  portfolio.  The Bank has the  ability to purchase
loans which meet its normal credit standards.

     The Bank's investment policy is considered to be generally conservative. It
provides for unlimited  investment in U.S.  government  bonds,  with the maximum
size of a single  purchase  limited  to  $3,000,000  and a maximum  maturity  of
fifteen  years.  Municipal  bonds with an A rating or better may be purchased to
provide nontaxable  income,  with the maximum life of municipal bonds limited to
ten years.  Nonrated  bonds may be  purchased  from local  communities  that are
familiar to the Bank, with a maximum block size of a single purchase  limited to
$250,000.  Investments  in states other than  Michigan may not exceed 10% of the
municipal  portfolio,  and  investments  in a single issuer may not exceed 5% of
equity capital.  Mortgage backed securities,  which are fully  collateralized by
securities issued by government  sponsored  agencies,  may be purchased in block
sizes of up to $3,000,000,  provided the average life expectancy does not exceed
ten years.

     In addition,  certain collateralized  mortgage obligations may be purchased
if  their  average  life  does not  exceed  five  years.  In  addition  to these
referenced  thresholds  affecting  the  acquisition  of  investment  securities,
holdings of approved  "non  high-risk  mortgage  securities"  are required to be
"stress  tested" at least  annually.  The  acquisition  of  "high-risk  mortgage
securities"  is  prohibited.  In no  case  may  the  Bank  participate  in  such
activities as "gains  trading,"  "when-issued"  trading,  "pair offs," corporate
settlement  of  government  and  agency  securities,   repositioning  repurchase
agreements,  and short sales. All securities  dealers effecting  transactions in
securities held or purchased by the Bank must be approved by the Bank's Board of
Directors.

Bank Competition

     The Bank has ten offices, one within each of the communities it serves. See
"Properties"   below  for  more  detail  on  these   facilities.   Within  these
communities,  its principal  competitors  are Comerica  Bank, NBD Bank, Old Kent
Bank,  National City Bank,  Huntington Bank,  Michigan  National Bank and United
Bank of Michigan. Each of these financial institutions,  which are headquartered
in larger  metropolitan  areas, have significantly  greater assets and financial
resources than the Company, with the exception of United Bank of Michigan. Based
on deposit information as of June 30, 1996, the Bank holds approximately 1.8% of
deposits  in the Kent  County  market,  1.3% of  deposits  in the Ottawa  County
market,  and 4% of the deposits in the Allegan County market.  Information as to
asset  size of  competitor  financial  institutions  is  derived  from  publicly
available reports filed by and with regulatory agencies.

     The financial services industry  continues to be increasingly  competitive.
Principal methods of competition  include loan and deposit pricing,  advertising
and  marketing  programs  and the types and  quality of services  provided.  The
deregulation of the financial service industry has led to increased  competition
among banks and other financial  institutions for a significant portion of funds
which have  traditionally  been deposited  with  commercial  banks.  Competition
within the Bank's  markets has been  relatively  stable  within the past several
years.  Management  continues to evaluate the opportunities for the expansion of
products  and  services,  such  as  trust  services,  and  additional  branching
opportunities.

                                       -2-
<PAGE>
Growth of Bank

     The following table sets forth certain financial  information regarding the
growth of the Bank (and accordingly, excludes holding company data):
<TABLE>
                                                                      Balances as of December 31,
                                                                             (in thousands)
========================================================================================================================
                                                    1998           1997            1996            1995            1994
                                                    ----           ----            ----            ----            ----
<S>                                             <C>            <C>             <C>              <C>             <C>
Total Assets                                    $299,882       $241,283        $216,755         $210,307        $187,079
Loans, Net of Unearned Income                    222,133        168,953         145,069          142,813         127,286
Securities                                        54,734         59,988          57,302           56,702          45,598
Noninterest-Bearing Deposits                      35,919         26,459          23,807           19,211          16,478
Interest-Bearing Deposits                        181,789        158,244         146,442          150,807         134,603
Total Deposits                                   217,708        184,703         170,249          170,018         151,081
Stockholders' Equity                              37,983         35,107          34,744           31,979          27,728
========================================================================================================================
</TABLE>
     The Main Office in Byron Center  began in a small 600 square foot  building
in 1921.  It was expanded to 1,100  square feet in 1954.  In 1965 the Bank moved
next door to a new 10,000 square foot building.  In 1987 construction of another
new  building  of 30,000  square feet was begun.  The Main Office  moved to this
facility in 1988 and currently  occupies this space. The Bank's first branch was
opened in 1963 when the bank  refitted an old bank  building in  Jamestown.  The
building was once a bank which closed  during the Great  Depression.  The Bank's
next branch was opened in  Cutlerville  in 1972.  The original 2,500 square foot
building was expanded with a 1,000 square foot addition in 1987. The Bank's Dorr
office  was  opened  in 1986 at the site of the  Hillcrest  Mall.  It is a 2,500
square foot facility  with a 2,500 square foot storage  basement.  In 1991,  the
Bank opened its branch in  Hudsonville.  The Bank maximized this site for future
expansion  with a 10,000 square foot  building.  The Bank occupies  2,500 square
feet while the remainder is rented to various  office use tenants.  During 1995,
the Bank purchased and remodeled a former bank branch in  Grandville.  Also, the
same  year,  the Bank  purchased  from  National  City Bank a  building  and the
deposits of its Moline branch. Currently, the Bank operates three off-site ATMs.

     The Bank  opened  three  new  branches  in 1998 at 10500  Chicago  Drive in
Zeeland,  Michigan,  6163 Lake Michigan  Drive in  Allendale,  Michigan and 4601
134th Avenue, Suite C in Hamilton,  Michigan. The Bank leases the facilities for
each of these three  branches.  In February 1999, the Kentwood,  Michigan branch
was opened for business.  The Kentwood  branch was purchased  from National City
Bank.

                                       -3-
<PAGE>
                           SUPERVISION AND REGULATION

     The following is a summary of certain  statutes and  regulations  affecting
the Company and the Bank.  This  summary is  qualified  in its  entirety by such
statutes and regulations.  A change in applicable laws or regulations may have a
material effect on the Company, the Bank and the business of the Company and the
Bank.

General

     Financial   institutions  and  their  holding   companies  are  extensively
regulated  under  federal and state law.  Consequently,  the growth and earnings
performance  of the Company and the Bank can be affected not only by  management
decisions and general economic conditions, but also by the statutes administered
by,  and the  regulations  and  policies  of,  various  governmental  regulatory
authorities.  Those  authorities  include,  but are not limited to, the Board of
Governors of the Federal Reserve System (the "Federal Reserve Board"), the FDIC,
the Commissioner of the Michigan Financial Institutions Bureau ("Commissioner"),
the Internal Revenue Service,  and state taxing authorities.  The effect of such
statutes,  regulations and policies can be significant,  and cannot be predicted
with a high degree of certainty.

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

     Federal law and regulations  establish  supervisory standards applicable to
the  lending  activities  of  the  Bank,  including  internal  controls,  credit
underwriting,  loan documentation and loan-to-value  ratios for loans secured by
real property.

The Company

     General.  The Company is a bank holding company and, as such, is registered
with,  and subject to  regulation  by, the Federal  Reserve Board under the Bank
Holding  Company Act, as amended (the  "BHCA").  Under the BHCA,  the Company is
subject to periodic examination by the Federal Reserve Board, and is required to
file with the Federal Reserve Board periodic  reports of its operations and such
additional information as the Federal Reserve Board may require.

     In accordance with Federal Reserve Board policy, the Company is expected to
act as a source of  financial  strength to the Bank and to commit  resources  to
support the Bank in circumstances  where the Company might not do so absent such
policy.  In  addition,  if the  Commissioner  deems  the  Bank's  capital  to be
impaired,  the  Commissioner  may  require  the Bank to restore its capital by a
special  assessment  upon the  Company as the Bank's  sole  shareholder.  If the
Company were to fail to pay any such assessment, the directors of the Bank would
be required, under Michigan law, to sell the shares of the Bank's stock owned by
the Company to the highest bidder at either a public or private  auction and use
the proceeds of the sale to restore the Bank's capital.

     Investments and Activities.  In general, any direct or indirect acquisition
by the  Company  of any  voting  shares of any bank  which  would  result in the
Company's  direct or indirect  ownership or control of more than 5% of any class
of voting shares of such bank,  and any merger or  consolidation  of the Company
with  another  bank  company,  will  require the prior  written  approval of the
Federal  Reserve  Board  under the BHCA.  In  acting on such  applications,  the
Federal Reserve Board must consider various statutory  factors,  including among
others,  the effect of the  proposed  transaction  on  competition  in  relevant
geographic and product markets, and each party's financial condition, managerial
resources,  and record of  performance  under the  Community  Reinvestment  Act.
Effective  September 29, 1995, bank holding  companies may acquire banks located
in any state in the United States without regard to geographic  restrictions  or
reciprocity   requirements   imposed  by  state  law,  but  subject  to  certain
conditions,  including  limitations on the aggregate amount of deposits that may
be held by the acquiring company and all of its insured  depository  institution
affiliates.

                                       -4-
<PAGE>
     The merger or  consolidation  of an existing bank subsidiary of the Company
with another bank, or the  acquisition by such a subsidiary of assets of another
bank, or the assumption of liability by such a subsidiary to pay any deposits in
another bank, will require the prior written approval of the responsible Federal
depository institution regulatory agency under the Bank Merger Act, based upon a
consideration of statutory  factors similar to those outlined above with respect
to the BHCA. In addition, in certain such cases an application to, and the prior
approval of, the Federal  Reserve  Board under the BHCA and/or the  Commissioner
under the Michigan Banking Code, may be required.

     With certain limited  exceptions,  the BHCA prohibits any bank company from
engaging,  either directly or indirectly  through a subsidiary,  in any activity
other  than  managing  or  controlling  banks  unless the  proposed  non-banking
activity is one that the Federal  Reserve Board has  determined to be so closely
related to banking or managing or controlling  banks as to be a proper  incident
thereto.  Under current  Federal  Reserve Board  regulations,  such  permissible
non-banking  activities  include  such  things as  mortgage  banking,  equipment
leasing,  securities  brokerage,  and consumer and  commercial  finance  company
operations.  As a result of recent amendments to the BHCA, well- capitalized and
well-managed  bank  holding  companies  may engage de novo in  certain  types of
non-banking  activities  without  prior  notice to, or approval  of, the Federal
Reserve Board,  provided that written notice of the new activity is given to the
Federal  Reserve  Board within 10 business days after the activity is commenced.
If a bank  company  wishes to engage in a  non-banking  activity by  acquiring a
going concern,  prior notice and/or prior  approval will be required,  depending
upon the activities in which the company to be acquired is engaged,  the size of
the company to be acquired and the  financial  and  managerial  condition of the
acquiring bank company.

     In  evaluating  a  proposal  to  engage  (either  de  novo or  through  the
acquisition of a going concern) in a non-banking  activity,  the Federal Reserve
Board will consider  various  factors,  including among others the financial and
managerial  resources of the bank company,  and the relative public benefits and
adverse  effects  which may be expected to result  from the  performance  of the
activity by an  affiliate of the bank  company.  The Federal  Reserve  Board may
apply  different  standards to  activities  proposed to be commenced de novo and
activities commenced by acquisition, in whole or in part, of a going concern.

     Capital  Requirements.  The Federal  Reserve  Board uses  capital  adequacy
guidelines  in its  examination  and  regulation of bank holding  companies.  If
capital falls below minimum guidelines,  a bank company may, among other things,
be  denied  approval  to  acquire  or  establish  additional  banks or  non-bank
businesses.

     The Federal  Reserve  Board's  capital  guidelines  establish the following
minimum  regulatory  capital  requirements  for bank  holding  companies:  (i) a
leverage capital requirement expressed as a percentage of total assets, and (ii)
a  risk-based  requirement  expressed  as a  percentage  of total  risk-weighted
assets. The leverage capital  requirement  consists of a minimum ratio of Tier 1
capital (which consists principally of shareholders'  equity) to total assets of
3% for the most highly rated  companies,  with minimum  requirements of 4% to 5%
for all others. The risk- based requirement consists of a minimum ratio of total
capital to total risk-weighted  assets of 8%, of which at least one-half must be
Tier 1 capital.

     The risk-based and leverage standards presently used by the Federal Reserve
Board are minimum  requirements,  and higher  capital levels will be required if
warranted by the particular circumstances or risk profiles of individual banking
organizations.  For example,  Federal  Reserve  Board  regulations  provide that
additional  capital  may be required to take  adequate  account of,  among other
things,  interest  rate risk and the risks  posed by  concentrations  of credit,
nontraditional activities or securities trading activities. Further, any banking
organization  experiencing or anticipating  significant growth would be expected
to maintain capital ratios,  including  tangible capital positions (i.e., Tier 1
capital less all intangible assets),  well above the minimum levels. The Federal
Reserve Board has not advised the Company of any specific minimum Tier 1 Capital
leverage ratio applicable to it.

     Dividends.  The Company is a  corporation  separate and  distinct  from the
Bank. Most of the Company's revenues are received by it in the form of dividends
paid  by  the  Bank.  Thus,  the  Company's  ability  to  pay  dividends  to its
shareholders  is  indirectly  limited by  statutory  restrictions  on the Bank's
ability  to  pay  dividends.  See  "SUPERVISION  AND  REGULATION  - The  Bank  -
Dividends."  Further, the Federal Reserve Board has issued a policy statement on
the  payment  of  cash  dividends  by  bank  holding  companies.  In the  policy
statement,  the Federal  Reserve  Board  expressed  its view that a bank company
experiencing earnings weaknesses should not pay cash dividends exceeding its net
income or which can only be funded  in ways  that  weakened  the bank  company's
financial health, such

                                       -5-
<PAGE>
as by borrowing.  Additionally,  the Federal Reserve Board possesses enforcement
powers over bank holding companies and their non-bank subsidiaries to prevent or
remedy  actions that  represent  unsafe or unsound  practices or  violations  of
applicable  statutes  and  regulations.  Among  these  powers is the  ability to
proscribe the payment of dividends by banks and bank holding companies.  Similar
enforcement  powers  over  the Bank  are  possessed  by the  FDIC.  The  "prompt
corrective  action"  provisions  of federal law and  regulation  authorizes  the
Federal Reserve Board to restrict the payment of dividends by the Company for an
insured bank which fails to meet specified capital levels.

     In addition to the restrictions on dividends imposed by the Federal Reserve
Board,  the Michigan  Business  Corporation  Act provides that  dividends may be
legally declared or paid only if after the  distribution a corporation,  such as
the Company,  can pay its debts as they come due in the usual course of business
and its total assets equal or exceed the sum of its liabilities  plus the amount
that would be needed to satisfy the preferential  rights upon dissolution of any
holders of  preferred  stock  whose  preferential  rights are  superior to those
receiving the  distribution.  The  Company's  Articles of  Incorporation  do not
authorize the issuance of preferred stock and there are no current plans to seek
such authorization.

The Bank

     General.  The  Bank is a  Michigan  banking  corporation  and  its  deposit
accounts are insured by the Bank  Insurance  Fund (the "BIF") of the FDIC.  As a
BIF-insured  Michigan  chartered  bank, the Bank is subject to the  examination,
supervision,  reporting and enforcement requirements of the Commissioner, as the
chartering  authority for Michigan banks,  and the FDIC, as administrator of the
BIF.  These  agencies and the federal and state laws  applicable to the Bank and
its operations,  extensively  regulate  various aspects of the banking  business
including,   among  other  things,  permissible  types  and  amounts  of  loans,
investments and other activities, capital adequacy, branching, interest rates on
loans and on deposits,  the  maintenance  of  non-interest  bearing  reserves on
deposit accounts, and the safety and soundness of banking practices.

     Deposit Insurance. As an FDIC-insured institution,  the Bank is required to
pay deposit  insurance  premium  assessments to the FDIC. The FDIC has adopted a
risk-based assessment system under which all insured depository institutions are
placed into one of nine categories and assessed insurance  premiums,  based upon
their  respective  levels of  capital  and  results of  supervisory  evaluation.
Institutions  classified  as  well-capitalized  (as  defined  by the  FDIC)  and
considered  healthy pay the lowest premium while institutions that are less than
adequately  capitalized  (as defined by the FDIC) and  considered of substantial
supervisory concern pay the highest premium.  Risk classification of all insured
institutions is made by the FDIC for each semi-annual assessment period.

     The Federal Deposit  Insurance Act ("FDIA")  requires the FDIC to establish
assessment  rates at levels which will maintain the Deposit  Insurance Fund at a
mandated  reserve  ratio of not less than 1.25% of estimated  insured  deposits.
Accordingly,  the FDIC established the schedule of BIF insurance assessments for
the first semi-annual assessment period of 1998, ranging from 0% of deposits for
institutions in the lowest risk category to .27% of deposits for institutions in
the highest risk  category.  For 1998,  the Bank paid  $27,750 in BIF  insurance
assessments, representing a premium of .01%.

     The FDIC may  terminate  the deposit  insurance  of any insured  depository
institution if the FDIC determines, after a hearing, that the institution or its
directors have engaged or are engaging in unsafe or unsound  practices,  or have
violated any applicable  law,  regulation,  order,  or any condition  imposed in
writing by, or written  agreement with, the FDIC, or if the institution is in an
unsafe or unsound  condition to continue  operations.  The FDIC may also suspend
deposit  insurance  temporarily  during  the  hearing  process  for a  permanent
termination of insurance if the institution has no tangible capital.

     Commissioner  Assessments.  Michigan banks are required to pay  supervisory
fees to the Commissioner to fund the operations of the Commissioner.  The amount
of  supervisory  fees paid by a bank is based upon the bank's total  assets,  as
reported to the Commissioner.

     FICO  Assessments.  Pursuant to federal  legislation  enacted September 30,
1996,  the Bank, as a member of the BIF, is subject to  assessments to cover the
payments on outstanding  obligations of the Financing Corporation ("FICO"). FICO
was created in 1987 to finance the  recapitalization  of the Federal Savings and
Loan Insurance Corporation, the

                                       -6-
<PAGE>
predecessor to the FDIC's Savings Association  Insurance Fund (the "SAIF") which
insures the deposits of thrift  institutions.  Until  January 1, 2000,  the FICO
assessments  made  against  BIF members may not exceed 20% of the amount of FICO
assessments  made  against  SAIF  members.  Currently,  SAIF  members  pay  FICO
assessments  at a rate  equal to  approximately  0.063%  of  deposits  while BIF
members  pay  FICO  assessments  at a rate  equal  to  approximately  0.013%  of
deposits.  Between  January 1, 2000 and the  maturity  of the  outstanding  FICO
obligations  in 2019,  BIF members and SAIF  members  will share the cost of the
interest  on the FICO  bonds on a pro rata  basis.  It is  estimated  that  FICO
assessments during this period will be less than 0.025% of deposits.

     Capital  Requirements.  The  FDIC has  established  the  following  minimum
capital standards for  state-chartered,  FDIC-insured  non-member banks, such as
the Bank: a leverage requirement consisting of a minimum ratio of Tier 1 capital
to total assets of 3% for the most highly-rated banks with minimum  requirements
of 4% to 5% for all others, and a risk-based capital requirement consisting of a
minimum  ratio of total  capital to total  risk-weighted  assets of 8%, at least
one-half of which must be Tier 1 capital. Tier 1 capital consists principally of
shareholders'  equity.  These  capital  requirements  are minimum  requirements.
Higher   capital  levels  will  be  required  if  warranted  by  the  particular
circumstances  or risk profiles of individual  institutions.  For example,  FDIC
regulations provide that higher capital may be required to take adequate account
of, among other things, interest rate risk and the risks posed by concentrations
of credit, nontraditional activities or securities trading activities.

     Federal law provides  the federal  banking  regulators  with broad power to
take  prompt  corrective  action to resolve  the  problems  of  undercapitalized
institutions.  The extent of the  regulators'  powers  depends  on  whether  the
institution  in  question  is  "well  capitalized,"   "adequately  capitalized,"
"undercapitalized,"    "significantly    undercapitalized,"    or    "critically
undercapitalized."  Federal  regulations  define  these  capital  categories  as
follows:
<TABLE>
                                           Total                  Tier 1
                                           Risk-Based             Risk-Based
                                           Capital Ratio          Capital Ratio           Leverage Ratio
<S>                                        <C>                    <C>                     <C>
Well capitalized                           10% or above           6% or above             5% or above
Adequately capitalized                      8% or above           4% or above             4% or above
Undercapitalized                           Less than 8%           Less than 4%            Less than 4%
Significantly undercapitalized             Less than 6%           Less than 3%            Less than 3%
Critically undercapitalized                      --                    --                 A ratio of tangible
                                                                                          equity to total assets
                                                                                          of 2% or less
</TABLE>
     As of  December  31,  1998,  each of the  Bank's  ratios  exceeded  minimum
requirements for the well capitalized category.

     Depending  upon the capital  category to which an  institution is assigned,
the regulators' corrective powers include: requiring the submission of a capital
restoration plan; placing limits on asset growth and restrictions on activities;
requiring  the  institution  to  issue   additional   capital  stock  (including
additional  voting  stock)  or to be  acquired;  restricting  transactions  with
affiliates;  restricting  the interest rate the institution may pay on deposits;
ordering a new election of directors of the  institution;  requiring that senior
executive  officers or directors be dismissed;  prohibiting the institution from
accepting deposits from correspondent banks; requiring the institution to divest
certain  subsidiaries;  prohibiting  the  payment of  principal  or  interest on
subordinated debt; and ultimately, appointing a receiver for the institution.

     In  general,  a  depository  institution  may be  reclassified  to a  lower
category  than is indicated  by its capital  levels if the  appropriate  federal
depository  institution  regulatory  agency  determines  the  institution  to be
otherwise  in an unsafe or  unsound  condition  or to be engaged in an unsafe or
unsound  practice.  This could include a failure by the  institution,  following
receipt  of a  less-than-satisfactory  rating  on its  most  recent  examination
report, to correct the deficiency.

     Dividends.  Under  Michigan  law, the Bank is  restricted as to the maximum
amount  of  dividends  it may pay on its  common  stock.  The  Bank  may not pay
dividends  except out of net profits after deducting its losses and bad debts. A
Michigan state bank may not declare or pay a dividend  unless the bank will have
a surplus amounting to at least 20%

                                       -7-
<PAGE>
of its capital after the payment of the dividend. If the Bank has a surplus less
than the amount of its capital,  it may not declare or pay any dividend until an
amount equal to at least 10% of net profits for the preceding  one-half year (in
the case of quarterly or  semi-annual  dividends)  or full-year  (in the case of
annual  dividends) has been  transferred to surplus.  A Michigan state bank may,
with the approval of the Commissioner, by vote of shareholders owning 2/3 of the
stock  eligible to vote increase its capital  stock by a declaration  of a stock
dividend,  provided that after the increase the bank's  surplus  equals at least
20% of its  capital  stock,  as  increased.  The Bank may not declare or pay any
dividend  until the  cumulative  dividends on preferred  stock  (should any such
stock be issued and outstanding)  have been paid in full. The Bank's Articles of
Incorporation  do not authorize the issuance of preferred stock and there are no
current plans to seek such authorization.

     Federal law generally  prohibits a depository  institution  from making any
capital distribution  (including payment of a dividend) or paying any management
fee  to  its  company  if  the  depository   institution   would  thereafter  be
undercapitalized.  The FDIC may prevent an insured bank from paying dividends if
the  bank is in  default  of  payment  of any  assessment  due to the  FDIC.  In
addition,  the FDIC may prohibit  the payment of dividends by the Bank,  if such
payment is determined,  by reason of the financial  condition of the Bank, to be
an unsafe and unsound banking practice.

     Insider  Transactions.  The Bank is subject to certain restrictions imposed
by the  Federal  Reserve Act on any  extensions  of credit to the Company or its
subsidiaries,  on investments in the stock or other securities of the Company or
its  subsidiaries  and the  acceptance  of the stock or other  securities of the
Company or its  subsidiaries  as collateral for loans.  Certain  limitations and
reporting  requirements  are also placed on  extensions of credit by the Bank to
its  directors  and  officers,  to directors and officers of the Company and its
subsidiaries,  to  principal  shareholders  of  the  Company,  and  to  "related
interests" of such directors,  officers and principal shareholders. In addition,
federal law and  regulations may affect the terms upon which any person becoming
a director or officer of the Company or one of its  subsidiaries  or a principal
shareholder  of the  Company  may obtain  credit  from banks with which the Bank
maintains a correspondent relationship.

     Safety and Soundness  Standards.  The federal banking agencies have adopted
guidelines to promote the safety and soundness of federally  insured  depository
institutions.  These  guidelines  establish  standards  for  internal  controls,
information  systems,   internal  audit  systems,  loan  documentation,   credit
underwriting,  interest  rate  exposure,  asset growth,  compensation,  fees and
benefits,  asset quality and earnings.  In general, the guidelines prescribe the
goals to be achieved in each area, and each  institution will be responsible for
establishing its own procedures to achieve those goals. If an institution  fails
to  comply  with  any  of  the  standards  set  forth  in  the  guidelines,  the
institution's  primary federal regulator may require the institution to submit a
plan for achieving and  maintaining  compliance.  The preamble to the guidelines
states that the agencies expect to require a compliance plan from an institution
whose  failure to meet one or more of the  standards is of such severity that it
could  threaten  the safe and sound  operation  of the  institution.  Failure to
submit an acceptable  compliance plan, or failure to adhere to a compliance plan
that has been accepted by the appropriate  regulator,  would constitute  grounds
for further enforcement action.

     State Bank Activities. Under federal law and FDIC regulations, FDIC-insured
state  banks are  prohibited,  subject to  certain  exceptions,  from  making or
retaining  equity  investments  of a  type,  or  in  an  amount,  that  are  not
permissible   for  a  national  bank.   Federal  law,  as  implemented  by  FDIC
regulations,  also prohibits  FDIC-insured  state banks and their  subsidiaries,
subject to certain  exceptions,  from engaging as principal in any activity that
is not permitted for a national bank or its subsidiary, respectively, unless the
bank meets, and continues to meet, its minimum regulatory  capital  requirements
and the FDIC  determines the activity  would not pose a significant  risk to the
deposit insurance fund of which the bank is a member.  Impermissible investments
and activities must be divested or  discontinued  within certain time frames set
by the FDIC in accordance with federal law. These restrictions are not currently
expected to have a material impact on the operations of the Bank.

     Consumer  Protection Laws. The Bank's business includes making a variety of
types of loans to  individuals.  In making these  loans,  the Bank is subject to
State usury and regulatory  laws and to various  federal  statutes,  such as the
Equal  Credit  Opportunity  Act,  the Fair Credit  Reporting  Act,  the Truth in
Lending Act, the Real Estate  Settlement  Procedures  Act, and the Home Mortgage
Disclosure  Act, and the  regulations  promulgated  thereunder,  which  prohibit
discrimination, specify disclosures to be made to borrowers regarding credit and
settlement  costs,  and regulate the mortgage loan  servicing  activities of the
Bank,  including  the  maintenance  and  operation  of escrow  accounts  and the
transfer of mortgage loan servicing.  In receiving deposits, the Bank is subject
to extensive regulation under State and

                                       -8-
<PAGE>
federal law and  regulations,  including the Truth in Savings Act, the Expedited
Funds Availability Act, the Bank Secrecy Act, the Electronic Funds Transfer Act,
and the Federal Deposit  Insurance Act.  Violation of these laws could result in
the imposition of significant  damages and fines upon the Bank and its directors
and officers.

     Branching  Authority.  Michigan banks, such as the Bank, have the authority
under  Michigan  law to  establish  branches  anywhere in the State of Michigan,
subject to receipt of all required regulatory  approvals (including the approval
of the Commissioner and the FDIC).

     Effective  June 1, 1997 (or earlier if expressly  authorized  by applicable
state law), the Riegle-Neal  Interstate Banking and Branching  Efficiency Act of
1994 (the "IBBEA") allows banks to establish  interstate branch networks through
acquisitions of other banks,  subject to certain  conditions,  including certain
limitations  on the  aggregate  amount  of  deposits  that  may be  held  by the
surviving bank and all of its insured  depository  institution  affiliates.  The
establishment  of de novo  interstate  branches or the acquisition of individual
branches  of a  bank  in  another  state  (rather  than  the  acquisition  of an
out-of-state  bank in its  entirety)  is allowed  by IBBEA only if  specifically
authorized by state law. The legislation  allowed individual states to "opt-out"
of interstate branching authority by enacting  appropriate  legislation prior to
June 1, 1997.

     Michigan  did not opt out of IBBEA,  and now permits both U.S. and non-U.S.
banks to  establish  branch  offices in  Michigan.  The  Michigan  Banking  Code
permits, in appropriate circumstances and with the approval of the Commissioner,
(i)  the  acquisition  of  all  or   substantially   all  of  the  assets  of  a
Michigan-chartered  bank by an FDIC- insured bank,  savings bank, or savings and
loan association  located in another state,  (ii) the acquisition by a Michigan-
chartered  bank of all or  substantially  all of the  assets of an  FDIC-insured
bank,  savings bank or savings and loan  association  located in another  state,
(iii) the consolidation of one or more Michigan-chartered banks and FDIC-insured
banks,  savings banks or savings and loan  associations  located in other states
having laws  permitting  such  consolidation,  with the  resulting  organization
chartered by Michigan,  (iv) the  establishment by a foreign bank, which has not
previously  designated any other state as its home state under the International
Banking Act of 1978, of branches located in Michigan,  and (v) the establishment
or  acquisition of branches in Michigan by  FDIC-insured  banks located in other
states,  the District of Columbia or U.S.  territories or  protectorates  having
laws  permitting   Michigan-chartered   banks  to  establish  branches  in  such
jurisdiction. Further, the Michigan Banking Code permits, upon written notice to
the  Commissioner,  (i) the acquisition by a  Michigan-chartered  bank of one or
more  branches (not  comprising  all or  substantially  all of the assets) of an
FDIC-insured  bank,  savings  bank or savings  and loan  association  located in
another state,  the District of Columbia,  or a U.S.  territory or protectorate,
(ii) the establishment by Michigan-chartered  banks of branches located in other
states,  the District of Columbia,  or U.S.  territories or  protectorates,  and
(iii) the consolidation of one or more Michigan-chartered banks and FDIC-insured
banks,  savings banks or savings and loan associations  located in other states,
with the resulting organization chartered by one of such other states.

                                      -9-
<PAGE>
Item 2.  Properties.

     The Bank operates from ten  facilities,  located in seven  communities,  in
Kent, Ottawa and Allegan Counties,  Michigan.  The Bank's main office is located
at 2445 84th Street, S.W., Byron Center,  Michigan. This facility is a two story
30,000 square foot building  constructed  in 1988 and is owned by the Bank.  The
Bank's branch offices in Allendale,  Dorr, Grand Rapids,  Grandville,  Hamilton,
Hudsonville,  Jamestown,  Moline and  Zeeland  are all single  story  facilities
ranging in size from 1,100 square feet to 10,000 square feet.  The Bank owns its
branch offices in Dorr, Grand Rapids,  Grandville,  Hudsonville and Moline.  The
Bank leases the facilities  occupied by the Allendale,  Hudsonville  and Zeeland
branches. The Bank is in the process of remodeling its Kentwood, Michigan office
which was opened in February 1999.

Item 3.  Legal Proceedings.

     Neither  the Company  nor the Bank are  involved  in any legal  proceedings
other than routine litigation incidental to the ordinary conduct of the business
of the Bank,  none of which would result in a material  impact on the Company or
the Bank, individually or in the aggregate, in the event of an adverse outcome.

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

     No matters were  submitted to a vote of security  holders during the fourth
quarter of 1998.

                                      -10-
<PAGE>
Additional Item - Executive Officers

     Executive  officers of the Company are  appointed  annually by the Board of
Directors.  There are no family  relationships  among the  officers  and/or  the
directors  of the  Company,  or any  arrangement  or  understanding  between any
officer and any other person pursuant to which the officer was elected.

     The  following  table sets forth  certain  information  with respect to the
Company's officers as of December 31, 1998:

<TABLE>
                                                                                                   Year Became
            Name                  Age            Position with Company                             an Officer
<S>                               <C>     <C>                                                         <C>
John A. Van Singel                 44     President, CEO and director of the Company                  1976
                                          and the Bank

Lois Smalligan                     66     Director of the Company and the Bank, Vice                  1975
                                          President of the Bank

John Peterson                      50     Executive Vice President of the Bank                        1983

Forrest Bowling                    50     Vice President of the Bank                                  1988

Martin Braun                       43     Vice President of the Bank                                  1988

Stanley Roberts                    45     Vice President of the Bank                                  1998
</TABLE>





                           [INTENTIONALLY LEFT BLANK]


                                      -11-
<PAGE>
                                     PART II

Item 5.  Market Price of and Dividends on the Registrant's Common Equity and
         Related Stockholder Matters.

     There is no active market for the Company's  Common Stock,  and there is no
published  information  with respect to its market price.  There are  occasional
sales through  brokers and direct sales by  shareholders  of which the Company's
management is aware.  It is the  understanding  of the management of the Company
that over the last two years,  the Company's  Common Stock has sold at prices in
excess of book value.  From January 1, 1997,  through  December 31, 1998,  there
were,  so far as the  Company's  management  knows,  106  sales of shares of the
Company's  Common  Stock,  involving  a total of  79,600  shares.  The price was
reported to management in only a few of these  transactions,  and management has
no way of confirming  the prices which were  reported.  During this period,  the
highest  price known by  management to be paid was $50.00 per share in the first
quarter of 1999,  and the lowest price was $28.00 per share in the first quarter
of 1997. To the knowledge of management,  the last sale of Common Stock occurred
on January 29,  1999,  involving  the sale of 90 shares at a price of $50.00 per
share. The per share information has been adjusted for the July 1, 1998, 2-for 1
stock split in the form of a dividend.

     The  following  table sets forth the range of high and low sales  prices of
the Company's  Common Stock during 1997 and 1998 and through  February 10, 1999,
based on information  made  available to the Company,  as well as per share cash
dividends declared during those periods. Although management is not aware of any
transactions  at higher or lower  prices,  there may have been  transactions  at
prices outside the ranges listed below:
<TABLE>
                                                                                                                   Cash
                                                                    Sales Prices                             Dividends Declared
                 1997                                    High                       Low
<S>                                                      <C>                        <C>                       <C>
First Quarter.........................                   $  31.50                   $  28.00                  $1.00 (1)
Second Quarter........................                      32.50                      31.50                  $ .265
Third Quarter.........................                      34.00                      31.50
Fourth Quarter........................                      35.00                      34.00                  $ .285
                 1998                                    High                       Low
First Quarter.........................                   $  35.00                   $  34.50                  $ .50  (2)
Second Quarter........................                      35.00                      35.00                  $ .325
Third Quarter.........................                      42.00                      32.00
Fourth Quarter........................                      50.00                      42.00                  $ .35
                 1999
First Quarter.........................                     $50.00                     $46.00
</TABLE>
(1)    A special dividend of $1.00 per share.

(2)    A special dividend of $.50 per share.

     On May 7, 1998,  the Board of  Directors  declared  a 2-for-1  split of the
Corporation's  common stock with an effective date of July 1, 1998 by means of a
one-for-one  stock  dividend  to  shareholders  of record on June 1,  1998.  All
references  to per share  amounts and prices of the shares have been restated to
give retroactive effect to the stock split.

                                      -12-
<PAGE>
     There are 4,000,000  shares of the Company's  Common Stock  authorized,  of
which  2,041,779  shares were issued and  outstanding  as of February  28, 1999.
There were approximately 660 shareholders of record, including trusts and shares
jointly owned, as of that date. No warrants or options exist for the purchase of
additional common stock of the Company.

     The holders of the Company's  Common Stock are entitled to dividends  when,
as and if declared by the Board of Directors of the Company out of funds legally
available  for that  purpose.  Cash  dividends  have been paid on a  semi-annual
basis. In determining dividends,  the Board of Directors considers the earnings,
capital  requirements and financial condition of the Company and the Bank, along
with other relevant  factors.  The Company's  principal source of funds for cash
dividends is the dividends  paid by the Bank. The ability of the Company and the
Bank to pay dividends is subject to regulatory  restrictions  and  requirements.
See the discussion under "Business-Supervision and Regulation" above.






                           [INTENTIONALLY LEFT BLANK]



                                      -13-
<PAGE>
Item 6.  Selected Financial Data.

                 SUMMARY OF SELECTED CONSOLIDATED FINANCIAL DATA
                      (in thousands, except per share data)
<TABLE>
                             Year Ended December 31,


                                                  1998            1997             1996             1995             1994
                                                  ----            ----             ----             ----             ----
<S>                                           <C>             <C>              <C>              <C>              <C>
Income Statement Data:                                                                                     
  Interest income                             $  21,134       $  18,624        $  17,502        $  16,268        $  14,082
  Interest expense                                8,916           7,693            7,181            6,637            5,371
  Net interest income                            12,218          10,931           10,321            9,631            8,711
  Provision for loan losses                         400              50                0              275              170
  Noninterest income                              2,659           1,542            1,075              919              665
  Noninterest expenses                            7,334           5,782            5,169            4,511            4,097
  Income before federal                           7,144           6,641            6,227            5,764            5,109
    income taxes
  Net income                                      5,076           4,626            4,375            4,004            3,680
Per Share Data(1)(2):
  Net income                                       2.54            2.30             2.17             1.99             1.83
  Cash dividends declared                          1.18            1.55              .47              .41              .34
  Book Value                                      19.98           18.37            17.66            16.12            13.76
  Weighted average shares
     outstanding (1)                              2,000           2,010            2,014            2,020            2,028
Balance Sheet Data:
  Total assets                                 $301,494        $243,088         $217,527         $210,880         $187,244
  Loans, net of unearned income                 222,133         168,953          145,069          142,813          127,286
  Allowance for loan losses                       2,879           2,565            2,376            2,305            2,056
  Deposits                                      217,291         184,700          170,221          170,012          151,074
  Stockholders' equity                           39,953          36,915           35,544           32,559           27,900
Ratios:
  Tax equivalent net interest
  income to average earning
  assets                                          5.02%           5.24%            5.23%            5.42%            5.24%
  Return on average equity                       13.28%           13.08            12.89            13.21            13.64
  Return on average assets                        1.90%            2.03             2.03             2.07             2.02
  Nonperforming loans to
  total loans                                     0.26%            0.14             0.82             0.66             0.24
  Tier 1 leverage ratio                          13.53%           15.03            15.97            15.42            15.36
  Dividend payout ratio                          46.30%           67.35            21.54            18.75            16.77
  Equity to asset ratio                          13.25%           15.19            16.34            15.44            14.90
</TABLE>
(1)      At year end in thousands.
(2)      As restated for a 2-for-1 common stock split in the form of a dividend
         in 1998.

                                      -14-
<PAGE>
ITEM 7.
                MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                       CONDITION AND RESULTS OF OPERATIONS
              FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996


     The  following  financial  review  presents  management's   discussion  and
analysis of consolidated  financial  condition and results of operations  during
the period of 1996 through 1998.  The  discussion  should be read in conjunction
with the Company's  consolidated  financial  statements and  accompanying  notes
thereto.

Summary

     The Company and its subsidiary bank, Byron Center State Bank,  consistently
have been ranked as a high  performance  community  bank by various  bank rating
companies.  The Company's capital ratio of 13.25% as of December 31, 1998, makes
it one of the strongest capitalized community banks in the State of Michigan.

     To achieve  this  status,  the  Company  has relied on years of  continuous
improvements in a business culture that emphasizes quality assets, managed in an
efficient  manner so as to minimize  the cost of overhead.  Technology  has also
been a key component to the Company's  success and will remain an important tool
that will help  management  deliver  more  services  and manage more assets at a
lower cost to support these functions.

     The Company has a surplus of capital.  The Board of Directors has made it a
priority  to make  more  efficient  use of  capital.  The  primary  emphasis  is
re-leveraging capital through aggressive yet careful growth. This is expected to
be  accomplished  through  competitive,  cost  effective  products and services,
efficiently  delivered  without  compromising  the Bank's risk and  underwriting
standards.  The Company has increased  its cash dividend  pay-out ratio over the
years from 15% in 1993 to 46% in 1998,  although  there can be no assurance that
the Company will maintain comparable pay-out ratios in the future.

Results of Operations

Table 1  Earnings Performance (in thousands, except per share data)
<TABLE>
                                                                       Year Ended December 31
                                                            1998              1997               1996
                                                            ----              ----               ----
<S>                                                       <C>               <C>                <C>
Net income....................................            $5,076            $4,626             $4,375
  Per share of common stock...................              2.54              2.30               2.17

Earnings ratios:
  Return on average assets....................             1.90%             2.03%              2.03%
  Return on average equity....................            13.28%            13.08%             12.89%
</TABLE>
Net Interest Income

     The following schedule presents the average daily balances, interest income
(on a fully  taxable  equivalent  basis) and interest  expense and average rates
earned and paid for the Company's major categories of assets,  liabilities,  and
stockholders' equity for the periods indicated:

                                      -15-
<PAGE>
Table 2 - Interest Yields and Costs (in thousands)
<TABLE>
                                                                Year ended December 31,

                                             1998                                1997                                1996
                                Average                  Yield/   Average                    Yield/     Average               Yield/
                               Balance    Interest       Cost     Balance       Interest      Cost      Balance     Interest    Cost
Assets
<S>                            <C>          <C>          <C>      <C>           <C>          <C>      <C>           <C>        <C>
Fed. funds sold                $     375    $    21      5.60%    $   1,197     $     67     5.60%    $    2,483    $    133   5.36%
Securities:                                                
  Taxable                         38,030      2,410       6.34       41,684        2,710      6.50        39,831       2,524   6.34
  Tax-exempt                      19,442      1,497       7.70       16,681        1,359      8.15        14,875       1,283   8.63
Loans(1)(2)                      194,728     17,661       9.07      156,657       14,887      9.50       147,529      13,952   9.46
                                --------    -------               ---------     --------               ---------    --------
Total earning assets/total
 interest income                 252,575     21,589       8.55      216,219       19,023      8.80       204,718      17,892   8.74
                                            -------                             --------                            --------
Cash and due from banks            6,507                              4,956                                4,474
Unrealized gain                    1,085                                289                                  420
All other assets                   9,428                              8,427                                7,999
Allowance for loan loss          (2,663)                            (2,477)                              (2,462)
                               ---------                        -----------                           ----------
  Total assets                  $266,932                           $227,414                             $215,149
                                ========                           ========                             ========
Liabilities and
  Stockholders' Equity
Interest bearing deposits:
MMDA, Savings/NOW accounts      $ 71,658    $ 2,027      2.83%    $  63,927     $  1,927     3.01%     $  62,076    $  1,854   2.99%
Time                              98,870      5,547       5.61       90,180        5,131      5.69        87,885       4,916   5.59
Fed Funds Purchased               15,767        685       4.35        9,038          369      4.08         8,004         301   3.76
Other Borrowed Money              10,966        656       5.99        4,443          266      5.99         1,893         110   5.81
                                --------  ---------              ----------    ---------              ----------   ---------
Total interest bearing
 liabilities/total
 interest expense                197,261      8,915       4.52      167,588        7,693      4.59       159,858       7,181   4.49
                                             ------                            ---------                            --------
Noninterest bearing deposits      29,324                             22,764                               19,762
All other liabilities              2,136                              1,773                                1,543
Stockholders' Equity:
Accumulated other comprehensive
  income                             716                                191                                  277
Common Stock, Paid-in Capital,
   Retained Earnings              37,495                             35,098                               33,709
                               ---------                          ---------                            ---------
Total liabilities and
  stockholders' equity          $266,932                           $227,414                             $215,149
                                ========                           ========                             ========

Interest spread                             $12,218      4.03%                   $10,931     4.21%                   $10,321   4.25%
                                                         =====                               =====                             =====
Net interest income-FTE                     $12,674                              $11,330                             $10,711
                                            =======                              =======                             =======
Net Interest Margin as
 a Percentage of Average
 Earning Assets - FTE                                    5.02%                               5.24%                             5.23%
                                                         =====                               =====                             =====
</TABLE>
                                      -16-
<PAGE>
(1)      Nonaccruing loans are not significant  during theyears  indicated,  and
         for  purposes of the  computations  above,  are included in the average
         daily loan balances.
(2)      Interest on loans includes net origination fees totaling $183,443 in 
         1998,$249,067 in 1997 and $263,376 in 1996.

     Net interest income is the principal  source of income for the Company.  In
the current year,  tax equivalent net interest  income  increased  $1,344,000 to
$12,674,000, a 11.9% increase from the same period in 1997.

     Net interest  income is the difference  between  interest  earned on loans,
securities,  and other earning assets and interest paid on deposits and borrowed
funds.  In Table 2 and Table 3 the interest  earned on investments  and loans is
expressed on a fully  taxable  equivalent  (FTE) basis.  Tax exempt  interest is
increased to an amount comparable to interest subject to federal income taxes in
order to properly  evaluate the effective  yields earned on earning assets.  The
tax equivalent  adjustment is based on a federal income tax rate of 34%. Table 3
analyzes the reasons for the  increases  and  decreases  in interest  income and
expense. The change in interest due to changes in both balance and rate has been
allocated to change due to balance and change due to rate in  proportion  to the
relationship of the absolute dollar amounts of change in each.

Table 3 - Change in Tax Equivalent Net Interest Income (in thousands)
<TABLE>
                                             1998 Compared to 1997                        1997 Compared to 1996
                                            -----------------------                       ---------------------
                                                   Amount of                                    Amount of
                                              Increase/(Decrease)                          Increase/(Decrease)
                                               Due to Change In                              Due to Change In
                                                                        Net                                           Net
                                                                     Amount of                                     Amount of
                                                     Average         Increase/                                     Increase/
                                     Volume           Rate           (Decrease)       Volume                      (Decrease)
Interest Income
<S>                                  <C>             <C>              <C>           <C>             <C>            <C>
Federal funds sold..............     $     (46)      $       0        $   (46)      $    (72)       $      6       $   (66)

Securities:
   Taxable......................          (232)           (54)           (286)            120             52            172
   Tax Exempt...................            213           (89)             124            149           (59)             90
Loans...........................          3,453          (679)           2,774            867             68            935
                                      ---------     ----------       ---------        -------        -------       --------

Total interest income...........          3,388          (822)           2,566          1,064             67          1,131
                                      ---------     ----------       ---------        -------        -------        -------

Interest Expense
Interest bearing deposits:
   Savings/NOW Accounts.........            219          (119)             100             56             17             73
   Time.........................            488           (72)             416            131             84            215
   Fed Funds Purchased..........            293             23             316             42             26             68
   Other Borrowed Money.........            390              0             390           152               4            156
                                     ----------    -----------      ----------     ----------    -----------        -------
   Total Interest Expense.......          1,390            168           1,222            381            131            512
                                      ---------      ---------       ---------       --------      ---------        -------

Net interest income (FTE).......      $   1,998       $  (654)        $  1,344        $   683       $  ( 64)        $   619
                                      =========       ========        ========        =======       ========        =======
</TABLE>
     The Company's  commitment to  reinvesting  in the  communities it serves is
evident  in its  ratios of loans to  assets  and  loans to  deposits,  which are
generally  greater than the comparable  ratios of the Company's  peers.  This in
turn  translates  into above peer net interest  margin.  (Based on FFIEC uniform
bank performance report.)

     Net interest  income as a percent of total interest  income FTE was 58.7% ,
59.6% and 59.9%, for 1998, 1997 and 1996, respectively.  Net interest margin was
5.02%, 5.24% and 5.23% for the same years.

                                      -17-
<PAGE>
     Interest from loans  represents  81.8%,  78.3% and 78.0% of total  interest
income for 1998,  1997 and 1996,  respectively.  Net interest income is strongly
influenced by results of the Bank's lending activities.

     Total interest expense increased 15.9% from 1997 to 1998 and also increased
7.1% from 1996 to 1997;  such  variances  are detailed in Table 3. Cost of funds
are influenced by economic conditions and activities of the Federal Reserve. The
Bank's asset/liability  committee seeks to manage sources and uses of funds, and
to  monitor  the gap in  maturities  of these  funds to  maintain  a steady  net
interest margin in varying market conditions.


Table 4 - Composition of Average Earning Assets and Interest Paying Liabilities
<TABLE>
                                                                            Year ended December 31
     
                                                                 1998                1997                1996
                                                                 ----                ----                ----
<S>                                                           <C>                 <C>                 <C>
As a percent of average earning assets                                                   
  Loans........................................                 77%                 72%                 72%
  Other earning assets.........................                 23%                 28%                 28%
                                                              -----               -----               -----
     Average earning assets....................                100%                100%                100%

  Savings and NOW accounts.....................                 36%                 38%                 39%
  Time deposits................................                 50%                 54%                 55%
  Other borrowings.............................                 14%                  8%                  6%
                                                              -----               -----               -----
     Average interest bearing liabilities......                100%                100%                100%

Earning asset ratio............................                 95%                 95%                 95%
</TABLE>

Table 5 - Noninterest Income (in thousands)
<TABLE>

                                                                               Year Ended December 31
                                                                 1998                 1997                 1996
                                                                 ----                 ----                 ----
<S>                                                         <C>                  <C>                  <C>
Service charges on deposit accounts .........               $   588               $  527               $  529

Net gains on asset sales:
  Loans......................................                 1,367                  414                  133
  Securities.................................                   204                   66                   13
Other income.................................                   500                  535                  400
                                                           --------              -------              -------
     Total noninterest income................                $2,659               $1,542               $1,075
                                                             ======               ======               ======
</TABLE>

Noninterest Income

     Noninterest income consists of service charges on deposit accounts, service
fees,  gains from sales of investment  securities  available-for-sale  and gains
from sales of loans to the Federal Home Loan Mortgage Corporation (Freddie Mac).
The Company  retains the  servicing  rights on these loans.  Noninterest  income
increased $1,117,000 or 72% for 1998 versus 1997. The increase was primarily due
to a  $953,000  increase  in gains on real  estate  mortgage  loan  sales  and a
$138,000 increase on gains of securities available-for-sale.

                                      -18-
<PAGE>
Table 6  Net Gains on the Sale of Real Estate Mortgage Loans (in thousands)
<TABLE>
                                                                           Year ended December 31
                                                                1998                1997                  1996
                                                                ----                ----                  ----
<S>                                                        <C>                 <C>                   <C>
Total Real estate mortgage loan
      originations...........................              $91,446             $39,112               $40,934

Real estate mortgage loan sales..............               72,075              20,567                21,784

Real estate mortgage loans servicing
    rights sold..............................                    0                   0                     0

Net gains on the sale of real
    estate mortgage loans....................                1,367                 414                   133

Net gains as a percent of real
    estate mortgage loan sales...............                1.90%               2.01%                 0.61%
</TABLE>

     Net gains on the sale of real estate  mortgage  loans  totaled  $1,367,000,
$414,000 and $133,000 in 1998,  1997 and 1996,  respectively.  The increase from
1997 to  1998  of  $953,000  was a  result  of a more  favorable  interest  rate
environment. The increase from 1996 to 1997 of $281,000 was a result of adopting
SFAS No. 125 and a more favorable interest rate environment.

     The Bank sells the majority of its fixed-rate  obligations.  Such loans are
sold without recourse. The Bank retains servicing rights on real estate mortgage
loans sold.  The impact of new accounting  standards in 1996 (see  Discussion of
SFAS No.'s 122 and 125 in Notes to Consolidated  Financial  Statements) has been
and is expected to continue to be  insignificant  to the Company's  consolidated
financial position and results of operations.

Noninterest Expense

Table 7 - Noninterest Expense (in thousands)
<TABLE>
                                                                            Year ended December 31
                                                                1998                1997                  1996
                                                                ----                ----                  ----
<S>                                                         <C>                 <C>                   <C>
Salaries and employee benefits...............               $3,918              $3,028                $2,650
Occupancy and equipment......................                1,143                 897                   845
FDIC assessment..............................                   28                  27                    17
Postage......................................                  115                 129                   104
Printing and supplies........................                  268                 118                   132
Marketing....................................                  213                 163                   161
Michigan Single Business Tax.................                  192                 220                   197
Other........................................                1,457               1,200                 1,063
                                                           -------              ------               -------
  Total noninterest expense..................               $7,334              $5,782                $5,169
                                                            ======              ======                ======
</TABLE>
     Table 7 lists the Bank's most significant noninterest expenses.

     Noninterest  expense  increased  $1,552,000  or 26.8% for 1998 versus 1997.
Salaries  and  employee  benefits  increased  $890,000  to  $3,918,000,  a 29.4%
increase  which was the major factor for the increase in  non-interest  expense.
The increase was primarily due to staffing three new branches.

     Noninterest  expense  increased  $613,000  or  11.9% in 1997  versus  1996.
Salaries and employee benefits increased $378,000 to $3,028,000 a 14.3% increase
which was the major factor for the increase in non-interest expense.

                                      -19-
<PAGE>
     The 1997  increases in salary and employee  benefit  expense are related to
increased  staffing,  annual  hourly and salary pay  adjustments  and  increased
medical  insurance  expenses.  The increased  staffing is a long term initiative
that will be utilized to improve asset quality,  regulatory compliance and build
and improve marketing and sales support.

Financial Condition--Summary

     During 1998, total assets increased 24% to $301,493,990, deposits increased
17.6%  to  $217,290,807  and  loans  grew  31.5%  to  $222,133,200.  The Bank is
emphasizing  relationship  banking  and  has  competed  aggressively  to  obtain
deposits and loans.  A discussion  of changes in balance  sheet amounts by major
categories follows:

The Loan Portfolio

     The loan  personnel of the Bank are committed to making  quality loans that
produce a  competitive  rate of return for the Bank and also serve the community
by providing funds for home purchases, business purposes, and consumer needs. It
is  management's  intent to  maintain a loan to  deposit  ratio of at least 80%,
enabling the Company to earn the highest interest rates available on loans. Loan
demand in the Bank's  service area is expected to remain  strong to achieve that
goal.

     The  majority  of loans are made to  businesses  in the form of  commercial
loans and real  estate  mortgages.  The Bank's  consumer  mortgage  activity  is
substantial;  however,  only a small portion of these loans are retained for the
Bank's own portfolio. The Bank does retain servicing rights on substantially all
such sold  loans.  Over the past seven  years the Bank has built an one  hundred
twenty-two  million  dollar  servicing  portfolio  with the  Federal  Home  Loan
Mortgage  Corporation  ("FHLMC").  At December  31, 1998 and 1997,  the Bank was
servicing  loans of $126,651,000  and  $93,000,000,  respectively,  which relate
primarily to residential  mortgages  originated by the Bank. The Bank originated
$91,446,000  (1,073 loans) and $39,112,000 (441 loans) in mortgage loans in 1998
and 1997,  respectively,  and sold to FHLMC  $72,676,000 (872 loans) in 1998 and
$20,567,000  (233 loans) in 1997.  Repayments and early payoffs were $17,768,000
in 1998 and $13,102,000 in 1997.

     The loan portfolio mix at December 31, 1998 consists of 51% commercial real
estate,   17%  residential   real  estate,   18%  commercial  and  14%  consumer
installment.  The growth  rate of the lending  portfolio  was 16.5% from 1996 to
1997 and 31.5% from 1997 to 1998.

     Nearly 80% of loans are placed  within the area the Bank  designates as its
market for purposes of regulatory Community Reinvestment Act ("CRA") compliance.
Nearly all loans are placed  within the  metropolitan  area of Grand  Rapids and
surrounding communities.

Table 8 - Loan Portfolio Composition (in thousands)
<TABLE>
                                                                         Year ended December 31
                                                         1998                      1997                      1996
                                                   Amount         %          Amount          %        Amount         %
<S>                                                 <C>          <C>          <C>          <C>          <C>          <C>
Commercial Real Estate.......................        $114,248     51           $ 90,005     53          $ 72,280     50
Residential Real Estate......................          36,554     17             38,886     23            33,443     23
Other Commercial.............................          40,825     18             26,380     16            27,452     19
Installment..................................          30,506     14             13,682      8            11,894      8
                                                   ----------                 ---------     --         ---------     --
  Total loans...............................          222,133    100%           168,953    100%          145,069    100%
                                                                 ====                      ====                     ====
Less:
Allowance for Loan Losses...................          (2,879)                   (2,565)                  (2,376)
                                                 ------------                ----------               ----------
Total Loans Receivable, Net..................        $219,254                 $166,388                  $142,693
                                                     ========                 =========                 ========
</TABLE>
                                      -20-
<PAGE>
     The lending  policy of the Bank was written to reduce credit risk,  enhance
earnings and guide the lending officers in making credit decisions.  There are 8
levels in the loan authorization procedure depending on the dollar amount of the
loan request.

                 $1,800,001 to $4,500,000   Board of Directors
                 $  750,001 to $1,800,000   Executive Loan Committee
                        0 to $  750,000   Loan Committee
                        0 to $  250,000   Class 1 Lender
                        0 to $  150,000   Class 2 Lender
                        0 to $   75,000   Class 3 Lender
                        0 to $   30,000   Class 4 Lender
                     Student Loans Only   Class 5 Lender

     The class of lender is approved by the Bank's Board of Directors. The Board
of Directors has appointed a Chief Lending  Officer who is  responsible  for the
supervision of the lending  activities of the Bank. The Board has also appointed
a loan review  officer who  monitors  the credit  quality of the loan  portfolio
independent of the loan approval process.  Periodic reviews are submitted by the
loan  review  officers  to the  Chief  Lending  Officer  and these  reviews  are
submitted to the  Audit/Compliance  Committee on a quarterly basis. The Bank has
no foreign  loans and there  were no  concentrations  greater  than 10% of total
loans that are not disclosed as a separate category in Table 8.

     The  extent  of  loan  quality  is   demonstrated  by  the  low  ratios  of
nonperforming  loans and charge offs as a percentage of the loan  portfolio.  As
referenced in more detail in Table 10 below,  the Bank's ratio of  nonperforming
loans to total  loans  at  December  31,  1998 was only  .26%.  The Bank had net
charge-offs of $86,000 in 1998 and net recoveries of $139,000 in 1997.

     Nonperforming  assets  are  comprised  of loans for which  the  accrual  of
interest  has been  discontinued,  accruing  loans  90 days or more  past due in
payments,  collateral  for loans which have been  in-substance  foreclosed,  and
other real estate which has been acquired  primarily through  foreclosure and is
awaiting disposition.  Loans, including loans considered impaired under SFAS No.
118, are generally  placed on a nonaccrual  basis when  principal or interest is
past due 90 days or more and when, in the opinion of management, full collection
of principal and interest is unlikely.

Table 9  Maturities and Sensitivities of Loans to Changes in Interest Rates

     The  following  table  shows the amount of total  loans  outstanding  as of
December 31, 1998 which, based on remaining  scheduled  repayments of principal,
are due in the periods indicated.
<TABLE>
                                                                                       Maturing
                                                                               (in thousands of dollars)
                                                                        After one but
                                                  Within one Year      within five years      After five years     Total
<S>                                               <C>                   <C>                     <C>            <C>
Residential Real Estate..............              $  11,856             $  21,269                $3,429        $ 36,554
Installment..........................                  1,679                27,054                 1,773          30,506
Commercial Real Estate...............                 27,667                76,722                 9,859         114,248
Other Commercial.....................                 23,021                17,428                   376          40,825
                                                  ----------            ----------              --------        --------
      Totals.........................                $64,223              $142,473               $15,437         222,133
                                                     =======              ========               =======
Allowance for Loan Losses............                                                                             (2,879)
                                                                                                              ----------
Total Loans Receivable, Net..........                                                                           $219,254
                                                                                                                ========
</TABLE>
                                      -21-
<PAGE>
     Below  is a  schedule  of the  amounts  maturing  or  repricing  which  are
classified according to their sensitivity to changes in interest rates.
<TABLE>
                                                                                           Interest Sensitivity
                                                                                         (in thousands of dollars)
                                                                        Fixed Rate            Variable Rate          Total
<S>                                                                  <C>                   <C>                <C>
Due within 3 months....................................              $    7,443              $44,563          $  52,006
Due after 3 months within 1 year.......................                  19,341                1,595             20,936
Due after one but within five years....................                 135,349                    0            135,349
Due after five years...................................                  13,842                    0             13,842
                                                                     ----------            ---------         ----------
Total..................................................                $175,975              $46,158            222,133
                                                                       ========              =======
Allowance for loan losses..............................                                                          (2,879)
                                                                                                            -----------
Total loans receivable, net............................                                                        $219,254
                                                                                                               ========
</TABLE>

Table 10 - Nonperforming Assets (in thousands)
<TABLE>
                                                                                            December 31
                                                                             1998              1997              1996
                                                                             ----              ----              ----
<S>                                                                        <C>               <C>               <C>
Nonaccrual loans................................................            $  353            $  105            $1,080
90 days or more past due & still accruing.......................               217               132               114
                                                                           -------           -------               ---
    Total nonperforming loans...................................               570               237             1,194
Other real estate...............................................               116                45                 0
                                                                           -------          --------            ------
    Total nonperforming assets..................................            $  686            $  282            $1,194
                                                                            ======            ======            ======

Nonperforming loans as a percent of total loans.................             0.26%             0.14%             0.82%
Nonperforming assets as a percent of total loans................             0.31%             0.17%             0.82%
Nonperforming loans as a percent of the allowance
    for loan losses.............................................               20%                9%               50%
</TABLE>
     Nonperforming loans equal 20% of the Bank's allowance for loan losses as of
December 31, 1998;  management  believes  that the  allowance for loan losses is
adequate  for these  loans and the  remainder  of the lending  portfolio.  As of
December 31, 1998 there were no other  interest  bearing  assets which  required
classification.  Management  is not aware of any  recommendations  by regulatory
agencies,  which, if implemented,  would have a material impact on the Company's
liquidity, capital or results of operations.

     It is expected  that the  $116,000 in other real estate will be  liquidated
without loss in 1999.

     The table below presents the interest income that would have been earned on
non-performing  loans outstanding at December 31, 1998, 1997, and 1996 had those
loans been accruing  interest in accordance  with the original terms of the loan
agreement  (pro forma  interest)  and the  amount of  interest  income  actually
included in net interest income for those years.

                                      -22-
<PAGE>
Table 11 - Foregone Interest on Non-Performing Loans
<TABLE>
                                                                  For the Year Ended December 31
                                                                          (in thousands)
                                             1998                              1997                              1996
                                 Non-accrual     Restructured    Non-accrual      Restructured     Non-accrual        Restructured
<S>                                 <C>             <C>               <C>              <C>              <C>            <C>  
Pro forma interest                  $33             $  -              $11              $25              $212           $  -
Interest earned                      32                -                8               25                11              -
                                   ----          -------            -----             ----             -----          -----
Foregone interest income           $  1           $  -               $  3             $  0              $201              -
                                   ====           ======             ====             ====              ====          =====
</TABLE>

Table 12 - Loan Loss Experience (in thousands)

     The following is a summary of loan balances (excluding loans held for sale)
at the end of each  period  and their  daily  average  balances,  changes in the
allowance for loan losses arising from loans charged off and recoveries on loans
previously charged off, and additions to the allowance which have been expensed.
<TABLE>
                                                                                       Year ended December 31
                                                                              1998              1997             1996
                                                                              ----              ----             ----
<S>                                                                        <C>               <C>               <C>
Loans:
  Average daily balance of loans for the year....................          $190,472          $155,286          $146,052
  Amount of loans outstanding at end of period...................          $222,133          $168,953          $145,069

Allowance for loan losses
  Balance at beginning of year...................................            $2,565         $   2,376         $   2,305
  Loans charged off:                                                
    Real estate..................................................                 0                 0                 0
    Commercial...................................................                90                 0               108
    Consumer.....................................................               117               124                71
                                                                       ------------         ---------         ---------
        Total charge-offs........................................               207               124               179
  Recoveries of loans previously charged off
    Real estate..................................................                 0                 0                56
    Commercial...................................................                33               224               157
    Consumer.....................................................                88                39                37
                                                                       ------------         ---------         ---------
        Total recoveries.........................................               121               263               250
                                                                        -----------          --------         ---------

  Net (charge off) recoveries....................................              (86)               139                71
  Additions to allowance charged to operations...................               400                50                 0
                                                                        -----------        ----------       -----------
        Balance at end of year...................................         $   2,879          $  2,565         $   2,376
                                                                          =========          ========         =========
Ratios:
  Net (charge offs) recoveries to average daily balance
     of loans for the year.......................................            (.05%)              .09%              .05%
  Allowance for loan losses to loans outstanding at year end.....             1.30%             1.52%             1.64%
</TABLE>

                                      -23-
<PAGE>
Table 13 - Allocation of the Allowance for Loan Losses

     The allowance for loan losses is analyzed  quarterly by  management.  In so
doing,  management  assigns a portion of the allowance to specific  credits that
have been  identified  as problem  loans and reviews past loss  experience.  The
local economy and particular  concentrations are considered, as well as a number
of other factors.
<TABLE>
                                                                 Year ended December 31
                                            1998                          1997                           1996
                                            ----                          ----                           ----
                                                 % of each                      % of each                     % of each
                                                  category                      category                       category
                                  Allowance       to total      Allowance       to total       Allowance       to total
                                   Amount          loans          Amount          loans          Amount         loans
<S>                              <C>              <C>            <C>            <C>             <C>           <C>
Commercial....................      $2,175          68.8%         $1,895          68.9%          $1,734          68.7%
Real estate mortgages.........         310           16.5            205           23.0             188           23.1
Consumer......................         378           13.7            179            8.1             158            8.2
Unallocated...................          16             .0            286             .0             296             .0
                                 ---------      ---------        -------       --------         -------        -------
  Total.......................      $2,879         100.0%         $2,565         100.0%          $2,376         100.0%
                                    ======         ======         ======         ======          ======         ======
</TABLE>
     The above allocations are not intended to imply limitations on usage of the
allowance. The entire allowance is available for any future loans without regard
to loan type.

Investment Securities

     Securities  are purchased and  classified  as  "available-for-sale."  These
securities  may be sold to meet the Bank's  liquidity  needs or to  improve  the
quality of the  investment  portfolio.  The primary  objective of the  Company's
investing  activities  is to  provide  for  safety  of the  principal  invested.
Secondary  considerations include earnings,  liquidity, and the overall exposure
to  changes  in  interest  rates.  The  Company's  net  holdings  of  investment
securities  decreased  $5.4 million in 1998 and increased  $3.7 million in 1997.
The mortgage  backed  securities  are issues of the Federal  Home Loan  Mortgage
Corporation,  GNMA, and FNMA which pay monthly amortized  principal and interest
payments.

Table 14 - Available-for-Sale Securities Portfolio
<TABLE>
                                                                                       Year Ended December 31
                                                                             1998              1997              1996
                                                                             ----              ----              ----
<S>                                                                       <C>             <C>                 <C>
U. S. Treasury and U.S. Government Agencies.....................           $32,453         $  39,176          $ 40,048
State and political subdivisions................................            21,007            19,604            15,880
Other...........................................................             2,887             3,013             2,143
                                                                         ---------        ----------         ---------
                                                                           $56,347         $  61,793          $ 58,071
                                                                           =======         =========          ========
</TABLE>

     Excluding those holdings of the investment  portfolio in U.S.  Treasury and
U.S.  Government Agency  Securities,  there were no investments in securities of
any one issuer which exceeded 10% of shareholders' equity.

                                      -24-
<PAGE>
Table 15 - Schedule of Maturities of Investment Securities and Weighted Average
           Yields

     The following is a schedule of maturities and their weighted  average yield
of each category of investment  securities as of December 31, 1998. The weighted
average interest rates have been computed on a fully taxable  equivalent  basis,
based on  amortized  cost.  The rates shown on  securities  issued by states and
political  subdivisions are stated on a taxable equivalent basis using a 34% tax
rate.
<TABLE>
                                                                                     Maturing
                                                                (Dollars in Thousands)
                                                                                                                Investments With
                            Due Within               One to               Five to                After             No Contractual
                             One Year              Five Years            Ten Years             Ten Years              Maturity
                          Fair       Avg.        Fair       Avg.       Fair       Avg.       Fair       Avg.       Fair       Avg.
                         Value       Yield       Value      Yield      Value     Yield       Value     Yield      Value      Yield
<S>                      <C>        <C>         <C>         <C>       <C>        <C>         <C>       <C>        <C>        <C>
Available for Sale:
U.S. Treasury
and U.S.
Government
Agencies                  $1,383     6.52%      $21,835     6.75%    $  7,471    6.66%       $1,764    6.04%    $      -         -
States and
Political
Subdivisions               1,760    10.30%        6,404     8.82%       9,372    7.48%        3,471    7.48%           -         -
Other Securities               -         -            -         -           -        -            -        -       2,887     7.13%
                          ------    ------      -------               -------                ------              -------
                          $3,143     8.62%      $28,239     7.22%     $16,843    7.12%       $5,235    4.97%      $2,887     7.13%
</TABLE>

Deposits

     Deposits are gathered from the  communities  the Bank serves.  Recently the
Bank has emphasized  relationship  marketing to reinforce the core nature of its
deposit base.

     Table 16  indicates a  relatively  stable base of deposits  spread over the
Bank's  product  lines.  Average total deposits grew 13.0% from 1997 to 1998 and
grew  4.2% from 1996 to 1997.  The  increase  in 1997  resulted  primarily  from
gaining market share and opening three branches.

     The Bank is  continually  enhancing  its  deposit  product.  In addition to
relationship  pricing the Bank has  instituted  telephone and personal  computer
banking as new alternatives to customer access. The Bank operates nine automated
teller machines, three of which are off-site.


Table 16 - Average Daily Deposits (in thousands)
<TABLE>
                                                                         Average for the Year
                                                      1998                          1997                           1996
                                          Amount           % of Assets    Amount          % of Assets    Amount          % of Assets
<S>                                       <C>                   <C>       <C>                 <C>       <C>                  <C>
Noninterest bearing demand...........     $  29,324              11%      $ 22,764             10%      $ 19,762               9%
NOW accounts.........................        15,352               6         12,687              6         11,840               6
MMDA/Savings ........................        56,306              21         51,240             22         50,236              23
Time.................................        98,870              37         90,180             40         87,885              41
                                         ----------             ----     ---------            ----     ---------              ---
   Total Deposits....................      $199,852              75%      $176,871             78%      $169,723              79%
                                           ========             ====      ========            ====      ========              ===
</TABLE>
                                      -25-
<PAGE>
Table 17 - Average Deposit Balances

     The  following  table  sets  forth the  average  deposit  balances  and the
weighted average rates paid thereon:
<TABLE>
                                                                         Average for the Year
                                                       1998                          1997                          1996
                                             Average          Average       Average       Average        Average       Average
                                             Balance            Rate        Balance         Rate         Balance        Rate
<S>                                         <C>                 <C>       <C>               <C>         <C>           <C>
Noninterest bearing demand...........         $29,324                      $ 22,764                     $ 19,762
NOW Accounts.........................          15,352           2.45%        12,687          2.44%        11,840        2.44%
MMDA/Savings.........................          56,306           2.93         51,240          3.16         50,236        3.11
Time.................................          98,870           5.61         90,180          5.69          87,885       5.99
                                             --------           -----     ---------         ------     ---------        ----
   Total Deposits....................       $199,852            3.79%      $176,871          3.99%      $169,723        3.99%
                                            =========                      ========                     ========
</TABLE>

Table 18 - Maturity Distribution of Time Deposits of $100,000 Or More

         The following table  summarizes time deposits in amounts of $100,000 or
more by time remaining until maturity as of December 31, 1998:
<TABLE>
                                                                                        Amount
                     <S>                                                               <C>
                     Three months or less.............................                  $4,663
                     Over 3 months through 6 months...................                   2,552
                     Over 6 months through 1 year....................                    4,454
                     Over 1 year......................................                   3,007
                                                                                       -------
                                                                                       $14,676
                                                                                       =======
</TABLE>
     The Bank operates in a very competitive  environment.  Management  monitors
rates at other  financial  institutions  in the area to ascertain that its rates
are  competitive  with the  market.  Management  also  attempts  to offer a wide
variety  of  products  to meets  the  needs of its  customers.  The Bank  offers
business  and  consumer  checking  accounts,  regular and money  market  savings
accounts, and certificates having many options in their terms.

Market Risk

     The Bank complements its stable core deposit base with alternate sources of
funds,  which  includes  advances  from the Federal Home Loan Bank and on a very
limited  basis,  jumbo  certificates  of deposit  from  outside its market area.
Management  evaluates  the funding  needs and makes a decision  based on current
interest rates and terms whether to fund  internally or from alternate  sources.
To date, the Bank has not employed the use of derivative  financial  instruments
in managing the risk of changes in interest rates.

Capital

     A financial  institution's  capital ratio is looked upon by the  regulators
and the  public as an  indication  of its  soundness.  Table 19  summarizes  the
Company's  regulatory capital and its capital ratios. Also shown are the capital
requirements   established  by  the  regulatory   agencies  for  adequately  and
well-capitalized  institutions.  The Bank's strong  capital ratio puts it in the
best  classification  on which the FDIC bases its assessment  charge. As capital
ratios  continue  to  increase,   management  is  challenged  to  find  ways  to
effectively invest and administer the Bank's resources.

     In 1998, the Company paid cash dividends totaling $2,350,000, approximately
46% of earnings.  In 1997, the Company paid cash dividends totaling  $3,115,620,
approximately  67% of  earnings.  In 1996,  the Company  paid cash  dividends of
$942,389, approximately 22% of earnings.

                                      -26-
<PAGE>
     On  February  2,  1998,  the  Company  paid a special  $1.00 per share cash
dividend.  This  distribution was in addition to the regular dividends for 1998.
The Company  remains in all the top  regulatory  categories  for  adequately and
well-capitalized institutions after paying such dividends.

Table 19 - Capital Resources (in thousands)
<TABLE>
                                                   Regulatory Requirements                       December 31
                                                  Adequately          Well
                                                Capitalized       Capitalized       1998            1997             1996
                                                                                    ----            ----             ----
<S>                                               <C>              <C>          <C>             <C>             <C>
Tier 1 capital.....................                                              $39,232         $35,689          $34,566
Tier 2 capital.....................                                                2,879           2,293            1,976
                                                                               ---------       ---------        ---------
  Total qualifying capital.........                                              $42,111         $37,982          $36,542
                                                                                 =======         =======          =======

Tier 1 leverage ratio..............                4%                5%           13.53%          15.03%           15.97%
Tier 1 risk-based capital..........                4%                6%           16.02%          19.48%           21.92%
Total risk-based capital...........                8%               10%           17.20%          20.74%           23.18%
</TABLE>

Asset/Liability Management

     The Bank's Asset/Liability Management committee ("ALCO") meets regularly to
evaluate  the Bank's  interest  rate  sensitivity  position,  address  issues of
liquidity,  and review the interest margin,  analyzing causes for changes in net
interest  income.  During 1998, the Bank's one year gap position  averaged a 43%
negative gap.

     Management  was able to influence the gap by selling fixed rate  mortgages,
investments/sales  of available-for-  sale securities that met the criteria that
filled the gap position decided by the Asset/Liability Committee.

     The Company's sources of liquidity  include principal  payments received on
loans, maturing investment securities, sale of securities held in the "available
for sale" designation,  customer deposits, borrowings from the Federal Home Loan
Bank of Indianapolis,  other bank borrowings,  Federal Funds and the issuance of
common stock.  The Company has ready access to significant  sources of liquidity
on  an  almost  immediate  basis.   Management   anticipates  no  difficulty  in
maintaining  liquidity  at levels  necessary  to conduct  the Bank's  day-to-day
business activity.

                                      -27-
<PAGE>
Table 20 - Asset/Liability Gap Position (in thousands)
<TABLE>
                                                                          December 31, 1998
                                                    0-3            4-12             1-5             5+
                                                  Months          Months           Years           Years           Total
Interest earning assets:
<S>                                              <C>             <C>            <C>              <C>             <C>
  Loans...................................         $52,006         $20,936        $135,349         $13,842        $222,133
  Securities..............................          10,167           3,970           6,514          35,696          56,347
  Loans held for sale.....................           4,680               -               -               -           4,680
                                                 ---------       ---------     -----------       ---------       ---------
  Total interest earning assets...........         $66,853         $24,906       $141,863          $49,538        $283,160
                                                   =======         =======       =========         =======        ========

Interest bearing liabilities:
  Savings & NOW...........................         $28,241       $       -     $         -         $52,430       $  80,671
  Time....................................          23,547          51,307          26,264               -         101,118
                                                  --------       ---------     -----------   -------------       ---------
  Total deposits..........................          51,788          51,307          26,264          52,430         181,789
  Other borrowings........................          30,126           4,000           8,000               -          42,126
                                                  --------      ----------     -----------   -------------      ----------

   Total interest bearing liabilities.....         $81,914         $55,307       $  34,264         $52,430        $223,915
                                                   -------         -------       ---------         -------

Rate sensitivity gap and ratios:                            
  Gap for period..........................         (15,061)        (30,401)        107,599          (2,892)
  Cumulative gap..........................         (15,061)        (45,462)         62,137          59,245
Ratio for period as a % of assets.........           (5.0)%         (10.1)%          35.7%          (1.0)%
Cumulative rate sensitive ratio as
   a % of assets..........................           (5.0)%         (15.1)%          20.6%          19.7%
</TABLE>
     The savings and NOW accounts are  categorized in the above table based upon
the Bank's historical experience.

Impact of Inflation

     The  majority  of assets and  liabilities  of  financial  institutions  are
monetary in nature. Generally, changes in interest rates have a more significant
impact on earnings of the Bank than inflation. Although influenced by inflation,
changes  in rates do not  necessarily  move in  either  the  same  magnitude  or
direction as changes in the price of goods and services.  Inflation  does impact
the growth of total  assets,  creating a need to  increase  equity  capital at a
higher  rate to  maintain  an  adequate  equity to assets  ratio,  which in turn
reduces the amount of earnings available for cash dividends.

Year 2000

     Because many computerized systems use only two digits to record the year in
date fields (for example, the year 1998 is recorded as 98), such systems may not
be able to  accurately  process  dates  ending in the year 2000 and  after.  The
effects of the issue will vary from  system to system and may  adversely  affect
the ability of a financial  institution's  operations  as well as its ability to
prepare financial statements.

     Company  management has developed and the Board of Directors has approved a
comprehensive  Year 2000 Compliance Plan. The Company has an internal task force
to assess Year 2000 compliance by the Company, its vendors, and major commercial
loan customers.  In addition, the Bank asks commercial borrowers about Year 2000
compliance as part of the loan application and review process.

     To date, the Company has spent approximately $5,000 on Year 2000 compliance
and expects to spend an additional $5,000 to complete this work.

                                      -28-
<PAGE>
     The  Company  presently  anticipates  that it will  complete  its Year 2000
assessment  and  remediation  by December  31,  1999.  However,  there can be no
assurance  that the Company will be  successful  in  implementing  its Year 2000
remediation plan according to the anticipated schedule. In addition, the Company
may be adversely  affected by the  inability of other  businesses  whose systems
interact with the Company to become Year 2000 compliant.

     Although the Company expects its internal systems to be Year 2000 compliant
as described  above,  the Company is in the process of  preparing a  contingency
plan that will  specify  what it plans to do if  important  internal or external
systems are not Year 2000 compliant in a timely manner.

     Management  does  not  anticipate  that the  Company  will  incur  material
operating  expenses  or  be  required  to  invest  heavily  in  computer  system
improvements  to be Year 2000  compliant.  Nevertheless,  the  inability  of the
Company to successfully  address Year 2000 issues could result in  interruptions
in the Company's  business and have a material  adverse  effect on the Company's
results of operations.

Forward Looking Statements

     This report contains certain forward-looking  statements within the meaning
of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities  Exchange  Act  of  1934,  as  amended.   The  Company  intends  such
forward-looking  statements  to be covered  by the safe  harbor  provisions  for
forward-looking  statements  contained in the Private  Securities  Reform Act of
1995,  and is  including  this  statement  for  purposes  of these  safe  harbor
provisions.  Forward-looking statements,  which are based on certain assumptions
and describe  future plans,  strategies  and  expectations  of the Company,  are
generally  identifiable  by use  of the  words  "believe,"  "expect,"  "intend,"
"anticipate,"  "estimate,"  "project"  or  similar  expressions.  The  Company's
ability to predict results or the actual effect of future plans or strategies is
inherently uncertain.  Factors which could have a material adverse affect on the
operations and future prospects of the Company and the subsidiaries include, but
are not limited to, changes in: interest  rates,  general  economic  conditions,
legislative/regulatory  changes,  monetary  and  fiscal  policies  of  the  U.S.
Government,  including  policies of the U.S.  Treasury  and the Federal  Reserve
Board, the quality or composition of the loan or investment  portfolios,  demand
for loan products, deposit flows, competition,  demand for financial services in
the Company's  market area and accounting  principles,  policies and guidelines.
These risks and uncertainties should be considered in evaluating forward-looking
statements and undue reliance should not be placed on such  statements.  Further
information  concerning  the  Company  and its  business,  including  additional
factors  that  could  materially  affect the  Company's  financial  results,  is
included in the Company's filings with the Securities and Exchange Commission.

                                      -29-
<PAGE>
ITEM 7A:  Quantitative and Qualitative Disclosures About Market Risk

     A derivative financial instrument includes futures, forwards, interest rate
swaps,   option  contracts,   and  other  financial   instruments  with  similar
characteristics.  The Company  currently does not enter into futures,  forwards,
swaps, or options.  However, the Company is party to financial  instruments with
off-balance  sheet risk in the normal  course of business to meet the  financing
needs of its  customers.  These  financial  instruments  include  commitments to
extend  credit  and  standby  letters of credit.  These  instruments  involve to
varying  degrees,  elements  of credit and  interest  rate risk in excess of the
amount  recognized in the  consolidated  balance  sheets.  Commitments to extend
credit are  agreements to lend to a customer as long as there is no violation of
any condition  established  in the contract.  Commitments  generally  have fixed
expiration  dates  and may  require  collateral  from  the  borrower  if  deemed
necessary by the Company.  Standby letters of credit are conditional commitments
issued by the  Company to  guarantee  the  performance  of a customer to a third
party up to a stipulated amount and with specified terms and conditions.

     Commitments to extend credit and standby letters of credit are not recorded
as an asset or liability by the Company until the instrument is exercised.

     The Company's exposure to market risk is reviewed on a regular basis by the
Asset/Liability  Committee.  Interest  rate risk is the  potential  of  economic
losses  due to future  interest  rate  changes.  These  economic  losses  can be
reflected as a loss of future net interest  income and/or a loss of current fair
market values. The objective is to measure the effect on net interest income and
to adjust the balance sheet to minimize the inherent risk while at the same time
maximize  income.  Management  realizes  certain risks are inherent and that the
goal is to identify and minimize the risks. Tools used by management include the
standard  GAP report and a  simulation  model.  The  Company  has no market risk
sensitive instruments held for trading purposes. It appears the Company's market
risk is reasonable at this time.

                                      -30-
<PAGE>
Item 8.  Financial Statements and Supplementary Data.



O.A.K. FINANCIAL CORPORATION                           TABLE OF CONTENTS
AND SUBSIDIARY
--------------------------------------------------------------------------------




                                                                            PAGE

Independent Auditors' Report                                                  32

Consolidated Financial Statements

   Consolidated Balance Sheets                                                33

   Consolidated Statements of Income                                          34

   Consolidated Statements of Comprehensive Income                            35

   Consolidated Statements of Changes in Stockholders' Equity                 36

   Consolidated Statements of Cash Flows                                      37

   Notes to Consolidated Financial Statements                              38-52


                                      -31-
<PAGE>
REHMANN
ROBSON
--------------------------------------------------------------------------------
CPA'S & CONSULTANTS - PC                     Member of Summit International
                                             Associates, Inc.
                                             Worldwide Association of
                                             Accounting Firms


                          INDEPENDENT AUDITORS' REPORT




Board of Directors and Stockholders
O.A.K. Financial Corporation and Subsidiary
Byron Center, Michigan

We have audited the accompanying consolidated balance sheets of O.A.K. Financial
Corporation  and  Subsidiary  as of December 31, 1998 and 1997,  and the related
consolidated  statements of income,  comprehensive income,  stockholders' equity
and cash flows for each of the three  years in the  period  ended  December  31,
1998. These consolidated  financial  statements are the responsibility of O.A.K.
Financial Corporation's management.  Our responsibility is to express an opinion
on these consolidated financial statements based on our audits.

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

In our opinion, the consolidated  financial statements referred to above present
fairly, in all material  respects,  the financial  position of O.A.K.  Financial
Corporation  and Subsidiary as of December 31, 1998 and 1997, and the results of
their  operations and their cash flows for each of the three years in the period
ended  December  31,  1998 in  conformity  with  generally  accepted  accounting
principles.



                                             /s/ Rehmann Robson, P.C.



Grand Rapids, Michigan
January 29, 1999


3230 Eagle Park Drive, N.W., Suite 201, - Grand Rapids, MI 49525 - 
Phone (616) 975-4100 - FAX (616) 975-4400

                                      -32-
<PAGE>
O.A.K. FINANCIAL CORPORATION                      CONSOLIDATED BALANCE SHEETS
AND SUBSIDIARY
--------------------------------------------------------------------------------
<TABLE>
                                                                                            December 31,
                                                                                -----------------------------------
ASSETS                                                                             1998                   1997
                                                                                ------------          -------------
<S>                                                                             <C>                   <C>
Cash and due from banks                                                           $8,913,513             $5,367,937
Available-for-sale securities - amortized cost of
     $55,079,539 - 1998 ($60,999,414 - 1997)                                      56,346,568             61,792,674
Loans receivable, net                                                            219,253,824            166,387,650
Loans held for sale                                                                4,679,962              1,345,615
Accrued interest receivable                                                        2,026,185              1,513,146
Premises and equipment, net                                                        7,092,765              4,534,281
Other assets                                                                       3,181,173              2,146,617
                                                                                ------------          -------------
Total assets                                                                    $301,493,990           $243,087,920
                                                                                ============          =============


LIABILITIES AND STOCKHOLDERS' EQUITY

Deposits
     Interest bearing                                                           $181,789,253           $158,243,971
     Noninterest bearing                                                          35,501,554             26,456,357
                                                                                ------------          -------------

Total deposits                                                                   217,290,807            184,700,328

Borrowed funds                                                                    27,752,803             11,300,000
Securities sold under agreements to repurchase                                    14,373,304              8,657,583
Other liabilities                                                                  2,124,091              1,515,231
                                                                                ------------          -------------
Total liabilities                                                                261,541,005            206,173,142
                                                                                ------------          -------------

Stockholders' equity
     Common stock, $1 par value; 4,000,000 shares authorized;
         2,000,000 shares issued and outstanding,
         (1,000,000 shares in 1997)                                                2,000,000              1,000,000
     Additional paid-in capital                                                    5,622,680              5,622,680
     Retained earnings                                                            31,494,055             29,768,536
     Accumulated other comprehensive income                                          836,250                523,562
                                                                                ------------           ------------
Total stockholders' equity                                                        39,952,985             36,914,778
                                                                                ------------           ------------
Total liabilities and stockholders' equity                                      $301,493,990           $243,087,920
                                                                                ============           ============
</TABLE> 
The accompanying notes are an integral part of these consolidated
financial statements.
                                      -33-
<PAGE>
O.A.K. FINANCIAL CORPORATION                 CONSOLIDATED STATEMENTS OF INCOME
AND SUBSIDIARY

--------------------------------------------------------------------------------
<TABLE>
                                                                           Year Ended December 31,
                                                           -------------------------------------------------------
                                                                 1998               1997               1996
                                                           -----------------  -----------------  -----------------
<S>                                                           <C>                <C>                <C>
Interest income
     Loans                                                      $17,629,417        $14,858,954        $13,922,548
     Available-for-sale securities                                3,485,214          3,697,712          3,445,883
     Federal funds sold                                              19,827             67,073            133,136
                                                           -----------------  -----------------  -----------------
Total interest income                                            21,134,458         18,623,739         17,501,567
                                                           -----------------  -----------------  -----------------
Interest expense
     Deposits                                                     7,574,458          7,058,031          6,770,126
     Borrowed funds                                                 849,088            314,015            137,212
     Securities sold under agreements to repurchase                 492,626            320,519            273,350
                                                           -----------------  -----------------  -----------------
Total interest expense                                            8,916,172          7,692,565          7,180,688
                                                           -----------------  -----------------  -----------------
Net interest income                                              12,218,286         10,931,174         10,320,879

Provision for loan losses                                           400,000             50,000                  0
                                                           -----------------  -----------------  -----------------
Net interest income after provision for
     loan losses                                                 11,818,286         10,881,174         10,320,879
                                                           -----------------  -----------------  -----------------
Noninterest income
     Service charges                                                587,786            527,099            529,471
     Net gain on sale of available-for-sale loans                 1,367,075            414,364            133,000
     Loan servicing fees                                            183,735            203,295            180,837
     Net gain on sale of availiable-for-sale securities             204,076             66,190             13,071
     Other                                                          316,633            331,126            218,562
                                                           -----------------  -----------------  -----------------
Total noninterest income                                          2,659,305          1,542,074          1,074,941
                                                           -----------------  -----------------  -----------------
Noninterest expenses
     Salaries and employee benefits                               3,917,992          3,028,338          2,649,626
     Occupancy                                                      465,271            384,237            361,280
     Furniture and fixtures                                         678,055            512,896            483,930
     Michigan single business tax                                   192,042            220,000            197,000
     Printing and supplies                                          267,682            117,941            132,251
     Other                                                        1,813,030          1,518,062          1,344,441
                                                           -----------------  -----------------  -----------------
Total noninterest expenses                                        7,334,072          5,781,474          5,168,528
                                                           -----------------  -----------------  -----------------
Income before federal income taxes                                7,143,519          6,640,974          6,227,292

Federal income taxes                                              2,068,000          2,015,000          1,852,000
                                                           -----------------  -----------------  -----------------
Net income                                                       $5,075,519         $4,625,974         $4,375,292
                                                           =================  =================  =================
Net income per basic share of common stock                            $2.54              $2.30              $2.17
                                                           =================  =================  =================
</TABLE>
The  accompanying  notes are an integral  part of these  consolidated  financial
statements.
                                      -34-
<PAGE>
O.A.K. FINANCIAL CORPORATION                      CONSOLIDATED STATEMENTS OF
AND SUBSIDIARY                                       COMPREHENSIVE INCOME

--------------------------------------------------------------------------------
<TABLE>
                                                                           Year Ended December 31,
                                                          ----------------------------------------------------------
                                                                1998                1997                 1996
                                                          -----------------   -----------------    -----------------
<S>                                                          <C>                  <C>                 <C>
Unrealized gains (losses) on available-
     for-sale securities arising during the year                  $676,764            $491,830            ($591,457)

Less reclassification adjustment for realized
     gains included in net income                                  204,076              66,190               13,071
                                                          -----------------   -----------------    -----------------
Comprehensive income (loss)
     before income taxes                                           472,688             425,640             (604,528)

Related income taxes (benefit)                                     160,000             145,000             (205,000)
                                                          -----------------   -----------------    -----------------

Other comprehensive income (loss)                                  312,688             280,640             (399,528)

Net income                                                       5,075,519           4,625,974            4,375,292
                                                          -----------------   -----------------    -----------------
Comprehensive income                                            $5,388,207          $4,906,614           $3,975,764
                                                          =================   =================    =================
</TABLE>


The  accompanying  notes are an integral  part of these  consolidated  financial
statements.
                                      -35-
<PAGE>
O.A.K. FINANCIAL CORPORATION                 CONSOLIDATED STATEMENTS OF
AND SUBSIDIARY                               CHANGES IN STOCKHOLDERS' EQUITY
--------------------------------------------------------------------------------
<TABLE>
                                                                             Year Ended December 31,
                                                              -------------------------------------------------------
                                                                    1998               1997               1996
                                                              -----------------  -----------------  -----------------
<S>                                                               <C>              <C>                   <C>
Shares of common stock issued and outstanding
     Balance, beginning of year                                      1,000,000          1,006,174            915,562
     Common stock dividends                                          1,000,000                  0             91,522
     Repurchases and retirements                                             0             (6,174)              (910)
                                                              -----------------  -----------------  -----------------
     Balance, end of year                                            2,000,000          1,000,000          1,006,174
                                                              =================  =================  =================

Common stock
     Balance, beginning of year                                     $1,000,000         $1,006,174           $915,562
     Common stock dividends                                          1,000,000                  0             91,522
     Repurchase and retirement of common shares                              0             (6,174)              (910)
                                                              -----------------  -----------------  -----------------
     Balance, end of year                                            2,000,000          1,000,000          1,006,174
                                                              -----------------  -----------------  -----------------

Additional paid-in-capital
     Balance, beginning of year                                      5,622,680          6,036,338          6,084,056
     Repurchase and retirement of common shares                              0           (413,658)           (47,718)
                                                              -----------------  -----------------  -----------------
     Balance, end of year                                            5,622,680          5,622,680          6,036,338
                                                              -----------------  -----------------  -----------------

Retained earnings
     Balance, beginning of year                                     29,768,536         28,258,182         24,916,801
     Net income                                                      5,075,519          4,625,974          4,375,292
     Common stock dividends                                         (1,000,000)                 0            (91,522)
     Cash dividends                                                 (2,350,000)        (3,115,620)          (942,389)
                                                              -----------------  -----------------  -----------------
     Balance, end of year                                           31,494,055         29,768,536         28,258,182
                                                              -----------------  -----------------  -----------------
Accumulated other comprehensive income
     Balance, beginning of year                                        523,562            242,922            642,450
     Other comprehensive income (loss)                                 312,688            280,640           (399,528)
                                                              -----------------  -----------------  -----------------
     Balance, end of year                                              836,250            523,562            242,922
                                                              -----------------  -----------------  -----------------
Total stockholders' equity                                         $39,952,985        $36,914,778        $35,543,616
                                                              =================  =================  =================
</TABLE>

The  accompanying  notes are an integral  part of these  consolidated  financial
statements.
                                      -36-
<PAGE>
O.A.K. FINANCIAL CORPORATION                      CONSOLIDATED STATEMENTS OF
AND SUBSIDIARY                                           CASH FLOWS
--------------------------------------------------------------------------------
<TABLE>
                                                                            Year Ended December 31,
                                                              --------------------------------------------------------
                                                                    1998                1997               1996
                                                              ------------------  -----------------  -----------------
<S>                                                                <C>                <C>              <C>
Cash flows from operating activities
     Net income                                                      $5,075,519         $4,625,974         $4,375,292
     Adjustments to reconcile net income to net
         cash provided by operating activities
              Depreciation and amortization                             553,789            459,915            441,655
              Provision for possible loan losses                        400,000             50,000                  0
              Proceeds from sales of loans held
              for sale                                               73,442,003         20,981,500         21,917,000
              Originations of loans held for sale                   (75,409,274)       (19,979,751)       (21,784,000)
              Net gain on sale of available-for-sale
              securities                                               (204,076)           (66,190)           (13,071)
              Net gain on sale of loans held for sale                (1,367,075)          (414,364)          (133,000)
              Net amortization of investment premiums                   203,231            196,390            211,107
              Changes in operating assets and liabilities
              which (used) provided cash
              Accrued interest receivable                              (513,039)           (59,748)           116,746
              Other assets                                           (1,034,556)          (223,816)          (104,533)
              Other liabilities                                         608,860            290,516           (147,407)
                                                              ------------------  -----------------  -----------------
Net cash provided by operating activities                             1,755,382          5,860,426          4,879,789
                                                              ------------------  -----------------  -----------------

Cash flows from investing activities
     Available-for-sale securities
         Proceeds from maturities                                    11,773,936         10,278,679          9,466,608
         Proceeds from sales                                          2,213,374          7,445,638          3,159,555
         Purchases                                                   (8,228,435)       (21,299,916)       (14,019,935)
     Net increase in loans held for investment                      (53,266,174)       (23,744,280)        (3,938,702)
     Purchases of premises and equipment                             (3,111,510)          (335,955)          (477,122)
                                                              ------------------  -----------------  -----------------
Net cash used in investing activities                               (50,618,809)       (27,655,834)        (5,809,596)
                                                              ------------------  -----------------  -----------------
Cash flows from financing activities
     Net increase in non-interest bearing demand
         deposits, NOW accounts and savings deposits                 25,040,906          3,256,194          8,792,535
     Net increase (decrease) in time deposits                         7,549,573         11,223,227         (8,583,471)
     Net borrowed funds                                              16,452,803          8,099,006          1,200,000
     Net increase in securities sold under agreements
         to repurchase                                                5,715,721          1,321,285          2,399,741
     Dividends paid                                                  (2,350,000)        (3,115,620)          (942,389)
     Repurchase and retirement of common shares                               0           (419,832)           (48,628)
                                                              ------------------  -----------------  -----------------
Net cash provided by financing activities                            52,409,003         20,364,260          2,817,788
                                                              ------------------  -----------------  -----------------
Net increase (decrease) in cash and
     cash equivalents                                                 3,545,576         (1,431,148)         1,887,981

Cash and cash equivalents, beginning of year                          5,367,937          6,799,085          4,911,104
                                                              ------------------  -----------------  -----------------
Cash and cash equivalents, end of year                               $8,913,513         $5,367,937         $6,799,085
                                                              ==================  =================  =================
</TABLE>
The  accompanying  notes are an integral  part of these  consolidated  financial
statements.
                                      -37-
<PAGE>
O.A.K. FINANCIAL CORPORATION                      NOTES TO CONSOLIDATED
AND SUBSIDIARY                                    FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

1. BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Business - O.A.K.  Financial Corporation (the ACorporation")  through its wholly
owned  subsidiary,  Byron Center  State Bank (the "Bank")  provides a variety of
financial  services to individuals and businesses in the southern portion of the
greater Grand Rapids,  Michigan area through its seven branches located in Byron
Center, Jamestown, Cutlerville, Hudsonville, Grandville, Moline and Dorr. Active
competition,  principally from other commercial banks and credit unions,  exists
in all of the Bank's principal markets.  The Bank's results of operations can be
significantly  affected  by  changes in  interest  rates or changes in the local
economic environment.

The Bank's  primary  deposit  products  are  interest  and  noninterest  bearing
checking  accounts,  savings  accounts and time deposits and its primary lending
products are commercial loans, real estate mortgages, and consumer loans.

The Bank is a state chartered bank and a member of the Federal Deposit Insurance
Corporation's  ("FDIC")  Bank  Insurance  Fund.  The  Bank  is  subject  to  the
regulations and supervision of the FDIC,  Federal Reserve Bank and the Financial
Institutions  Bureau and undergoes  periodic  examinations  by these  regulatory
authorities (see Note 10).

Use of Estimates - 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 consolidated
financial  statements and the reported  amounts of revenues and expenses  during
the reporting  period.  Actual  results could differ from those  estimates.  The
estimates that are  particularly  susceptible to significant  change in the near
term relate to the  determination  of the allowance for loan losses and the fair
value of certain financial instruments.

Accounting  Policies - The  accounting  policies used in the  preparation of the
accompanying  consolidated  financial  statements conform to predominant banking
industry  practices and are based on generally accepted  accounting  principles.
The principles which materially  affect the  determination of the  Corporation's
consolidated  financial  position or results of  operations  are  summarized  as
follows:

Principles of Consolidation

The consolidated  financial  statements  include the accounts of the Corporation
and the Bank. All significant  intercompany  accounts and transactions have been
eliminated in consolidation.

Comprehensive Income

In 1998, the Corporation  adopted  Statement of Financial  Accounting  Standards
(SFAS) No. 130,  Reporting  Comprehensive  Income.  This  statement  establishes
presentation standards for the reporting and display of comprehensive income and
its components.  Comprehensive income for the Corporation consists of net income
and net  unrealized  gains and losses on available-  for-sale  securities and is
presented in a separate Statement of Comprehensive  Income. The adoption of SFAS
No.  130 had no  impact  on net  income  or  stockholders'  equity.  Prior  year
financial  statements  have been  reclassified  to  conform  to the SFAS No. 130
requirements.

Cash and Cash Equivalents

Cash and cash  equivalents  include  cash on hand,  amounts  due from  banks and
federal funds sold. Generally, federal funds are sold for a one-day period.

Available-For-Sale Securities

All  securities are  classified as  available-for-sale  and are recorded at fair
value. Unrealized appreciation and depreciation, net of the effect of applicable
income taxes, on  available-for-sale  securities are reported as a net amount in
other  comprehensive  income.  Realized  gains or losses on securities  sold are
determined using the specific  identification method. Premiums and discounts are
recognized  in  interest  income  using the  interest  method over the period to
maturity.

Loans held for Investment and Related Income

Loans held for  investment  are stated at their  principal  amount  outstanding.
Interest  on loans is accrued  over the term of the loan based on the  principal
amount  outstanding.  Management  reviews  loans  delinquent  90 days or more to
determine if interest accrual should be discontinued based on the estimated fair
market  value of the or the present  value of estimated  future cash flows.  The
carrying  values of impaired  loans are  periodically  adjusted to reflect  cash
payments,  revised  estimates of future cash flows, and increases in the present
value of

                                      -38-
<PAGE>
O.A.K. FINANCIAL CORPORATION                      NOTES TO CONSOLIDATED
AND SUBSIDIARY                                    FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

expected  cash flows due to the  passage  of time.  Cash  payments  representing
interest  income are  reported  as such.  Other cash  payments  are  reported as
reductions  in carrying  value,  while  increases or decreased due to changes in
estimates  of future  payments  and due to the  passage of time are  reported as
reductions or increases in the provision for loan losses.

Loan fees net of direct loan  origination  costs are deferred and  recognized as
interest income over the term of the loan using the constant yield method.

Mortgage Banking Activities

Loans held for sale are  carried  at the lower of  aggregate  amortized  cost or
market  value.  Lower of cost or market value  adjustments,  as well as realized
gains and losses,  are recorded in current earnings.  SFAS No. 122 as amended by
SFAS No. 125 requires  the Bank to  recognize  as separate  assets the rights to
service  mortgage  loans for others  that have been  acquired by purchase or the
origination  and  subsequent  sale of a loan with servicing  retained.  The fair
value of capitalized  originated  mortgage  servicing rights has been determined
based upon market  value  quotes for similar  servicing.  The impact of adopting
SFAS Nos. 122 and 125 on the Corporation's  consolidated  financial position and
results of operations was not material.

Mortgage  servicing rights are allocated between the loan (without the servicing
rights) and the servicing rights, based on their relative fair values. The costs
allocated  to mortgage  servicing  rights are  recorded as a separate  asset and
amortized  in  proportion  to, and over the life of, the net  servicing  income.
Gains and  losses on the sale of loans,  which are sold  without  recourse,  are
recognized  when  proceeds  from the loan sales are received by the Bank and are
measured by the difference  between the net selling price and the carrying value
of  such  loans.  The  carrying  value  of  the  mortgage  servicing  rights  is
periodically  evaluated for impairment.  Impairment is recognized using the fair
value of individual  stratum of servicing  rights based on the  underlying  risk
characteristics  of  the  serviced  loan  portfolio,  compared  to an  aggregate
portfolio approach under existing accounting guidance.

Foreclosed Real Estate

Real estate  properties  acquired  through,  or in lieu of, loan foreclosure are
initially  recorded at fair value at the date of foreclosure  establishing a new
cost basis.

Allowance for Loan Losses

An allowance for loan losses is recorded because some loans may not be repaid in
full.  The allowance is increased by a provision in the income  statement and by
recoveries on loans previously  charged off. The allowance is decreased as loans
are charged off. A  charge-off,  in whole or in part,  occurs once a significant
probability  of loss  has  been  determined,  with  consideration  given to such
factors  as  the  customer's  financial  condition,  underlying  collateral  and
guarantees.  Collection  efforts  continue and future  recoveries may occur with
respect to loans previously charged off.

Estimating  the risk of loss and the  amount of loss on any loan is  necessarily
subjective.  Management's  evaluation  of the  allowance is based upon  periodic
reviews of the loan  portfolios.  These reviews are performed by the responsible
lending  officers and internal loan review  personnel who consider,  among other
factors,  the  Bank's  past  loan  loss  experience,   the  effects  of  current
developments  with respect to the borrowers,  the estimated  value of underlying
collateral, changes in economic conditions, specific impaired loans, and results
of examinations by bank regulatory authorities.

Impaired loans, as defined,  are measured based on the present value of expected
cash flows  discounted at the loans  effective  interest rate or, as a practical
expedient,  at the  loans  observable  market  price  or at the  fair  value  of
collateral if the loan is collateral dependent.  Loans considered to be impaired
are  reduced to the present  value of expected  future cash flows or to the fair
value of collateral, by allocating a portion of the allowance for loan losses to
such  loans.  If these  allocations  cause  the  allowance  for loan  losses  to
increase, such increase is reported as additional provision for loan losses.

                                      -39-
<PAGE>
O.A.K. FINANCIAL CORPORATION                      NOTES TO CONSOLIDATED
AND SUBSIDIARY                                    FINANCIAL STATEMENTS
--------------------------------------------------------------------------------


Smaller-balance  homogeneous  loans are residential first mortgage loans secured
by one-to-four family residences,  residential  construction loans,  automobile,
home  equity  and  second  mortgage  loans and are  collectively  evaluated  for
impairment.   Commercial  loans  and  first  mortgage  loans  secured  by  other
properties are evaluated individually for impairment. Management uses the Bank's
normal credit analysis information,  including delinquency reports,  non-accrual
listings and an internally  prepared  watch list, to identify loans which should
be evaluated  for  impairment.  A loan is considered  impaired  when  management
concludes it is probable that the borrower will not remit payments in accordance
with the terms of the agreement.  Loans,  or portions  thereof,  are charged off
when deemed  uncollectible.  The nature of  disclosures  for  impaired  loans is
considered  generally  comparable to prior  nonaccrual,  past due,  trouble debt
restructuring and nonperforming asset disclosures.

In management's judgment, the allowance for loan losses is maintained at a level
adequate  to  provide  for  estimated  potential  losses  inherent  in the  loan
portfolio. However, because of uncertainties inherent in the estimation process,
it is possible that the allowance for loan losses may change in the near term.

Premises and Equipment

Premises  and  equipment  are  stated  at cost  less  accumulated  depreciation.
Depreciation is computed using both the  straight-line  and accelerated  methods
over the related assets  estimated  useful lives which generally range from 5 to
approximately 40 years.  Maintenance,  repairs and minor alterations are charged
to  current   operations  as  expenditures  occur  and  major  improvements  are
capitalized.  Management  annually  reviews  these assets to  determine  whether
carrying values have been impaired.

Net Income Per Share

Net income per basic  share of common  stock is  calculated  on the basis of the
weighted average number of shares outstanding, which was approximately 2,000,000
in 1998,  2,010,000 in 1997 and  2,014,000  in 1996,  as adjusted for the common
stock  split in 1998  effected  in the form of a dividend  (Note 17).  Given the
simple capital  structure of the  Corporation,  only basic earnings per share is
presented.

Federal Income Taxes

Income taxes are provided  for the tax effects of  transactions  reported in the
financial statements and consist of the taxes currently due plus deferred taxes.
Deferred  income taxes are  recognized  for  temporary  differences  between the
carrying amounts of assets and liabilities for financial  reporting purposes and
the  amounts  used for  income  tax  purposes.  Deferred  income  tax assets and
liabilities  represent the future tax return  consequences of those differences,
which will either be taxable or deductible  when the assets or  liabilities  are
recorded  or  settled.  As  changes  in income  tax laws or rates  are  enacted,
deferred income tax assets and  liabilities  are adjusted  through the provision
for income taxes.

The Corporation and its subsidiary file a consolidated federal income tax return
on a calendar year basis.

Reclassifications

Certain amounts as originally reported in the 1997 and 1996 financial statements
have been reclassified to conform to the 1998 presentation.

                                      -40-
<PAGE>
O.A.K. FINANCIAL CORPORATION                      NOTES TO CONSOLIDATED
AND SUBSIDIARY                                    FINANCIAL STATEMENTS
--------------------------------------------------------------------------------


2. AVAILABLE-FOR-SALE SECURITIES

The amortized cost, gross unrealized appreciation, gross unrealized depreciation
and  fair  value  of  investment  securities,  all of which  are  classified  as
available-for-sale as of December 31, are as follows:
<TABLE>

                                                                             Gross                   Gross
                                               Amortized                   Unrealized              Unrealized             Fair
1998                                             Cost                     Appreciation            Depreciation            Value
----                                           -----------                ------------           --------------         -------
<S>                                            <C>                         <C>                   <C>                  <C>
U.S. Treasury, government
    agencies and corporations                  $32,109,957                 $  391,951             $48,809              $32,453,099
States and political subdivisions               20,083,303                    927,464               3,577               21,007,190
Other                                            2,886,279                          -                   -                2,886,279
                                              ------------                -----------            --------              -----------
Total                                          $55,079,539                 $1,319,415             $52,386              $56,346,568
                                              ============                ===========            ========              ===========


1997
-----
U.S. Treasury, government
     agencies and corporations                 $38,998,513                   $349,221            $172,346              $39,175,388
States and political subdivisions               18,987,600                    618,246               1,861               19,603,985
Other                                            3,013,301                          -                   -                3,013,301
                                              ------------                  ---------           ---------              -----------
Total                                          $60,999,414                   $967,467            $174,207              $61,792,674
                                              ============                  =========           =========              ===========
</TABLE>
The  amortized  cost  and  fair  value  of   available-for-sale   securities  by
contractual  maturity at December 31, 1998 is shown below.  Expected  maturities
will differ from contractual  maturities because borrowers may have the right to
call or prepay obligations with or without call or prepayment penalties.
<TABLE>

                                                                                      Amortized               Fair
                                                                                         Cost                 Value
                                                                                     ------------         -------------
<S>                                                                                  <C>                 <C>
Due in one year or less                                                              $  2,731,092          $  2,775,450

Due after one year through five years                                                   8,546,336             8,817,447
Due after five years through ten years                                                 15,799,717            16,299,507
Due after ten years                                                                     3,311,763             3,470,779
                                                                                     ------------         -------------
Subtotal                                                                               30,388,908            31,363,183
Mortgage-backed securities                                                             24,690,631            24,983,385
                                                                                     ------------         -------------
Total                                                                                 $55,079,539           $56,346,568
                                                                                     ============         =============
</TABLE>
Investment  income from taxable and  nontaxable  securities  for the years ended
December 31, is as follows:
<TABLE>
                                                                1998                    1997                  1996
                                                            ----------              ----------            ----------
<S>                                                         <C>                     <C>                   <C>
Taxable                                                     $2,410,611              $2,709,564            $2,523,572
Nontaxable                                                   1,074,603                 988,148               922,311
                                                            ----------              ----------            ----------
Total                                                       $3,485,214              $3,697,712            $3,445,883
                                                            ==========              ==========            ==========
</TABLE>
                                      -41-
<PAGE>
O.A.K. FINANCIAL CORPORATION                      NOTES TO CONSOLIDATED
AND SUBSIDIARY                                    FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

Proceeds from sales of available-for-sale  securities during 1998, 1997 and 1996
were  $2,213,374,  $7,445,638 and $3,159,555  respectively.  The gross gains and
gross losses realized on sales for the years ended December 31, are as follows:
<TABLE>
                                                                 1998                    1997                   1996
                                                                 ----                    ----                   ----
<S>                                                           <C>                     <C>                  <C>
Gross realized gains                                          $ 231,259               $ 87,375             $ 19,711
Gross realized losses                                           (27,183)               (21,185)              (6,640)
                                                              ---------               --------             --------
Net realized gain on sale of
     available-for-sale securities                            $ 204,076               $ 66,190              $ 13,071
                                                              =========               ========              ========
</TABLE>

Investment  securities  with a carrying value of  approximately  $34,943,000 and
$23,396,000 at December 31, 1998 and 1997, respectively,  were pledged to secure
public  deposits and for various other purposes as required or permitted by law.
The fair value of these investments approximates carrying value.


3. LOANS

The  Bank  grants  commercial,  consumer  and  residential  loans  to  customers
primarily in a fifteen mile radius of its  branches  which are located  south of
Grand Rapids, Michigan.  Substantially all of the consumer and residential loans
are secured by various  items of property,  while  commercial  loans are secured
primarily by business assets,  and personal  guarantees;  a portion of loans are
unsecured. The source of repayment of approximately 20% of the loan portfolio is
generated from cash flows from developers and owners of commercial real estate.


Major  classifications  of  loans  held for  investment  at  December  31 are as
follows:
<TABLE>
                                                          1998                 1997
                                                          ----                 ----
<S>                                                    <C>                 <C>
Commercial real estate                                  $114,248,448       $ 90,004,939
Residential real estate                                   36,554,021         38,885,996
Commercial                                                40,825,169         26,379,822
Consumer                                                  30,505,562         13,682,323
                                                       -------------       ------------
Total loans receivable, net of deferred loan
    fees of $142,131 - 1998 and $213,259 - 1997          222,133,200        168,953,080
Less allowance for loan losses                             2,879,376          2,565,430
                                                       -------------       ------------
Loans receivable, net                                   $219,253,824       $166,387,650
                                                       =============       ============
</TABLE>

At December 31, 1998, scheduled maturities of loans with fixed rates of interest
are as follows:
<TABLE>
<S>                                                                             <C>
One year or less                                                                 $26,783,988
One to five years                                                                135,349,071
Over five years                                                                   13,842,358
                                                                                ------------
Total                                                                           $175,975,417
                                                                                ============
</TABLE>
                                      -42-
<PAGE>
O.A.K. FINANCIAL CORPORATION                      NOTES TO CONSOLIDATED
AND SUBSIDIARY                                    FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

Variable  rate loans of  $46,157,783  at December 31, 1998 reprice  quarterly or
more frequently.

The Bank  extends  loan  commitments  in the normal  course of  business to meet
financing needs of its customers.  These  commitments to make loans and lines of
credit are  recorded  when  proceeds  are  disbursed.  The Bank follows the same
credit policy to make such commitments, including collateral, as is followed for
those loans  recorded in the financial  statements;  no  significant  losses are
anticipated as a result of these commitments. At December 31, 1998, the Bank had
commitments  for standby  letters of credit of  approximately  $2,532,000,  loan
commitments outstanding of approximately $46,556,000 and unused credit lines and
revolving credit agreements of approximately $48,603,000.

Loans on which the accrual of  interest  has been  discontinued  and those loans
past due 90 days or more  amounted to $570,280 and $237,189 at December 31, 1998
and 1997, respectively.  Interest income that would have been recorded under the
original terms of such loans would have been  approximately  $1,000,  $3,000 and
$201,000 for the years ended December 31, 1998, 1997 and 1996, respectively.

At December 31, 1998 and 1997, the Bank was servicing loans for others amounting
to approximately $127,000,000 and $93,000,000,  respectively; such loans are not
included in the accompanying  consolidated  balance sheets.  Servicing loans for
others generally consists of collecting  mortgage  payments,  maintaining escrow
accounts,   disbursing  payments  to  investors  and  taxing  authorities,   and
foreclosure  processing.  Loan servicing  income is recorded on an accrual basis
and includes  servicing fees from investors and certain  charges  collected from
borrowers, such as late payment fees.

Certain  directors,  executive  officers and their related  interests  were loan
customers of the Bank. All such loans were made on substantially the same terms,
including  interest rates and collateral,  as those  prevailing at the same time
for  comparable  transactions  and do not  represent  more than a normal risk of
collectibility   or  present  other  unfavorable   features.   The  total  loans
outstanding  to  these  customers   aggregated   approximately   $6,420,000  and
$5,615,000 at December 31, 1998 and 1997, respectively; new loans and repayments
during 1998 were approximately $3,767,000 and $2,962,000, respectively.


4. ALLOWANCE FOR LOAN LOSSES

The following is an analysis of changes in the allowance for loan losses for the
years ended December 31:
<TABLE>
                                                              1998                    1997                   1996
                                                              ----                    ----                   ----
<S>                                                          <C>                    <C>                   <C>
Balance, beginning of year                                   $2,565,430             $2,375,970            $2,304,848
Provision for loan losses                                       400,000                 50,000
Recoveries                                                      121,382                263,109               249,854
Loans charged off                                              (207,436)              (123,649)             (178,732)
                                                             ----------             ----------            ----------
Balance, end of year                                         $2,879,376             $2,565,430            $2,375,970
                                                             ==========             ==========            ==========
</TABLE>
                                      -43-
<PAGE>
O.A.K. FINANCIAL CORPORATION                      NOTES TO CONSOLIDATED
AND SUBSIDIARY                                    FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

Information  regarding  impaired loans is as follows for the year ended December
31:
<TABLE>
                                                              1998                    1997                 1996
                                                              ----                    ----                 ----
<S>                                                         <C>                      <C>                 <C>
Balance of impaired loans at year-end                          $570,280               $478,250             $1,079,602

Allowance for loan losses allocated
    to the impaired loan balance                                202,021                 47,716                 75,000

Average investment in impaired loans                            445,645                620,890                847,835

Interest income recognized on
    impaired loans (no interest
    income was recognized on the
    cash basis)                                                  44,818                 42,940                 14,456
</TABLE>

5. PREMISES AND EQUIPMENT

A summary of premises and equipment at December 31 follows:
<TABLE>
                                                                                      1998                   1997
                                                                                --------------           ------------
<S>                                                                             <C>                      <C>
Land                                                                             $   2,099,757            $   880,376
Buildings and improvements                                                           5,252,099              4,369,850
Furniture and equipment                                                              3,714,796              2,760,477
                                                                                --------------           ------------
Total premises and equipment                                                        11,066,652              8,010,703

Less accumulated depreciation                                                        3,973,887              3,476,422
                                                                                --------------           ------------
Premises and equipment, net                                                      $   7,092,765            $ 4,534,281
                                                                                ==============            ===========
</TABLE>


6.   DEPOSITS

The following is a summary of the distribution of deposits at December 31:
<TABLE>
                                                                                     1998                   1997
                                                                                     ----                   ----
<S>                                                                                <C>                    <C>
Interest bearing
  NOW accounts                                                                     $  17,182,308          $  13,114,691
  Savings                                                                             36,980,476             31,576,744
  Money market demand                                                                 26,508,552             19,984,192
  Time, $100,000 and over                                                             14,676,281             11,367,451
  Other time                                                                          86,441,636             82,200,893
                                                                                   -------------         --------------
Total interest bearing                                                               181,789,253            158,243,971

Noninterest bearing demand                                                            35,501,554             26,456,357
                                                                                   -------------         --------------
Total deposits                                                                      $217,290,807           $184,700,328
                                                                                   =============         ==============
</TABLE>
                                      -44-
<PAGE>
O.A.K. FINANCIAL CORPORATION                 NOTES TO CONSOLIDATED
AND SUBSIDIARY                               FINANCIAL STATEMENTS
--------------------------------------------------------------------------------


At December 31, 1998, scheduled maturities of time deposits are as follows:
<TABLE>
<S>                                                                                <C>
1999                                                                               $  74,853,460
2000                                                                                  19,750,295
2001                                                                                   1,834,524
2002                                                                                   2,246,032
2003                                                                                   2,433,606
                                                                                   -------------
Total time deposits                                                                 $101,117,917
                                                                                   =============
</TABLE>

Deposits of Bank directors,  executive officers and their related interests were
approximately   $1,004,000  and  $1,127,000  at  December  31,  1998  and  1997,
respectively.

Interest  expense on time deposits issued in  denominations  of $100,000 or more
was approximately $721,000 in 1998, $520,000 in 1997 and $270,000 in 1996.


7. BORROWED FUNDS

Borrowed funds at December 31, consist of the following obligations:
<TABLE>
                                                                                     1998                     1997
                                                                                     ----                     ----
<S>                                                                             <C>                      <C>
Federal funds purchased                                                           $14,200,000            $  3,300,000
Federal Home Loan Bank advances                                                    12,000,000               6,000,000
Treasury tax and loan note option                                                   1,552,803               2,000,000
                                                                                -------------            ------------
Total borrowed funds                                                              $27,752,803             $11,300,000
                                                                                =============            ============
</TABLE>

Federal funds are generally  purchased  for a one-day  period.  The Federal Home
Loan Bank borrowings are  collateralized  by U.S.  government  agency securities
with a fair value of  approximately  $12,749,000  and $6,892,000 at December 31,
1998 and 1997, respectively. The Federal Home Loan Bank advances at December 31,
1998 are comprised of six $2,000,000  advances with an average  interest rate of
6.03%.  These  advances  mature at dates  ranging from December 14, 1999 through
August 21, 2003. The Treasury Tax and Loan Note option is collateralized by U.S.
Government agency  securities with a fair value of approximately  $2,714,000 and
$2,822,000  at December  31, 1998 and 1997,  respectively.  The Treasury Tax and
Loan Note option is a daily  borrowing  with the Federal  Reserve  Bank,  due on
demand,  at 25 basis points below the national federal fund interest rate (4.75%
at December 31, 1998).


8. SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE

Securities  sold under  agreements  to  repurchase at December 31, 1998 and 1997
mature  within one day from the  transaction  date and have an average  interest
rate of 3.0% and 3.93%,  respectively.  The U.S.  government  agency  securities
underlying the agreements  have a fair value of  approximately  $19,480,000  and
$13,573,000 at December 31, 1998 and 1997, respectively.  Such securities remain
under the control of the Bank. The maximum  amount  outstanding at any month end
during  the  years  ended  December  31,  1998  and  1997  was  $17,272,000  and
$9,661,000,  respectively  with the daily average balance being  $12,195,000 and
$8,158,000, respectively.
                                      -45-
<PAGE>
O.A.K. FINANCIAL CORPORATION                      NOTES TO CONSOLIDATED
AND SUBSIDIARY                                    FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

9. FEDERAL INCOME TAXES

     The  provision  for federal  income  taxes for the years ended  December 31
consists of:
<TABLE>
                                                              1998                 1997               1996
                                                            -----------         -----------         -----------
<S>                                                         <C>                 <C>                 <C>
Current                                                      $1,947,000          $1,953,700          $1,859,000
Deferred (benefit)                                              121,000              61,300              (7,000)
                                                            -----------         -----------         -----------
Federal income taxes                                         $2,015,000          $2,068,000          $1,852,000
                                                            ===========         ===========         =========== 
</TABLE>
A  reconciliation  between federal income tax expense and the amount computed by
applying the statutory federal income tax rate of 34% to income before taxes for
the years ended December 31, is as follows:
<TABLE>
                                                               1998                1997                 1996
                                                            ----------          -----------         ------------
<S>                                                         <C>                 <C>                 <C>
Statutory rate applied to income
    before income taxes                                     $2,428,756           $2,257,829           $2,117,279
Effect of tax-exempt interest
    income                                                    (387,285)            (355,031)            (294,221)
Change in valuation allowance                                        -               64,000               25,000
Other - net                                                     26,529               48,202                3,942
                                                            ----------          -----------         ------------
Federal income taxes                                        $2,068,000           $2,015,000           $1,852,000
                                                            ==========          ===========         ============
</TABLE>
The net deferred income tax asset (liability) as of December 31, is comprised of
the tax effect of the following temporary differences:
<TABLE>
                                                                                    1998                1997
                                                                                ------------        -----------
<S>                                                                             <C>                 <C>
Deferred tax assets
    Allowance for loan losses                                                   $    878,000        $  770,000
    Deferred compensation plan                                                       245,000           224,000
    Deferred loan fees                                                                 3,000             7,000
                                                                                ------------        ----------        
Total deferred tax assets                                                          1,126,000         1,001,000
Valuation allowance                                                                 (719,000)         (719,000)
                                                                                ------------        ----------
Net deferred tax assets                                                              407,000           282,000
                                                                                ------------        ----------
Deferred tax liability
    Discount accretion                                                               (25,000)          (19,000)
    Loan servicing rights                                                           (312,000)          (72,000)
                                                                                ------------        ----------
Total deferred tax liabilities                                                      (337,000)          (91,000)
                                                                                ------------        ----------
Net deferred tax assets entering into the determination of
    the provision for federal income taxes                                            70,000           191,000

Additional deferred tax liability related to
      other comprehensive income                                                    (430,000)         (270,000)
                                                                                ------------        ----------
Net deferred tax liability included in other
    liabilities on the accompanying balance sheets                              $   (360,000)       $  (79,000)
                                                                                ============        ==========
</TABLE>
                                      -46-
<PAGE>
O.A.K. FINANCIAL CORPORATION                      NOTES TO CONSOLIDATED
AND SUBSIDIARY                                    FINANCIAL STATEMENTS
--------------------------------------------------------------------------------


10.  REGULATORY MATTERS

The Bank is subject to various regulatory capital  requirements  administered by
its primary regulator, the Federal Reserve Bank ("FRB"). Failure to meet minimum
capital requirements can initiate certain mandatory and/or discretionary actions
by the FRB. These actions could have a material  effect on the Bank's  financial
statements.  Under FRB capital adequacy guidelines and the regulatory  framework
for prompt  corrective  action,  the Bank must meet specific capital  guidelines
that involve quantitative measures of the Bank's assets, liabilities and certain
off-balance-sheet items as calculated under regulatory accounting standards. The
Bank's capital amounts and  classification  under the prompt  corrective  action
guidelines  are  also  subject  to  regulatory   qualitative   judgments   about
components,  risk  weighting  and other  factors.  Measurements  established  by
regulation  to ensure  capital  adequacy  require the Bank to  maintain  minimum
amounts and ratios of total capital to risk  weighted  assets (as defined in the
regulations),  Tier 1 capital  to risk  weighted  assets  and Tier 1 capital  to
adjusted  total assets (as  defined).  Management  believes,  as of December 31,
1998,  that the Bank  meets all  capital  adequacy  requirements  to which it is
subject.

As of December 31, 1998 the most recent  notification  from the FRB  categorized
the  Bank  as  well  capitalized  under  the  regulatory  framework  for  prompt
corrective  action.  To remain  categorized as well  capitalized,  the Bank must
maintain minimum total risk-based, Tier 1 risk-based, and Tier 1 leverage ratios
as set forth in the  following  table.  The Bank's  actual  capital  amounts and
ratios  are  presented  in  the  table  (dollars  in  thousands).  There  are no
conditions or events since the most recent notification that management believes
has changed the Bank's category.
<TABLE>
                                                                                                    To Be Well
                                                                                                 Capitalized Under
                                                                     For Capital                 Prompt Corrective
                                         Actual                   Adequacy Purposes              Action Provisions
                                   -----------------------       -----------------------       -----------------------
                                   Amount         Ratio          Amount         Ratio          Amount         Ratio
                                   --------       --------       --------       -------        -------        -------
<S>                                <C>            <C>            <C>            <C>            <C>            <C>
As of December 31, 1998
Total capital (to risk
    weighted assets)               $39,305        16.22%         $19,386        >=8.0%         $24,232        >=10.0%
Tier 1 capital (to risk
    weighted assets)               $36,426        14.97%         $ 9,733        >=4.0%         $14,600        >= 6.0%
Tier 1 capital (to
    average assets)                $36,426        13.60%         $10,714        >=4.0%         $13,392        >= 5.0%

As of December 31, 1997
Total capital (to risk
    weighted assets)               $36,147        19.93%         $14,629        >=8.0%         $18,287        >=10.0%
                                                                                                     
Tier 1 capital (to risk
    weighted assets)               $33,880        18.68%         $ 7,256        >=4.0%         $10,884        >= 6.0%
                                                                                               
Tier 1 capital (to
    average assets)                $33,880        14.13%         $ 9,591        >=4.0%         $11,989        >= 5.0%
</TABLE>

The Bank is required to deposit  certain  amounts with the Federal Reserve Bank.
These  reserve  balances  vary  depending  upon the  level of  certain  customer
deposits in the Bank.  At December  31, 1998 and 1997,  those  required  reserve
balances were $1,737,000 and $986,000, respectively.

The Bank is also  subject to  limitations  under the Federal  Reserve Act on the
amount  of loans  or  advances  that  can be  extended  to the  Corporation  and
dividends  that can be paid to the  Corporation.  Approval  is  needed  if total
dividends  declared in any calendar  year exceed the  retained  "net profit" (as
defined in the Federal  Reserve Act) of that year plus the retained "net profit"
of the preceding two years.  The amount that was not subject to this restriction
is approximately $7,400,000 at January 1, 1999.

                                      -47-
<PAGE>
O.A.K. FINANCIAL CORPORATION                      NOTES TO CONSOLIDATED
AND SUBSIDIARY                                    FINANCIAL STATEMENTS
--------------------------------------------------------------------------------


11. RETIREMENT PLANS

Profit  Sharing - The Bank  maintains  a profit  sharing  and a 401(k)  plan for
substantially all employees. Under the 401(k) plan, employees may make voluntary
contributions  based on a percentage of covered  compensation.  The Bank matches
each employee contribution at a rate of up to 50% of the first 3% contributed by
the employee. The profit sharing plan also allows the Bank, at the discretion of
the  Board  of  Directors,  to  provide  an  annual  contribution.   The  Bank's
contributions  to these plans were  $240,200,  $203,055,  and $191,459 for 1998,
1997 and 1996, respectively.

Deferred  Compensation - The Bank sponsors a deferred  compensation plan for all
directors who wish to participate.  The cost of the plan was $152,000,  $109,000
and  $105,000  in  1998,  1997  and  1996,  respectively.  The  accrued  benefit
obligation  for this plan was  $717,578 and $659,448 as of December 31, 1998 and
1997, respectively, and is included in other liabilities. The Bank has purchased
life insurance policies on participating directors.

12. CONTINGENCIES

The Bank is party to litigation arising in the normal course of business. In the
opinion of management,  based on  consultation  with legal counsel,  liabilities
from  such  litigation,  if  any,  would  not  have  a  material  effect  on the
Corporation's  consolidated financial statements.  As a result of acquiring real
estate from foreclosure proceedings, the Bank is subject to potential claims and
possible legal proceedings involving  environmental matters. No such claims have
been asserted at December 31, 1998.

13. FAIR VALUES OF FINANCIAL INSTRUMENTS

The Corporation utilized quoted market prices,  where available,  to compute the
fair value of its  financial  instruments.  In cases where quoted  market prices
were not  available,  the Bank used present  value  methods to estimate the fair
values  of  its  financial  instruments.  These  estimates  of  fair  value  are
significantly  affected  by  the  assumptions  made  and,  accordingly,  do  not
necessarily  indicate  amounts  which  could be  realized  in a  current  market
exchange.  The fair values of certain financial instruments and all nonfinancial
instruments including, among other elements, the estimated earning power of core
deposit accounts, the trained workforce, customer goodwill and similar items are
not required to be  determined.  Accordingly,  the aggregate net fair values are
not necessarily indicative of the underlying value of the Bank.

The following methods and assumptions were used by the Corporation in estimating
the fair value disclosures for financial instruments:

Cash and Cash  Equivalents - The carrying amounts reported in the balance sheets
for cash approximate those assets' fair values.

Investment  Securities  - Fair  values for  investment  securities  are based on
quoted market prices.

Loans  Receivable - For variable rate loans that reprice  frequently and with no
significant change in credit risk, fair values approximate  carrying values. The
fair values for other loans are estimated  using  discounted cash flow analysis,
using  interest  rates  currently  being offered for loans with similar terms to
borrowers  of similar  credit  quality.  The  resulting  amounts are adjusted to
estimate  the effect of  declines,  if any, in the credit  quality of  borrowers
since the loans were originated.

Loans Held for Sale - The fair value of loans held for sale,  including the fair
value of associated mortgage servicing rights, is estimated based on the present
value of estimated  future cash flows of the loan and related  servicing  rights
using a discount rate commensurate with the risks associated with the respective
financial instruments.

Deposit  Liabilities  - The fair values  disclosed  for demand  deposits  (e.g.,
interest and noninterest checking,  passbook savings, and money market accounts)
are, by definition,  equal to the amount  payable on demand.  The fair values of
approximately  53% and 50% of the Bank's deposits at December 31, 1998 and 1997,
respectively  were equal to their  carrying  values.  Fair values for fixed rate
time deposits and other time deposits  with stated  maturities  are based on the
discounted value of contractual cash flows, using interest rates currently being
offered for deposits of similar remaining maturities.

Securities  Sold Under  Agreements to  Repurchase  Fair value  approximates  the
carrying value since the majority of these  instruments were entered into at our
near December 31, 1998 and 1997.

                                      -48-
<PAGE>
O.A.K. FINANCIAL CORPORATION                      NOTES TO CONSOLIDATED
AND SUBSIDIARY                                    FINANCIAL STATEMENTS
--------------------------------------------------------------------------------


Borrowed Funds - The carrying  amount is a reasonable  estimate of fair value of
other  borrowings  as these  financial  instruments  are tied to  floating  rate
indices such as prime and LIBOR, and reprice frequently.

Off-Balance-Sheet  Instruments - Commitments to extend credit were evaluated and
fair value was estimated using the fees currently  charged to enter into similar
agreements,  taking into consideration the remaining terms of the agreements and
the  present  credit  worthiness  of the  counterparties.  For  fixed-rate  loan
commitments,  fair value also considers the difference between current levels of
interest  rates and the  committed  rates.  As the Bank does not charge fees for
lending  commitments,  it is not practicable to estimate the fair value of these
instruments.

The estimated  fair values of the Bank's  financial  instruments at December 31,
are as follows:
<TABLE>
     1998                                                                           Carrying             Fair
     ----                                                                            Amount             Value
                                                                                --------------      --------------
<S>                                                                             <C>                 <C>
Financial assets
    Cash and cash equivalents                                                   $    8,913,513      $    8,913,513
    Available-for-sale securities                                                   56,346,568          56,346,568
    Loans receivable, net                                                          219,253,824         223,293,988
    Loans held for sale                                                              4,679,962           4,679,962
    Accrued interest receivable                                                      2,026,185           2,026,185

Financial liabilities
    Deposits                                                                       217,290,807         218,071,445
    Borrowed funds                                                                  27,752,803          27,913,887
    Securities sold under agreements
      to repurchase                                                                 14,373,304          14,373,304
    Other liabilities                                                                2,124,091           2,124,091


     1997
     ----

Financial assets
    Cash and cash equivalents                                                   $    5,367,937       $   5,367,937
    Available-for-sale securities                                                   61,792,674          61,792,674
    Loans receivable, net                                                          166,387,650         168,077,719
    Loans held for sale                                                              1,345,615           1,345,615
    Accrued interest receivable                                                      1,513,146           1,513,146

Financial liabilities
    Deposits                                                                       184,700,328         185,197,789
    Borrowed funds                                                                  11,300,000          11,314,409
    Securities sold under agreements
      to repurchase                                                                  8,657,583           8,657,583
    Other liabilities                                                                1,515,231           1,515,231
</TABLE>
                                      -49-
<PAGE>
O.A.K. FINANCIAL CORPORATION                      NOTES TO CONSOLIDATED
AND SUBSIDIARY                                    FINANCIAL STATEMENTS
--------------------------------------------------------------------------------


14. SUPPLEMENTAL DISCLOSURES OF CASH FLOWS INFORMATION

Cash paid for interest  and income taxes during the years ended  December 31, is
as follows:
<TABLE>
                                                                1998               1997                 1996
                                                            -----------         ------------        -------------
<S>                                                         <C>                 <C>                 <C>
Interest                                                     $8,838,116           $7,583,946           $7,216,223
                                                            ===========         ============        =============
Income taxes                                                 $1,795,773           $1,941,029           $1,916,713
                                                            ===========         ============        =============
</TABLE>
15. O.A.K. FINANCIAL CORPORATION (PARENT COMPANY ONLY) FINANCIAL INFORMATION

The following summarizes parent company financial information as of December 31,
1998 and 1997 and the related condensed  statements of income and cash flows for
each of the three years in the period ended December 31, 1998:
<TABLE>
                            Condensed Balance Sheets
                                                                                      1998               1997
                                                                                --------------      -------------
<S>                                                                             <C>                 <C>
Assets
    Cash                                                                         $     416,959        $     2,734
    Investment in subsidiary                                                        37,983,469         35,107,243
    Available-for-sale securities                                                    1,612,479          1,804,801
                                                                                --------------      -------------
Total assets                                                                       $40,012,907        $36,914,778
                                                                                ==============      =============
Other liabilities                                                                $      59,922        $         -

Stockholders' equity                                                                39,952,985         36,914,778
                                                                                --------------      -------------
Total liabilities and stockholders' equity                                        $ 40,012,907        $36,914,778
                                                                                ==============      =============
</TABLE>
<TABLE>
                         Condensed Statements of Income
                                                              1998                 1997                 1996
                                                            -----------         -----------         -----------
<S>                                                         <C>                 <C>                 <C>
Income
    Dividends from subsidiary                                $2,362,500          $4,543,040          $1,211,471
    Interest from available-for-sale securities                  59,065              38,876              22,232
    Net realized gain on sale of
      available-for-sale securities                             209,722                   -                   -
                                                            -----------         -----------         -----------
Total income                                                  2,631,287           4,581,916           1,233,703

Other expenses                                                  119,305              38,876              22,232
Income before equity in undistributed net                   -----------         ----------          -----------
    income of subsidiary                                      2,511,980           4,543,040           1,211,471
Equity in undistributed net income of
    subsidiary                                                2,563,539              82,934           3,163,821
                                                            -----------         -----------         -----------
Net income                                                   $5,075,519          $4,625,974          $4,375,292
                                                            ===========         ===========         ===========
</TABLE>
                                      -50-
<PAGE>
O.A.K. FINANCIAL CORPORATION                      NOTES TO CONSOLIDATED
AND SUBSIDIARY                                    FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

<TABLE>
                       Condensed Statements of Cash Flows

                                                           1998                1997                1996
                                                       ------------        ------------        ------------
<S>                                                    <C>                 <C>                 <C>
Cash flows from operating activities
    Net income                                          $ 5,075,519         $ 4,625,974         $ 4,375,292
    Adjustments to reconcile net income
      to net cash provided by operating
      activities:
         Undistributed earnings of subsidiary            (2,563,539)            (82,934)         (3,163,821)
         Changes in other liabilities                        59,922                   -                   -
                                                       ------------        ------------        ------------
Net cash provided by operating
    activities                                            2,571,902           4,543,040           1,211,471
                                                       ------------        ------------        ------------
Cash flows from investing activities
    Available-for-sale securities sold                      204,823                   -                   -
    Available-for-sale securities purchased                 (12,500)         (1,011,272)           (220,453)
                                                       ------------        ------------        ------------
Net cash provided by (used in)
    investing activities                                    192,323          (1,011,272)           (220,453)
                                                       ------------        ------------        ------------
Cash flows from financing activities
    Repurchase and retirement of common
      shares                                                      -            (419,832)            (48,628)
    Dividends paid                                       (2,350,000)         (3,115,620)           (942,389)
                                                       ------------        ------------        ------------
Net cash used in financing activities                    (2,350,000)         (3,535,452)           (991,017)
                                                       ------------        ------------        ------------
Net increase (decrease) in cash and cash
    equivalents                                             414,225              (3,684)                  1

Cash and cash equivalents,
    beginning of year                                         2,734               6,418               6,417
                                                       ------------        ------------        ------------
Cash and cash equivalents,
    end of year                                         $    416,959       $      2,734        $      6,418
                                                       =============       ============        ============
</TABLE>
                                      -51-
<PAGE>
O.A.K. FINANCIAL CORPORATION                 NOTES TO CONSOLIDATED
AND SUBSIDIARY                               FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

16. COMMITMENTS

The Bank  has  remaining  construction  contracts  amounting  to  $2,700,000  on
building construction.


17. STOCKHOLDERS EQUITY

On May 7,  1998,  the  Board  of  Directors  declared  a  2-for-1  split  of the
Corporation's common stock effected on July 1, 1998 in the form of a one-for-one
stock dividend to  shareholders  of record on June 1, 1998. The par value of the
common stock remained at $1 per share. As a result, $1,000,000, representing the
total par value of the new shares issued, was transferred from retained earnings
to common stock.  All  references in the  consolidated  financial  statements to
amounts  per share  and to the  number of  shares  have  been  restated  to give
retroactive effect to the stock split.

18. SUBSEQUENT EVENTS

Acquisition

On  February 1, 1999,  the Bank  established  a  subsidiary,  Byron  Acquisition
Company,  which purchased an Insurance  Agency.  Total  consideration  exchanged
consisted of 28,775  shares of the  Corporation's  stock valued at $1,439,000 in
exchange for 40,000 shares of the Insurance Agency's stock.

Stock Option Plans

On January 28, 1999 the  Corporation's  Board of Directors  adopted,  subject to
shareholder  approval,  a stock  compensation plan for key employees and a stock
option plan for directors.  Together,  a total of 200,000 shares of common stock
are reserved for issuance under the plans.

                                      -52-
<PAGE>
Item 9.  Changes in and Disagreements with Accountants on Accounting and
         Financial Disclosure.

         None

                                    PART III


Item 10.  Directors and Executive Officers of the Registrant.

Directors

     The  information  with respect to Directors and Nominees of the Registrant,
set forth under the caption  "Information About Directors and Nominees" on pages
4 through 5 of the  Company's  definitive  proxy  statement,  as filed  with the
Commission  and dated  March 26,  1999,  relating  to the April 22,  1999 Annual
Meeting of Shareholders, is incorporated herein by reference.

Executive Officers

     The information called for by this item is contained in Part I of this Form
10-K Report.

Item 11.  Executive Compensation.

     The  information  set  forth  under  the  caption  "Executive  Compensation
Summary" on page 6 of the Company's  definitive proxy  statement,  as filed with
the Commission  and dated March 26, 1999,  relating to the April 22, 1999 Annual
Meeting of Shareholders, is incorporated herein by reference.  Information under
the  caption  "Committee  Report  on  Executive  Compensation"  on page 6 of the
definitive  proxy statement is not  incorporated by reference  herein and is not
deemed to be filed with the Securities and Exchange Commission.

Item 12.  Security Ownership of Certain Beneficial Owners and Management.

     The  information  set  forth  under  the  caption  "Voting  Securities  and
Beneficial  Ownership of Management" on page 3 of the Company's definitive proxy
statement,  as filed with the Commission  and dated March 26, 1999,  relating to
the April 22, 1999 Annual Meeting of  Shareholders,  is  incorporated  herein by
reference.

Item 13.  Certain Relationships and Related Transactions.

     The information set forth under the caption "Certain  Transactions" on page
7 of the Company's definitive proxy statement,  as filed with the Commission and
dated  March 26,  1999,  relating  to the  April  22,  1999  Annual  Meeting  of
Shareholders, is incorporated herein by reference.

                                      -53-
<PAGE>
Item 14.  Exhibits, Financial Statement Schedules and Report on Form 8-K.

(a)      1.       Financial Statements

                  Independent Auditors' Report
                  Consolidated Financial Statements
                       Consolidated Balance Sheet as of
                           December 31, 1998 and 1997
                       Consolidated  Statements  of Income for each of the Three
                           Years Ended December 31, 1998, 1997 and 1996
                       Consolidated Statements of Comprehensive  Income for each
                           of the Three Years Ended  December 31, 998,  1997 and
                           1996
                       Consolidated   Statements  of  Changes  in  Stockholders'
                           Equity for each of the Three Years Ended December 31,
                           1998, 1997 and 1996

                       Consolidated  Statements  of Cash  Flows  for each of the
                           Three Years Ended December 31, 1998, 1997 and 1996
                       Notes to Consolidated Financial Statements

         2.       Financial Statement Schedules
                  Not applicable

         3.       Exhibits  (Numbered in accordance  with Item 601 of Regulation
                  S-K) The  Exhibit  Index is  located on the final page of this
                  report on Form 10-K.

(b)      Reports on Form 8-K

         No reports on Form 8-K were filed during the fourth quarter of the year
ended December 31, 1998.

                                      -54-
<PAGE>
                                   SIGNATURES

     Pursuant  to the  requirements  of  Section  13 or 15(d) 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, dated March 11 , 1999.

                                    O.A.K. FINANCIAL CORPORATION


                                    /s/John A. Van Singel    
                                    John A. Van Singel
                                    President, Chief Executive Officer
                                    (Principal Executive Officer)

                                    /s/Martin R. Braun               
                                    Martin R. Braun
                                    Vice President
                                    (Principal Financial and Accounting Officer)


     Pursuant to the  requirements of the Securities  Exchange Act of 1934, this
report has been signed by the following  persons on behalf of the Registrant and
in the capacities and on the dates  indicated.  Each director of the Registrant,
whose signature appears below,  hereby appoints David G. Van Solkema and John A.
Van Singel, and each of them severally, as his or her attorney-in-fact,  to sign
in his or her name and on his or her behalf,  as a director  of the  Registrant,
and to file with the  Commission  any and all  Amendments to this Report on Form
10-K.

       Signature                                                     Date


/s/ Robert Deppe                                                 March 11, 1999
Robert Deppe

/s/ Norman Fifelski                                              March 11, 1999
Norman Fifelski


Dellvan Hoezee


Lois Smalligan

/s/John A. Van Singel                                            March 11, 1999
John A. Van Singel

/s/David Van Solkema                                             March 11, 1999
David Van Solkema

/s/Gerald Williams                                               March 11, 1999
Gerald Williams


                                      -55-
<PAGE>
                                  EXHIBIT INDEX

     The  following  exhibits  are  filed  herewith,  indexed  according  to the
applicable assigned number:

Exhibit
Number

3.        Amendment to the Articles of  Incorporation  of Registrant filed April
          28, 1998,  increasing authorized shares of common stock from 2,000,000
          to 4,000,000 shares.

21        Subsidiaries of Registrant

27        Financial Data Schedule


     The  following  exhibits,  indexed  according  to the  applicable  assigned
number,  were  previously  filed  by the  Registrant  and  are  incorporated  by
reference in this Form 10-K Annual Report.

Exhibit
Number

3.1       Articles  of  Incorporation  of the  Registrant  are  incorporated  by
          reference to Exhibit 3.1 of the Registrant's Registration Statement on
          Form 10, as amended

3.2       Bylaws of the Registrant are  incorporated by reference to Exhibit 3.1
          of the Registrant's Registration Statement on Form 10, as amended

4         Form of Registrant's  Stock  Certificate are incorporated by reference
          to Exhibit 3.1 of the Registrant's  Registration Statement on Form 10,
          as amended

10.1      1999 Stock Compensation Plan,  incorporated by reference to Appendix A
          to the  Registrant's  Definitive Proxy Statement filed with respect to
          its April 22, 1999 annual meeting of shareholders.

10.2      1999  Directors'  Stock  Option  Plan,  incorporated  by  reference to
          Appendix B to the  Registrant's  Definitive Proxy Statement filed with
          respect to its April 22, 1999 annual meeting of shareholders.

10.3      1988 Director Deferred  Compensation Plan is incorporated by reference
          to Exhibit 10 of the Registrant's  Registration  Statement on Form 10,
          as amended


                                      -56-
<PAGE>
Exhibit 3 - Amendment to Articles of Incorporation


                            CERTIFICATE OF AMENDMENT
                        TO THE ARTICLES OF INCORPORATION


     Pursuant to the provisions of Act 284, Public Acts of 1972, as amended, the
undersigned corporation executes the following Certificate:

         1. The present name of the corporation is:

            O.A.K. Financial Corporation

         2. The identification number assigned by the Bureau is: 467-551

         3. The location of the registered office is:

                  2445 - 84th Street, S.W.
                  Byron Center, MI 49315

         4. The following  amendment to the Articles of  Incorporation  was duly
adopted  on the 16th day of April,  1998.  The  amendment  was duly  adopted  in
accordance with Section 611(2) of the Act by the vote of the shareholders.
The necessary votes were cast in favor of the amendment.

     Article  III of the  Corporation's  Articles  of  Incorporation  is  hereby
amended in its entirety to read as follows:

                                   ARTICLE III

     The total authorized capital stock is 4,000,000 shares of a single class of
common stock, par value $1.00 per share. Each such share shall be equal to every
other such share.


                                   Signed this 16th day of April, 1998.


                                   By:  /s/ John A. Van Singel       
                                        John A. Van Singel, President
<PAGE>
Exhibit 21 - Subsidiaries of Registrant - 100% Owned

         Byron Center State Bank
         2445  84th Street, S.W.
         Byron Center, MI  49315

         O.A.K. Financial Services, Inc. (100% owned subsidiary of Byron Center
           State Bank)
         2445  84th Street, S.W.
         Byron Center, MI  49315

         Dornbush Insurance Agency, Inc. (100% owned subsidiary of O.A.K.
           Financial Services, Inc.)
         5445  32nd Avenue
         Hudsonville, MI 49426

                                      -57-

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<PAGE>