# UNITED STATESSECURITIES AND
EXCHANGE COMMISSION Washington, D.C. 20549



# FORM 10-K

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

For the fiscal year
ended December 31, 2004

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
000-22461

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

|MICHIGAN
(State of other jurisdiction of
incorporation or organization) | 38-2817345      
(I.R.S. Employer
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].

Indicate by check mark whether the
registrant is an accelerated filer (as defined in Exchange Act Rule 12-b-2). Yes [X].
  No [__].

State the aggregate market value of
the voting and nonvoting common equity held by non-affiliates of the registrant computed
by reference to the price at which the common equity was sold, or the average bid and
asked prices of such common equity, as of the last business day of the registrants
most recently completed second quarter.

Aggregate Market Value
as of June 30, 2004: $79,925,982

As of February 25, 2005, there were
outstanding 2,034,691 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 21, 2005 are incorporated by reference into Part III of this report.

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# PART I

# Item 1. Business.

# The Company

OAK
Financial Corporation (the Company), was incorporated under the laws of the
State of Michigan on October 13, 1988, for the purpose of becoming a bank holding company.
The Company is registered under the Bank Holding Company Act of 1956, as amended, and owns
the outstanding stock of Byron Bank (the Bank), which is organized under the
laws of the State of Michigan. Aside from the Bank, the Company has no other substantial
assets. The Company conducts no business except for the provision of certain management
and operational services to the Bank, the collection of dividends from the Bank and the
payment of dividends to the Companys stockholders. The executive office of the
Company is located at 2445 84th Street, S.W., Byron Center, Michigan 49315. While the
Companys chief decision makers monitor the revenue streams of various products and
services, operations are managed and financial performance is evaluated on a company wide
basis. Accordingly, all of the Companys operations are considered by Management to
be aggregated in one reportable operating segment.

The
Company and all its subsidiaries are provided staff resources through OAK ELC, an employee
leasing company. OAK ELC provides staffing solely to the Company and its subsidiaries.

# The Bank

The
Bank was organized in 1921 as a Michigan banking corporation. The executive office of the
Bank is 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 a total of 12
offices. 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 suburban population as the Grand Rapids Metropolitan
Area expands.

On
February 17, 2005 the Bank changed its name from Byron Center State Bank to Byron Bank.
Along with the new name, a new logo and new colors were introduced. The name change
reflects the Banks heritage of over 80 years in the banking business and offers a
dynamic new look for the future. The name of the Banks subsidiaries, OAK Financial
Services and Dornbush Insurance Agency were also changed to Byron Investment Services and Byron
Insurance, respectively.

The
Bank provides a broad range of financial products and services through its branch network
in West Michigan. A typical branch includes a full service lobby, most with drive-thru
service and automatic teller machines. The Bank provides a wide range of commercial and
personal banking services, including but not limited to: real estate, consumer and
commercial loans, checking accounts, savings accounts, certificates of deposit, safe
deposit boxes, U.S. Savings Bonds, internet banking, electronic ATM banking, telephone
banking and other electronic banking services. Currently, the Bank does not offer trust
services.

The
Bank owns a subsidiary, Byron Investment Services, Inc., which offers mutual fund products,
securities brokerage services, retirement planning services, investment management and
advisory services. During 2004, Byron Investment Services, Inc. added tax preparation to its list
of available services. This service will allow Byron Investment Services to prepare
customers tax returns and advise them on investment strategies for future tax
savings. Byron Investment Services owns Byron Insurance Agency, Inc., which offers property and
casualty, life, disability and long-term care insurance. On January 24, 2005, Byron
Investment Services, Inc. formed a joint venture between OAK Title Insurance Agency, Inc. and First
Metropolitan Title Co. as members of the new OAK Title Agency, LLC. OAK Title Insurance
Agency, Inc. is a wholly owned subsidiary of Byron Investment Services, Inc.

# Effect of Government
Monetary Policies

Earnings
are affected by domestic economic conditions and the monetary and fiscal policies of the
United States government, its agencies, and the Federal Reserve Board. The Federal Reserve
Boards monetary policies have had, and will likely continue to have, an important
impact on the operating results of commercial banks through its power to implement
national monetary policy in order to, among other things, curb inflation or avoid a
recession. The policies of the Federal Reserve Board have a major effect upon the levels
of bank loans, investments and deposits through its open market operations in United
States government securities, and through its regulation

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of, among other things, the discount
rate on borrowings of member banks and the reserve requirements against member bank
deposits. It is not possible to predict the nature and impact of future changes in
monetary and fiscal policies.

# Bank Competition

The
Bank has twelve offices, one within each of the communities it serves. Within these
communities, its principal competitors are Comerica Bank, Bank One, Fifth-Third Bank,
Flagstar Bank, National City Bank, Huntington Bank, Macatawa Bank, Mercantile Bank of West
Michigan, United Bank of Michigan , and various credit unions. Generally the banks
products, services, and pricing are competitive within the markets served. However, credit
unions, due to favorable tax treatment, frequently offer higher rates on some deposit
products.

The
financial services industry is very competitive. Principal methods of competition include
loan and deposit pricing and the quality of services provided. The deregulation of the
financial service industry has led to increased competition among banks and other
financial institutions for funds, which traditionally have been deposited with commercial
banks. The enactment of the Gramm-Leach-Bliley Act of 1999, which permits the combination
of banks, insurance companies, and securities firms, has also increased competition in the
financial services industry. Management continues to evaluate the opportunities for the
expansion of products and services and additional branching opportunities. Management also
believes the Bank is well positioned to compete effectively with other providers of
financial serves in West Michigan.

# Source of Revenue

The
Banks principal sources of revenue include net interest income and non-interest
income. The net interest revenue is the difference between the interest the Bank earns on
loans and investments and the interest the Bank pays on deposits and other interest
bearing borrowed funds. Non-interest revenue includes fees from the sale of loans, deposit
service charges, insurance premium income, brokerage fees, mortgage banking and other fees
collected for services provided. Mortgage banking revenue includes the gains resulting
from the origination and sale of mortgage loans and fees received for servicing mortgage
loans for others. The sources of income for the three most recent years are as follows:

|% of total revenue:      | 2004 | 2003 | 2002
|------------------------ | ---- | ---- | ----
|                         |     
|Net interest revenue     |      |      |     
|Non-interest revenue     |      |      |     
|Mortgage banking revenue |      |      |     

# Employees

As
of December 31, 2004, the Registrant and subsidiaries employed 153 full-time and 56
part-time persons. Management believes that relations with employees are good.

# 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

On
October 16, 2003, OAK Financial Corporation and the Bank were released from the written
agreement that was entered into on October 4, 2002 with the Federal Reserve Bank of
Chicago and the Michigan Office of Financial and Insurance Services. Release from the
written agreement followed managements compliance with all of the provisions of the
written agreement. The Written Agreement addressed issues including management and asset
quality. While the Written Agreement was in effect, the Company and the Bank required
prior regulatory approval to pay dividends, add new directors, employ new senior executive
officers, and to pay certain severance or related compensation.

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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 Michigan Office of Financial and Insurance Services (OFIS), 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 stockholders 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 OFIS
deems the Banks capital to be impaired, OFIS 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 percent 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.

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. In addition, in certain such cases an application to, and the prior
approval of, the Federal Reserve Board under the BHCA and/or the OFIS under the Michigan
Banking Code, may be required.

With
certain limited exceptions, the BHCA prohibits any bank holding 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.
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
holding 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 holding company.

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Eligible
bank holding companies that elect to operate as financial holding companies may engage in,
or own shares in companies engaged in, a wider range of non-banking activities, including
securities and insurance activities and any other activity that the Federal Reserve Board,
in consultation with the Secretary of the Treasury, determines by regulation or order is
financial in nature, incidental to any such financial activity or complementary to any
such financial activity and does not pose a substantial risk to the safety or soundness of
depository institutions or the financial system generally. The Bank Holding Company Act
generally does not place territorial restrictions on the domestic activities of non-bank
subsidiaries of bank or financial holding companies.

The
Companys common stock is registered under the Securities Exchange Act of 1934, as
amended (the Exchange Act). It is therefore subject to the information, proxy
solicitation, insider trading and other restrictions and requirements of the SEC under the
Exchange Act. On July 30, 2002, President Bush signed into law the Sarbanes-Oxley Act of
2002. The Sarbanes-Oxley Act provides for numerous changes to the reporting, accounting,
corporate governance and business practices of companies as well as financial and other
professionals who have involvement with the U.S. public markets. The SEC continues to
issue new and proposed rules implementing various provisions of the Sarbanes-Oxley Act.
During 2004, the Company became an accelerated filer based on its aggregate market value
as of June 30, 2004. As such, the Company is required to file regulatory reports on an
accelerated basis and is also required to issue a report regarding the companys
system of internal controls.

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 holding 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 for bank holding companies are essentially the same as those described
below for the Bank.

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 stockholders is
          indirectly limited by statutory restrictions on the Banks ability to pay
          dividends described below. Further, in a policy statement, the Federal Reserve
          Board expressed its view that a bank holding company experiencing earnings
          weaknesses should not pay cash dividends exceeding its net income or which can
          only be funded in ways that weaken the bank holding companys financial
          health, such 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. 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, is a member of the Federal Reserve
          System and its deposit accounts are insured by the Bank Insurance Fund (the
          BIF) of the FDIC. As a Federal Reserve System member and a Michigan
          chartered bank, the Bank is subject to the examination, supervision, reporting
          and enforcement requirements of the Federal Reserve Board as its primary federal
          regulator and OFIS, as the chartering authority for Michigan banks. 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 deposits, the maintenance of non-interest bearing reserves on deposit
          accounts, and the safety and soundness of banking practices.

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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 percent of estimated insured deposits. For several years, the BIF
reserve ratio has been at or above the mandated ratio and assessments have ranged from 0
percent of deposits for institutions in the lowest risk category to .27 percent of
deposits in the highest risk category.

FICO
Assessments. 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 to finance the recapitalization of the Federal
Savings and Loan Insurance Corporation, the predecessor to the FDICs Savings
Association Insurance Fund (the SAIF), which insures the deposits of thrift
institutions. From now until 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
ratabasis. It is estimated that FICO assessments during this period will be less than
0.025 percent of deposits.

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

Capital
Requirements. The Federal Reserve has established the following minimum
capital standards for state-chartered, member banks, such as the Bank: a leverage
requirement consisting of a minimum ratio of Tier 1 capital to total average assets of 3
percent for the most highly-rated banks with minimum requirements of 4 percent to 5
percent for all others, and a risk-based capital requirement consisting of a minimum ratio
of total capital to total risk-weighted assets of 8 percent, at least one-half of which
must be Tier 1 capital. Tier 1 capital consists principally of stockholders 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.

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:

|                                                                                                                                                        | Total        
Risk-Based   
Capital Ratio                   | Tier 1
Risk-Based
Capital Ratio                             | Leverage Ratio                                                                                            
|------------------------------------------------------------------------------------------------------------------------------------------------------- | ----------------------------------------------------------- | ----------------------------------------------------------- | ----------------------------------------------------------------------------------------------------------
|                                                                                                                                                        |                                                             |                                                             |                                                                                                           
|Well capitalized              
Adequately capitalized        
Undercapitalized              
Significantly undercapitalized
Critically undercapitalized | 10% or above
 8% or above
Less than 8%
Less than 6%
     -- | 6% or above 
4% or above 
Less than 4%
Less than 3%
     -- | 5% or above
4% or above
Less than 4%
Less than 3%
A ratio of tangible
equity to total assets
of 2% or less

As
of December 31, 2004, the Banks ratios exceeded minimum requirements for the well
capitalized category. (See Liquidity and Capital Resources.)

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.

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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
          income after deducting its losses and bad debts. A Michigan state bank may not
          declare or pay a dividend unless the bank will have surplus amounting to at
          least 20 percent of its capital after the payment of the dividend.

As
a member of the Federal Reserve System, the Bank is required by federal law to obtain the
prior approval of the Federal Reserve Board for the declaration or payment of a dividend,
if the total of all dividends declared by the Banks Board of Directors in any year
will exceed the total of (i) the Banks retained net income (as defined and
interpreted by regulation) for that year plus (ii) the retained net income for the
preceding two years, less any required transfers to surplus. Federal law generally
prohibits a depository institution from making any capital distribution (including payment
of a dividend) or paying any management fee to its holding company if the depository
institution would thereafter be undercapitalized. Further, federal regulatory agencies can
prohibit a banking institution or bank holding company from engaging in unsafe and unsound
business practices and could prohibit payment of dividends if such payment could be deemed
an unsafe and unsound business 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 stockholders of the Company, and to
related interests of such directors, officers and principal stockholders. 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. Pursuant to FDICIA, the FDIC adopted guidelines to
establish operational and managerial standards to promote the safety and soundness of
federally insured depository institutions. The 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.

Investments
and Other Activities. Under federal law and regulations, Federal Reserve
System member banks and 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 regulations, also
prohibits 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 banks primary federal regulator 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 banks primary federal regulator 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, including the privacy of consumer
financial information provisions of the Gramm-Leach-Bliley Act and regulations under the
Equal Credit Opportunity Act, the Fair Credit Reporting Act, the Fair and Accurate Credit
Transactions Act, the Truth in Lending Act, the Real Estate Settlement Procedures Act, and
the Home Mortgage Disclosure Act, and regulations 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 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.

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The
USA Patriot Act.The Patriot Act contains sweeping anti-money laundering
and financial transparency laws. Under the Act and implementing regulations, among other
requirements financial institutions must establish anti-money laundering programs that
include (i) internal policies, procedures, and controls, (ii) specific designation of an
anti-money laundering compliance officer, (iii) ongoing employee training programs, and
(iv) an independent audit function to test the anti-money laundering program. Financial
institutions must also implement a risk-based customer identification program in
connection with opening new accounts. The program must contain requirements for identity
verification, record-keeping, comparison of information to government-maintained lists,
and notice to customers. Bank regulators are directed to consider a holding companys
effectiveness in combating money laundering when ruling on Federal Reserve Act and Bank
Merger Act applications.

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.

Banks
may establish interstate branch networks through acquisitions of other banks. 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 only if specifically authorized by state law.

Michigan
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 Michigan
Office of Financial and Insurance Services, Division of Financial Institutions, (1)
acquisition of Michigan banks by FDIC-insured banks, savings banks or savings and loan
associations located in other states, (2) sale by a Michigan bank of branches to an
FDIC-insured bank, savings bank or savings and loan association located in a state in
which a Michigan bank could purchase branches of the purchasing entity, (3) consolidation
of Michigan banks and FDIC-insured banks, savings banks or savings and loan associations
located in other states having laws permitting such consolidation, (4) establishment 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 a Michigan bank to
establish a branch in such jurisdiction, and (5) establishment by foreign banks of
branches located in Michigan.

Our
annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K,
and all amendments to those reports are available free of charge through a link on our
website at www.BankAtByron.com to the SEC website. The reports are also available through
the SEC website.

Item 2. Properties.

The
Company and the Bank own and operate a total of 12 facilities in Michigan. The facilities
are located in Kent, Ottawa, and Allegan Counties. The individual properties are not
materially significant to the Companys or the Banks business or to the
consolidated financials.

With
the exception of the potential remodeling of certain facilities to provide for the
efficient use of work space or to maintain an appropriate appearance, each property is
considered adequate for current and anticipated needs.

At
the end of 2004, the mortgage center, which was located in a separate facility, was in the
process of being consolidated into the main office in Byron Center. The Company does not
anticipate a continuing need for the facility and plans to list it for sale in 2005.

# Item 3. Legal
Proceedings.

From
time to time, we may be involved in various legal proceedings that are incidental to our
business. In the opinion of management, we are not a party to any current legal
proceedings that are material to our financial condition, either individually or in the
aggregate.

-7-

---



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

None.

# Executive Officers of
the Company

The
Board of Directors appoints the executive officers of the Bank. 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 executive officers (included for information purposes only) as of
December 31, 2004:

|Name                                                           | Age               | Position with Company                                                                                                                                                                                                                                                     | Year Becamean Executive Officer
|-------------------------------------------------------------- | ----------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -------------------------------
|Patrick K. Gill     
James A. Luyk       
Thomas L. Fitzgerald | 53
  
42
  
  
59 | President, Chief Executive Officer and    
Director of the Company and the Bank
Executive Vice President, Chief Financial 
Officer and Chief Operating Officer of the
Company and the Bank
Executive Vice President and Chief Lending
Officer of the Company and the Bank | 2002
2000
2002                 

Prior
to being named  President  and Chief  Executive  Officer in 2002,  Mr. Gill  served as
 President  and Chief Executive Officer of Pavilion Bancorp, Inc. for more than five (5)
years.

Prior
to being named Executive Vice President and Chief Financial Officer in 2000, Mr. Luyk
served as regional controller for Huntington National Bank.

Prior
to being named Executive Vice President and Chief Lending Officer in 2002, Mr. Fitzgerald
served as Executive Vice President, in charge of business development, at National City
Bank for more than five (5) years.

# PART II

# Item 5.  Market Price
and Dividends for Registrant's Common Equity and Related Stockholder Matters.

The
following table sets forth the range of high and low sales prices of the Companys
common stock during 2004 and 2003, based on information available to the Company, as well
as per share cash dividends declared during those periods.

|               | Sales Prices | Cash Dividends Declared
|-------------- | ------------ | -----------------------
|               |              |                        
|               |              |                        
|               |              |                        
|First Quarter  |              |                        
|Second Quarter |              |                        
|Third Quarter  |              |                        
|Fourth Quarter |              |                        
|               |              |                        
|               |              |                        
|               |              |                        
|First Quarter  |              |                        
|Second Quarter |              |                        
|Third Quarter  |              |                        
|Fourth Quarter |              |                        

At February 18, 2005, the Company has
873 record holders of our common stock. In addition, we estimate that there were
approximately 300 beneficial owners of our common stock who own their shares through
brokers or banks. The common stock is traded and quoted on the Over-the-Counter Bulletin
Board under the symbol OKFC.

-8-

---



We
are a holding company and substantially all of our assets are held by our subsidiaries.
Our ability to pay dividends to our shareholders depends primarily on our Banks
ability to pay dividends to us. Dividend payments and extensions of credit to us from our
Bank are subject to legal and regulatory limitations, generally based on capital levels
and current and retained earnings imposed by law and regulatory agencies with authority
over our Bank. The ability of our Bank to pay dividends is also subject to its
profitability, financial condition, capital expenditures and other cash flow requirements.

Item 6. Selected Financial
Data(dollars in thousands, except per share data).

# SUMMARY OF SELECTED
CONSOLIDATED FINANCIAL DATA

|                                      | Year Ended December 31,
|------------------------------------- | -----------------------
|                                      |                        
|                                      |                        
|                                      |                        
|Consolidated Results of Operations:   |                        
|Interest income                       |                        
|Interest expense                      |                        
|                                      |                        
|Net interest income                   |                        
|Provision for loan losses             |                        
|Non-interest income                   |                        
|Non-interest expenses                 |                        
|                                      |                        
|Income before federal income taxes    |                        
|Federal income taxes                  |                        
|                                      |                        
|Net income                            |                        
|                                      |                        
|                                      |                        
|Per Share Data:                       |                        
|Net income                            |                        
|Cash dividends declared               |                        
|Book Value                            |                        
|Weighted average shares outstanding   |                        
|                                      |                        
|Consolidated Balance Sheet Data:      |                        
|Total assets                          |                        
|Loans, net of unearned income         |                        
|Allowance for loan losses             |                        
|Deposits                              |                        
|Stockholders' equity                  |                        
|                                      |                        
|Consolidated Financial Ratios:        |                        
|Tax equivalent net interest income to |                        
|average earning assets                |                        
|Return on average equity              |                        
|Return on average assets              |                        
|Non-performing loans to total loans   |                        
|Efficiency ratio                      |                        
|Dividend payout ratio                 |                        
|Equity to asset ratio                 |                        
|Tier 1 leverage ratio                 |                        

# FORWARD LOOKING
STATEMENTS

This
report includes forward-looking statements as that term is used in the
securities laws. All statements regarding our expected financial position, business and
strategies are forward-looking statements. In addition, the words anticipates,
believes, estimates, seeks, expects,
plans, intends, and similar expressions, as they relate to us or
our management, are intended to identify forward-looking statements. The presentation and
discussion

-9-

---



of the provision and allowance for loan losses and statements concerning future
profitability or future growth or increases, are examples of inherently forward looking
statements in that they involve judgments and statements of belief as to the outcome of
future events. 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 its operations and its future prospects 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 our 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, including additional factors that could materially affect
financial results, is included in the Companys otherfilings with the
Securities and Exchange Commission.

# ITEM 7.

# MANAGEMENTS
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONSFOR THE YEARS ENDED
DECEMBER 31, 2004, 2003 AND 2002

The
following financial review presents managements discussion and analysis of
consolidated financial condition and results of operations during the period of 2002
through 2004. The discussion should be read in conjunction with the Companys
consolidated financial statements and accompanying notes.

# Critical Accounting
Policies

As
described under Supervision and Regulation, the financial services industry is
highly regulated. Furthermore, the nature of the financial services industry is such that,
other than described below, the use of estimates and management judgment are not likely to
present a material risk to the financial statements. In cases where estimates or
management judgment are required, internal controls and processes are established to
provide assurance that such estimates and management judgments are materially correct to
the best of managements knowledge.

Allowance
for loan losses  Accounting for loan classifications, accrual status, and
determination of the allowance for loan losses is based on regulatory guidance. This
guidance includes, but is not limited to, generally accepted accounting principles, the
uniform retail credit classification and account management policy issued by the Federal
Financial Institutions Examination Council and the joint policy statement on the allowance
for loan losses methodologies issued by the Federal Financial Institutions Examination
Council, Federal Deposit Insurance Corporation, and various other regulatory agencies.
Accordingly, the allowance for loan losses includes a reserve calculation based on an
evaluation of loans determined to be impaired, risk ratings, historical losses, loans past
due, general and local economic conditions, trends, portfolio concentrations, collateral
values and other subjective factors.

Commercial
loan rating system and identification of impaired loans  The Company has a
defined risk rating system that is designed to assess the risk of individual loans and
overall risk of the commercial loan portfolio. The system assigns a risk weighting to
factors such as cash flow, collateral, financial condition, operating performance,
repayment history, management, and strength of the industry. An assessment of risk is
performed as a part of the loan approval process as well as periodic updates based on the
circumstances of the individual loan. Also, in addition to routine examinations by bank
regulators, the Company employs external loan review services to assess risk ratings.

Originated
mortgage-servicing rights (OMSR)  The Company records the original
OMSR based on market data. The OMSR is amortized into non-interest
income, in proportion to the period of the estimated future net servicing income of the
underlying financial asset. Additionally, an independent third party valuation is
performed to determine potential impairment of the OMSR as a result of changes
in interest rates and expected future loan repayment speeds. Changes in interest rates or
repayment speeds could have a significant impact on the carrying value of the mortgage
servicing assets.

-10-

---



# FINANCIAL CONDITION

# Summary

Total
assets increased 6 percent during 2004 as a result of the Bank making a concentrated
effort to grow loans and deposits during the year. Total loans increased 12 percent for
the year, due in large part to a 20 percent increase in commercial loans and commercial
real estate loans, which was somewhat offset by a 41 percent decline in consumer indirect
loans, which the Bank has exited. Total deposits also increased 12 percent for the year.
This was mainly the result of a 93 percent increase in NOW accounts, due to a new pricing
strategy for the high-interest checking product. This was somewhat offset by a 13 percent
decline in MMDA and savings accounts and an 8 percent decline in time deposits as the Bank
did not compete aggressively for rate sensitive deposits and decreased its reliance upon
deposits from outside its market area. A discussion of changes in balance sheet amounts by
major categories follows:

# Securities (in thousands)

The
Bank maintains a diversified securities portfolio, which includes obligations of
government sponsored agencies, securities issued by states and political subdivisions,
corporate securities, and mortgage-backed securities. The primary objective of the
Companys investing activities is to provide a source of liquidity, provide for
safety of the principal invested and manage the Banks exposure to changes in
interest rates.

A
relatively high percentage of the Banks security portfolio is pledged. The majority
of the securities pledged are to secure Federal Home Loan Bank borrowings and securities
sold under agreements to repurchase or for other purposes as required or permitted by law.
For administrative purposes, the Bank generally pledges more securities than required. The
Bank was required to have approximately $33 million pledged at December 31, 2004 compared
to $58 million at December 31, 2003.

All
of the Companys securities are classified as available-for-sale. As a result,
changes in market value are recognized as adjustments to the carrying amount on the
balance sheet and gains or losses are reported, net of tax, as an adjustment to the
Banks stockholders equity. The Companys total holdings declined
approximately $4 million in 2004. The slight decline is the result of the asset liability
management of the Bank in relation to the loan and deposit growth the Bank experienced in
2004.

|Securities available-for-sale: | Amortized Cost | Fair Value | Amount Pledged
|------------------------------ | -------------- | ---------- | --------------
|                               |                |            |               
|December 31, 2004              |                |            | $             
|December 31, 2003              |                |            | $             

# Schedule of Maturities
of Investment Securities and Weighted Average Yields

The
following is a schedule of contractual maturities and their weighted average yield of each
category of investment securities as of December 31, 2004. The weighted average interest
rates have been computed on a fully taxable equivalent basis, using a 34 percent tax rate,
based on amortized cost.

|                                  | Maturing
|--------------------------------- | --------
|                                  |         
|
|                                  |         
|                                  |         
|                                  |         
|                                  |         
|Available for Sale:               |         
|US government securities          |         
|Mortgage-backed securities        |         
|States and Political Subdivisions |         
|Other Securities                  |         
|                                  |         
|                                  |         
|                                  |         

-11-

---



# The Loan Portfolio

The
Banks lending policy is intended to reduce credit risk, enhance earnings and guide
the lending officers in making credit decisions. The Board of Directors of the Bank
approves the loan authority for each lender and has appointed a Chief Lending Officer who
is responsible for the supervision of the lending activities of the Bank. In previous
years the Bank appointed an internal loan review officer to monitor the credit quality of
the loan portfolio. During 2005, the Bank will be using the services of an independent
third party to periodically review the credit quality of the loan portfolio, separate from
the loan approval process. These reviews will be submitted to the Risk Management Officer
and to the Audit Committee.

Requests
to the Bank for credit are considered on the basis of the creditworthiness of each
applicant, without consideration of 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 based on cash flow,
collateral, capital and alternative sources of repayment. Loan applications are accepted
at all the Banks offices and are approved within the limits of each lending
officers authority. Secured loan requests in excess of $1,250,000 or unsecured loan
requests in excess of $400,000, are required to be presented to the Board of Directors or
the Directors Loan Committee for review and approval.

The
Bank does not have any foreign loans and there were no concentrations greater than 10
percent of total loans that are not disclosed as a separate category. The Banks
largest concentration of loans is to businesses in the form of commercial loans and real
estate mortgages. Management reviews the concentration, and changes in concentrations of
loans, using the method of coding the commercial loan portfolio by Standard Industrial
Classification (S.I.C.) code. Total consumer loans continue to decline as a result of the
low interest financing provided by the auto industry and the Banks substantial exit
from the consumer indirect business. As of December 31, 2004, the Bank had indirect loans
totaling approximately $10 million, down 41 percent from $18 million at December 31, 2003.
Management expects the indirect consumer loan portfolio to continue to decline during
2005. During 2004, total loans secured by residential real estate increased 7 percent. The
increase was largely comprised of floating rate home equity loans, which increased 60
percent from $20 million at December 31, 2003 to $32 million at December 31, 2004.

It
is the Banks general practice to sell residential real estate loans with maturities
over 15 years. During 2004, the Bank sold loans totaling $43 million with the servicing
rights retained and $25 million with the servicing rights released. At December 31, 2004
and 2003, the Bank was servicing loans totaling approximately $240 million and $257
million, respectively.

In
addition to the communities served by the Banks branches, principal lending markets
include nearby communities and metropolitan areas. Subject to established underwriting
criteria, the Bank participates with other financial institutions to fund certain large
commercial loans, which would otherwise exceed the Banks legal lending limit if made
solely by the Bank.

|Loan Portfolio
Composition (in thousands) | Year ended December 31,
|----------------------------------------- | -----------------------
|                                          |                        
|                                         
|                                          |                        
|                                          |                        
|                                          |                        
|Commercial Real Estate                    |                        
|Residential Real Estate                   |                        
|Commercial                                |                        
|Consumer                                  |                        
|                                          |                        
|Total loans                               |                        
|                                          |                        

Commercial
and Commercial Real-Estate Loans: Business loans are originated for a
variety of purposes, including working capital financing, machinery and equipment
acquisition and the financing of commercial real-estate. The loans are generally secured
by all assets of the borrower and are underwritten based on an assessment of the industry
in which the borrower operates, management, economic conditions, cash flow, owners equity
and collateral. Commercial real-estate loans are secured by properties located in the
Banks primary market area.

-12-

---



Residential
Real-Estate Loans: Residential real-estate loans are originated in the
Banks primary market area. Generally, the Bank sells all salable loans in the
secondary market. Loans are underwritten to the Secondary Market Investors Guidelines
using the automated underwriting system designed by the investor that will be purchasing a
particular loan. On occasion, residential real-estate loans will be retained in the
Banks portfolio. Personal loans secured by the equity in the borrowers
residence are also granted for a variety of needs.

Consumer
Loans: Consumer loans are originated for a variety of purposes including
the acquisition of new and used automobiles, boats and recreational vehicles. Consumer
loans are underwritten based on the borrowers credit history, monthly income,
stability of employment, the amount of the down payment and the type of collateral.

The
Bank experienced significant growth during 2004 in the commercial real estate and
commercial loan portfolios. Commercial real estate loans increased $22 million, or 11
percent and commercial loans increased $27 million, or 55 percent. This is the result of a
concentrated effort by the Bank to grow business loans. Loans secured by residential real
estate increased $6 million or 7 percent during the year. This was mainly the result of a
60 percent increase in home equity lines of credit. Consumer loans declined $10 million,
or 29 percent from December 31, 2003 to December 31, 2004. This is primarily the result of
an $8 million, or 41 percent, intentional decline, in indirect consumer loans.

Management
has taken significant steps over the past two years in the loan administration area to
improve underwriting standards. These changes have improved asset quality, which
management expects to continue. However, asset quality is also dependent upon general and
local economic conditions.

# Non-performing Assets
(in thousands)

Non-performing
assets are comprised of loans for which the accrual of interest has been discontinued,
accruing loans 90 days or more past due in payments and collateral for loans and other
real estate, which has been acquired primarily through foreclosure and is awaiting
disposition. Loans, including loans considered impaired under SFAS No. 118 and SFAS No.
114, are generally placed on a non-accrual 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.

|                                                                   | December 31,
|------------------------------------------------------------------ | ------------
|                                                                   |             
|                                                                  
|                                                                   |             
|Non-accrual loans                                                  |             
|90 days or more past due & still accruing                          |             
|                                                                   |             
|Total non-performing loans                                         |             
|Other real estate                                                  |             
|                                                                   |             
|Total non-performing assets                                        |             
|                                                                   |             
|                                                                   |             
|As a percentage of portfolio loans                                 |             
|Non-performing loans                                               |             
|Non-performing assets                                              |             
|Allowance for loan losses                                          |             
|Allowance for loan losses as a  percentage of non-performing loans |             

The
Banks total non-performing assets as of December 31, 2004 declined 29 percent,
compared to December 31, 2003, which reflects the sale of two commercial properties that
were held as other real estate at the end of 2003 and were sold during 2004. The
Banks management has an aggressive approach to credit management and expects that a
significant portion of the customers, with loans in non-accrual status, will secure
alternative financing and repay their loans to the Bank. In some instances, non-performing
assets are sold to a new borrower of the Bank. As of December 31, 2004 there were no other
interest bearing assets, which required classification.

-13-

---



# Foregone Interest on
Non-Performing Loans (in thousands)

The
table below presents the interest income that would have been earned on non-performing
loans outstanding at December 31, 2004, 2003 and 2002 had those loans been accruing
interest in accordance with the original terms of the loan agreements (pro forma interest)
and the amount of interest income actually included in net interest income for those
years.

|                         | For
the Year Ended December 31,
|------------------------ | -------------------------------
|                         |                                
|                         |                                
|                         |                                
|                         |                                
|Pro forma interest       |                                
|Interest earned          |                                
|                         |                                
|Foregone interest income |                                
|                         |                                

|Allowance for Loan
Losses (dollars in thousands)          | Year Ended December 31,
|--------------------------------------------------------- | -----------------------
|                                                          |                        
|                                                          |                        
|                                                          |                        
|Balance at beginning of year                              |                        
|                                                          |                        
|Charge-offs:                                              |                        
|Commercial real estate                                    |                        
|Residential real estate                                   |                        
|Commercial                                                |                        
|Consumer                                                  |                        
|                                                          |                        
|                                                          |                        
|Recoveries:                                               |                        
|Commercial real estate                                    |                        
|Residential real estate                                   |                        
|Commercial                                                |                        
|Consumer                                                  |                        
|                                                          |                        
|                                                          |                        
|                                                          |                        
|Net charge-offs                                           |                        
|                                                          |                        
|(Reductions) additions to allowance (credited) charged to |                        
|operations                                                |                        
|                                                          |                        
|Balance at end of year                                    |                        
|                                                          |                        
|Net charge-offs as a percent of average loans             |                        

As
discussed under Critical Accounting Policies the Bank establishes an allowance
for loan losses including a reserve calculation based on an evaluation of loans determined
to be impaired, risk ratings, historical losses, loans past due, general and local
economic conditions, trends, portfolio concentrations, collateral value and other
subjective factors. During the fourth quarter of 2004, the Bank was able to reverse $1.1
million of the allowance for loan losses. This is due to the significant improvement in
the Banks asset quality. The allowance for loan losses as a percent of total loans
decreased from 2.31 percent at December 31, 2003 to 1.67 percent at December 31, 2004.

Net
loans charged off for the year, as a percentage of average loans outstanding, decreased
from .18 percent in 2003 to .12 percent in 2004. This is primarily the result of the
reduction of the amount of commercial real estate loans charged off during the year, which
was partially offset by a reduction in the amount of funds recovered on consumer loans.
Net charge-offs in the Real Estate portfolio continue to be very low.

-14-

---



# Allocation of the
Allowance for Loan Losses (dollars in thousands)

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, reviews past loss experience, the local economy and a number of other
factors. Management believes that the allowance for loan losses is adequate.

|                          | Year ended December 31,
|------------------------- | -----------------------
|                          |                        
|                          |                        
|                          |                        
|                          |                        
|                          |                        
|Commercial and commercial |                        
|real estate               |                        
|Real estate mortgages     |                        
|Consumer                  |                        
|Unallocated               |                        
|                          |                        
|Total                     |                        
|                          |                        

In
determining the adequacy of the allowance for loan losses, management determines (i) a
specific allocation for loans when a loss is probable, (ii) an allocation based on credit
risk rating for other adversely rated loans, (iii) an allocation based on historical
losses for various categories of loans, and (iv) subjective factors including local and
general economic factors and trends. The allowance for loan losses as a percent of total
loans reflects managements assessment of the improved quality of the Banks
assets, the decline in non-performing assets and the improving general economic conditions
and labor market.

The
first element reflects our estimate of probable losses based upon our systematic review of
specific loans. These estimates are based upon a number of objective factors, such as
payment history, financial condition of the borrower, and discounted collateral exposure.

The
second element reflects the application of our loan rating system. This rating system is
similar to those employed by state and federal banking regulators. Loans that are rated
below a certain predetermined classification are assigned a loss allocation factor.

The
third element is determined by assigning allocations based principally upon the three-year
average of loss experience for each type of loan. Additionally, an allocation is provided
based on the current delinquency rate for some loan categories. Loss analyses are
conducted at least annually.

The
fourth element is based on factors that cannot be associated with a specific credit or
loan category and reflects our attempt to ensure that the overall allowance for loan
losses appropriately reflects a margin for the imprecision necessarily inherent in the
estimates of expected credit losses. We consider a number of subjective factors when
determining the unallocated portion, including local and general economic business factors
and trends, portfolio concentrations and changes in the size, mix and general terms of the
loan portfolios.

Actual
losses experienced in the future could significantly vary from the estimated allocation of
the loan loss reserve. Changes in local and national economic factors could significantly
affect the adequacy of the allowance for loan losses. While amounts are allocated to
various portfolios as directed by Statement of Financial Accounting Standards No. 114, the
entire allowance for loan losses is available to absorb losses from any portfolio segment.

# Sources of Funds

The
primary sources of funding for the Bank are deposits, which includes brokered deposits,
securities sold under agreements to repurchase, Federal Home Loan Bank advances, federal
funds purchased and other borrowed funds. Non-deposit sources of funding decreased 19
percent or $15 million from December 31, 2003 to December 31, 2004. The decline is the
result of a net reduction of $10 million in Federal Home Loan Bank advances during 2004 as
well as a significant decline in securities sold under agreements to repurchase, as many
of these funds were shifted into NOW and money market accounts. This shift of funds, along
with a concentrated effort to grow deposits and the new pricing strategy for the
Banks high interest checking product, helped to grow the Banks total deposits
during 2004. Total deposits increased $45 million, or 12 percent, from December 31, 2003
to December 31, 2004. The growth in total deposits includes a decline in certificates of
deposit. Certificates of deposit declined $14 million, or 8 percent, during 2004. The
decline in certificates of deposit mainly reflects a decrease in time deposits of less
than $100,000. Time deposits less than $100,000 declined $19 million, or 20 percent,
during 2004. This was partially due to the Bank not being as aggressive in retaining rate
sensitive deposits by not offering as many premium priced certificates in 2004 as in prior
years. Time deposits over $100,000 increased $4 million, or 6 percent, during 2004. This
was the result of the Banks loan growth and a need for additional funding that was
obtained through brokered deposits. Brokered deposits increased $4 million, or 8 percent,
during 2004. The Bank will continue to use brokered deposits as part of its asset &
liability management plan.

-15-

---



Deposits
are gathered from the communities the Bank serves. Increasing core deposits is a key
element of the Banks strategic plan. The checking and savings product mix is also
aligned to reward customers with special values if they maintain at least two accounts
with the Bank. This is designed to improve the level of core deposits. Improvement in the
equity markets has resulted in some deposit outflow back into those markets. The Bank
expects this trend to continue. In addition to the traditional bank offices, the Company
provides a wide array of alternative electronic methods to serve customers. New cash
management products as well as a new business sweep product were introduced in 2004. The
Bank expects these new products to be excellent tools in marketing to potential business
customers. During 2003, the Bank launched Mobile Banking, a business banking courier
service in West Michigan that provides convenient, safe, and reliable pick-up and delivery
for a variety of items including cash, checks and important Bank documents. From December
31, 2003 to December 31, 2004 the number of customers using the Mobile Banking courier
service has increased more than 150 percent. Management expects this service to continue
to be a key factor in attracting new business customers to the Bank.

# Average Deposit Balances
(dollars in thousands)

The
following table lists the total average deposit balances during 2004 and 2003 and the
weighted average rates paid on the funds provided:

|                            | Average for the Year
|--------------------------- | --------------------
|                            |                     
|                           
|                            |                     
|                            |                     
|                            |                     
|Non-interest bearing demand |                     
|NOW Accounts                |                     
|MMDA/Savings                |                     
|Time - negotiable brokered  |                     
|Time                        |                     
|                            |                     
|Total Deposits              |                     
|                            |                     

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 meet the needs of
its customers. The Bank offers business and consumer checking accounts, regular and money
market savings accounts, and certificates of deposit with many term options.

# Repurchase Agreements,
Federal Funds Purchased and Borrowed Funds (dollars in thousands)

|                        | December 31, 2004 | December 31, 2003
|----------------------- | ----------------- | -----------------
|                        |                   |                  
|                        |                   |                  
|                        |                   |                  
|Repurchase agreements   |                   |                  
|FHLB Borrowings         |                   |                  
|Federal funds purchased |                   |                  
|Other borrowings        |                   |                  
|                        |                   |                  
|                        |                   |                  
|                        |                   |                  

Repurchase
agreements are a variable interest rate borrowing with a 1-day maturity. These borrowings
are from local customers of the Bank. The FHLB borrowings have a fixed term and fixed
interest rate.

-16-

---



# RESULTS OF OPERATIONS

# Summary

As
a result of improvements in the Banks asset quality, the Bank was able to reverse
$1.1 million from the allowance loan losses in 2004 compared to a provision of $625,000 in
2003. This reversal resulted in 2004 net income exceeding 2003 by 8 percent. The Company
achieved net income of $4.5 million in 2004 compared to $4.2 million in 2003. Diluted
earnings per share increased 8 percent, from $2.04 per share in 2003 to $2.21 per share in
2004. Net loan losses charged against the allowance for loan losses declined from .18
percent of total loans in 2003 to .12 percent of total loans in 2004.

Net
interest income declined approximately 4 percent in 2004. The decrease was a result of
declines in the net interest margin. The net interest margin compression is a direct
result of the significant commercial loan refinancing activity that occurred during 2002
and 2003, the exceptionally low interest rate environment and competitive pressures. The
net interest margin was 3.42 percent in 2004 compared to 3.59 percent in 2003. Although
the net interest margin for 2004 was lower than 2003, it showed significant signs of
improvement throughout the year. The net interest margin increased 30 basis points from
the first quarter of 2004 to the fourth quarter of 2004, from 3.32% to 3.62%,
respectively.

Non-interest
income declined 8 percent in 2004, which is the result of a 32 percent decline in mortgage
banking related fees and a 9 percent decline in insurance premiums and brokerage fees. The
decline in mortgage banking related fees is due to a significant reduction in mortgage
refinancing activity. The decline in insurance premiums and brokerage fees, from 2003 to
2004, was mainly due to a significant decline in the annual profit sharing revenue that
was received from insurance carriers.

Total
non-interest expenses remained relatively flat from 2003 to 2004, increasing less than 1
percent. Salaries and benefits expenses increased 4 percent in 2004, compared to 2003.
This was mainly the result of the increasing cost of providing employee health care.
Employee health care expenses increased 42 percent in 2004, compared to 2003.
Non-employment related expenses declined 5 percent in 2004. This decline was the result of
an organization-wide effort to reduce operating expenses that began in 2003 and continued
throughout 2004. As part of the effort to control costs, the Company was also able to
reduce its total number of full time equivalent employees by 9 percent during 2004.

# Earnings Performance (in
thousands, except per share data)

|                          | Year Ended December 31,
|------------------------- | -----------------------
|                          |                        
|                          |                        
|                          |                        
|Net income                |                        
|Per share of common stock |                        
|                          |                        
|Earnings ratios:          |                        
|Return on average assets  |                        
|Return on average equity  |                        

Net
income increased approximately 8 percent from 2003 to 2004. The asset quality improvements
that the Bank has made over the past two years resulted in the reversal of $1.1 million of
the allowance for loans losses during 2004. This reversal offset a decline in net interest
income due to the low interest rate environment and the compression of the net interest
margin. It also compensated for an 8 percent decline in non-interest income that was
mainly the result of a decline in mortgage related fees.

Net
income increased approximately 10 percent from 2002 to 2003. A significant improvement in
asset quality resulted in a lower provision for loans losses during 2003. This offset a
decline in net interest income that resulted from a decline in earning assets and
compression of the net interest margin. This compression was primarily due to the low
interest rate environment. Net income was also affected by a 5 percent decline in
non-interest income, primarily due to a decline in mortgage fees and a 2 percent increase
in non-interest expense.

-17-

---



# 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:

# Interest Yields and
Costs (in thousands)

|                                    | Year ended December 31,
|----------------------------------- | -----------------------
|                                    |                        
|                                    |                        
|                                    |                        
|                                    |                        
|                                    |                        
|Assets                              |                        
|Fed. funds sold                     |                        
|Securities:                         |                        
|Taxable                             |                        
|Tax-exempt(1)                       |                        
|Loans and leases(2)(3)              |                        
|                                    |                        
|Total earning assets/total          |                        
|interest income                     |                        
|                                    |                        
|Cash and due from banks             |                        
|Unrealized gain                     |                        
|All other assets                    |                        
|Allowance for loan loss             |                        
|                                    |                        
|Total assets                        |                        
|                                    |                        
|Liabilities and                     |                        
|Stockholders' Equity                |                        
|Interest bearing deposits:          |                        
|MMDA, Savings/NOW accounts          |                        
|Time                                |                        
|Securities sold under               |                        
|agreements to repurchase            |                        
|and federal funds purchased         |                        
|Other borrowed money                |                        
|                                    |                        
|Total interest bearing liabilities/ |                        
|interest expense                    |                        
|                                    |                        
|Non-interest bearing deposits       |                        
|All other liabilities               |                        
|                                    |                        
|Total liabilities                   |                        
|Stockholders' Equity:               |                        
|Total equity                        |                        
|                                    |                        
|Total liabilities and equity        |                        
|                                    |                        
|Net interest income-FTE             |                        
|                                    |                        
|Net interest margin as a            |                        
|percentage of average earning       |                        
|assets - FTE                        |                        
|                                    |                        

|(1) | Interest income on tax-exempt securities and loans is presented on a fully tax
          equivalent basis assuming a marginal tax rate of 34 percent.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Non-accrual loans and leases and loans held for sale have been included in the
          average loans and lease balances. Average non-accrual loans were approximately
          $1,450,000, $3,605,000 and $6,156,000 in 2004, 2003 and 2002 respectively.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | Interest on loans includes net origination fees totaling $258,000 in 2004,
          $226,000 in 2003 and $355,000 in 2002.
|--- | ---------------------------------------------------------------------------------------------------------------------------

Net
interest income is the principal source of income for the Company. In the current year,
tax equivalent net interest income declined approximately $613,000 to $16.7 million in
2004, a 3.5 percent decrease from 2003. This resulted in a net interest margin, as a
percentage of average earning assets, on a fully taxable equivalent basis, of 3.42
percent.

In
2004, the yield on total earning assets declined 42 basis points, compared to a 28 basis
point decline in the total interest-bearing liabilities cost of funds. The decline in both
the interest yield and the cost of funds was a direct result of the low interest rate
environment that occurred over the past few years. During 2004, the interest rate
environment stabilized and during the second half of the year short-term rates began to
rise. As a result, the Companys net interest margin showed signs of improvement,
rising steadily from 3.27 percent in the first quarter of 2004 to 3.62 percent in the
fourth quarter of 2004.

-18-

---



In
2003, the yield on total earning assets decreased 115 basis points, compared to a 72 basis
point decline in the total interest-bearing liabilities cost of funds. Both the net
interest spread and net interest margin decreased in 2003 due to lower interest rates and
interest-earning assets repricing faster than interest-bearing liabilities. The
compression was a result of significant commercial loan refinancing from long-term fixed
rates to short-term variable rates, combined with the lowest interest rates in 45 years,
which reduced the spread and margin on the Banks non-interest bearing deposits and
other funding sources, known as free funds.

With
the improving economy, management expects the increasing trend in the fully
taxable-equivalent (FTE) net interest margin that was experienced during 2004 to continue
during 2005. However, the rate of increase is expected to moderate based on the rising
cost of funds. The net interest margin is significantly affected by the monetary policies
of the U.S. government, local competition and level of economic activity. There is no
assurance regarding rates and the Banks net interest margin.

# Change in Tax Equivalent
Net Interest Income (in thousands)

|                                            | 2004 Compared to 2003 | 2003 Compared to 2002
|------------------------------------------- | --------------------- | ---------------------
|                                            |                       |                      
|                                            |                       |                      
|                                            |                       |                      
|Increase (decrease) in  interest income (1) |                       |                      
|Federal funds sold                          |                       |                      
|Securities:                                 |                       |                      
|Taxable                                     |                       |                      
|Tax Exempt (2)                              |                       |                      
|Loans (2)                                   |                       |                      
|                                            |                       |                      
|Total interest income                       |                       |                      
|                                            |                       |                      
|                                            |                       |                      
|Increase (decrease) in  interest expense    |                       |                      
|Interest bearing deposits:                  |                       |                      
|Savings/NOW Accounts                        |                       |                      
|Time                                        |                       |                      
|Securities sold under                       |                       |                      
|agreements to repurchase                    |                       |                      
|and federal funds purchased                 |                       |                      
|Other Borrowed Money                        |                       |                      
|                                            |                       |                      
|Total Interest Expense                      |                       |                      
|                                            |                       |                      
|                                            |                       |                      
|Net interest income (FTE)                   |                       |                      
|                                            |                       |                      

|(1) | The change in interest due to changes in both balance and rate has been
          allocated between the factors in proportion to the relationship of the absolute
          dollar amounts of change in each.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Interest income on tax-exempt securities and loans is presented on a fully tax
          equivalent basis assuming a marginal tax rate of 34 percent.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------

Interest
from loans is the primary source of interest income for the Bank, accounting for 84
percent, 85 percent, and 88 percent of total interest income for 2004, 2003 and 2002,
respectively. Net interest income is significantly influenced by results of the
Banks lending activities. During the past two years interest income declined $7.2
million, while interest expense declined only $4.4 million over the same period. The
primary reason interest income declined faster than interest expense was the significant
shift of long-term fixed rate commercial loans to floating rate commercial loans that
occurred in 2002 and 2003.

Total
interest expense decreased 12.7 percent, or $1.2 million, from 2003 to 2004 and declined
24.9 percent, or $3.2 million, from 2002 to 2003. The $1.2 million decline in the cost of
funds was largely due to the low interest rates that were paid on time deposits, which
were slightly offset by the higher rate that was paid on the Banks new high interest
checking product and the additional volume that this product created. 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.

-19-

---



# Composition of Average
Earning Assets and Interest Paying Liabilities

|                                       | Year ended December 31,
|-------------------------------------- | -----------------------
|                                       |                        
|                                       |                        
|                                       |                        
|As a percent of average earning assets |                        
|Loans                                  |                        
|Other earning assets                   |                        
|                                       |                        
|Average earning assets                 |                        
|                                       |                        
|Savings and NOW accounts               |                        
|Time deposits                          |                        
|Securities sold under agreements to    |                        
|repurchase, fed funds purchased        |                        
|and other borrowings                   |                        
|                                       |                        
|Average interest bearing liabilities   |                        
|                                       |                        
|Average earning asset ratio            |                        
|Free funds ratio                       |                        

The
Banks earning asset ratio increased to 94 percent in 2004, compared to 93 percent in
2003, due mainly to the increase in the Banks loan portfolios. The Banks
earning asset ratio increased to 93 percent in 2003 from 92 percent in 2002, due to the
reduction in loans on non-accrual, which had reduced the earning asset ratio in 2002.

The
free funds ratio, funds on which the Bank does not pay interest, increased from 16 percent
in 2003 to 18 percent in 2004. The increase is mainly the result of the increase in the
loan portfolios combined with an increase in non-interest bearing deposits. The free funds
ratio increased from 12 percent in 2002 to 16 percent in 2003. The improvement reflects an
increase in the Banks ratio of stockholders equity as a percentage of average
earning assets.

# Provision and Allowance
for Loan Loss

The
provision for loan losses charged to earnings was a credit to income of $1,100,000 in
2004, compared to an expense of $625,000 in 2003 and an expense of $4,070,000 in 2002. The
credit to income is the result of the improving asset quality of the Bank, combined with
improving general economic conditions. Although asset quality is substantially improved,
loans originated prior to managements adoption of new underwriting standards still
present a higher level of risk than loans made after adoption of these standards.
Management is projecting that a provision of approximately $500,000 will be necessary
during 2005 to support the Banks anticipated loan growth, net charge-offs and change
in credit quality. The actual provision charged to income may vary from the projected
amount based on changes in these factors.

As
previously reported, management has taken significant steps to improve underwriting
standards and loan administration and has exited the indirect consumer loan business.
These changes have improved asset quality. Future changes in asset quality will be subject
to continued adherence to established policies and the general economic conditions of the
markets in which the Bank operates.

-20-

---



|Non-interest Income (in
thousands)        | Year ended December 31,
|----------------------------------------- | -----------------------
|                                          |                        
|                                          |                        
|                                          |                        
|Service charges on deposit accounts       |                        
|Net gains on asset sales:                 |                        
|Loans                                     |                        
|Securities                                |                        
|Amortization of mortgage servicing rights |                        
|Impairment of (recovery of impairment on) |                        
|mortgage servicing rights                 |                        
|Loan servicing fees                       |                        
|Insurance premium revenue                 |                        
|Brokerage revenue                         |                        
|Other                                     |                        
|                                          |                        
|Total non-interest income                 |                        
|                                          |                        

Non-interest
income declined $500,000, or 8 percent in 2004, compared to 2003. This decline was mainly
the result of a decline in mortgage-related fees. The gain on the sale of loans declined
$1,690,000, or 61 percent, from 2003 to 2004. This was mainly due to a significant slow
down in mortgage refinancing activity. This was partially offset by a $1,133,000, or a 65
percent, decline in the amortization of mortgage servicing rights. This decline was also
directly related to the slowdown in mortgage refinancing activity. Service charges on
deposit accounts increased $269,000, or 12 percent, in 2004, compared to 2003. This
increase reflects the increases in the Banks deposit accounts as well as an increase
in ATM fees.

Non-interest
income declined 5 percent, or approximately $0.4 million, from 2002 to 2003. Service
charges on deposits increased 16 percent due to deposit account growth and changes in the
Banks fee structure. The gain on sale of mortgages declined $0.7 million, or 20
percent, despite a 7 percent increase in the volume of mortgage loans sold during 2003.
The decline in gains on sale of loans reflects a lower sales price on loans due to a more
aggressive pricing strategy, as well as the sale of some mortgages at a loss during the
third quarter due to the overwhelming volume of mortgages in that quarter, which prevented
the Bank from closing all mortgage production within their respective rate lock time
periods.

|Net Gains on the Sale of
Real Estate Mortgage Loans (in thousands) | Year ended December 31,
|------------------------------------------------------------------ | -----------------------
|                                                                   |                        
|                                                                   |                        
|                                                                   |                        
|Total real estate mortgage loan originations                       |                        
|                                                                   |                        
|Real estate mortgage loan sales, servicing retained                |                        
|                                                                   |                        
|Real estate mortgage loan sales, servicing released                |                        
|                                                                   |                        
|Net gains on the sale of real estate mortgage loans                |                        
|                                                                   |                        
|Net gains as a percent of real estate mortgage loan sales .        |                        

The
gain on the sale of real estate loans declined 61 percent in 2004 as mortgage refinancing
activity significantly slowed during the year. This slow down was mainly the result of
mortgage rates stabilizing near the end of 2003 and throughout 2004. Total real estate
mortgages originated declined to $86 million in 2004, compared to $205 million in 2003 and
$184 million in 2002. During 2004, the Bank sold a larger percentage of loans with
servicing rights released. During 2004, 37 percent of loans sold had the servicing rights
released, compared to 3 percent in 2003 and none in 2002. Selling mortgage loans with the
servicing rights released gives the customers more options when choosing their type of
mortgage loan and it reduces the Banks exposure to changes in interest rates. Net
gains as a percentage of real estate mortgage loan sales for 2004 remained consistent with
2003 at 1.62 percent in 2004 compared to 1.63 percent in 2003 and 2.19 percent in 2002.
The decline from 2002 to 2003 was mainly the result of a more aggressive pricing strategy
that was adopted during 2003.

-21-

---



Net
gains on the sale of loans are generally a function of the volume of loans sold. The
volume of loans sold is dependent upon the Banks ability to originate loans, which
is particularly sensitive to the absolute level of interest rates. Net gains on the sale
of real estate mortgage loans are also dependent upon economic and competitive factors as
well as managements ability to effectively manage the Banks exposure to
changes in interest rates. The Bank intends to aggressively market its services in the
real estate area.

# Realized Gains and
Losses on the Sale of Securities (in thousands)

|     | Year ended December 31,
|---- | -----------------------
|     |                        
|     |                        
|     |                        
|2004 |                        
|2003 |                        
|2002 |                        

Approximately
$200,000 of the gain in 2004 and $138,000 of the gain in 2003 was due to the sale of
equity securities, predominately other bank stocks, held at the parent company. In
addition to providing interest income and secondary liquidity, our securities portfolio is
an important part of our asset and liquidity management plan. Generally, the majority of
the securities investment portfolio are classified as available for sale to provide
flexibility in managing the Banks liquidity and interest rate risk.

# Non-interest Expense

|                             | Year ended December 31,
|---------------------------- | -----------------------
|                             |                        
|                             |                        
|
|                             |                        
|Salaries                     |                        
|Employee benefits            |                        
|Occupancy                    |                        
|Equipment                    |                        
|Data processing and software |                        
|Professional and legal fees  |                        
|Printing and supplies        |                        
|Marketing                    |                        
|Other                        |                        
|                             |                        
|Total non-interest expense   |                        
|                             |                        

Non-interest
expense remained relatively flat in 2004, increasing only $49,000, or less than 1 percent,
compared to 2003. Total salaries and employee benefits expenses increased $391,000 or 4
percent from 2003 to 2004. The increase was mainly the result of significant increases in
the cost of providing employee health care. Employee health care expenses increased 42
percent from 2003 to 2004. The Companys medical plan is self-insured and medical
claims and participation fluctuate from year to year. Management has implemented
strategies to contain health benefit costs. Occupancy and equipment costs rose modestly in
2004, compared to 2003. Data processing and software expenses increased $64,000 or 6
percent in 2004. This was the result of continued investment in technology upgrades to
remain competitive and to maintain existing systems. The Bank anticipates a continued
investment in technology in the future. Total professional and legal fees, printing and
supplies, marketing and other expenses declined $492,000 or 14 percent in 2004, compared
to 2003. This was mainly due to the benefits of the on-going cost reduction efforts of the
Bank as well as lower FDIC premiums. These benefits were partially offset by increased
professional and legal expenses associated with compliance with Sarbanes-Oxley Act of
2002. During 2004 the Company had expenses related to the compliance with the
Sarbanes-Oxley Act of 2002 totaling approximately $100,000. Management expects the
increased costs associated with the Sarbanes-Oxley Act of 2002 to continue during 2005.

Non-interest
expense increased $391,000 or 2.4 percent, in 2003, compared to 2002. The Companys
salary expense increased 9.5 percent, or $701,000, during 2003, compared to 2002. The
increase includes the addition of several key management positions and significantly
higher mortgage commissions due to the increased volume and change in compensation
structure. Employee benefits declined 1.6 percent, or $28,000, during 2003 compared to a
year earlier. An increase in employment taxes was off-set by a slight decline in the
employee health benefits and profit sharing plan. Data processing and software expense
increased approximately 20 percent in 2003. The Bank completed significant software and
hardware upgrades during 2002 and 2003. Professional and legal fees decreased 13 percent
compared to 2002 as a result of a reduction in the remediation cost attributed to the
prior supervision and

-22-

---



regulation issues. Printing &
supplies, marketing and other non-interest expenses declined approximately 14 percent in
aggregate. The decrease reflected managements effort to reduce operating cost and a
decrease in remediation costs associated with loan collection cost and legal fees. The
decrease included the recapture of approximately $210,000 of director deferred
compensation benefit plan expense due to the early retirement of a participating director.

# Provision for Income
Taxes

The
provision for income taxes was $1,753,000 in 2004, compared with $1,564,000 in 2003 and
$1,490,000 in 2002. The Companys effective tax rate approximated 28 percent in 2004,
27 percent in 2003 and 28 percent in 2002.

# LIQUIDITY AND CAPITAL
RESOURCES

# Capital

Capital
provides the foundation for future growth and expansion. The major component of capital is
stockholders equity. Stockholders equity was $57.4 million as of December 31,
2004, an increase of $2.3 million, or 4.1 percent from a year ago. The increase resulted
primarily from the retention of earnings. The Company expects to fund future growth from
current capital and retention of future earnings.

In
2004, the Company declared cash dividends totaling $1.5 million, approximately 34 percent
of earnings. In 2003, the Company paid cash dividends totaling $1.1 million, or
approximately 26 percent of earnings.

# Capital Resources (in
thousands)

Under
the regulatory risk-based capital guidelines in effect for both banks and bank
holding companies, minimum capital levels are based upon perceived risk in the
Companys various asset categories. These guidelines assign risk weights to
on-balance sheet and off-balance sheet categories in arriving at total risk-adjusted
assets. Regulatory capital is divided by the computed total of risk adjusted assets to
arrive at the minimum levels prescribed by the Federal Reserve Board as of December 31,
2004, as shown in the table below:

|                          | Regulatory Requirements | December 31,
|------------------------- | ----------------------- | ------------
|                          |                         |             
|                          |                         |             
|                          |                         |             
|Tier 1 capital            |                         |             
|Tier 2 capital            |                         |             
|                          |                         |             
|Total qualifying capital  |                         |             
|                          |                         |             
|                          |                         |             
|Tier 1 leverage ratio     |                         |             
|Tier 1 risk-based capital |                         |             
|Total risk-based capital  |                         |             

# Interest Rate Risk

The
primary components of the balance sheet are interest-earning assets, which are funded by
interest-bearing liabilities. The differences in cash flows of these rate sensitive assets
and liabilities, combined with shifts, or changes in the overall market yield curve result
in interest rate risk. Interest rate risk is the change in net interest income due to
interest rate changes. Interest rate risk is inherent to banking and cannot be eliminated.

The
Asset and Liability Management Committee (ALCO) is responsible for overseeing the
financial management of net interest income, liquidity, investment activities, and other
related activities. In regard to interest rate risk, management has relied on re-pricing
GAP analysis, which is a traditional method of assessing interest rate risk. Recognizing
that there is no single measure that absolutely measures current or future risk,
management also relies on a simulation analysis to assess risk in dynamic interest rate
environments.

-23-

---



# Maturities and
Sensitivities of Loans to Changes in Interest Rates

The
following table shows the amount of total loans outstanding as of December 31, 2004, which
based on scheduled maturity dates, are due in the periods indicated:

|                            | Maturing(in thousands)
|--------------------------- | ----------------------
|                            |                       
|                            |                       
|                            |                       
|Residential Real Estate     |                       
|Installment                 |                       
|Commercial Real Estate      |                       
|Other Commercial            |                       
|                            |                       
|Totals                      |                       
|                            |                       
|Allowance for Loan Losses   |                       
|                            |                       
|Total Loans Receivable, Net |                       
|                            |                       

Below
is a schedule of the amounts maturing or re-pricing, which are classified according to
their sensitivity to changes in interest rates:

|                                    | Interest Sensitivity(in thousands)
|----------------------------------- | ----------------------------------
|                                    |                                   
|                                    |                                   
|                                    |                                   
|Due within 3 months                 |                                   
|Due after 3 months within 1 year    |                                   
|Due after one but within five years |                                   
|Due after five years                |                                   
|                                    |                                   
|Total                               |                                   
|                                    |                                   
|Allowance for loan losses           |                                   
|                                    |                                   
|Total loans receivable, net         |                                   
|                                    |                                   

-24-

---



# Asset/Liability Gap
Position (in thousands)

|                                           | December 31, 2004
|------------------------------------------ | -----------------
|                                           |                  
|                                           |                  
|                                           |                  
|Interest earning assets:                   |                  
|Fed Funds Sold                             |                  
|Loans                                      |                  
|Securities (including restricted           |                  
|investments)                               |                  
|Loans held for sale                        |                  
|                                           |                  
|Total interest earning assets              |                  
|                                           |                  
|Non-interest earning assets:               |                  
|Cash and due from banks                    |                  
|Allowance for loan losses                  |                  
|Accrued interest receivable                |                  
|Premises and equipment (net)               |                  
|Other assets                               |                  
|                                           |                  
|Total non-interest earning assets          |                  
|                                           |                  
|Total Assets                               |                  
|                                           |                  
|                                           |                  
|Interest bearing liabilities:              |                  
|Savings & NOW                              |                  
|Time                                       |                  
|                                           |                  
|Total deposits                             |                  
|Other borrowings                           |                  
|                                           |                  
|Total interest bearing liabilities .       |                  
|                                           |                  
|                                           |                  
|Non-interest bearing liabilities           |                  
|and equity:                                |                  
|Non-interest bearing deposits              |                  
|Other liabilities                          |                  
|Stockholders' equity                       |                  
|                                           |                  
|Total non-interest bearing liabilities     |                  
|and equity:                                |                  
|                                           |                  
|Total liabilities and stockholders' equity |                  
|                                           |                  
|                                           |                  
|Rate sensitivity gap and ratios:           |                  
|Gap for period                             |                  
|Cumulative gap                             |                  
|Period gap ratio                           |                  
|Cumulative gap ratio                       |                  
|Gap /Total Earning assets                  |                  
|Period                                     |                  
|Cumulative                                 |                  

The
asset/liability gap reflects the scheduled repayment and maturities of the Banks
loans, investments, deposits and borrowings. Management has made a number of assumptions
to improve the usefulness of the gap analysis and to manage interest rate risk. The
assumptions include, but are not limited to, prepayments on loans, repayment speeds on
certain investment securities, and the likelihood of certain call and put features on
financial instruments being exercised. Management attempts to reflect the sensitivity of
assets and liabilities; however, customer behavior in different rate and economic
environments is not entirely predictable. As such, interest rate risk cannot be
eliminated.

-25-

---



As
of December 31, 2004 the cumulative one-year liability gap position was approximately 8.9
percent of earning assets. The previous table reflects that the Bank has an
asset-repricing gap of approximately $3 million at 3 months and a liability-repricing gap
of $29 million at one year. Management recognizes that GAP analysis alone is not a
reliable measure of interest rate risk. Management is comfortable with the Banks
current GAP position and interest rate exposure and will continue to invest in assets and
fund liabilities with the intent of maintaining a neutral GAP position. Management
regularly reviews the asset liability gap position and other available information to
manage the overall interest rate risk of the Bank.

# Market Risk

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

# Changes in Market Value
of Portfolio Equity and Net Interest Income (dollars in thousands)

|Change in Interest Rates | Market Value ofPortfolioEquity(1) | PercentChange | Net InterestIncome(2) | PercentChange
|------------------------ | --------------------------------- | ------------- | --------------------- | -------------
|                         |                                   |               |                       |              
|300 basis point rise     |                                   |               | $                     | 39,666       
|200 basis point rise     |                                   |               |                       | 44,256       
|100 basis point rise     |                                   |               |                       | 48,930       
|Base rate                |                                   |               |                       | 53,701       
|100 basis point decline  |                                   |               |                       | 58,473       
|200 basis point decline  |                                   |               |                       | 63,206       
|300 basis point decline  |                                   |               |                       | 67,610       

|(1) | Simulation analyses calculates the change in the net present value of the
          Companys assets and liabilities, under parallel shifts in interest rates,
          by discounting the estimated future cash flows.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Simulation analyses calculates the change in net interest income, under parallel
          shifts in interest rates over the next 12 months based on a static balance
          sheet.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Simulation
models are useful tools, but require numerous assumptions that have a significant impact
on the measured interest rate risk. The use of simulation models requires numerous
assumptions, which could impact the results. Simulation models require the ability to
accurately predict customer behavior to interest rate changes, changes in the competitive
environment and other economic factors.

# Liquidity

Liquidity
is measured by our ability to raise funds through deposits, borrowed funds, capital or
cash flow from the repayment of loans and investment securities. These funds are used to
meet deposit withdrawals, maintain reserve requirements, fund loans and operate our
Company. Liquidity is primarily achieved through the growth of deposits and liquid assets
such as securities available for sale, matured securities, and federal funds sold. Asset
and liability management is the process of managing the balance sheet to achieve a mix of
earning assets and liabilities that maximizes profitability, while providing adequate
liquidity.

The
Companys liquidity strategy is to fund loan growth with deposits, and other borrowed
funds and to maintain an adequate level of short-term and medium-term investments to meet
typical daily loan and deposit activity. The growth of the Banks loan portfolio
during 2004 was funded through deposit growth, including brokered deposits, as well as the
Bank shifting from a federal funds sold position at December 31, 2003 to a federal funds
purchased position at December 31, 2004. Management has targeted a federal funds purchased
position of $10 million. Advances from the Federal Home Loan Bank decreased by $10
million, the use of brokered certificates of deposit increased by $4 million and
certificates of deposit over $100,000 (excluding brokered deposits) increased by $1
million in 2004 compared to 2003.

-26-

---



The
Bank has the ability to borrow money on a daily basis through correspondent banks using
established federal funds purchased lines. During 2004, the Banks federal funds sold
position averaged $3.3 million and its federal funds purchased position averaged $4.7
million. At December 31, 2004, the Banks established unsecured federal funds
purchased borrowing limits totaled $50 million. In addition, as a member of the Federal
Home Loan Bank of Indianapolis (FHLBI), the Bank has access to the
FHLBIs borrowing programs. As of December 31, 2004, FHLBI advances totaled $22.8
million and, based on available collateral, the Bank could borrow up to an additional
$16.8 million.

Net
cash flows from operating activities fluctuate sharply from year to year due to the dollar
amount of mortgage loans originated and the amount of mortgage loans sold. The significant
changes from 2002 to 2003 and from 2003 to 2004 are largely due to mortgage loan-related
activity.

Cash
flows from investment activities reflect cash used to fund the increase in total loans,
cash received from the maturity and sale of available for sale securities and the
reinvestment of that cash through the purchase of new securities. The significant changes
from 2003 to 2004 are mainly the result of the growth of the Banks loan portfolio.
Net loans increased by $46 million in 2004 compared to a $13 million reduction in 2003.

Net
cash flows from financing activities reflect the increases or decreases in the products
used to fund the loan growth of the bank. The significant change in cash flows from
financing activities reflects an increase in the Banks total deposits of $45
million, a decrease in FHLB borrowings of $10 million, an increase in federal funds
purchased of $8 million and a decline in securities sold under agreements to repurchase of
$14 million.

The
Companys cash and cash equivalents declined approximately $10 million during 2004 to
$10 million at December 31, 2004. The decrease in liquidity is reflected in the
Companys December 31, 2004 federal funds position, which changed from a federal
funds sold position of $7 million at December 31, 2003 to a federal funds purchased
position of $8 million at December 31, 2004. Overall liquidity is significantly determined
by deposit and loan growth in addition to borrowing and security investment activity.

|Contractual Obligations
(dollars in thousands)
|----------------------------------------------
|
|                                              
|                                              
|                                              
|Time deposits                                 
|Federal funds purchased                       
|FHLB advances                                 
|Other borrowed funds                          
|                                              
|Total contractual cash obligations            

The
long-term debt obligations consist entirely of fixed rate advances from the Federal Home
Loan Bank that were purchased to fund growth in the loan portfolio.

|Other Commercial
Commitments            
|----------------------------------------
|
|                                        
|                                        
|                                        
|Commitments to grant loans              
|Unfunded commitment under commercial and
|other lines of credit                   
|Unfunded commitments under home equity  
|lines of credit                         
|Commercial and standby letters of credit
|                                        
|Total commitments                       

All
of the commercial commitments are underwritten using the commercial loan underwriting
guidelines.

-27-

---



# 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 than inflation on the
earnings of the Bank. 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.

# Selected Quarterly
Financial Data (Unaudited):    (in thousands, except
per share data)

|                               | Three Months Ended
|------------------------------ | ------------------
|                               |                   
|                               |                   
|Periods Ended, 2004            |                   
|Total Assets                   |                   
|Net Interest Income            |                   
|Provision for Loan Losses      |                   
|Net Income                     |                   
|                               |                   
|Earnings per Share             |                   
|Book Value per Share           |                   
|Return on Average Assets       |                   
|Return on Stockholders' Equity |                   
|Efficiency Ratio               |                   
|                               |                   
|Periods Ended, 2003            |                   
|Total Assets                   |                   
|Net Interest Income            |                   
|Provision for Loan Losses      |                   
|Net Income                     |                   
|                               |                   
|Earnings per Share             |                   
|Book Value per Share           |                   
|Return on Average Assets       |                   
|Return on Stockholders' Equity |                   
|Efficiency Ratio               |                   

-28-

---



# 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 (See Market Risk from Item 7). 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 manage the inherent risk while at the same time maximizing
income. Management realizes certain risks are inherent and that the goal is to identify
and minimize these 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.

# ITEM 8. Financial
Statements and Supplementary Data

The
Consolidated Financial Statements, Notes to Consolidated Financial Statements and the
Report of the Independent Public Accountants are included in the following pages.

-29-

---



# OAK Financial
CorporationManagements Report on Internal Control Over Financial Reporting

The
management of OAK Financial Corporation is responsible for establishing and maintaining
adequate internal control over financial reporting. OAK Financial Corporations
internal control system was designed to provide reasonable assurance to the Companys
management and board of directors regarding the preparation and fair presentation of its
financial statements.

All
internal control systems, no matter how well designed, have inherent limitations.
Therefore, even those systems determined to be effective, provide only reasonable
assurance with respect to financial statement preparation and presentation.

Management
of OAK Financial Corporation assessed the effectiveness of the Companys internal
control over financial reporting as of December 31, 2004. In making this assessment, it
used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO) in Internal ControlIntegrated Framework. Based on our
assessment we believe that, as of December 31, 2004, the Companys internal control
over financial reporting is effective based on those criteria.

Plante
& Moran, PLLC, an independent registered public accounting firm, has issued an
attestation report on managements assessment of the Companys internal control
over financial reporting.

Dated: March 10, 2005

| |  | /s/ Patrick K. Gill
Patrick K. GillPresident and Chief Executive Officer/s/ James A. Luyk
James A. LuykChief Financial Officer and Chief Operating Officer
| |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

-30-

---



# Report of Independent
Registered Public Accounting Firm

To the Board of Directors
and StockholdersO.A.K. Financial Corporation and Subsidiaries

We have audited managements
assessment included in the accompanying Report of Management on O.A.K. Financial
Corporation and Subsidiaries Internal Control over Financial Reporting that the Company
maintained effective internal control over financial reporting as of December 31, 2004,
based on criteria established in Internal Control-Integrated Framework issued by the
committee of Sponsoring Organizations of the Treadway Commission (COSO). Management is
responsible for maintaining effective internal control over financial reporting and for
its assessment of the effectiveness of internal control over financial reporting. Our
responsibility is to express an opinion on managements assessment and an opinion on
the effectiveness of the companys internal control over financial reporting based on
our audit.

We conducted our audit in accordance
with the standards of the Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain reasonable assurance about
whether effective internal control over financial reporting was maintained in all material
respects. Our audit included obtaining an understanding of internal control over financial
reporting, evaluating managements assessment, testing and evaluating the design and
operating effectiveness of internal control, and performing such other procedures as we
considered necessary in the circumstances. We believe that our audit provides a reasonable
basis for our opinion.

A companys internal control
over financial reporting is a process designed to provide reasonable assurance regarding
the reliability of financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting principles. Because
managements assessment and our audit were conducted to also meet the reporting
requirements of Section 112 of the Federal Deposit Insurance Corporation Improvement Act
(FDICIA), managements assessment and our audit of the Companys internal
control over financial reporting included controls over the preparation of financial
statements in accordance with the instructions to the Consolidated Financial Statements
for Bank Holding Companies (Form FR Y-9c). A companys internal control over
financial reporting includes those policies and procedures that (1) pertain to the
maintenance of records that, in reasonable detail, accurately and fairly reflect the
transactions and dispositions of the assets of the company; (2) provide reasonable
assurance that transactions are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting principles, and that receipts
and expenditures of the company are being made only in accordance with authorizations of
management and directors of the company; and (3) provide reasonable assurance regarding
prevention or timely detection of unauthorized acquisition, use, or disposition of the
companys assets that could have a material effect on the financial statements.

Because of inherent limitations,
internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk
that controls may become inadequate because of changes in conditions, or that the degree
of compliance with the policies or procedures may deteriorate.

In our opinion, managements
assessment that O.A.K. Financial Corporation and Subsidiaries maintained effective
internal control over financial reporting as of December 31, 2004, is fairly stated,
in all material respects, based on COSO criteria. Also in our opinion, O.A.K. Financial
Corporation and Subsidiaries maintained, in all material respects, effective internal
control over financial reporting as of December 31, 2004 based on the COSO criteria.

We have also audited, in accordance
with the standards of the Public Company Accounting Oversight Board (United States), the
consolidated balance sheets of O.A.K. Financial Corporation and Subsidiaries as of
December 31, 2004 and 2003 and the related consolidated statements of income,
shareholders equity and cash flows for each of the three years in the period ended
December 31, 2004 and our report dated February 25, 2005, expressed an unqualified opinion
thereon.

| | /s/ Plante & Moran,
PLLC
| | ------------------------

February 25, 2005Grand
Rapids, Michigan

-31-

---



# Report of Independent
Registered Public Accounting Firm

To the Board of Directors
and StockholdersO.A.K. Financial Corporation and Subsidiaries

We have audited the accompanying
consolidated balance sheet of O.A.K. Financial Corporation and Subsidiaries as of December
31, 2004 and 2003 and the related consolidated statements of income, comprehensive income,
changes in stockholders equity and cash flows for each of the three years in the
period ended December 31, 2004. These consolidated financial statements are the
responsibility of the Corporations management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance
with the standards of the Public Company Accounting Oversight Board (United States). 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
consolidated financial position of O.A.K. Financial Corporation and Subsidiary as of
December 31, 2004 and 2003, and the consolidated results of their operations, and their
cash flows for each of the three years in the period ended December 31, 2004, in
conformity with accounting principles generally accepted in the United States of America.

We have also audited, in accordance
with the standards of the Public Company Accounting Oversight Board (United States), the
effectiveness of O.A.K. Financial Corporation and Subsidiaries internal control over
financial reporting as of December 31, 2004, based on criteria established in Internal
Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the
Treadway Commission and our report dated February 25, 2005, expressed an unqualified
opinion thereon.

| | /s/ Plante & Moran,
PLLC
| | ------------------------

Grand Rapids, MichiganFebruary
25, 2005

-32-

---



|OAK FINANCIAL CORPORATIONAND SUBSIDIARIES | CONSOLIDATED BALANCE SHEETS
|----------------------------------------- | ---------------------------

|December 31,                                            
|--------------------------------------------------------
|                                                        
|                                                        
|                                                        
|Cash and due from banks                                 
|Federal funds sold                                      
|                                                        
|Cash and cash equivalents                               
|                                                        
|Available-for-sale securities                           
|                                                        
|Loans held for sale                                     
|                                                        
|Total Loans                                             
|Allowance for loan losses                               
|                                                        
|Net Loans                                               
|                                                        
|Accrued interest receivable                             
|Premises and equipment, net                             
|Restricted investments                                  
|Other assets                                            
|                                                        
|Total assets                                            
|                                                        
|LIABILITIES AND STOCKHOLDERS' EQUITY                    
|                                                        
|Deposits                                                
|Non-interest bearing                                    
|Interest bearing                                        
|                                                        
|Total deposits                                          
|                                                        
|Securities sold under agreements to repurchase          
|Federal funds purchased                                 
|FHLB advances                                           
|Other borrowed funds                                    
|Other liabilities                                       
|                                                        
|Total liabilities                                       
|                                                        
|Stockholders' equity                                    
|Common stock, $1 par value; 4,000,000 shares authorized,
|shares issued and outstanding: 2,034,691 at December 31,
|2004 and 2,035,191 at December 31, 2003                 
|Additional paid-in capital                              
|Retained earnings                                       
|Accumulated other comprehensive income                  
|                                                        
|Total stockholders' equity                              
|                                                        
|Total liabilities and stockholders' equity              
|                                                        

The accompanying notes are an
integral part of these consolidated financial statements.

-33-

---



|OAK FINANCIAL CORPORATION
AND SUBSIDIARIES | CONSOLIDATED STATEMENTSOF INCOME
|------------------------------------------ | --------------------------------

|Year Ended December 31,                            
|---------------------------------------------------
|                                                   
|                                                   
|                                                   
|Interest income                                    
|Interest and fees on loans                         
|Available-for-sale securities                      
|Restricted investments                             
|Other                                              
|                                                   
|Total interest income                              
|                                                   
|Interest expense                                   
|Deposits                                           
|Borrowed funds                                     
|Securities sold under agreements to repurchase     
|                                                   
|Total interest expense                             
|                                                   
|Net interest income                                
|                                                   
|Provision for loan losses                          
|                                                   
|Net interest income after provision for loan losses
|                                                   
|Non-interest income                                
|Service charges on deposit accounts                
|Mortgage banking                                   
|Net gain on sales of available for sale securities 
|Insurance premiums & brokerage fees                
|Other                                              
|                                                   
|Total non-interest income                          
|                                                   
|Non-interest expenses                              
|Salaries                                           
|Employee benefits                                  
|Occupancy (net)                                    
|Furniture and fixtures                             
|Other                                              
|                                                   
|Total non-interest expenses                        
|                                                   
|Income before federal income taxes                 
|                                                   
|Federal income taxes                               
|                                                   
|Net income                                         
|                                                   
|Income per common share:                           
|Basic                                              
|Diluted                                            

The accompanying notes are an integral
part of these consolidated financial statements.

-34-

---



|OAK FINANCIAL CORPORATION
AND SUBSIDIARIES | CONSOLIDATED
STATEMENTS OFCHANGES IN STOCKHOLDERS' EQUITY
|------------------------------------------ | ---------------------------------------------------------

|Year Ended December 31,                      
|---------------------------------------------
|                                             
|                                             
|                                             
|Shares of common stock issued and outstanding
|Balance, beginning of year                   
|Redemption of unallocated ESOP shares        
|                                             
|Balance, end of year                         
|                                             
|Common stock                                 
|Balance, beginning of year                   
|Redemption of unallocated ESOP shares        
|                                             
|Balance, end of year                         
|                                             
|Additional paid-in-capital                   
|Balance, beginning of year                   
|Common stock issued                          
|Redemption of unallocated ESOP shares        
|Allocation of ESOP shares                    
|                                             
|Balance, end of year                         
|                                             
|Retained earnings                            
|Balance, beginning of year                   
|Net income                                   
|Dividends declared                           
|                                             
|Balance, end of year                         
|                                             
|Accumulated other comprehensive income       
|Balance, beginning of year                   
|Other comprehensive (loss) income            
|                                             
|Balance, end of year                         
|                                             
|Unallocated common stock held by ESOP        
|Balance, beginning of year                   
|Redemption of unallocated ESOP shares        
|Allocation of ESOP shares                    
|                                             
|Balance, end of year                         
|                                             
|Total stockholders' equity                   
|                                             

The accompanying notes are an
integral part of these consolidated financial statements.

-35-

---



|OAK FINANCIAL CORPORATION
AND SUBSIDIARIES | CONSOLIDATED STATEMENTS OFCASH FLOWS
|------------------------------------------ | ------------------------------------

|Year Ended December 31,                             
|----------------------------------------------------
|                                                    
|                                                    
|                                                    
|Cash flows from operating activities                
|Net income                                          
|Adjustments to reconcile net income to net          
|cash provided by operating activities               
|Depreciation and amortization                       
|Provision for loan losses                           
|Proceeds from sales of loans held for sale          
|Originations of loans held for sale                 
|Net gain on sales of available-for-sale securities  
|Net gain on sales of loans held for sale            
|Net amortization of investment premiums             
|(Gain) loss on sales of property and equipment      
|Deferred federal income taxes                       
|Changes in operating assets and liabilities         
|which (used) provided cash                          
|Accrued interest receivable                         
|Stock dividends received from restricted investments
|Other assets                                        
|Other liabilities                                   
|                                                    
|Net cash provided by operating activities           
|                                                    
|Cash flows from investing activities                
|Available-for-sale securities                       
|Proceeds from maturities                            
|Proceeds from sales                                 
|Purchases                                           
|Net decrease (increase) in loans held for investment
|Purchases of premises and equipment                 
|Proceeds from the sale of premises and equipment    
|                                                    
|Net cash used in investing activities               
|                                                    
|Cash flows from financing activities                
|Net (decrease) increase in deposits                 
|Net increase in TT&L note                           
|Proceeds from FHLB borrowings                       
|Repayments of FHLB borrowings                       
|Net other borrowed funds (repayments)               
|Net increase (decrease) in fed funds purchased      
|Net (decrease) increase in securities sold under    
|agreements to repurchase                            
|Dividends paid                                      
|Redemption of ESOP shares                           
|Proceeds from issuance of common stock              
|                                                    
|Net cash (used in) provided by financing activities 
|                                                    
|Net (decrease) increase in cash and cash equivalents
|Cash and cash equivalents, beginning of year        
|                                                    
|Cash and cash equivalents, end of year              
|                                                    
|Supplementary cash flows information                
|Interest paid                                       
|Income taxes paid                                   
|Non-cash activities                                 
|Loans transferred to other real estate              

The accompanying notes are an integral
part of these consolidated financial statements.

-36-

---



|OAK FINANCIAL CORPORATION
AND SUBSIDIARIES | NOTES TO CONSOLIDATEDFINANCIAL STATEMENTS
|------------------------------------------ | -----------------------------------------

# NOTE 1. SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES

The
accounting and reporting policies and practices of OAK Financial Corporation and
subsidiaries conform with accounting principles generally accepted in the United States of
America and prevailing practices within the banking industry. Our critical accounting
policies include accounting for the allowance for loan losses, the valuation of originated
mortgage servicing rights, the valuation of deferred tax assets. We are required to make
material estimates and assumptions that are particularly susceptible to changes in the
near term as we prepare the consolidated financial statements and report amounts for each
of these items. The fair value of financial instruments is also particularly sensitive to
estimates and assumption. Actual results may vary from these estimates.

The
bank provides a variety of financial services typically provided in the commercial banking
industry. The Banks activities cover traditional phases of commercial banking,
including checking and savings accounts, commercial lending, direct consumer financing,
and mortgage lending. The company also provides mutual fund products, securities brokerage
services, retirement planning services, investment management and advisory services, as
well as property and casualty, life, disability and long-term care insurance products
through two subsidiary companies, OAK Financial Services and the Dornbush Insurance
Agency. The principal markets are the rural and suburban communities south and west of
Grand Rapids in Kent, Ottawa and Allegan counties. The economies of these communities are
relatively stable and reasonably diversified. The banks primary competitors include
both large and local financial institutions. The Bank is chartered by State and is a
member of the Federal Reserve Bank (FRB). The Bank is subject to the
regulations and supervision of the FDIC, the FRB and the Michigan Office of Financial
Institutions and Insurance Services (OFIS) and undergoes periodic examinations
by these regulatory authorities.

Principles
of Consolidation:The consolidated financial statements
include the accounts of the Corporation, and its subsidiaries. The income, expense, assets
and liabilities of the subsidiaries are included in the respective accounts of the
consolidated financial statements, after elimination of all material intercompany
transactions and accounts.

Statement
of Cash Flows:For purposes of reporting cash flows, cash and cash equivalents
include cash on hand, demand deposits with other financial institutions, and federal funds
sold. We report net cash flows for customer loan and deposit transactions.

Securities:Securities can be classified as trading, held to maturity, or available for sale. The
bank does not have any securities that have been classified as trading or held to
maturity. Securities available-for-sale consists of those securities, which might be sold
prior to maturity due to changes in interest rates, prepayment risks, yield and
availability of alternative investments, liquidity needs or other factors. Securities
classified as available for sale are reported at fair value with unrealized gains or
losses reported in other comprehensive income, net of tax. Declines in the fair value of
securities below cost that are determined to be other than temporary are reflected in
earnings as realized losses. In estimating other-than-temporary impairment losses,
management considers the length of time and the extent to which the fair value has been
less than cost, the financial condition and near-term prospects of the issuer and the
intent and ability of the Corporation to retain its investment in the issuer for a period
of time sufficient to allow for any anticipated recovery in fair value. Gains or losses on
the sale of available-for-sale securities are determined using the specific identification
method. Premiums and discounts are recognized in interest income using the level yield
method over the period to maturity.

-37-

---



|OAK FINANCIAL CORPORATION
AND SUBSIDIARIES | NOTES TO CONSOLIDATEDFINANCIAL STATEMENTS
|------------------------------------------ | -----------------------------------------

# NOTE 1.  SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES (Continued)

Loans:Loans are reported at their outstanding unpaid principal balances adjusted for any
charge-offs, the allowance for loan losses, and any deferred fees or costs on originated
loans. Interest on loans is accrued over the term of the loan based on the principal
amount outstanding. The accrual of interest income is discontinued when a loan becomes 90
days past due and the borrowers capacity to repay the loan and collateral values
appear insufficient. When the accrual of interest is discontinued, all uncollected accrued
interest is reversed. A non-accrual loan may be restored to accrual status when interest
and principal payments are current and the loan appears otherwise collectible. For
impaired loans not classified as non-accrual, interest income continues to be accrued over
the term of the loan based on the principal amount outstanding. Loan origination fees, net
of certain direct loan origination costs, are deferred and recognized as an adjustment of
the related loan yield using the interest method.

The
Corporation grants commercial real estate, residential real estate, commercial, and
consumer loans to customers. A substantial portion of the loan portfolio is represented by
commercial real estate loans throughout West Michigan. The ability of the
Corporations debtors to honor their contracts is dependant upon the real estate and
general economic conditions in this area.

Allowance
for Loan Losses:Some loans will not be repaid in full. Therefore, an allowance
for loan losses is maintained at a level which represents our best estimate of losses
incurred. In determining the allowance and the related provision for loan losses, we
consider four principal elements: (i) specific allocations based upon probable losses
identified during the review of the loan portfolio, (ii) allocations established for other
adversely rated loans, (iii) allocations based principally on historical loan loss
experience, and (iv) additional allowances based on subjective factors, including local
and general economic business factors and trends, portfolio concentrations and changes in
the size and/or the general terms of the loan portfolios. Increases in the allowance are
recorded by a provision for loan losses charged to expense. Although we periodically
allocate portions of the allowance to specific loans and loan portfolios, the entire
allowance is available for any losses, which occur. Collection efforts may continue and
recoveries may occur after a loan is charged against the allowance.

This
evaluation is inherently subjective, and as such, requires estimates that are susceptible
to significant revision as additional information becomes available. An unallocated
component is maintained to cover uncertainties that could affect managements
estimate of probable losses. The unallocated component of the allowance reflects the
margin of imprecision inherent in the underlying assumptions used in the methodologies for
estimating specific and general losses in the portfolio.

A
loan is considered impaired when full payment under the loan or lease terms is not
expected. Impairment is evaluated by assessing payment status, collateral value, and the
probability of collecting scheduled principal and interest payments when due. Loans are
evaluated for impairment when payments are delayed, typically 90 days or more, or when the
internal grading system indicates a doubtful classification. Impairment is measured on a
loan by loan basis for commercial and construction loans by either the present value of
expected future cash flows discounted at the loans effective interest rate, the
loans obtainable market price, or the fair value of the collateral if the loan is
collateral dependent. Large groups of smaller balance homogeneous loans are collectively
evaluated for impairment. Accordingly, the Bank does not separately identify individual
consumer and residential loans for impairment disclosures.

Loans
Held for Sale:Loans originated and intended for sale in the secondary market are
carried at the lower of cost or estimated fair value in the aggregate. Net unrealized
losses, if any, are recognized in a valuation allowance by charges to income.

Premises
and Equipment: Land is carried at cost. Premises and equipment are stated
at cost less accumulated depreciation. Depreciation is computed using both the
straight-line and accelerated methods over the useful lives of the respective assets.
Maintenance, repairs and minor alterations are charged to current operations as
expenditures occur and major improvements are capitalized. These assets are reviewed for
impairment.

-38-

---



|OAK FINANCIAL CORPORATION
AND SUBSIDIARIES | NOTES TO CONSOLIDATEDFINANCIAL STATEMENTS
|------------------------------------------ | -----------------------------------------

# NOTE 1.  SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES (Continued)

Servicing:Mortgage servicing assets are recognized as separate assets when rights are acquired
through purchase or through sale of financial assets. Capitalized servicing rights are
reported in other assets and are amortized into non-interest income in proportion to, and
over the period of, the estimated future net servicing income of the underlying financial
assets. Servicing assets are evaluated for impairment based upon the fair value of the
rights as compared to amortized cost. Impairment is determined by stratifying rights by
predominant characteristics, such as interest rates and terms. Fair value is determined
using prices of similar assets with similar characteristics, when available, or based upon
discounted cash flows using market-based assumptions. Impairment is recognized through a
valuation allowance.

Income
Taxes:Income tax expense is the sum of the current years income tax due or
refundable and the change in deferred tax assets and liabilities. Deferred tax assets and
liabilities are the expected future tax consequence of temporary differences between the
carrying amounts and tax bases of assets and liabilities, computed using enacted tax
rates. A valuation allowance, if needed, reduces deferred tax assets to the amount
expected to be realized. The Corporation and its subsidiary file a consolidated federal
income tax return on a calendar year basis.

Off
Balance Sheet Instruments: In the ordinary course of business, the Bank has
entered into commitments to extend credit, including commitments under credit card
arrangements, commercial letters of credit, and standby letters of credit. Such financial
instruments are recorded when they are funded.

Repurchase
Agreements: Repurchase agreement liabilities represent amounts advanced by
customers. Securities are pledged to cover these liabilities, which are not covered by
federal deposit insurance.

Fair
Values of Financial Instruments: Fair values of financial instruments are
estimated using relevant market information and other assumptions, as more fully disclosed
separately. Fair value estimates involve uncertainties and matters of significant judgment
regarding interest rates, credit risk, prepayments and other factors, especially in the
absence of broad markets for particular items. Changes in assumptions or in market
conditions could significantly affect the estimates. The fair value estimates of existing
on  and off-balance sheet financial instruments do not include the value of
anticipated future business or the values of assets and liabilities not considered
financial instruments.

Earnings
Per Share: Basic earnings per share is net income divided by the weighted
average number of common shares outstanding during the period. Diluted earnings per common
share includes the dilutive effect of additional potential common shares that could be
issued under the stock option plan.

Comprehensive
Income:Comprehensive income consists of net income and other
comprehensive income, which includes the unrealized gains and losses on available-for-sale
securities. The unrealized gains and losses on available-for-sale securities are reported
as a separate component of the equity section of the balance sheet, net of tax.

Contingencies:
Loss contingencies, including claims and legal actions arising in the ordinary course of
business, are recorded as liabilities when the likelihood of loss is probable and an
amount or range of loss can be reasonably estimated. Management does not believe there are
any such matters that will have a material effect on the financial statements.

Stock
Compensation Plans:The Corporation accounts for stock option plans using the
intrinsic value based method. No compensation cost related to stock options was recognized
during 2004, 2003 or 2002, as all options granted had an exercise price equal to or
greater than the market price of the underlying common stock at the date of the grant. Had
compensation cost for stock options been measured using the fair value method, net income
and basic and diluted earnings per share would have been the pro forma amounts indicated
below (dollars in thousands except per share data).

-39-

---



|OAK FINANCIAL CORPORATION
AND SUBSIDIARIES | NOTES TO CONSOLIDATEDFINANCIAL STATEMENTS
|------------------------------------------ | -----------------------------------------

|                                                     | 2004 | 2003 | 2002
|---------------------------------------------------- | ---- | ---- | ----
|                                                     |      |      |     
|Net Income as reported                               |      |      | $   
|                                                     |      |     
|Stock based compensation credit (expense) determined |      |     
|under fair value method, net of related tax effect   |      |      |     
|                                                     |      |     
|Pro-forma net income                                 |      |      | $   
|                                                     |      |     
|Basic earnings per share as reported                 |      |      | $   
|Pro-forma basic earnings per share                   |      |      | $   
|                                                     |      |     
|Diluted earnings per share as reported               |      |      | $   
|Pro-forma diluted earnings per share                 |      |      | $   

The
fair value of each option grant is estimated on the date of the grant using the
Black-Scholes option-pricing model with the following weighted average assumptions:

|                                                                | 2004 | 2003 | 2002
|--------------------------------------------------------------- | ---- | ---- | ----
|                                                                |      |      |     
|Dividend yield                                                  |      |      |     
|Expected life                                                   |      |      |     
|Expected volatility                                             |      |      |     
|Risk-free interest rate                                         |      |      |     
|Weighted-average fair value per share of options granted during |      |     
|the year                                                        |      |      | $   

Segment
Reporting: While management monitors the revenue streams of various
products and services offered, operations are managed and financial performance is
evaluated on a company wide basis. Accordingly, all of the Corporations operations
are considered by management to be aggregated in one reportable operating segment.

Restricted
Investments:The Bank is a member of the Federal Home Loan Bank System and is
required to invest in capital stock of the Federal Home Loan Bank of Indianapolis
(FHLB). The amount of the required investment is determined and adjusted
annually by the FHLB. The investment is carried at cost plus the value assigned to stock
dividends.

The
Bank is also a member of the Federal Reserve Bank System. The amount of the required
investment is determined by the FRB at the time the Bank becomes a member. The amount of
the investment may be adjusted thereafter and is carried at cost.

Recent
Pronouncements:In December 2004, the FASB re-issued SFAS No. 123
Accounting for Stock-Based Compensation which becomes effective for interim
periods beginning after June 15, 2005. This Statement supersedes APB Opinion No. 25
Accounting for Stock Issued to Employees and its related implementation
guidance. Under Opinion No. 25, issuing stock options to employees generally resulted in
recognition of no compensation cost. This Statement requires entities to recognize the
cost of employee services received in exchange for these stock options. This Statement
applies to all unvested awards outstanding as of the effective date. The Corporation plans
to adopt SFAS No. 123 for the period beginning after June 15, 2005 and does not expect a
material impact on the Companys Consolidated Financial Statements.

Reclassifications:
 Certain amounts in the 2003 and 2002 consolidated financial statements have been
reclassified to conform with the 2004 presentation.

-40-

---



|OAK FINANCIAL CORPORATION
AND SUBSIDIARIES | NOTES TO CONSOLIDATEDFINANCIAL STATEMENTS
|------------------------------------------ | -----------------------------------------

# NOTE 2. COMPREHENSIVE
INCOME (in thousands)

The
components of comprehensive income and related tax effects for the year ended December 31,
are as follows:

|                                            | 2004 | 2003 | 2002
|------------------------------------------- | ---- | ---- | ----
|                                            |      |      |     
|Unrealized (losses) gains on available-     |      |      |     
|for-sale securities arising during the year |      |      |     
|                                            |      |     
|Reclassification adjustment for realized    |      |     
|gains included in net income                |      |      |     
|                                            |      |      |     
|                                            |      |     
|Other comprehensive (loss) income           |      |     
|before income taxes                         |      |      |     
|                                            |      |     
|Income taxes related to                     |      |     
|other comprehensive income                  |      |      |     
|                                            |      |      |     
|                                            |      |     
|Other comprehensive (loss) income           |      |      |     
|                                            |      |     
|Net income                                  |      |      |     
|                                            |      |      |     
|Comprehensive income                        |      |      | $   
|                                            |      |      |     

# NOTE 3. RESTRICTIONS ON
CASH AND AMOUNTS DUE FROM BANKS

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, 2004 and 2003, those required reserve balances were $717,000
and $899,000, respectively.

# NOTE 4.
 AVAILABLE-FOR-SALE SECURITIES (in thousands)

The
amortized cost, gross unrealized gains, gross unrealized losses and fair value of
investment securities, all of which are classified as available-for-sale as of
December 31, are as follows:

|                                  | Amortized
  Cost | Gross  
Unrealized
   Gains | Gross
Unrealized
  Losses | Fair
Value
|--------------------------------- | ---------------- | --------------------------- | ------------------------- | ----------
|                                  |                  |                             |                           |           
|2004                              |                  |                             |                           |           
|U S government securities         |                  |                             | $                         | 18,782    
|Mortgage-backed securities        |                  |                             |                           | 32,629    
|States and political subdivisions |                  |                             |                           | 42,870    
|Other                             |                  |                             |                           | 4,633     
|                                  |                  |                             |                           |           
|Total                             |                  |                             | $                         | 98,914    
|                                  |                  |                             |                           |           
|                                  |                  |                            
|2003                              |                  |                            
|U S government securities         |                  |                             | $                         | 23,814    
|Mortgage-backed securities        |                  |                             |                           | 42,695    
|States and political subdivisions |                  |                             |                           | 30,837    
|Other                             |                  |                             |                           | 4,158     
|                                  |                  |                             |                           |           
|Total                             |                  |                             | $                         | 101,504   
|                                  |                  |                             |                           |           

-41-

---



|OAK FINANCIAL CORPORATION
AND SUBSIDIARIES | NOTES TO CONSOLIDATEDFINANCIAL STATEMENTS
|------------------------------------------ | -----------------------------------------

Investment
securities with carrying values of approximately $79.1 million and $85.1 million at
December 31, 2004 and 2003, respectively, were pledged to secure borrowing arrangements
disclosed in notes 9 and 10 or for other purposes as required or permitted by law.

The
amortized cost and fair value of available-for-sale securities by contractual maturity at
December 31, 2004 is shown below. Expected maturities will differ from contractual
maturities because issuers may have the right to call or prepay obligations with or
without call or prepayment penalties.

|                                       | AmortizedCost | FairValue
|-------------------------------------- | ------------- | ---------
|                                       |               |          
|Due in one year or less                |               |          
|Due after one year through five years  |               |          
|Due after five years through ten years |               |          
|Due after ten years                    |               |          
|                                       |               |          
|Subtotal                               |               |          
|Mortgage-backed securities             |               |          
|                                       |               |          
|Total                                  |               |          
|                                       |               |          

The
gross gains and gross losses realized on sales for the years ended December 31 are as
follows:

|                              | 2004 | 2003 | 2002
|----------------------------- | ---- | ---- | ----
|                              |      |      |     
|Gross realized gains          |      |      | $   
|Gross realized losses         |      |      |     
|                              |      |      |     
|Net realized gain on sales of |      |     
|available-for-sale securities |      |      | $   
|                              |      |      |     

The
unrealized losses shown in the following table resulted primarily from an increase in
market rates across the yield curve. The issuers of the bonds are of high quality and the
fair value is expected to recover as the bonds approach the maturity date. The Bank has
the intent and ability to hold the bonds for foreseeable future and therefore the
unrealized losses on securities have not been recognized into income.

|December 31, 2004                   | Less than 12 months | 12 months or longer | Total
|----------------------------------- | ------------------- | ------------------- | -----
|                                    |                     |                     |      
|                                    |                     |                     |      
|                                    |                     |                     |      
|U S government securities           |                     |                     | $    
|Mortgage-backed securities          |                     |                     |      
|States and political subdivisions . |                     |                     |      
|Other                               |                     |                     |      
|                                    |                     |                     |      
|                                    |                     |                     | $    

|December 31, 2003                   | Less than 12 months | 12 months or longer | Total
|----------------------------------- | ------------------- | ------------------- | -----
|                                    |                     |                     |      
|                                    |                     |                     |      
|                                    |                     |                     |      
|U S government securities           |                     |                     | $    
|Mortgage-backed securities          |                     |                     |      
|States and political subdivisions . |                     |                     |      
|Other                               |                     |                     |      
|                                    |                     |                     |      
|                                    |                     |                     | $    

-42-

---



|OAK FINANCIAL CORPORATION
AND SUBSIDIARIES | NOTES TO CONSOLIDATEDFINANCIAL STATEMENTS
|------------------------------------------ | -----------------------------------------

# NOTE 5.  LOANS AND
ALLOWANCE FOR LOAN LOSSES (in thousands)

Major loan classifications at
December 31, are as follows:

|                        | 2004 | 2003
|----------------------- | ---- | ----
|                        |      |     
|Commercial real estate  |      |     
|Residential real estate |      |     
|Commercial              |      |     
|Consumer                |      |     
|                        |      |     
|Total loans             |      |     
|                        |      |     

The following is an analysis of
changes in the allowance for loan losses for the years ended December 31:

|                           | 2004 | 2003 | 2002
|-------------------------- | ---- | ---- | ----
|                           |      |      |     
|Balance, beginning of year |      |      | $   
|Provision for loan losses  |      |      |     
|Recoveries                 |      |      |     
|Loans charged off          |      |      |     
|                           |      |      |     
|Balance, end of year       |      |      | $   
|                           |      |      |     

The following is a summary of
information pertaining to impaired loans as of December 31:

|                                                            | 2004 | 2003
|----------------------------------------------------------- | ---- | ----
|                                                            |      |     
|Impaired loans without a valuation allowance                |      |     
|Impaired loans with a valuation allowance                   |      |     
|                                                            |      |     
|Total impaired loans                                        |      |     
|                                                            |      |     
|Valuation allowance related to impaired loans               |      |     
|Total non-accrual loans                                     |      |     
|Total loans past due ninety days or more and still accruing |      |     

The following is a summary of information
pertaining to impaired loans for the years ended December 31:

|                                              | 2004 | 2003 | 2002
|--------------------------------------------- | ---- | ---- | ----
|                                              |      |      |     
|Average investment in impaired loans          |      |      | $   
|                                              |      |     
|Interest income recognized on impaired loans  |      |      | $   
|                                              |      |     
|Interest income recognized on a cash basis on |      |     
|impaired loans                                |      |      |     

No additional funds are committed to
be advanced in connection with impaired loans.

-43-

---



|OAK FINANCIAL CORPORATION
AND SUBSIDIARIES | NOTES TO CONSOLIDATEDFINANCIAL STATEMENTS
|------------------------------------------ | -----------------------------------------

# NOTE 6. PREMISES AND
EQUIPMENT (in thousands)

A summary of premises and equipment
at December 31 follows:

|                              | 2004 | 2003
|----------------------------- | ---- | ----
|                              |      |     
|Land and land improvements    |      |     
|Building and improvements     |      |     
|Furniture and equipment       |      |     
|                              |      |     
|Total premises and equipment  |      |     
|                              |      |     
|Less accumulated depreciation |      |     
|                              |      |     
|Premises and equipment, net   |      |     
|                              |      |     

Depreciation expense was $1.1
million, $1.1 million and $1.0 million for each of the years ending December 31, 2004,
2003 and 2002.

# NOTE 7. SERVICING (in
thousands)

The
mortgage servicing rights, MSR, value is a present value of the future income
stream attained from mortgage servicing fees, ancillary income from processing mortgage
related payments, delinquency effects and overnight income of processing,
float. The value is the sum of the present value of these future income
streams, which is impacted by assumptions on prepayment or decay rates, mortgage
classifications and the applied discount rate.

The
process is to classify the serviced mortgages into groups based on maturity, payment
terms, seasoning and interest rate. The result is a series of mortgage pools with
homogeneous characteristics, which are then subjected to appropriate prepayment speeds to
derive a future stream of expected cash flows for each pool. The current industry accepted
rate is used to discount the future cash flows. The sum of the present value of each pool
is the mortgage servicing portion of the valuation. The Bank employs an independent third
party to determine the fair value of the mortgage servicing rights.

Loans
serviced for others are not included on the accompanying consolidated balance sheets. The
unpaid principal balances of mortgage and other loans serviced for others were $240
million and $257 millionat December 31, 2004 and 2003, respectively.

The
balance of capitalized servicing rights, net of valuation allowance, included in other
assets at December 31, 2004 and 2003, was $2.2 million and $2.4 million respectively. The
fair value of these rights was $2.2 million and $2.4 million, respectively. The fair value
of servicing rights was determined using an average discount rate of 8.19 percent and
prepayment speeds ranging from 5.0 percent to 58.2 percent.

The
following table summarizes mortgage servicing rights capitalized and amortized, along with
the aggregate activity in related valuation allowances:

|                                      | 2004 | 2003 | 2002
|------------------------------------- | ---- | ---- | ----
|                                      |      |      |     
|Mortgage servicing rights capitalized |      |      | $   
|                                      |      |      |     
|Mortgage servicing rights amortized   |      |      | $   
|                                      |      |      |     
|Valuation Allowances:                 |      |     
|Balance at beginning or year          |      |      |     
|Net change in valuation allowance     |      |      |     
|                                      |      |      |     
|Balance at end of year                |      |      | $   
|                                      |      |      |     

-44-

---



|OAK FINANCIAL CORPORATION
AND SUBSIDIARIES | NOTES TO CONSOLIDATEDFINANCIAL STATEMENTS
|------------------------------------------ | -----------------------------------------

# NOTE 8. DEPOSITS
(dollars in thousands)

Deposits at year-end were as follows:

|                                    | 2004 | 2003
|----------------------------------- | ---- | ----
|                                    |      |     
|Noninterest-bearing demand          |      |     
|Interest-bearing checking           |      |     
|Money market and savings            |      |     
|Time deposits less than $100,000    |      |     
|Time deposits greater than $100,000 |      |     
|                                    |      |     
|Total deposits                      |      |     
|                                    |      |     

At December 31, 2004, scheduled
maturities of certificates of deposit are as follows:

|                    | 
|------------------- | 
|2005                | 
|2006                | 
|2007                | 
|2008                | 
|2009                | 
|2010                | 
|                    | 
|Total time deposits | 
|                    | 

Brokered deposits, which are included
in certificates of deposit, over $100,000 totaled approximately $43.7 million and $47.4
million at December 31, 2004 and 2003.

# NOTE 9. SECURITIES SOLD
UNDER AGREEMENTS TO REPURCHASE

Securities
sold under agreements to repurchase at December 31, 2004 and 2003 mature
within one day from the transaction date and have an average interest
rate of 0.73 percent and 0.99 percent, respectively. The U.S. government agency
securities underlying the agreements have a carrying value and a fair value of
approximately $64.2 million and $61.5 million at December 31, 2004 and 2003,
respectively. Such securities remain under the control of the Bank.

The
maximum amount of repurchase borrowings outstanding at any month end during the years
ended December 31, 2003 and 2002 was $55.6 million and $58.6 million,
respectively; the daily average balance was $44.6 million and $47.1 million, respectively.

# NOTE 10.  FEDERAL HOME
LOAN ADVANCES  (in thousands)

Each
advance is payable at its maturity date, and is subject to a prepayment fee if paid prior
to the maturity date. Advances with put options held by the Federal Home Loan Bank
amounted to $16.8 million at December 31, 2004 and 2003. At December 31, 2004, the Federal
Home Loan Bank borrowings were collateralized by specific 1 to 4 family residential
mortgage loans with a carrying value of approximately $38.2 million and U.S. government
agency securities with a carrying value of approximately $9.5 million. At December 31,
2003, the Federal Home Loan Bank borrowings were collateralized by specific 1 to 4 family
residential mortgage loans with a carrying value of approximately $28.8 million and U.S.
government agency securities with a carrying value of approximately $17.9 million. The
average interest rate was 5.39 percent and 5.29 percent, for 2004 and 2003, respectively.

-45-

---



|OAK FINANCIAL CORPORATION
AND SUBSIDIARIES | NOTES TO CONSOLIDATEDFINANCIAL STATEMENTS
|------------------------------------------ | -----------------------------------------

The Federal Home Loan Bank advances
at December 31, 2004 and their contractual maturities are as follows:

|            | Balance | Rates
|----------- | ------- | -----
|            |         |      
|Due in 2005 |         |      
|Due in 2006 |         |      
|Due in 2007 |         |      
|Due in 2010 |         |      
|            |         |      
|            |         |      
|            |         |      

# NOTE 11. FEDERAL INCOME
TAXES (in thousands)

The provision for federal income
taxes for the years ended December 31 consists of:

|                           | 2004 | 2003 | 2002
|-------------------------- | ---- | ---- | ----
|                           |      |      |     
|Current                    |      |      | $   
|Deferred expense (benefit) |      |      |     
|                           |      |      |     
|Federal income tax expense |      |      | $   
|                           |      |      |     

A reconciliation between federal income
tax expense and the amount computed by applying the statutory federal income tax rate of
34 percent to income before taxes for the years ended December 31, is as follows:

|                                     | 2004 | 2003 | 2002
|------------------------------------ | ---- | ---- | ----
|                                     |      |      |     
|Statutory rate applied to income     |      |      |     
|before income taxes                  |      |      | $   
|Effect of tax-exempt interest income |      |      |     
|Other - net                          |      |      |     
|                                     |      |      |     
|Federal income tax expense           |      |      | $   
|                                     |      |      |     

The net deferred income tax asset
recorded includes the following amounts of deferred tax assets and liabilities:

|                                                 | 2004 | 2003
|------------------------------------------------ | ---- | ----
|                                                 |      |     
|Deferred tax assets                              |      |     
|Allowance for loan losses                        |      |     
|Deferred compensation plan                       |      |     
|Deferred loan fees                               |      |     
|Non-accrual interest                             |      |     
|Other                                            |      |     
|Total deferred tax assets                        |      |     
|                                                 |      |     
|                                                 |      |     
|Deferred tax liabilities                         |      |     
|Depreciation                                     |      |     
|Discount accretion                               |      |     
|Unrealized gain on securities available for sale |      |     
|Loan servicing rights                            |      |     
|Other                                            |      |     
|Total deferred tax liabilities                   |      |     
|                                                 |      |     
|Net deferred tax asset                           |      |     
|                                                 |      |     

-46-

---



|OAK FINANCIAL CORPORATION
AND SUBSIDIARIES | NOTES TO CONSOLIDATEDFINANCIAL STATEMENTS
|------------------------------------------ | -----------------------------------------

# NOTE 12. RELATED PARTY
TRANSACTIONS

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 $431,000 and
$6,624,000 at December 31, 2004 and 2003, respectively. New loans and repayments during
2004 were approximately $237,000 and $58,000, respectively. Decreases related to retired
executive officers or directors were $6,372,000.

# NOTE 13.  OFF-BALANCE
SHEET ACTIVITIES (in thousands)

The
Bank is a party to credit related 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, standby letters of credit and commercial
letters of credit. Such commitments involve to varying degrees elements of credit and
interest rate risk in excess of the amount recognized in the consolidated balance sheets.
The Bank follows the same credit policy to make such commitments, including collateral as
is followed for those loans recorded in the consolidated financial statements; no
significant losses are anticipated as a result of these commitments.

The
Banks exposure to credit loss is represented by the contractual amount of these
commitments. The Bank follows the same credit policies in making commitments as it does
for on-balance-sheet instruments.

At
December 31, 2004 and 2003, the following financial instruments were outstanding whose
contract amounts represent credit risk:

|                                                                | Contract Amount
|--------------------------------------------------------------- | ---------------
|                                                                |                
|                                                               
|                                                                |                
|Commitments to grant loans                                      |                
|Unfunded commitments under commercial and other lines of credit |                
|Unfunded commitments under home equity lines of credit          |                
|Commercial and standby letters of credit                        |                

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 or other termination clauses and may require payment of a fee. The commitments for
equity lines of credit may expire without being drawn upon. Therefore, the total
commitment amounts do not necessarily represent future cash requirements. The amount of
collateral obtained, if it is deemed necessary by the Bank, is based on managements
credit evaluation of the customer.

Unfunded
commitments under commercial lines-of-credit, revolving credit lines and overdraft
protection agreements are commitments for possible future extensions of credit to
existing customers. These lines-of-credit usually do not contain a specified maturity
date and may not be drawn upon to the total extent to which the Bank is committed; a
portion are unsecured.

Commercial
and standby letters-of-credit are conditional commitments issued by the Bank to guarantee
the performance of a customer to a third party. Those letters-of-credit are primarily
issued to support public and private borrowing arrangements. Essentially all letters of
credit issued have expiration dates within one year. The credit risk involved in issuing
letters-of-credit is essentially the same as that involved in extending loan facilities to
customers. The Bank generally holds collateral supporting those commitments if deemed
necessary.

-47-

---



|OAK FINANCIAL CORPORATION
AND SUBSIDIARIES | NOTES TO CONSOLIDATEDFINANCIAL STATEMENTS
|------------------------------------------ | -----------------------------------------

# NOTE 14. REGULATORY
MATTERS (dollars in thousands)

The
Corporation (on a consolidated basis) and the Bank are subject to various regulatory
capital requirements administered by its primary regulator, the FRB. Failure to meet
minimum capital requirements can initiate certain mandatory and possibly additional
discretionary actions by the FRB that, if undertaken, could have a direct material effect
on the Corporations and the Banks financial statements. Under capital adequacy
guidelines and the regulatory framework for prompt corrective action, the Corporation and
the Bank must meet specific capital guidelines that involve quantitative measures of the
their assets, liabilities, capital and certain off-balance-sheet items as defined in the
regulations and calculated under regulatory accounting practices. The capital amounts and
classification are also subject to qualitative judgments by the regulators about
components, risk weightings and other factors. Prompt corrective action provisions are not
applicable to bank holding companies.

Quantitative
measurements established by regulation to ensure capital adequacy require the Corporation
and the Bank to maintain minimum amounts and ratios (set forth in the following table) of
total capital and Tier 1 capital to risk weighted assets and Tier 1 capital to average
assets. Management believes, as of December 31, 2004, that the Corporation and
the Bank meet all capital adequacy requirements to which they are subject. As of December
31, 2004 the most recent notification from the FRB categorized the Bank as well
capitalized under the regulatory framework for prompt corrective action. To be 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. There are no conditions or
events since the most recent notification that management believes has changed the
Banks category.

The
Corporations and the Banks actual capital amounts and ratios as of
December 31, 2004 and 2003 are also presented in the table below:

|                                         | Actual | Minimum Capital Requirement | Minimum to be well
Capitalized Under Prompt Corrective Action Provisions
|---------------------------------------- | ------ | --------------------------- | ------------------------------------------------------------------------
|                                         |        |                             |                                                                         
|                                         |        |                             |                                                                         
|                                         |        |                             |                                                                         
|As of December 31, 2004                  |        |                             |                                                                         
|Total capital (to risk weighted assets)  |        |                            
|Consolidated                             |        |                             | $                                                                       
|Bank                                     |        |                             |                                                                         
|Tier 1 capital (to risk weighted assets) |        |                            
|Consolidated                             |        |                             |                                                                         
|Bank                                     |        |                             |                                                                         
|Tier 1 capital (to average assets)       |        |                            
|Consolidated                             |        |                             |                                                                         
|Bank                                     |        |                             |                                                                         
|                                         |        |                            
|As of December 31, 2003                  |        |                            
|Total capital (to risk weighted assets)  |        |                            
|Consolidated                             |        |                             | $                                                                       
|Bank                                     |        |                             |                                                                         
|Tier 1 capital (to risk weighted assets) |        |                            
|Consolidated                             |        |                             |                                                                         
|Bank                                     |        |                             |                                                                         
|Tier 1 capital (to average assets)       |        |                            
|Consolidated                             |        |                             |                                                                         
|Bank                                     |        |                             |                                                                         

-48-

---



|OAK FINANCIAL CORPORATION
AND SUBSIDIARIES | NOTES TO CONSOLIDATEDFINANCIAL STATEMENTS
|------------------------------------------ | -----------------------------------------

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. Loans or advances are limited to 10 percent of the Banks capital stock
and surplus on a secured basis. Generally, 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. In addition, dividends paid by the Bank to the Corporation would be prohibited if
the effect thereof would cause the Banks capital to be reduced below applicable
minimum capital requirements. At January 1,2005, the corporations subsidiary bank,
without obtaining prior governmental approvals, could declare aggregate dividends of
approximately $5.3 million from retained net profits of the proceeding two years, plus an
amount approximately equal to the net profits (as measured under current regulations), if
any, earned for the period from January 1, 2005 through the date of declaration.

# NOTE 15. EMPLOYEE
BENEFIT PLANS AND POST RETIREMENT BENEFITS

The
Corporation maintains a 401(k) covering substantially all employees. The Corporation
matches employee contributions to the 401(k) up to a maximum of 4.5 percent of
employees eligible wages.

The
Profit Sharing Plan was terminated as of January 1, 2004, as such, no employer
contribution was made in 2004. The Corporation maintained a Profit Sharing Plan covering
substantially all employees. The Corporations contribution to the profit sharing
plan was based on defined performance targets established annually by the board of
directors.

The
ESOP plan was terminated in the fourth quarter of 2003. The shares allocated to
participants became fully vested as of the termination date. The ESOP returned the 5,589
unallocated shares to the Corporation to satisfy the remaining unpaid loan balance. The
Corporation maintained an internally leveraged Employee Stock Ownership Plan (ESOP)
covering substantially all employees. The Corporation made annual contributions equal to
at least the ESOPs debt service less dividends received by the ESOP. The original
loan has been repaid. The dividends on the allocated shares were distributed to
participants and the dividends on the unallocated shares were used to pay debt service.
The ESOP shares initially were pledged as collateral for its debt. As the debt was repaid,
prior to the termination of the plan, shares were released from collateral and allocated
to active participants. The shares pledged as collateral were reported as unallocated
common stock held by the ESOP in the equity section of the balance sheet. As shares were
released they became outstanding for earnings per share computations.

The ESOP shares as of December 31,
were as follows:

|                               | 2004 | 2003 | 2002
|------------------------------ | ---- | ---- | ----
|                               |      |      |     
|Allocated Shares               |      |      |     
|Shares released for allocation |      |      |     
|Shares Repurchased and retired |      |      |     
|Shares Issued                  |      |      |     
|                               |      |      |     
|Sub-total                      |      |      |     
|                               |      |     
|Unreleased Shares              |      |      |     
|                               |      |      |     
|Total ESOP Shares              |      |      |     
|                               |      |      |     

The
total Corporation contributions to the 401(k) match, profit sharing plan and ESOP were
$158,000, $301,000 and $316,000 for 2004, 2003 and 2002, respectively.

-49-

---



|OAK FINANCIAL CORPORATION
AND SUBSIDIARIES | NOTES TO CONSOLIDATEDFINANCIAL STATEMENTS
|------------------------------------------ | -----------------------------------------

The
Bank adopted deferred compensation plans for all directors who wish to participate. The
cost of the plan was $(257,000), $(142,000) and $175,000 in 2004, 2003 and 2002,
respectively. The credit to expense in 2004 reflects an amendment to the plan on February
1, 2004, to change the earnings credit from a fixed rate of 12 percent to an annually
adjusted rate. The rate, which is provided by an independent third party, was 7.7 percent
in 2004. The credit to expense in 2003 reflects a decrease in the benefit obligation
resulting from the reduction in benefits payable to a former director as prescribed by the
plan. The accrued benefit obligation for this plan was $1,171,000 and $1,402,000 as of
December 31, 2004 and 2003, respectively, and is included in other liabilities.
The Bank has purchased life insurance policies on participating directors.

# NOTE 16. STOCK OPTIONS

The
Corporation maintains stock option plans for non-employee directors (the Directors
Plan) and employees and officers of the Corporation and its subsidiary (the
Employees Plan). The stock compensation plans were established in 1999, and
authorize the issue of up to 165,000 options under the Employees Plan and up to
35,000 options under the Directors Plan.

Options
under both plans become exercisable after the first anniversary of the award date. The
option exercise price is at least 100 percent of the market value of the common stock at
the grant date. During 2004, 1,000 options were awarded with an exercise price of $45.00
per share. No options were awarded during 2003. During 2002, 14,747 options were awarded
with an exercise price of $44.50 per share.

The
following tables summarize information about stock option transactions:

|                               | 2004 | 2003 | 2002
|------------------------------ | ---- | ---- | ----
|                               |      |      |     
|                               |      |      |     
|                               |      |      |     
|Outstanding, beginning of year |      |      |     
|Granted                        |      |      |     
|Exercised                      |      |      |     
|Forfeited/expired              |      |      |     
|                               |      |      |     
|Outstanding, end of year       |      |      |     
|                               |      |      |     
|Exercisable, end of year       |      |      |     
|                               |      |      |     

|Exercise Price | Number   Outstanding December 31, 2004 | Weighted Average Remaining Contractual Life | Number of Options  Exercisable December 31, 2004 | Weighted Average  Exercise Price
December 31, 2004
|-------------- | -------------------------------------- | ------------------------------------------- | ------------------------------------------------ | --------------------------------------------------
|               |                                        |                                             |                                                  |                                                   
|$44.50         |                                        |                                             |                                                  | 9,492                                             
|$45.00         |                                        |                                             |                                                  | 1,000                                             
|$50.00         |                                        |                                             |                                                  | 12,158                                            
|$55.00         |                                        |                                             |                                                  | 5,601                                             
|               |                                        |                                             |                                                  |                                                   
|Total          |                                        |                                             |                                                  | 28,251                                            
|               |                                        |                                             |                                                  |                                                   

All options
expire 10 years after the date of the grant; 145,992 shares are reserved for future
issuance under the Stock Compensation Plan and 25,000 shares are reserved for future
issuance under the Stock Option Plan for non-employee directors.

-50-

---



|OAK FINANCIAL CORPORATION
AND SUBSIDIARIES | NOTES TO CONSOLIDATEDFINANCIAL STATEMENTS
|------------------------------------------ | -----------------------------------------

# NOTE 17.  EARNINGS PER
SHARE (in thousands, except earnings per share)

A
reconciliation of basic and diluted earnings per share for the years ended December 31,
follows:

|                                                 | 2004 | 2003 | 2002
|------------------------------------------------ | ---- | ---- | ----
|                                                 |      |      |     
|Net income                                       |      |      | $   
|                                                 |      |      |     
|Average common shares outstanding                |      |      |     
|Assumed exercise of dilutive stock options       |      |      |     
|                                                 |      |      |     
|Average common shares outstanding, including the |      |     
|assumed exercise of dilutive stock options       |      |      |     
|                                                 |      |      |     
|Net income per share:                            |      |     
|Basic                                            |      |      | $   
|Diluted                                          |      |      | $   

# NOTE 18.  FAIR VALUES OF
FINANCIAL INSTRUMENTS (in thousands)

The
carrying amount and estimated fair values of financial instruments at December 31, are as
follows:

|                                       | 2004 | 2003
|-------------------------------------- | ---- | ----
|                                       |      |     
|                                       |      |     
|                                       |      |     
|Financial assets                       |      |     
|Cash and cash equivalents              |      |     
|Available-for-sale securities          |      |     
|Loans receivable, net                  |      |     
|Loans held for sale                    |      |     
|Accrued interest receivable            |      |     
|Restricted investments                 |      |     
|                                       |      |     
|Financial liabilities                  |      |     
|Deposits                               |      |     
|FHLB advances and other borrowed funds |      |     
|Securities sold under agreements to    |      |     
|repurchase and federal funds purchased |      |     
|Other liabilities                      |      |     

Carrying
amount is the estimated fair value of cash and cash equivalents, accrued interest
receivable and payable, restricted investments, demand deposits, short-term borrowings,
and variable rate loans or deposits that reprice frequently and fully. Security fair
values are based on market prices or dealer quotes, and if no such information is
available, on the rate and term of security and information about the issuer. For fixed
rate loans or deposits and for variable rate loans or deposits with infrequent repricing
or repricing limits, fair value is based on discounted cash flows using current market
rates applied to the estimated life and credit risk. Fair values for impaired loans are
estimated using discounted cash flow analysis or underlying collateral values. Fair value
of loans held for sale is based on market quotes. Fair value of debt is based on current
rates for similar financing.

-51-

---



|OAK FINANCIAL CORPORATION
AND SUBSIDIARIES | NOTES TO CONSOLIDATEDFINANCIAL STATEMENTS
|------------------------------------------ | -----------------------------------------

# NOTE 19.  OAK FINANCIAL
CORPORATION (PARENT COMPANY ONLY) CONDENSED FINANCIAL INFORMATION (in thousands)

The
following summarizes parent company only condensed balance sheets as of December 31, 2004
and 2003 and the related condensed statements of income and cash flows for each of the
three years in the period ended December 31, 2004, 2003 and 2002:

# Condensed Balance
Sheets

|                                           | 2004 | 2003
|------------------------------------------ | ---- | ----
|                                           |      |     
|Assets                                     |      |     
|Cash                                       |      |     
|Investment in subsidiary                   |      |     
|Available-for-sale securities              |      |     
|Other Assets                               |      |     
|                                           |      |     
|Total assets                               |      |     
|                                           |      |     
|Other liabilities                          |      |     
|Stockholders' equity                       |      |     
|                                           |      |     
|Total liabilities and stockholders' equity |      |     
|                                           |      |     

# Condensed Statements
of Income

|                                              | 2004 | 2003 | 2002
|--------------------------------------------- | ---- | ---- | ----
|                                              |      |      |     
|Income                                        |      |      |     
|Dividends from subsidiary                     |      |      | $   
|Interest from available-for-sale securities . |      |      |     
|Net realized gain on sale of                  |      |     
|available-for-sale securities                 |      |      |     
|                                              |      |      |     
|Total income                                  |      |      |     
|                                              |      |     
|Other expenses                                |      |      |     
|                                              |      |      |     
|Income before income taxes and equity in      |      |     
|undistributed net income of subsidiary        |      |      |     
|Applicable income tax provision (benefit)     |      |      |     
|                                              |      |      |     
|                                              |      |      |     
|Equity in undistributed net income of         |      |     
|subsidiary                                    |      |      |     
|                                              |      |      |     
|Net income                                    |      |      | $   
|                                              |      |      |     

-52-

---



|OAK FINANCIAL CORPORATION
AND SUBSIDIARIES | NOTES TO CONSOLIDATEDFINANCIAL STATEMENTS
|------------------------------------------ | -----------------------------------------

# Condensed Statements
of Cash Flows

|                                              | 2004 | 2003 | 2002
|--------------------------------------------- | ---- | ---- | ----
|                                              |      |      |     
|Cash flows from operating activities          |      |      |     
|Net income                                    |      |      | $   
|                                              |      |     
|Adjustments to reconcile net income           |      |     
|to net cash provided by operating activities  |      |     
|Net gain on available-for-sale securities     |      |      |     
|Undistributed earnings of subsidiary          |      |      |     
|Amortization of available-for-sale securities |      |      |     
|Changes in other liabilities                  |      |      |     
|                                              |      |      |     
|Net cash provided by operating activities     |      |      |     
|                                              |      |      |     
|Cash flows from investing activities          |      |     
|Available-for-sale securities                 |      |     
|Proceeds from sales                           |      |      |     
|Purchases                                     |      |      |     
|                                              |      |      |     
|Net cash provided by investing activities     |      |      |     
|                                              |      |      |     
|Cash flows from financing activities          |      |     
|Repayment of long-term debt                   |      |      |     
|Proceeds from allocation of ESOP              |      |      |     
|Proceeds from common stock issued             |      |      |     
|Redemption of ESOP shares                     |      |      |     
|Dividends paid                                |      |      |     
|                                              |      |      |     
|Net cash used in financing activities         |      |      |     
|                                              |      |      |     
|Net (decrease) increase in cash and cash      |      |     
|equivalents                                   |      |      |     
|                                              |      |     
|Cash and cash equivalents, beginning of year  |      |      |     
|                                              |      |      |     
|Cash and cash equivalents, end of year        |      |      | $   
|                                              |      |      |     

-53-

---



# Item 9.  Changes in and
Disagreements with Accountants on Accounting and Financial Disclosure.

None

# Item 9A Controls and
Procedures

(a)        Evaluation
of Disclosure Controls and Procedures.

The
Corporations Chief Executive Officer and the Chief Financial Officer, after
evaluating the effectiveness of the Corporations disclosure controls and procedures
(as defined in Exchange Act Rules 13a-15(e) and 15(d)-15(e)) as of the end of the period
covered by this Form 10-K Annual Report have concluded that the Corporations
disclosure controls and procedures were adequate and effective to ensure that material
information relating to the Corporation would be made known to them by others within the
Corporation, particularly during the period in which this Form 10-K Annual Report was
being prepared.

(b)        Management's
Report on Internal Control Over Financial Reporting.

The
Corporation's management report on internal control over financial reporting is included in Item 8 on
page 30 of this Annual Report and is incorporated herein by reference.  The attestation report of Plante &
Moran, PLLC, the Corporation's independent registered public accounting firm, on management's assessment
 of the effectiveness of the Corporation's internal control over financial reporting is included in Item 8 on
page 31 of this Annual Report and is incorporated herein by reference.

(c)        Changes
in Internal Controls.

During
the period covered by this report, there have been no changes in the Corporations
internal control over financial reporting that have materially affected or are reasonably
likely to materially affect the Corporations internal control over financial
reporting.

# Item 9B Other Information

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 5 through 8 and
under the caption Section 16(a) Beneficial Ownership Reporting Compliance on
page 14 of the Companys definitive proxy statement, as filed with the Commission,
relating to the April 21, 2005 Annual Meeting of Shareholders, is incorporated herein by
reference.

# Audit Committee
Financial Expert

The
Board of Directors of the Corporation has determined that Robert F. Dentzman, a director
and member of the Audit Committee, qualifies as an Audit Committee Financial
Expert as defined in rules adopted by the Securities and Exchange Committee pursuant
to the Sarbanes-Oxley Act of 2002.

# Executive Officers

Reference
is made to additional item under Part I of this report on Form 10-K.

# Code of Ethics

The
honesty, integrity and sound judgment of the chief executive officer and senior financial
officers is fundamental to the reputation and success of OAK Financial Corporation. While
all employees, officers, and directors are required to adhere to the OAK Financial
Corporation Code of Ethics, the professional and ethical conduct of the chief executive
officer and senior financial officers is essential to the proper function and success of
OAK Financial Corporation as a leading financial services provider. Executives of OAK
Financial Corporation subject to this Code include the Chief Executive Officer, the Chief
Financial Officer, the Chief Accounting Officer, the Controller, and any other officer
performing accounting, auditing, financial management or similar functions. The Code of
Ethics is incorporated by reference as an exhibit to this Report on Form 10-K.

-54-

---



Item 11. Executive
Compensation.

The
information set forth under the caption Executive Compensation Summary and
Shareholders Return Performance Graph, on pages 11, 12 and 13 of the
Companys definitive proxy statement, as filed with the Commission, relating to the
April 21, 2005 Annual Meeting of Shareholders, is incorporated herein by reference.
Information under the caption Committee Report on Executive Compensation on
pages 9 and 10 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 pages 3 and 4 of the Companys definitive proxy statement, as
filed with the Commission, relating to the April 21, 2005 Annual Meeting of Shareholders,
is incorporated herein by reference.

Securities
Authorized for Issuance Under Equity Compensation Plans. The Company had the following
equity compensation plans at December 31, 2004:

# EQUITY COMPENSATION
PLAN INFORMATION

|Plan Category                 | Number of securities to
be issued upon exercise
 of outstanding options | Weighted-average
 exercise price of
outstanding options | Number of securities
 remaining available for
  future issuance under
   equity compensation
     plans (excluding
 securities reflected in
    the first column)
|----------------------------- | ----------------------------------------------------------------------- | ------------------------------------------------------- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------
|                              |                                                                         |                                                         |                                                                                                                                                                  
|Equity compensation plans     |                                                                         |                                                         |                                                                                                                                                                  
|approved by security holders  |                                                                         |                                                         |                                                                                                                                                                  
|Equity compensation plans not |                                                                         |                                                        
|approved by security holders  |                                                                         |                                                         |                                                                                                                                                                  
|                              |                                                                         |                                                         |                                                                                                                                                                  
|Total                         |                                                                         |                                                         |                                                                                                                                                                  

These
equity compensation plans are more fully described in Note 16 to the Consolidated
Financial Statements.

# Item 13. Certain
Relationships and Related Transactions.

The
information set forth under the caption Certain Transactions on page 13 of the
Companys definitive proxy statement, as filed with the Commission, relating to the
April 21, 2005 Annual Meeting of Shareholders, is incorporated herein by reference.

# Item 14.  Principal
Accountant Fees and Services.

The
information set forth under the heading Fees of Independent Accountants on
page 14 of the Companys definitive proxy statement, as filed with the Commission,
relating to the April 21, 2005 annual meeting of shareholders, is incorporated herein
by reference.

-55-

---



# Item 15.  Exhibits,
Financial Statement Schedules and Report on Form 8-K.

|(a) | 1. | Financial Statements
|--- | -- | --------------------

| |  | Independent Auditors' Report
Consolidated Financial Statements
     Consolidated Balance Sheets as of
         December 31, 2004 and 2003
     Consolidated Statements of Income for the Years Ended
         December 31, 2004, 2003 and 2002
     Consolidated Statements of Comprehensive Income for the
         Years Ended December 31, 2004, 2003 and 2002
     Consolidated Statements of Changes in Stockholders' Equity
         for the Years Ended December 31, 2004, 2003 and 2002
     Consolidated Statements of Cash Flows for each of the Years Ended
         December 31, 2004, 2003 and 2002
     Notes to Consolidated Financial Statements
| |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 2. | Financial
Statement SchedulesNot 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 - Response no longer required.
|--- | --------------------------------------------------

-56-

---



# 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 10, 2005.

| |  | OAK FINANCIAL CORPORATION/s/ Patrick K. Gill
Patrick K. GillPresident, Chief Executive Officer(Principal Executive Officer)/s/ James A. Luyk
James A. LuykExecutive Vice President(Chief Financial Officer and Chief Operating 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
Patrick K. Gill and James A. Luyk, 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/s/ Robert F. Dentzman

Robert F. Dentzman | DateMarch 10, 2005
|------------------------------------------------------------------ | ------------------

|/s/ Patrick K. Gill

Patrick K. Gill | March 10, 2005
|--------------------------------------------------- | --------------

|/s/ Norm J. Fifelski

Norm J. Fifelski | March 10, 2005
|----------------------------------------------------- | --------------

|/s/ Dellvan J. Hoezee

Dellvan J. Hoezee | March 10, 2005
|------------------------------------------------------- | --------------

|/s/ Grace O. Shearer

Grace O. Shearer | March 10, 2005
|----------------------------------------------------- | --------------

|/s/ David G. Van Solkema

David G. Van Solkema | March 10, 2005
|------------------------------------------------------------- | --------------

|/s/ James B. Meyer

James B. Meyer | March 10, 2005
|------------------------------------------------- | --------------

-57-

---



# EXHIBIT INDEX

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

ExhibitNumber

|10.1 | Form
of Employee Stock Options
|---- | ------------------------------

|10.2 | Form
of Non-employee Director Stock Option
|---- | ------------------------------------------

|21 | Subsidiaries
of Registrant
|-- | --------------------------

|24 | Powers
of Attorney.  Contained on the signature page of this report.
|-- | --------------------------------------------------------------------

|31.1 | Certificate
 of Chief  Executive  Officer of OAK  Financial  Corporation.  pursuant to 15 U.S.C.
 Section 7241, as          adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.
|---- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|31.2 | Certificate
of Chief Financial Officer of OAK Financial Corporation pursuant to 15 U.S.C. Section
7241, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|---- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|32.1 | Certificate
of Chief Executive Officer and Chief Financial Officer of OAK Financial Corporation
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
|---- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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.

ExhibitNumber

|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 | 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, incorporated by
reference to Exhibit 3 of Registrants Report on Form 10-K for the year ended
December 31, 1998.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|3.3 | 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.
|- | ------------------------------------------------------------------------------------------------------------------------------------------------------

|10.3 | 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.
|---- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.4 | Nonemployee
Directors Stock Option 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.
|---- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.5 | 1988
Director Deferred Compensation Plan is incorporated by reference to Exhibit 10 of the
Registrants Registration Statement on Form 10, as amended.
|---- | ------------------------------------------------------------------------------------------------------------------------------------------------------

|10.6 | Director
Deferred Compensation Plan is incorporated by reference to Exhibit 10 of the Registrants
Report on Form 10-K for the year ended December 31, 2000.
|---- | ------------------------------------------------------------------------------------------------------------------------------------------------------------

-58-

---



|10.7 | Income
Protection Agreement between Registrant and James Luyk is incorporated by reference to
Exhibit 10 of Registrants Report on Form 10-K for the year ended December 31, 2001.
|---- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.8 | Employment
Agreement between Byron Center State Bank and Patrick K. Gill is incorporated by
reference to Exhibit 10.1 to the Registrants Report on Form 10-K for the year ended
December 31, 2002.
|---- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.9 | Form
of Indemnity Agreement executed between OAK Financial Corporation and each of Grace O.
Shearer and Robert F. Dentzman is incorporated by reference to Exhibit 10.3 to Registrants
Report on Form 10-K for the year ended December 31, 2002.
|---- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|14 | Code
of Ethics is incorporated by reference to Exhibit 14 to Registrants Report on Form
10-K for the year ended December 31, 2003.
|-- | -----------------------------------------------------------------------------------------------------------------------------------

-59-

---



# Exhibit 10.1

# O.A.K. FINANCIAL
CORPORATION

# STOCK OPTION AGREEMENT For Incentive Stock
Option (ISO) Granted Under Stock Compensation
Plan

This
STOCK OPTION AGREEMENT is made this , between O.A.K. FINANCIAL CORPORATION(herein called the Company) and , an employee of the Company or one of its
subsidiaries (the Employee), pursuant to the O.A.K. Financial Corporation 1999
Stock Compensation Plan (the Plan), which Plan was approved by the board of
directors and shareholders of the Company on April 22, 1999.

IT
IS AGREED AS FOLLOWS:

|1. | Grant
of Option
|-- | ---------------

Pursuant
to the Plan, the Company hereby grants to the Employee the option to purchase __________
shares of the Companys common stock, $1.00 par value per share.

|2. | Purchase
Price
|-- | --------------

The
purchase price of the shares covered by this Option shall be per share. The
Committee (provided for in Article 3 of the Plan) has determined that such
price represents one hundred percent (100%) of the fair market value of a share of the
Companys common stock on this date.

|3. | Term
of Option
|-- | --------------

The
term of this Option shall be for a period of ten (10) years from the date hereof, subject
in each case to earlier termination as provided in subsequent paragraphs of this
Agreement.

|4. | Employees
Agreement
|-- | --------------------

In
consideration of the granting of the Option, the Employee agrees to remain in the employ
of the Company for a period of at least twelve (12) months from the date hereof (the
Minimum Employment Period). Such employment, subject to the provisions of any
written contract between the Company and the Employee, shall be at the pleasure of the
Board of Directors, and this Option Agreement shall not impose on the Company any
obligation to retain the Employee in its employ for any period. In the event of the
termination of employment of the Employee for any reason during the Minimum Employment
Period, this Option shall terminate, unless this Option becomes exercisable as provided in
paragraph 9.

-60-

---



|5. | Exercise
of Option
|-- | ------------------

Except
as provided in paragraph 9, this Option shall not be exercisable prior to the expiration
of the Minimum Employment Period. Thereafter, this Option may be exercised in whole or in
part, at any time and from time to time. This Option may not be exercised as to less than
100 shares at any one time, unless the number purchased is the total number at that time
purchasable under this Option. This Option shall be exercised by written notice to the
Company. The notice shall state the number of shares with respect to which the Option is
being exercised, shall be signed by the person exercising this Option, and shall be
accompanied by payment of the full purchase price of the shares in such form as the
Committee may accept. This Option agreement shall be submitted to the Company with the
notice for purposes of recording the shares being purchased, if exercised in part, or for
purposes of cancellation if all shares then subject to this Option are being purchased. In
the event the Option shall be exercised pursuant to paragraph 8(c) hereof by any person
other than the Employee, such notice shall be accompanied by appropriate proof of the
right of such person to exercise the Option. To the extent determined by the Committee in
its sole discretion, payment of the purchase price shall be made by: (a) cash, check, bank
draft, or money order, payable to the order of the Company; (b) the delivery by the
Employee of unencumbered shares of common stock of the Company with a Fair Market Value on
the last trading day preceding payment equal to the total purchase price of the shares to
be purchased; (c) the reduction in the number of shares issuable upon exercise (based on
the fair market value of the shares on the date of exercise); or (d) a combination of (a),
(b), and (c). Upon exercise of all or a portion of this Option, the Company shall issue to
the Employee a stock certificate representing the number of shares with respect to which
this Option was exercised.

|6. | Tax
Withholding
|-- | ---------------

The
exercise of this Option is subject to the satisfaction of withholding tax or other
withholding liabilities, if any, under federal, state and local laws in connection with
such exercise or the delivery or purchase of shares pursuant hereto. The exercise of this
Option shall not be effective unless applicable withholding shall have been effected or
obtained in the following manner or in any other manner acceptable to the Committee.
Unless otherwise prohibited by the Committee, Optionee may satisfy any such withholding
tax obligation by any of the following means or by a combination of such means: (a)
tendering a cash payment; (b) authorizing the Company to withhold from the shares
otherwise issuable to Optionee as a result of the exercise of this Option a number of
shares having a fair market value as of the date that the amount of tax to be withheld is
to be determined (Tax Date), which shall be the date of exercise of the
Option, less than or equal to the amount of the withholding tax obligation; or (c)
delivering to the Company unencumbered shares of the Companys common stock owned by
Optionee having a fair market value, as of the Tax Date, less than or equal to the amount
of the withholding tax obligation.

|7. | Nontransferability
of Option
|-- | ----------------------------

This
Option shall not be sold, transferred, pledged, assigned, or otherwise alienated or
hypothecated other than by will or by the laws of descent and distribution, and shall not
be subject to execution, levy, attachment or similar process. Any attempted sale,
transfer, assignment, pledge, hypothecation or other disposition of this Option contrary
to the terms hereof, and any execution, levy, attachment or similar process upon the
Option, shall be null and void and without effect. Following any transfer, this Option
shall continue to be subject to the same terms and conditions immediately prior to
transfer. The designation of a person entitled to exercise this Option after the
Employees death will not be deemed a transfer.

-61-

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|8. | Termination
of Employment
|-- | -------------------------

| | (a) | Termination
of Employment for Reasons Other Than Retirement, Disability or Death
| | --- | --------------------------------------------------------------------------------

| | Upon
Termination of Employment for any reason other than Retirement or on account of Disability
or death, this Option shall, to the extent rights to purchase shares hereunder have
accrued at the date of such Termination of Employment and shall not have been fully
exercised, be exercisable, in whole or in part, at any time within a period of three (3)
months following Termination of Employment, subject, however, to prior expiration of the
term of this Option and any other limitations upon its exercise in effect at the date of
exercise.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (b) | Termination
of Employment for Retirement or Disability
| | --- | ------------------------------------------------------

| | Upon
Termination of Employment by reason of Retirement or Disability, this Option shall, to the
extent rights to purchase shares hereunder have accrued at the date of such Retirement or
Disability and have not been fully exercised, be exercisable, in whole or in part, for a
period of one (1) year following such Termination of Employment, subject to any other
limitations imposed by the Plan. If the Employee dies after such Retirement or Disability,
this Option shall be exercisable in accordance with paragraph 8(c) hereof.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (c) | Termination
of Employment for Death
| | --- | -----------------------------------

| | Upon
Termination of Employment due to death, this Option shall, to the extent rights to
purchase shares hereunder have accrued at the date of death and shall not have been fully
exercised, be exercisable, in whole or in part, by the personal representative of the
Employees estate, by any person or persons who shall have acquired this Option
directly from the Employee by bequest or inheritance, by a person designated to exercise
the Option after the Employees death, or a Permitted Transferee only under the
following circumstances and during the following periods: (i) if the Employee dies while
employed by the Company or a subsidiary, at any time within one (1) years after his or her
death, or (ii) if the Employee dies during the extended exercise period following
termination of employment specified in paragraph 8(b), at any time within the longer of
such extended period or one (1) year after his or her death, subject, in any case, to the
earlier expiration of this Option.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

-62-

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| | (d) | Termination
of Option
| | --- | ---------------------

| | If
this Option is not exercised within whichever of the exercise periods specified in
paragraph 8(a), 8(b) or 8(c) is applicable, this Option shall terminate upon expiration of
such exercise period.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|9. | Changes
in Capital Structure
|-- | ----------------------------

The
number of shares covered by this Option, and the price per share, shall be proportionately
adjusted for any increase or decrease in the number of issued shares of common stock of
the Company resulting from any combination of shares or the payment of a stock dividend on
the Companys common stock or any other increase or decrease in the number of such
shares effected without receipt of consideration by the Company.

In
the event of a Change of Control (as defined in Section 12.2 of the Plan) of
the Company, this Option will be and become fully vested and exercisable irrespective of
the Minimum Employment Period and irrespective of any vesting schedule set forth in this
Agreement, unless in the case of a transaction described in clause (iii) or (iv), of
Section 12.2 of the Plan, provisions are made in connection with such transaction for the
continuance of the Plan and the assumption of this Option or the substitution for this
Option of a new option covering the stock of a successor employer corporation, or a parent
or subsidiary thereof, with appropriate adjustments as to the number and kind of shares
and prices.

In
the event of a change in the common stock of the Company as presently constituted, which
is limited to a change of all its authorized shares into the same number of shares with a
different par value or without par value, the shares resulting from any such change shall
be deemed to be the shares subject to this Option.

Except
as expressly provided in this paragraph 9, the Employee shall have no rights by reason of:
(i) any subdivision or combination of shares of stock of any class; (ii) the payment of
any stock dividend or any other increase or decrease in the number of shares of stock of
any class; or (iii) any dissolution, liquidation, merger or consolidation or spinoff of
assets or stock of another corporation. Except as provided in this paragraph 9, any issue
by the Company of shares of stock of any class, or securities convertible into shares of
stock of any class, shall not affect, and no adjustment by reason thereof shall be made
with respect to, the number or price of shares of stock subject to this Option.

The
grant of this Option shall not affect in any way the right or power of the Company to make
adjustments, reclassifications, reorganizations or changes of its capital or business
structure or to merge or to consolidate or to dissolve, liquidate or sell, or transfer all
or any part of its business or assets.

-63-

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|10. | Rights
as a Shareholder
|--- | -----------------------

Neither
the Employee nor a transferee of this Option shall have any rights as a shareholder with
respect to any shares covered hereby until the date he or she shall have become the holder
of record of such shares. No adjustment shall be made for dividends, distributions or
other rights for which the record date is prior to the date on which he or she shall have
become the holder of record thereof, except as provided in paragraph 9 hereof.

|11. | Modification,
Extension and Renewal
|--- | -----------------------------------

Subject
to the terms and conditions and within the limitations of the Plan, the Committee, subject
to approval of the Board of Directors, may modify or renew this Option, or accept its
surrender (to the extent not theretofore exercised) and authorize the granting of a new
option or options in substitution therefor (to the extent not theretofore exercised).
Notwithstanding the foregoing, no modification shall, without the consent of the Employee,
alter or impair any rights or obligations hereunder.

|12. | Postponement
of Delivery of Shares and Representations
|--- | ------------------------------------------------------

The
Company, in its discretion, may postpone the issuance and/or delivery of shares upon any
exercise of this Option until completion of such stock exchange listing, or registration,
or other qualification of such shares under any state and/or federal law, rule or
regulation as the Company may consider appropriate, and may require any person exercising
this Option to make such representations, including a representation that it is the
Employees intention to acquire shares for investment and not with a view to
distribution thereof, and furnish such information as it may consider appropriate in
connection with the issuance or delivery of the shares in compliance with applicable laws,
rules and regulations. In such event, no shares shall be issued to such holder unless and
until the Company is satisfied with the accuracy of any such representations.

|13. | Subject
to Plan
|--- | ---------------

This
Option is subject to the terms and provisions of the O.A.K. Financial Corporation 1999
Stock Compensation Plan. If any inconsistency exists between the provisions of this
Agreement and the Plan, the Plan shall govern.

|14. | ISO
Stock Option
|--- | ----------------

Any
provision of this Option or the Plan to the contrary notwithstanding, neither the Company,
the Companys Board of Directors nor the Committee shall have any authority to take
any action or to do anything which would cause the shares designated herein as ISOs to
fail to qualify as ISOs within the meaning of Section 422 of the Internal Revenue Code of
1986, as amended.

-64-

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IN
WITNESS WHEREOF, this Stock Option Agreement has been executed the date first above
written.

| |  | O.A.K. FINANCIAL CORPORATIONBy:         
      Its:             EMPLOYEE:

Print Name:

Signature:
| |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------

-65-

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# Record of Exercise

|Date | Number of Shares | Price Per Share | Shares Subject to Option After Exercise
|---- | ---------------- | --------------- | ---------------------------------------

-66-

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# Exhibit 10.2

# O.A.K. FINANCIAL
CORPORATION 1999 DIRECTORS
STOCK OPTION PLAN

# STOCK OPTION AGREEMENT

STOCK
OPTION AGREEMENT,made this ______day of ______________,between
O.A.K. FINANCIAL CORPORATION(herein called the Company) and
_____________________,a director of the Company (the Grantee),
pursuant to the O.A.K. Financial Corporation 1999Directors Stock Option Plan
(herein called the Plan).

IT IS AGREED AS
FOLLOWS:

|1. | Grant
of Option
|-- | ---------------

Pursuant
to the Plan and the terms of this Agreement, the Company hereby grants to Grantee, an
Eligible Director under the terms of the Plan, the option to purchase _____shares
of the Companys common stock, $1.00 par value per share.

|2. | Purchase
Price
|-- | --------------

The
purchase price of the shares covered by this option shall be _________ per share, which
represents one hundred percent (100%) of the Fair Market Value of the Companys
common stock on this date (Grant Date).

|3. | Additional
Terms
|-- | ----------------

| | (a) | Exercise
Period
| | --- | ---------------

The
Option may be exercised and Option Shares may be purchased at any time and from time to
time on or after the first anniversary of the date of this Agreement and prior to the
tenth anniversary of the date of this Agreement (Exercise Period), subject to
the following:

| | (1)       
               If Grantee dies while serving as a director of the Company, this Option shall
               become immediately exercisable as of the date of death and shall remain
               exercisable until the earlier of (a) the last day of the 12th month after the
               month of Grantees death, or (b) the tenth anniversary of the Grant Date;
               and
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (2)       
               This Option may not be exercised after the earlier of (a) the last day of the
               12th month following the month in which Grantees service as a director
               terminates, or (b) the tenth anniversary of the Grant Date.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

-67-

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| | (b) | Procedure
for Exercise
| | --- | ----------------------

Subject
to conditions of this Agreement, the Option may be exercised at any time and from time to
time during the Exercise Period by delivering written notice to the Company, signed by
Grantee, a Permitted Transferee, or Post-Death Representative, specifying the number of
Option Shares to be purchased and accompanied by this Agreement.

| | (c) | Payment
of Option Price
| | --- | -----------------------

The
Option Price shall be paid in full either (1) in cash or (2) through the delivery of
unencumbered shares of the Companys common stock owned by the person exercising this
Option having a Fair Market Value on the date of exercise equal to the total exercise
price, or (3) by a combination of (1) and (2) above, except that (i) any portion of the
exercise price representing a fraction of a Share shall be paid in cash, and (ii) no
Shares of Stock which have been held for less than six months may be delivered in payment
of the exercise price. If approved by the Administrator of the Plan, payment of the
exercise price of this Option may be made by a reduction in the number of shares issuable
upon exercise of this Option, based upon the Fair Market Value of the Stock on the last
trading day preceding exercise of this Option.

|3. | Transferability
of Option
|-- | -------------------------

This
Option shall not be transferable by Grantee other than by will or the laws of descent and
distribution, provided, however, any part of this Option may be transferred, without
consideration, to a Permitted Transferee (as defined in the Plan), provided Grantee
satisfies the conditions to transfer as set forth in the Plan. This Option may be
exercised during the lifetime of Grantee only by Grantee, or, by a Permitted Transferee,
as the case may be. Without limiting the generality of the foregoing, except as provided
above, this Option shall not be transferred, assigned, pledged, or hypothecated in any
way, and shall not be assignable by operation of law, and shall not be subject to
execution, levy, attachment, or similar process. Any attempted transfer, assignment,
pledge, hypothecation or other disposition of this Option contrary to the terms hereof,
and any execution, levy, attachment, or similar process upon the Option, shall be null and
void and without effect.

|4. | Conformity
with Plan
|-- | --------------------

The
Option is intended to conform in all respects with and is subject to all applicable
provisions of the Plan which is incorporated herein by reference. Any inconsistencies
between this Agreement and the Plan shall be resolved in accordance with the terms of the
Plan. By executing and returning the enclosed copy of this Agreement, Grantee acknowledges
receipt of the Plan and agrees to be bound by all of the terms of the Plan.

|5. | Service
as a Director
|-- | ---------------------

Grantee
acknowledges that nothing in this Agreement or in the Plan imposes upon the Company, its
Board of Directors, or its shareholders any obligation to retain or elect the Grantee as
director of the Company for any period.

-68-

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|6. | Adjustments
|-- | -----------

The
Company shall make appropriate and proportionate adjustments, to the number of Option
Shares and the Option Price to reflect any stock dividend, stock split, or combination of
shares, merger, consolidation, or other change in the capitalization of the Company, as
provided in Section 10 of the Plan. In the event of any such adjustment, all new,
substituted, or additional securities or other property to which Grantee is entitled under
the Option shall be included in the term Option Shares.

|7. | Withholding
of Taxes
|-- | --------------------

The
exercise of this Option is subject to the satisfaction of withholding tax or other
withholding liabilities, if any, under federal, state and local laws in connection with
exercise, delivery, or purchase of Option Shares. The Company shall have the right to
require payment by the Grantee of any taxes required to be withheld.

|8. | Postponement
of Delivery of Shares and Representations
|-- | ------------------------------------------------------

The
Company, in its discretion, may postpone the issuance or delivery of Shares upon any
exercise of this Option until completion of the registration, or other qualification of
such shares under any state and/or federal law, rule, or regulation as the Company may
consider appropriate. The Company may require any person exercising this Option to make
such representations, including a representation that it is their intention to acquire
Shares for investment and not with a view to distribution thereof, and furnish such
information as it may consider appropriate in connection with the issuance or delivery of
the Shares in compliance with applicable laws, rules and regulations. No Shares shall be
issued unless the Company is satisfied with the accuracy of any such representations.

|9. | Rights
as a Shareholder
|-- | -----------------------

The
Grantee shall have no rights as a shareholder with respect to any Option Shares until the
Grantee becomes the holder of record of such shares.

|10. | Further
Actions
|--- | ---------------

The
parties agree to execute such further instruments and to take such further actions as may
reasonably be required to carry out the intent of this Agreement.

|11. | Notice
|--- | ------

Any
notice required or permitted hereunder shall be given in writing and shall be deemed
effectively given upon personal delivery or upon deposit in the United States Post Office,
by registered or certified mail with postage and fees prepaid, addressed to the other
party hereto at the address set forth in this Agreement or at such other address as such
party may designate by ten days advance written notice to the other party.

-69-

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|12. | Successors
and Assigns
|--- | ----------------------

This
Agreement shall be binding upon and inure to the benefit of the successors and assigns of
the Company and, subject to the restrictions on transfer set forth herein, be binding upon
and inure to the benefit of Grantees heirs, personal representatives, successors,
and permitted assigns.

|13. | Governing
Law
|--- | -------------

This
Agreement and all documents contemplated hereby, and all remedies in connection therewith
and all questions or transactions relating thereto, shall be construed in accordance with
and governed by the internal laws of the state of Michigan, excluding its conflicts of law
rules, and applicable federal law and in courts situated in the State of Michigan.

|14. | Entire
Agreement
|--- | ----------------

This
Agreement constitutes the entire understanding between the Grantee and the Company with
respect to the Option Shares and supersedes all other agreements, whether written or oral,
with respect to such Shares.

| |  | O.A.K. FINANCIAL CORPORATIONBy:         
      Its:             
| |  | -------------------------------------------------------------------------------------------

The undersigned hereby acknowledges
having read this Agreement, the Plan, and the other enclosures to this Agreement and
hereby agrees to be bound by all provisions set forth herein and in the Plan.

| |  | GRANTEE
SIGNATURE
(Please print name.)Address:
| |  | ------------------------------------------------------------------------------------------------------

-70-

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# Exhibit 21 
Subsidiaries of Registrant  100 percent Owned

| | Byron
Bank2445 84th Street, S.W.Byron Center, MI 49315
| | ------------------------------------------------------

| | Byron
Investment Services, Inc. (100 percent owned subsidiary of Byron Bank)2445  84th Street, S.W.
Byron Center, MI 49315
| | --------------------------------------------------------------------------------------------------------------------------

| | Byron
Insurance Agency, Inc. (100 percent owned subsidiary of Byron Investment Services)
                  5445  32nd Avenue  Hudsonville, MI 49426
| | ---------------------------------------------------------------------------------------------------------------------------------------------------

-71-

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# Exhibit 31.1

# CERTIFICATIONS

I, Patrick K. Gill, certify that:

|1. | I have reviewed this Annual Report on Form 10-K of OAK Financial Corporation;
|-- | -----------------------------------------------------------------------------

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

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

|4. | The registrants other certifying officers and I are responsible for
          establishing and maintaining disclosure controls and procedures (as defined in
          Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting
(as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

| | (b) | designed such internal control over financial reporting, or caused such internal control
over financial reporting to be designed under our supervision, to provide reasonable assurance regarding
the reliability
of financial reporting and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles;
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (c) | evaluated the effectiveness of the registrants disclosure controls and
               procedures and presented in this report our conclusions about the effectiveness
               of the disclosure controls and procedures, as of the end of the period covered
               by this report based on such evaluation;
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (d) | disclosed in this report any change in the registrants internal control
               over financial reporting that occurred during the registrants most recent
               fiscal quarter (the registrants fourth fiscal quarter in the case of an
               annual report) that has materially affected, or is reasonably likely to
               materially affect, the registrants internal control over financial
               reporting; and
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

| | (a) | all significant deficiencies and material weaknesses in the design or operation
               of internal control over financial reporting which are reasonably likely to
               adversely affect the registrants ability to record, process, summarize and
               report financial information; and
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (b) | any fraud, whether or not material, that involves management or other employees
               who have a significant role in the registrants internal control over
               financial reporting.
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Date: March 10, 2005

| |  | /s/ Patrick K. Gill
Patrick K. GillChief Executive Officer
| |  | ------------------------------------------------------------------------

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# Exhibit 31.2

# CERTIFICATIONS

I, James A. Luyk, certify that:

|1. | I have reviewed this Annual Report on Form 10-K of OAK Financial Corporation;
|-- | -----------------------------------------------------------------------------

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

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

|4. | The registrants other certifying officers and I are responsible for
          establishing and maintaining disclosure controls and procedures (as defined in
          Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting
(as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

| | (b) | designed such internal control over financial reporting, or caused such internal control
over financial reporting to be designed under our supervision, to provide reasonable assurance regarding
the reliability
of financial reporting and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles;
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (c) | evaluated the effectiveness of the registrants disclosure controls and
               procedures and presented in this report our conclusions about the effectiveness
               of the disclosure controls and procedures, as of the end of the period covered
               by this report based on such evaluation;
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (d) | disclosed in this report any change in the registrants internal control
               over financial reporting that occurred during the registrants most recent
               fiscal quarter (the registrants fourth fiscal quarter in the case of an
               annual report) that has materially affected, or is reasonably likely to
               materially affect, the registrants internal control over financial
               reporting; and
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

| | (a) | all significant deficiencies and material weaknesses in the design or operation
               of internal control over financial reporting which are reasonably likely to
               adversely affect the registrants ability to record, process, summarize and
               report financial information; and
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (b) | any fraud, whether or not material, that involves management or other employees
               who have a significant role in the registrants internal control over
               financial reporting.
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Date: March 10, 2005

| |  | /s/ James A. Luyk
James A. LuykChief Financial Officer and Chief Operating Officer
| |  | ------------------------------------------------------------------------------------------------

-73-

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# Exhibit 32.1

Each
of Patrick K. Gill, Chief Executive Officer, and James A. Luyk, Chief Financial Officer,
of OAK Financial Corporation, certify, pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

|(1) | the Annual Report on Form 10-K for the fiscal year ended December 31, 2003 which
          this statement accompanies fully complies with the requirements of Section 13(a)
          or 15(d) of the Securities Exchange Act of 1934, and
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | the information contained in the Annual Report on Form 10-K for the fiscal year
          ended December 31, 2003 fairly presents, in all material respects, the
          financial condition and results of operations of OAK Financial Corporation.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Dated: March 10, 2005

| |  | /s/ Patrick K. Gill
Patrick K. GillChief Executive Officer/s/ James A. Luyk
James A. LuykChief Financial Officer and Chief Operating Officer
| |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------

A signed original of this
certification has been provided to OAK Financial Corporation and will be retained by OAK
Financial Corporation and furnished to the Securities and Exchange Commission upon
request.

-74-