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


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

                   For the fiscal year ended December 31, 1999

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

               For the transition period from _______ to ________

                         Commission file number 0-22461

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

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

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

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

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

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

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days. Yes _X_ No ____

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

The  aggregate  market value of the voting and  non-voting  common stock held by
non-affiliates  of the  Registrant,  based on a per share  price of $55.75 as of
March 1, 2000, was approximately  $113,829,179  (common stock, $1.00 par value).
As of March 1, 2000,  there were  outstanding  2,041,775 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 27, 2000 are  incorporated  by reference  into Part III of this
report.
<PAGE>
Item 1.  Business.

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

     The  Bank  was  originally   organized  in  1921  as  a  Michigan   banking
corporation.  As of December 31, 1999, the Bank had  approximately 159 full-time
and part-time employees.  None of the Bank's employees are subject to collective
bargaining agreements.  The Company does not directly employ any personnel.  The
principal executive offices of the Company and the Bank are located at 2445 84th
Street, S.W., Byron Center, Michigan 49315. The Bank's main office is located in
Byron Center and it serves othe  communities  with branch  offices in Allendale,
Dorr, Grand Rapids, Grandville,  Hamilton,  Hudsonville,  Jamestown,  Moline and
Zeeland.  The Bank's  offices are located in Kent County,  Ottawa County and the
northern portion of Allegan County.

     The area in which the Bank's offices are located,  which is basically south
and west of the city of Grand Rapids,  has historically  been rural in character
but now has a growing  urban  population as the Grand Rapids  Metropolitan  Area
expands south and west. The populations of the cities in which the Banks offices
are located are  approximately as follows:  Byron Center - 1,000;  Dorr - 1,450;
Grand Rapids - 189,125;  Grandville - 16,500;  Hudsonville - 6,170;  Jamestown -
300; Moline - 800; Hamilton - 600; Zeeland - 6,000; Allendale - 9,600.

     The Bank  also  owns a  subsidiary,  O.A.K.  Financial  Services,  which is
responsible for mutual fund products and securities  brokerage services and also
offers  retirement  planning  services and provides  investment  management  and
advisory  services.  O.A.K.  Financial  Services in turn owns Dornbush Insurance
Agency  which was acquired  February 1, 1999.  Dornbush  Insurance  Agency sells
property and casualty, life, disability and long-term care insurance products.

Bank Services

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

     The Bank's deposits are generated in the normal course of business, and the
loss of any one  depositor  would not have a  materially  adverse  effect on the
business of the Bank.  No material  portion of the Bank's loans is  concentrated
within a single  industry or group of related  industries.  As of  December  31,
1999,  the Bank's  certificates  of deposits  of  $100,000  or more  constituted
approximately 13% of total deposit  liabilities.  The Bank's deposits  originate
primarily  from its service area,  and the Bank does,  on a very limited  basis,
obtain large deposits from outside this area.

     The Bank's principal  sources of revenue are interest and fees on loans and
interest  on  investment  securities.  Interest  and fees on  loans  constituted
approximately 75.5% and 74.1% of total revenues for the years ended December 31,
1999, and December 31, 1998,  respectively.  Interest on investment  securities,
including short-term investments, restricted investments and federal funds sold,
constituted  approximately  11.9% and 14.7% of total  revenues in 1999 and 1998.
Revenues were also generated from deposit  service  charges,  sales of loans and
securities and other financial service fees.

     The Bank provides real estate,  consumer and commercial  loans to customers
in its market.  Eighty  percent  (80%) of the Bank's loan  portfolio  is held in
fixed rate loans as of December  31, 1999.  Most of these  loans,  approximately
86.6%, mature within five years of issuance.  Approximately $30,805,000 of loans
(or 10.7% of the Bank's total loan  portfolio)  have fixed rates with maturities
exceeding five years. Of the Bank's interest-bearing deposits,

                                      -1-
<PAGE>
41.4%  are held in  savings,  NOW and  MMDAs,  all of which  are  variable  rate
products. Of the $126,125,000 in certificates,  approximately $96,124,000 mature
within one year, with the balance maturing within a five year period.

     Requests  to the Bank for  credit  are  considered  on the  basis of credit
worthiness of each applicant,  without  consideration 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,  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. Loan requests in
excess of  $1,000,000  are required to be presented to the Board of Directors or
the Executive Committee of the Board for review and approval.

     As  described  in more  detail in Table 20 on page 30, the Bank's  ratio of
rate sensitive assets to rate sensitive liabilities as of December 31, 1999, was
a 17% positive  gap,  compared to a 20 % positive  gap at December 31, 1998.  As
indicated  on page 30, the entire  balance of  savings,  NOW,  and MMDAs are not
categorized as 0 to 3 months,  although they are variable rate products. Some of
these balances are core deposits which are not considered  rate sensitive  based
on the Bank's historical experiences.

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

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

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

Bank Competition

     The Bank has ten offices, one within each of the communities it serves. See
"Properties"   below  for  more  detail  on  these   facilities.   Within  these
communities,  its principal  competitors  are Comerica Bank,  Bank One, Old Kent
Bank,  Ameribank,  Flagstar Bank, National City Bank,  Huntington Bank, Michigan
National Bank and United Bank of Michigan. Each of these financial institutions,
which are headquartered in larger metropolitan areas, have significantly greater
assets and financial  resources  than the Company,  with the exception of United
Bank of Michigan.  Based on deposit  information  as of June 30, 1999,  the Bank
holds approximately 2.7% of deposits in the Kent County market, 2.2% of deposits
in the Ottawa  County  market,  and 6.6% of the  deposits in the Allegan  County
market.  Information as to asset size of competitor  financial  institutions  is
derived from publicly available reports filed by and with regulatory agencies.

     The financial services industry  continues to be increasingly  competitive.
Principal methods of competition  include loan and deposit pricing,  advertising
and marketing programs and the types and quality of services provided.

                                      -2-
<PAGE>
The  deregulation  of the  financial  service  industry  has  led  to  increased
competition  among  banks and other  financial  institutions  for a  significant
portion of funds which have  traditionally been deposited with commercial banks.
Competition within the Bank's markets has been relatively stable within the past
several years. However, with the enactment of recent legislation discussed under
the caption  "Supervision  and  Regulation"  and the  increased  use of internet
banking,  it is expected that  competition  may become more intense.  Management
continues  to evaluate  the  opportunities  for the  expansion  of products  and
services, such as trust services, and additional branching opportunities.

Growth of Bank

     The following table sets forth certain financial  information regarding the
growth of the Bank (and accordingly, excludes holding company data):
<TABLE>
                                                                        Balances as of December 31,
                                                  ------------------------------------------------------------------------
                                                                              (in thousands)
                                                    1999            1998           1997            1996             1995
--------------------------------------------------------------------------------------------------------------------------
<S>                                               <C>            <C>            <C>              <C>              <C>
Total Assets                                      $375,741       $299,882       $241,283         $216,755         $210,307
Loans, Net of Unearned Income                      288,330        222,133        168,953           45,069          142,813
Securities                                          62,818         54,734         59,988           57,302           56,702
Noninterest-Bearing Deposits                        40,352         35,919         26,459           23,807           19,211
Interest-Bearing Deposits                          215,160        181,789        158,244          146,442          150,807
Total Deposits                                     255,512        217,708        184,703          170,249          170,018
Stockholders' Equity                                39,655         37,983         35,107           34,744           31,979
==========================================================================================================================
</TABLE>

     The Main Office in Byron Center  began in a small 600 square foot  building
in 1921.  It was expanded to 1,100  square feet in 1954.  In 1965 the Bank moved
next door to a new 10,000 square foot building.  In 1987 construction of another
new  building  of 30,000  square feet was begun.  The Main Office  moved to this
facility in 1988 and  currently  occupies  this  space.  In 1999 the Main Office
added an 8,000 square foot addition to its facility. The Bank's first branch was
opened in 1963 when the bank  refitted an old bank  building in  Jamestown.  The
building was once a bank which closed  during the Great  Depression.  The Bank's
next branch was opened in  Cutlerville  in 1972.  The original 2,500 square foot
building was expanded with a 1,000 square foot addition in 1987. The Bank's Dorr
office  was  opened  in 1986 at the site of the  Hillcrest  Mall.  It is a 2,500
square foot facility  with a 2,500 square foot storage  basement.  In 1991,  the
Bank opened its branch in  Hudsonville.  The Bank  maximized this sit for future
expansion  with a 10,000 square foot  building.  The Bank occupies  2,500 square
feet while the remainder is rented to various  office use tenants.  During 1995,
the Bank purchased and remodeled a former bank branch in  Grandville.  Also, the
same  year,  the Bank  purchased  from  National  City Bank a  building  and the
deposits of its Moline branch. Currently, the Bank operates three off-site ATMs.

     The Bank  opened  three  new  branches  in 1998 at 10500  Chicago  Drive in
Zeeland,  Michigan,  6163 Lake Michigan  Drive in  Allendale,  Michigan and 4601
134th  Avenue,  Suite C in  Hamilton,  Michigan.  All of these  facilities  were
initially leased. In February 1999, the Kentwood, Michigan branch was opened for
business in a former bank building  purchased from National City Bank. In August
1999, the Bank's Allendale branch was completed and opened at 5980 Lake Michigan
Drive in Allendale in a 10,000  squar foot  building  owned by the Bank with the
Bank  occupying  2,500  square feet and the  remainder  to be used for rental to
office use tenants.  In December 1999,  the Bank moved its Hamilton  Branch to a
newly  completed  3,600  square  foot  facility  owned by the Bank at 3614 M-40,
Hamilton, Michigan.

                                      -3-
<PAGE>
                           SUPERVISION AND REGULATION

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

General

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

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

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

Recent Legislation

     The  enactment  of the  Gramm-Leach-Bliley  Act of  1999  (the  "GLB  Act")
represents a pivotal  point in the history of the financial  services  industry.
The GLB Act modifies many of the principal federal laws which regulate financial
institutions and sweeps away large parts of a regulatory  framework that had its
origins in the Depression Era of the 1930s.

     Effective March 11, 2000, new  opportunities  became  available for banking
organizations, other depository institutions, insurance companies and securities
firms to enter  into  combinations  that  permit  a  single  financial  services
organization to offer customers a more complete array of financial  products and
services.  Specifically,  the GLB Act provides two new vehicles  through which a
banking  organization can engage in a variety of activities which,  prior to the
Act,  were  not  permitted.  First,  a  bank  holding  company  meeting  certain
requirements may elect to become a financial  holding company ("FHC").  FHCs are
generally authorized to engage in all "financial  activities" and, under certain
circumstances,  to make equity  investments in other companies  (i.e.,  merchant
banking).  In order to be  eligible  to elect to  become a FHC,  a bank  holding
company and all of its  depositary  financial  institutions  must:  (1) be "well
capitalized";  (2) be "well managed"; and (3) have a rating of "satisfactory" or
better in their most recent Community  Reinvestment  Act  examination.  Both the
bank holding company and all of its depositary financial  institutions must also
continue to satisfy these  requirements after the bank holding company elects to
become  a FHC or else the FHC  will be  subject  to  various  restrictions.  The
Federal  Reserve Board will be the umbrella  regulator of FHCs,  but  functional
regulation of a FHC's  separately  regulated  subsidiaries  will be conducted by
their primary functional regulator.

     Second,  the GLB Act also  provides that a national bank (and a state bank,
so long as otherwise  allowable under its state's law), which satisfies  certain
requirements,  may own a new type of  subsidiary  called a financial  subsidiary
("FS").  The GLB Act  authorizes  FSs to  engage  in many  (but  not all) of the
activities that FHCs are authorized to engage in. In order to be eligible to own
a FS, a bank must  satisfy the three  requirements  noted  above,  plus  several
additional requirements.

                                      -4-
<PAGE>
     The GLB Act also  imposes  several  rules that are  designed to protect the
privacy of the  customers of financial  institutions.  For example,  the GLB Act
requires  financial  institutions  to annually  adopt and  disseminate a privacy
policy and prohibits  financial  institutions  from disclosing  certain customer
information  to  "non-affiliated  third parties" for certain uses. All financial
institutions,  regardless  of whether  they elect to  utilize  FHCs or FSs,  are
subject to the GLB Act's privacy  provisions.  The Company and the Bank are also
subject  to  certain  state  laws  that deal  with the use and  distribution  of
non-public personal information.  In addition to its privacy provisions, the GLB
Act also contains various other provisions that apply to banking  organizations,
regardless of whether they elect to utilize FHCs or FSs.

     The  Company  believes  that  the  GLB  Act  could  significantly  increase
competition  in its business and is evaluating the  desirability  of electing to
become a FHC. The Company  believes that it is qualified to elect FHC status but
has not yet decided to do so.

The Company

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

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

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

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

     With certain limited  exceptions,  the BHCA prohibits any bank company from
engaging,  either directly or indirectly  through a subsidiary,  in any activity
other  than  managing  or  controlling  banks  unless the  proposed  non-banking
activity is one that the Federal  Reserve Board has  determined to be so closely
related to banking or managing or controlling  banks as to be a proper  incident
thereto.  Under current  Federal  Reserve Board  regulations,  such  permissible
non-banking  activities  include  such  things as  mortgage  banking,  equipment
leasing,  securities  brokerage,  and consumer and  commercial  finance  company
operations.  As a result of recent amendments to the BHCA,  well-capitalized and
well-managed  bank  holding  companies  may engage de novo in  certain  types of
non-banking  activities  without  prior  notice to, or approval  of, the Federal
Reserve Board, provided that written notice of the new activity is

                                      -5-
<PAGE>
given to the Federal Reserve Board within 10 business days after the activity is
commenced.  If a bank  company  wishes to engage in a  non-banking  activity  by
acquiring a going concern,  prior notice and/or prior approval will be required,
depending  upon the  activities  in which the company to be acquired is engaged,
the  size of the  company  to be  acquired  and  the  financial  and  managerial
condition of the acquiring bank company.

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

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

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

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

     Dividends.  The Company is a  corporation  separate and  distinct  from the
Bank. Most of the Company's revenues are received by it in the form of dividends
paid  by  the  Bank.  Thus,  the  Company's  ability  to  pay  dividends  to its
shareholders  is  indirectly  limited by  statutory  restrictions  on the Bank's
ability  to  pay  dividends.  See  "SUPERVISION  AND  REGULATION  - The  Bank  -
Dividends."  Further, the Federal Reserve Board has issued a policy statement on
the  payment  of  cash  dividends  by  bank  holding  companies.  In the  policy
statement,  the Federal  Reserve  Board  expressed  its view that a bank company
experiencing earnings weaknesses should not pay cash dividends exceeding its net
income or which can only be funded  in ways  that  weakened  the bank  company's
financial health, such as by borrowing.  Additionally, the Federal Reserve Board
possesses  enforcement  powers over bank holding  companies  and their  non-bank
subsidiaries  to  prevent or remedy  actions  that  represent  unsafe or unsound
practices or  violations  of applicable  statutes and  regulations.  Among these
powers is the ability to  proscribe  the payment of  dividends by banks and bank
holding companies. Similar enforcement powers over the Bank are possessed by the
FDIC. The "prompt  corrective  action"  provisions of federal law and regulation
authorizes the Federal Reserve Board to restrict the payment of dividends by the
Company for an insured bank which fails to meet specified capital levels.

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

                                      -6-
<PAGE>
The Bank

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

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

     The Federal Deposit  Insurance Act ("FDIA")  requires the FDIC to establish
assessment  rates at levels which will maintain the Deposit  Insurance Fund at a
mandated  reserve  ratio of not less than 1.25% of estimated  insured  deposits.
Accordingly,  the FDIC established the schedule of BIF insurance assessments for
the first semi-annual assessment period of 1999, ranging from 0% of deposits for
institutions in the lowest risk category to .27% of deposits for institutions in
the highest risk  category.  For 1999,  the Bank paid  $31,989 in BIF  insurance
assessments, representing a premium of .01%.

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

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

     FICO  Assessments.  Pursuant to federal  legislation  enacted September 30,
1996,  the Bank, as a member of the BIF, is subject to  assessments to cover the
payments on outstanding  obligations of the Financing Corporation ("FICO"). FICO
was created in 1987 to finance the  recapitalization  of the Federal Savings and
Loan Insurance  Corporation,  the predecessor to the FDIC's Savings  Association
Insurance  Fund (the "SAIF") which insures the deposits of thrift  institutions.
Until  January 1, 2000,  the FICO  assessments  made against BIF members may not
exceed  20% of the  amount  of  FICO  assessments  made  against  SAIF  members.
Currently,  SAIF members pay FICO  assessments at a rate equal to  approximately
0.063% of deposits  while BIF members  pay FICO  assessments  at a rate equal to
approximately  0.013% of deposits.  Between  January 1, 2000 and the maturity of
the  outstanding  FICO  obligations  in 2019,  BIF members and SAIF members will
share the cost of the  interest  on the FICO  bonds on a pro rata  basis.  It is
estimated that FICO  assessments  during this period will be less than 0.025% of
deposits.

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

                                      -7-
<PAGE>
capital may be  required  to take  adequate  account  of,  among  other  things,
interest   rate  risk  and  the  risks  posed  by   concentrations   of  credit,
nontraditional activities or securities trading activities.

     Federal law provides  the federal  banking  regulators  with broad power to
take  prompt  corrective  action to resolve  the  problems  of  undercapitalized
institutions.  The extent of the  regulators'  powers  depends  on  whether  the
institution  in  question  is  "well  capitalized,"   "adequately  capitalized,"
"undercapitalized,"    "significantly    undercapitalized,"    or    "critically
undercapitalized."  Federal  regulations  define  these  capital  categories  as
follows:
<TABLE>
                                           Total                  Tier 1
                                           Risk-Based             Risk-Based
                                           Capital Ratio          Capital Ratio           Leverage Ratio
                                           -------------          -------------           --------------
<S>                                        <C>                    <C>                     <C>
Well capitalized                           10% or above           6% or above             5% or above
Adequately capitalized                      8% or above           4% or above             4% or above
Undercapitalized                           Less than 8%           Less than 4%            Less than 4%
Significantly undercapitalized             Less than 6%           Less than 3%            Less than 3%
Critically undercapitalized                     --                     --                 A ratio of tangible
                                                                                          equity to total assets
                                                                                          of 2% or less
</TABLE>
     As of  December  31,  1999,  each of the  Bank's  ratios  exceeded  minimum
requirements for the well capitalized category.

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

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

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

     Federal law generally  prohibits a depository  institution  from making any
capital distribution  (including payment of a dividend) or paying any management
fee  to  its  company  if  the  depository   institution   would  thereafter  be
undercapitalized.  The FDIC may prevent an insured bank from paying dividends if
the  bank is in  default  of  payment

                                      -8-
<PAGE>
of any  assessment  due to the FDIC.  In  addition,  the FDIC may  prohibit  the
payment of dividends by the Bank,  if such payment is  determined,  by reason of
the  financial  condition  of the Bank,  to be an  unsafe  and  unsound  banking
practice.

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

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

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

     Consumer  Protection Laws. The Bank's business includes making a variety of
types of loans to  individuals.  In making these  loans,  the Bank is subject to
State usury and regulatory  laws and to various  federal  statutes,  such as the
Equal  Credit  Opportunity  Act,  the Fair Credit  Reporting  Act,  the Truth in
Lending Act, the Real Estate  Settlement  Procedures  Act, and the Home Mortgage
Disclosure  Act, and the  regulations  promulgated  thereunder,  which  prohibit
discrimination, specify disclosures to be made to borrowers regarding credit and
settlement  costs,  and regulate the mortgage loan  servicing  activities of the
Bank,  including  the  maintenance  and  operation  of escrow  accounts  and the
transfer of mortgage loan servicing.  In receiving deposits, the Bank is subject
to extensive  regulation under State and federal law and regulations,  including
the Truth in Savings Act, the Expedited Funds Availability Act, the Bank Secrecy
Act, the Electronic  Funds Transfer Act, and the Federal Deposit  Insurance Act.
Violation of these laws could result in the  imposition of  significant  damages
and fines upon the Bank and its directors and officers.

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

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

                                      -9-
<PAGE>
than the  acquisition  of an  out-of-state  bank in its  entirety) is allowed by
IBBEA only if  specifically  authorized  by state law. The  legislation  allowed
individual  states to "opt-out" of  interstate  branching  authority by enacting
appropriate legislation prior to June 1, 1997.

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

                                      -10-
<PAGE>
Item 2.  Properties.

     The Bank operates from eleven facilities,  located in seven communities, in
Kent, Ottawa and Allegan Counties,  Michigan.  The Bank's main office is located
at 2445 84th Street, S.W., Byron Center,  Michigan. This facility is a two story
30,000  square foot building  constructed  in 1988 with an 8,000 square foot two
story  addition  completed in 1999 and is owned by the Bank.  The Bank's  branch
offices in Allendale,  Dorr, Grand Rapids,  Grandville,  Hamilton,  Hudsonville,
Jamestown,  Moline and Zeeland ar all single  story  facilities  ranging in size
from 1,100 square feet to 10,000 square feet.  The Bank owns its branch  offices
in Allendale, Dorr, Grand Rapids, Grandville,  Hamilton,  Hudsonville,  Kentwood
and Moline.  The Bank leases the facilities  occupied by the Zeeland branch. The
Bank is in the  process of  construction  of its  Zeeland  office at 9581 Riley,
Zeeland, Michigan which is scheduled to open the middle of June 2000.

Item 3.  Legal Proceedings.

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

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

     No matters were  submitted to a vote of security  holders during the fourth
quarter of 1999.

                                      -11-
<PAGE>
Additional Item - Executive Officers

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

     The  following  table sets forth  certain  information  with respect to the
Company's officers as of December 31, 1999:
<TABLE>
                                                                                                   Year Became
            Name                  Age              Position with Company                           an Officer
            ----                  ---              ---------------------                           ----------
<S>                               <C>     <C>                                                         <C>
John A. Van Singel                 45     President, CEO and director of the Company
                                          and the Bank                                                1976
John Peterson                      51     Director of the Company and the Bank,
                                          Executive Vice President of the Bank                        1983
Lois Smalligan                     67     Director of the Company and the Bank,
                                          Vice President of the Bank                                  1975
Rob Arnoys                         32     Vice President of the Bank                                  1996
Forrest Bowling                    51     Vice President of the Bank                                  1988
Martin Braun                       44     Vice President of the Bank                                  1988
Todd Harrell                       48     Vice President of the Bank                                  1993
Melissa Lee                        30     Vice President of the Bank                                  1996
Stanley Roberts                    46     Vice President of the Bank                                  1998
Brad Slagh                         42     Vice President of the Bank                                  1997
</TABLE>



                           [INTENTIONALLY LEFT BLANK]


                                      -12-
<PAGE>
                                     PART II

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

     There is no active market for the Company's  Common Stock,  and there is no
published  information  with respect to its market price.  There are  occasional
sales through  brokers and direct sales by  shareholders  of which the Company's
management is aware.  It is the  understanding  of the management of the Company
that over the last two years,  the Company's  Common Stock has sold at prices in
excess of book value.  From January 1, 1998,  through  December 31, 1999,  there
were,  so far as the  Company's  management  knows,  79 sales of  shares  of the
Company's  Common  Stock,  involving  a total of  34,888  shares.  The price was
reported to management in only a few of these  transactions,  and management has
no way of confirming  the prices which were  reported.  During this period,  the
highest  price known by management to be paid was $60.00 per share in the second
and fourth  quarters of 1999 and the first quarter of 2000, and the lowest price
was  $32.00  per  share in the  third  quarter  of  1998.  To the  knowledge  of
management,  the last  sale of  Common  Stock  occurred  on  February  4,  2000,
involving  the sale of 200 shares at a price of $58.00 per share.  The per share
information  has been adjusted for the July 1, 1998,  2-for 1 stock split in the
form of a dividend.

     The  following  table sets forth the range of high and low sales  prices of
the Company's  Common Stock during 1998 and through  February 10, 2000, based on
information  made available to the Company,  as well as per share cash dividends
declared  during  those  periods.  Although  management  is  not  aware  of  any
transactions  at higher or lower  prices,  there may have been  transactions  at
prices outside the ranges listed below:
<TABLE>
                                                                                                    Cash
                                                           Sales Prices                      Dividends Declared
                                                           ------------                      ------------------
                1998                              High                       Low
                ----                              ----                       ---
<S>                                            <C>                        <C>                      <C>
First Quarter......................            $  35.00                   $  34.50                 $  .50 (1)
Second Quarter.....................               35.00                      35.00                 $  .325
Third Quarter......................               42.00                      32.00
Fourth Quarter.....................               50.00                      42.00                 $  .35

                1999                              High                        Low
                ----                              ----                        ---
First Quarter......................            $  50.00                   $  46.00
Second Quarter.....................               60.00                      50.00                 $  .40
Third Quarter......................               52.75                      51.00
Fourth Quarter.....................               60.00                      53.50                 $  .42
                2000
                ----
First Quarter......................              $60.00                     $55.00
</TABLE>
(1)  A special dividend of $.50 per share.

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

                                      -13-
<PAGE>
There are 4,000,000  shares of the Company's Common Stock  authorized,  of which
2,041,775 shares were issued and outstanding as of February 29, 2000. There were
approximately  817  shareholders of record,  including trusts and shares jointly
owned,  as of that date.  Directors  and officers of the Company hold options to
purchase  a total of  11,750  shares of the  Company's  Common  Stock.  No other
warrants or options  exist for the  purchase of  additional  common stock of the
Company.

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






                          [INTENTIONALLY LEFT BLANK]




                                      -14-
<PAGE>
Item 6.  Selected Financial Data.
<TABLE>
                                            SUMMARY OF SELECTED CONSOLIDATED FINANCIAL DATA
                                                 (in thousands, except per share data)

                                                                         Year Ended December 31,


                                               1999             1998             1997            1996             1995
                                               ----             ----             ----            ----             ----
<S>                                            <C>            <C>              <C>             <C>             <C>
Income Statement Data:
  Interest income                              $25,080        $  21,134        $  18,624       $  17,502       $  16,268

  Interest expense                              10,528            8,916            7,693           7,181           6,637

  Net interest income                           14,552           12,218           10,931          10,321           9,631

  Provision for loan losses                      1,250              400               50               0             275

  Noninterest income                             3,621            2,659            1,542           1,075             919

  Noninterest expenses                          10,603            7,334            5,782           5,169           4,511

  Income before federal
    income taxes                                 6,320            7,144            6,641           6,227           5,764

  Net income                                     4,529            5,076            4,626           4,375           4,004

Per Share Data(1)(2):
  Net income                                 $    2.23        $    2.54        $    2.30       $    2.17       $    1.99

  Cash dividends declared                          .82             1.18             1.55             .47             .41

  Book Value                                     20.31            19.98            18.37           17.66           16.12

  Weighted average shares
     outstanding (1)                             2,031            2,000            2,010           2,014           2,020

Balance Sheet Data:
  Total assets                                $376,073         $301,494         $243,088        $217,527        $210,880

  Loans, net of unearned income                287,830          222,133          168,953         145,069         142,813

  Allowance for loan losses                      3,551            2,879            2,565           2,376           2,305

  Deposits                                     254,166          217,291          184,700         170,221         170,012

  Stockholders' equity                          41,258           39,953           36,915          35,544          32,559

Ratios:

  Tax equivalent net interest
  income to average earning assets                4.89%            5.02%            5.24%           5.23%           5.42%

  Return on average equity                       11.08            13.28            13.08           12.89           13.21

  Return on average assets                        1.38             1.90             2.03            2.03            2.07

  Nonperforming loans to
  total loans                                     1.90             0.26             0.14            0.82            0.66

  Tier 1 leverage ratio                          12.64            14.74            15.03           15.97           15.42

  Dividend payout ratio                          36.97            46.30            67.35           21.54           18.75

  Equity to asset ratio                          10.97            13.25            15.19           16.34           15.44
</TABLE>
(1)  At year end in thousands.
(2)  As restated for a 2-for-1 common stock split effected in the form of a
     dividend in 1998.

                                      -15-
<PAGE>
ITEM 7.
                MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                       CONDITION AND RESULTS OF OPERATIONS
              FOR THE YEARS ENDED DECEMBER 31, 1999, 1998, AND 1997

     The  following  financial  review  presents  management's   discussion  and
analysis of consolidated  financial  condition and results of operations  during
the period of 1997 through 1999.  The  discussion  should be read in conjunction
with the Company's  consolidated  financial  statements and  accompanying  notes
thereto.

Summary

     The Company and its  subsidiary  bank,  Byron Center  State Bank  ("Bank"),
consistently  have been ranked as a high  performance  community bank by various
bank  rating  companies.  The  Company's  equity to asset  ratio of 10.97% as of
December 31, 1999, makes it one of the stronger  capitalized  community banks in
the State of Michigan.

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

     The Company has a surplus of capital.  The Board of Directors has made it a
priority to make more efficient use of capital by re-leveraging  capital through
aggressive  yet careful  growth.  This is expected  to be  accomplished  through
competitive, cost effective products and services, efficiently delivered without
compromising the Bank's risk and underwriting standards. The asset growth of the
Company  in 1999 was  24.74%.  This  growth  was a result of  existing  branches
cross-selling  products to existing  customers and targeting  non-bank customers
who are in the  Company's  market  area.  The  Company's  four newest  branches,
Kentwood,  Hamilton,  Zeeland and Allendale are positioning themselves to be the
largest  contributors  to the growth in year 2000. The Company has increased its
regular cash  dividend  pay-out  ratio over the years from 15% in 1993 to 37% in
1999,  although  there  can be no  assurance  that  the  Company  will  maintain
comparable pay-out ratios in the future.

Results of Operations

Table 1  Earnings Performance (in thousands, except per share data)
<TABLE>
                                                             Year Ended December 31
                                                     1999              1998               1997
                                                     ----              ----               ----
<S>                                                  <C>               <C>                <C>
Net income.................................          $4,529            $5,076             $4,626
  Per share of common stock................            2.23              2.54               2.30

Earnings ratios:
  Return on average assets.................            1.38%             1.90%              2.03%
  Return on average equity.................           11.08%            13.28%             13.08%
</TABLE>

     Net income  decreased 10.78% in 1999 as a result of the  implementation  of
the growth strategy that originated from the Board of Directors. During the last
two years as a part of this  strategy,  the Bank  opened four new  branches  and
expanded its corporate  operations.  The start-up and on-going expenses of these
new operations prior to attaining full income generation  potential were a major
reason for the Company's  decline in overall  profitability and in earnings as a
percent  of assets  and  average  equity.  The  expense  in 1999 for the  growth
strategy is expected to enhance future years' profitability and growth.

     The  Bank's net  interest  margin (on a fully  taxable  equivalent  ["FTE"]
basis) is well above peers.  Management  actively  manages the pricing of assets
and funding costs of the liabilities. The net interest margin-FTE decreased .13%
from 5.02% in 1998 to 4.89% in 1999.  The  Company's  strategy with the four new
branches  and  existing  branches  is  to  grow  the  Company's   business  with
approximately  the same  percentage mix of deposits as is reflected in Table 16.

                                      -16-
<PAGE>
The Bank has had and  expects to  continue t have  success  at  gathering  local
retail  interest  bearing  deposits  which  are  less  expensive  than  national
wholesale interest bearing deposits.

     The  loan  portfolio   increased   29.6%  from   $222,133,000  in  1998  to
$287,830,000 in 1999. The loan growth was funded by the $36,875,000  increase in
deposits and a $36,704,000  increase in borrowed funds and securities sold under
agreements to repurchase. The majority of the growth was fixed rate loans with a
maturity of 5 years or less.  This growth required  additional  provisions to be
allocated to the allowance for loan losses. The highest percentage growth in the
overall loan  portfolio was the consumer  loan  portfolio  (52%),  which was the
result of the Bank's indirect lending program, mostly automobile loans. Indirect
lending loans have a higher credit risk than direct lending loans. Consumer loan
net  charge-offs  increased  $528,000 in 1999  compared to 1998.  The  increased
indirect loan charge-offs  resulted in additional  provisions being allocated to
the allowance for loan losses. Real estate mortgage loan originations  decreased
28%  from  $91,446,000  in 1998 to  $65,668,000  in  1999.  This  resulted  in a
$27,311,000  decrease in real  estate  mortgage  loan sales.  In turn this lower
volume was a result of a higher interest rate  environment and a slowdown in the
refinance  business.  The net gains on the sale of real  estate  mortgage  loans
decreased $767,000 (56%).






                           [INTENTIONALLY LEFT BLANK]





                                      -17-
<PAGE>
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:

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

                                                  1999                               1998                                1997
                             Average                  Yield/     Average                Yield/    Average                   Yield/
                             Balance     Interest      Cost      Balance    Interest     Cost     Balance     Interest        Cost
<S>                          <C>         <C>            <C>      <C>        <C>          <C>      <C>         <C>            <C>
Assets
Fed. funds sold              $   1,079   $      53      4.91%   $    375    $    21       5.60%   $   1,197   $       67     5.60%
Securities:
  Taxable                       36,551       2,280      6.23      38,030      2,410       6.34       41,684        2,710     6.50
  Tax-exempt                    20,885       1,514      7.25      19,442      1,497       7.70       16,681        1,359     8.15
Loans(1)(2)                    248,440      21,691      8.73     194,728     17,661       9.07      156,657       14,887     9.50
                               -------     -------      ----    --------    -------               ---------     --------
Total earning assets/
 total interest income         306,955      25,538      8.32     252,575     21,589       8.55      216,219       19,023     8.80
Cash and due from banks          8,601                             6.507                              4,956
Unrealized gain                    212                             1,085                                289
All other assets                14,968                             9,428                              8,427
Allowance for loan loss         (2,936)                           (2,663)                            (2,477)
                              --------                          --------                           --------
  Total assets                $327,800                          $266,932                           $227,414
                              ========                          ========                           ========

Liabilities and
  Stockholders' Equity
Interest bearing deposits:

MMDA, Savings/NOW accounts    $ 83,740    $  2,153      2.57%   $ 71,658    $ 2,027       2.83%   $  63,927     $  1,927     3.01%
Time                           120,114       6,215      5.17      98,870      5,547       5.61       90,180        5,131     5.69
Fed Funds Purchased             28,901       1,252      4.33      15,767        685       4.35        9,038          369     4.08
Other Borrowed Money            15,342         918      5.98      10,966        656       5.99        4,443          266     5.99
                              --------     -------              --------    -------                --------      -------
Total interest bearing
   liabilities/total
   interest expense            248,097      10,538      4.25     197,261      8,915       4.52      167,588        7,693     4.59
                                          --------                           ------                              -------
Noninterest bearing deposits    36,452                            29,324                             22,764
All other liabilities            2,369                             2,136                              1,773
Stockholders' Equity:
Accumulated other comprehensive
  income                           361                               716                                191
Common Stock, Paid-in Capital,
   Retained Earnings            40,521                            37,495                             35,098
                              --------                         ---------                           --------
Total liabilities and
  stockholders' equity        $327,800                          $266,932                           $227,414
                              ========                          ========                           ========



Interest spread                            $14,552      4.07%               $12,218       4.03%                  $10,931     4.21%
                                           -------      =====                             =====                              =====
Net interest income-FTE                    $15,000                          $12,674                              $11,330
                                           =======                          =======                              =======
Net Interest Margin as a
 Percentage of Average
 Earning Assets - FTE                                   4.89%                             5.02%                              5.24%
                                                        =====                             =====                              =====
</TABLE>
(1)  Average  nonaccrual loans were not significant  during the years indicated,
     and for  purposes of the  computations  above,  are included in the average
     daily loan balances.
(2)  Interest on loans includes net origination fees totaling  $190,720 in 1999,
     $183,443 in 1998 and $249,067 in 1997.

     Net interest income is the principal  source of income for the Corporation.
In  the  current  year,  tax  equivalent  net  income  increased  $2,326,000  to
$15,000,000 a 18.35%  increase from the same period in 1998.  The increase was a
result of the growth of the  Corporation,  average  earning  assets grew 21.53%,
listed below are the details of the major

                                      -18-
<PAGE>
components that made up the increase.  The major factors for the increase in net
interest income were the loan portfolio  balance  averaged 27.58%  ($53,712,000)
higher in 1999  compared  to 1998 and  non-interest  bearing  deposits  averaged
24.30%  ($7,128,000)  higher  in 1999  compared  to  1998.  Non-deposit  funding
averaged 65.50%  ($17,510,000)  higher in 1999 compared to 1998. The Corporation
used  non-deposit  funding  to  support  the asset  growth  because of the lower
interest cost of funds. The fully taxable equivalent ("FTE") net interest margin
decreased  .13%  from  5.02% in 1998 to 4.89% in 1999.  Management  expects  the
declining  trend  in FTE net  interes  margin  to  continue  because  of  fierce
competition for deposits in its local markets and because of the upward pressure
on  costs  of  funds  from  increases  in the  Federal  Fund  rates.  Management
aggressively  sought  after the lowest  cost of funding in 1999  increasing  its
borrowings  from the FHLB and  increasing  the Treasury  Tax and Loan  borrowing
limit.

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

Table 3 - Change in Tax Equivalent Net Interest Income (in thousands)
<TABLE>

                                             1999 Compared to 1998                        1998 Compared to 1997
                                            -----------------------                      ----------------------

                                                   Amount of                                    Amount of
                                              Increase/(Decrease)                          Increase/(Decrease)
                                               Due to Change In                              Due to Change In

                                                                        Net                                           Net
                                                                     Amount of                                     Amount of
                                                     Average         Increase/                      Average        Increase/
                                     Volume           Rate           (Decrease)      Volume          Rate         (Decrease)
Interest Income
<S>                                  <C>            <C>               <C>           <C>             <C>            <C>
Federal funds sold...........        $       36     $      (4)        $     32      $     (46)      $      0       $     (46)
Securities:
   Taxable...................               (92)          (38)            (130)          (232)           (54)           (286)
   Tax Exempt................               105           (88)              17            213            (89)            124
Loans........................             4,689          (659)           4,030          3,453           (679)          2,774
                                      ---------     ----------       ---------      ---------      ---------        --------
Total interest income........             4,738          (789)           3,949          3,388           (822)          2,566
                                      ---------     ----------       ---------      ---------      ---------        --------

Interest Expense
Interest bearing deposits:
   Savings/NOW Accounts......               310          (184)             126            219           (119)            100
   Time......................             1,098          (430)             668            488            (72)            416
   Fed Funds Purchased.......               569            (2)             567            293             23             316
   Other Borrowed Money......               261             1              262            390              0             390
                                     ----------     ----------       ---------      ---------      ---------        --------
   Total Interest Expense....             2,238          (615)           1,623          1,390            168           1,222
                                     ----------     ----------       ---------      ---------      ---------        --------

Net interest income (FTE)....        $    2,500     $    (174)       $   2,326      $   1,998      $    (654)       $  1,344
                                     ==========     ==========       =========      =========      =========        ========
</TABLE>

     The Company's  commitment to  reinvesting  in the  communities it serves is
evident  in its  ratios of loans to  assets  and  loans to  deposits,  which are
generally  greater than the comparable  ratios of the Company's  peers.  This in
turn  translates  into above peer net interest  margin.  (Based on FFIEC iniform
bank performance report.)

                                      -19-
<PAGE>
     Net interest  income as a percent of total  interest FTE was 58.7%,  58.7%,
and 59.6% for 1999, 1998 and 1997, respectively.  Net interest margin was 4.89%,
5.02% and 5.24% for the same years.

     Interest from loans  represents  84.9%,  81.8% and 78.3% of total  interest
income for 1999,  1998 and 1997,  respectively.  Net interest income is strongly
influenced by results of the Bank's lending activities.
     Total interest expense increased 18.2% from 1998 to 1999 and also increased
15.9% from 1997 to 1998:  such  variances are detailed in Table 3. Cost of funds
are influenced by economic conditions and activities of the Federal Reserve. The
Bank's asset/liability  committee seeks to manage sources and uses of funds, and
to  monitor  the gap in  maturities  of these  funds to  maintain  a steady  net
interest margin in varying market conditions.

Table 4 - Composition of Average Earning Assets and Interest Paying Liabilities
<TABLE>
                                                                          Year ended December 31
                                                               1999                1998                1997
                                                               ----                ----                ----
<S>                                                           <C>                  <C>                <C>
As a percent of average earning assets
  Loans.....................................                    81%                 77%                 72%
  Other earning assets......................                    19%                 23%                 28%
                                                              -----                ----               -----
     Average earning assets.................                   100%                100%                100%

  Savings and NOW accounts..................                    34%                 36%                 38%
  Time deposits.............................                    48%                 50%                 54%
  Other borrowings..........................                    18%                 14%                  8%
                                                              -----                ----              ------
     Average interest bearing liabilities...                   100%                100%                100%

Average earning asset ratio.................                    94%                 95%                 95%
</TABLE>

Table 5 - Noninterest Income (in thousands)
<TABLE>
                                                                           Year Ended December 31
                                                             1999                  1998                 1997
                                                             ----                  ----                 ----
<S>                                                      <C>                     <C>                   <C>
Service charges on deposit accounts ......               $     811               $   588               $  527

Net gains on asset sales:
  Loans...................................                     600                 1,367                  414
  Securities..............................                     533                   204                   66
Loan servicing fees.......................                     148                   184                  203
Insurance premium revenue.................                   1,043                     0                    0
Brokerage revenue.........................                     322                   166                  206
Other.....................................                     164                   150                  126
                                                           -------                ------               ------
     Total noninterest income.............                  $3,621                $2,659               $1,542
                                                            ======                ======               ======
</TABLE>

Noninterest Income

     Noninterest income consists of service charges on deposit accounts, service
fees, gains on investment  securities available for sale and gains from sales of
Federal Home Loan  Mortgage  Corporation  (Freddie Mac) loans.  The  Corporation
retains the  servicing  rights of these  loans.  Non-interest  income  increased
$962,000 or 36% for 1999 versus  1998.  The  increase  was due  primarily to the
February 1, 1999 merger with  Dornbush  Insurance  Agency,  as a result of which
insurance premium revenue of $1,043,00 is included in 1999 non-interest  income.
Other increases in non-

                                      -20-
<PAGE>
interest  income include a $223,000 (38%) increase in service charges on deposit
accounts,  due to the deposit  growth  during the year.  Net gain on  securities
sales increased  $329,000 (161%) and brokerage revenue increased  $156,000 (94%)
in 1999 versus 1998. The brokerage  revenue  increase was due to increased sales
volume. Net gains on loan sales decreased $767,000 (56%), a direct result of the
interest rate  increases  during the year resulting in the slowdown of customers
refinancing higher interest rate mortgages.


Table 6  Net Gains on the Sale of Real Estate Mortgage Loans (in thousands)
<TABLE>
                                                                       Year ended December 31
                                                           1999                1998                 1997
                                                           ----                ----                 ----
<S>                                                        <C>                 <C>                  <C>
Total Real estate mortgage loan
      originations........................                 $65,668             $91,446              $39,112

Real estate mortgage loan sales...........                  44,764              72,075               20,568

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

Net gains on the sale of real
    estate mortgage loans.................                     600               1,367                  414

Net gains as a percent of real
    estate mortgage loan sales............                   1.34%               1.90%                2.01%
</TABLE>

     Net  gains on the sale of real  estate  mortgage  loans  totaled  $600,000,
$1,367,000 and $414,000 in 1999, 1998 and 1997, respectively.  The decrease from
1998 to 1999 of  $767,000  was a result  of the  less  favorable  interest  rate
environment  which slowed new mortgage loan business and caused a major slowdown
in the  refinance  business.  The  increase  from 1997 to 1998 of $953,000 was a
result  of a more  favorable  interest  rate  environment.  The Bank  sells  the
majority of its fixed-rate  obligations.  Such loans are sold without  recourse.
The Bank retains servicing rights on real estate mortgage loans sold.


Noninterest Expense

Table 7 - Noninterest Expense (in thousands)
<TABLE>
                                                                      Year ended December 31
                                                          1999                  1998                 1997
                                                          ----                  ----                 ----
<S>                                                      <C>                   <C>                  <C>
Salaries and employee benefits............               $   5,933              $3,918               $3,028
Occupancy and equipment...................                   1,728               1,143                  897
FDIC assessment...........................                      32                  28                   27
Postage...................................                     152                 115                  129
Printing and supplies.....................                     286                 268                  118
Marketing.................................                     233                 213                  163
Michigan Single Business Tax..............                     192                 192                  220
Other.....................................                   2,046               1,457                1,200
                                                           -------              ------               ------
  Total noninterest expense...............                 $10,602              $7,334               $5,782
                                                           =======              ======               ======
</TABLE>
     Table 7 lists the Bank's most significant noninterest expenses.

                                      -21-
<PAGE>
     Non-interest  expense increased $3,268,000 (45%) for 1999 versus 1998. This
increase is due in part to the February  1,1999 merger with  Dornbush  Insurance
Agency which incurred  noninterest expenses totaling $924,000 in 1999. Increases
in  non-interest  expense  include a $2,015,000  increase  (51%) in salaries and
employee  benefits of which  $640,000  (32%)  relate to the  Dornbush  Insurance
Agency merger.  Occupancy expense increased  $585,000 (51%) in 1999 versus 1998.
The majority of these increases are all related to the four new branch locations
that  were  opened  in late 1998 and  early  1999 and the  addition  to the main
office. Staffing the new branches and additional support at the corporate office
for the new  branches  and growth from  existing  branches  were the two primary
factors for the salary and employee benefit expense increase.

     Non-interest  expense  increased  $1,552,000  (27%) for 1998  versus  1997.
Salaries and employee benefits increased $890,000 to $3,918,000,  a 29% increase
which was the  major  factor  for the  increase  in  non-interest  expense.  The
increase was primarily due to staffing three new branches.

Financial Condition --Summary

     During 1999, total assets increased 25% to $376,072,609, deposits increased
17% to  $254,166,048  and  loans  increased  30% to  $284,279,189.  The  Bank is
emphasizing  relationship  banking  and  has  competed  aggressively  to  obtain
deposits and loans.  A discussion  of changes in balance  sheet amounts by major
categories follows:

The Loan Portfolio

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

     The  majority  of loans are made to  businesses  in the form of  commercial
loans and real  estate  mortgages.  The Bank's  consumer  mortgage  activity  is
substantial;  however,  only a small portion of these loans are retained for the
Bank's own portfolio. The Bank does retain servicing rights on substantially all
such sold  loans.  Over the past  eight  years  the Bank has  built a  servicing
portfolio of over $140,000,000  with the Federal Home Loan Mortgage  Corporation
("FHLMC").  At  December  31,  1999 and 1998,  the Bank was  servicing  loans of
$147,956,000  and   $126,651,000,   respectively,   which  relate  primarily  to
residential  mortgages  originated by the Bank. The Bank originated  $65,668,000
(652 loans) and  $91,446,000  (1,073 loans) in mortgage  loans in 1999 and 1998,
respectively,  and sold to FHLMC $44,764,000 (513 loans) in 1999 and $72,075,000
(872 loans) in 1998.  Repayments and early payoffs were  $19,520,000 in 1999 and
$17,768,000 in 1998.

     The loan portfolio mix at December 31, 1999 consists of 49% commercial real
estate,   15%  residential   real  estate,   20%  commercial  and  16%  consumer
installment.  Consumer  installment  loans as a percentage of the loan portfolio
have  doubled in the last two years as a result of the Bank's  indirect  lending
program,  substantially  all are vehicle  loans.  The growth rate of the lending
portfolio was 31.5% from 1997 to 1998 and 29.7% from 1998 to 1999.

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

                                      -22-
<PAGE>
Table 8 - Loan Portfolio Composition (in thousands)
<TABLE>
                                                                              Year ended December 31
                                                          1999                        1998                       1997
                                                  Amount         %             Amount          %         Amount          %
<S>                                               <C>           <C>            <C>           <C>         <C>           <C>
Commercial Real Estate....................         $140,648      49            $114,248      51           $ 90,005     53
Residential Real Estate...................           41,985      15              36,554      17             38,886     23
Other Commercial..........................           58,793      20              40,825      18             26,380     16
Installment...............................           46,404      16              30,506      14             13,682      8
                                                  ---------     ----           --------     ----          --------    ----
  Total loans............................           287,830     100%            222,133     100%           168,953    100%
                                                                ====                        ====                      ====
Less:
Allowance for Loan Losses................            (3,551)                     (2,879)                    (2,565)
                                                 ----------                    --------                   --------
Total Loans Receivable, Net...............         $284,279                    $219,254                   $166,388
                                                 ==========                    ========                   ========
</TABLE>

     The lending  policy of the Bank was written to reduce credit risk,  enhance
earnings and guide the lending officers in making credit decisions.  There are 8
levels in the loan authorization procedure depending on the dollar amount of the
loan request.

                  $2,000,001 to $6,000,000   Board of Directors
                  $1,000,001 to $2,000,000   Executive Loan Committee
                           0 to $1,000,000   Loan Committee
                           0 to $  300,000   Class 1 Lender
                           0 to $  200,000   Class 2 Lender
                           0 to $   75,000   Class 3 Lender
                           0 to $   30,000   Class 4 Lender
                        Student Loans Only   Class 5 Lender

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

     The extent of loan quality is demonstrated  by the ratios of  nonperforming
loans and charge offs as a percentage  of the loan  portfolio.  As referenced in
more detail in Table 10 below, the Bank's ratio of nonperforming  loans to total
loans at December 31, 1999 was 1.90%  compared to .26% in 1998. The December 31,
1999 ratio is significantly higher than the historical average and the Bank does
not expect this high of a percentage in the future.

                                      -23-
<PAGE>
Table 9  Maturities and Sensitivities of Loans to Changes in Interest Rates

     The  following  table  shows the amount of total  loans  outstanding  as of
December 31, 1999 which, based on remaining  scheduled  repayments of principal,
are due in the periods indicated.
<TABLE>
                                                                                          Maturing
                                                                                 (in thousands of dollars)
                                                                        After one but
                                                 Within one Year       within five years     After five years         Total
<S>                                                  <C>                 <C>                   <C>                  <C>
Residential Real Estate...........                   $13,136             $  24,459             $  4,390             $ 41,985
Installment.......................                     2,058                38,411                5,935               46,404
Commercial Real Estate............                    25,891                95,097               19,660              140,648
Other Commercial..................                    28,972                26,421                3,400               58,793
                                                    --------             ---------             --------             --------
       Totals.....................                   $70,057              $184,388              $33,385              287,830
                                                     =======              ========              =======
Allowance for Loan Losses.........                                                                                    (3,551)
                                                                                                                   ---------
Total Loans Receivable, Net.......                                                                                  $284,279
                                                                                                                   =========
</TABLE>
     Below  is a  schedule  of the  amounts  maturing  or  repricing  which  are
classified according to their sensitivity to changes in interest rates.
<TABLE>
                                                                                Interest Sensitivity
                                                                             (in thousands of dollars)
                                                              Fixed Rate           Variable Rate         Total
<S>                                                           <C>                  <C>                <C>
Due within 3 months.................................          $  13,201              $55,623          $  68,824
Due after 3 months within 1 year....................             11,662                2,046             13,708
Due after one but within five years.................            174,493                    0            174,493
Due after five years................................             30,805                    0             30,805
                                                              ---------            ---------          ---------
Total...............................................           $230,161              $57,669            287,830
                                                              =========            =========
Allowance for loan losses...........................                                                     (3,551)
                                                                                                      ---------
Total loans receivable, net.........................                                                   $284,279
                                                                                                      =========
</TABLE>

Table 10 - Nonperforming Assets (in thousands)
<TABLE>
                                                                                           December 31
                                                                            1999              1998               1997
                                                                            ----              ----               ----
<S>                                                                         <C>               <C>               <C>
Nonaccrual loans.............................................               $2,471            $  353            $  105
90 days or more past due & still accruing....................                3,003               217               132
                                                                             -----                              ------
    Total nonperforming loans................................                5,474               570               237
Other real estate............................................                    0               116                45
                                                                            ------                              ------
    Total nonperforming assets...............................               $5,474            $  686            $  282
                                                                            ======                              ======

Nonperforming loans as a percent of total loans..............                1.90%             0.26%             0.14%
Nonperforming assets as a percent of total loans.............                1.90%             0.31%             0.17%
Nonperforming loans as a percent of the allowance
    for loan losses..........................................                 154%               20%                9%
</TABLE>

                                      -24-
<PAGE>
     Nonperforming  assets  are  comprised  of loans for which  the  accrual  of
interest  has been  discontinued,  accruing  loans  90 days or more  past due in
payments,  collateral  for loans which have been  in-substance  foreclosed,  and
other real estate which has been acquired  primarily through  foreclosure and is
awaiting  disposition.  Loans including loans considered impaired under SFAS No.
118, are generally  placed on a nonaccrual  basis when  principal or interest is
past due 90 days or more and when, in the opinion of management, full collection
of  principal  and  interest is  unlikely.  Three  commercial  real estate loans
account for $4,528,256 of the  nonperforming  loans.  Although these three loans
are  delinquent,   the  bank  is  fully  collateralized  as  to  each  of  them.
Nevertheless,  a slightly  larger than normal reserve portion has been allocated
to these  specific  assets.  On  February  20,  2000 the  nonaccrual  status and
delinquency were fully resolved as to $4,189,886 of these assets.

     Nonperforming  loans equal 154% of the Bank's  allowance for loan losses as
of December 31,1999;  management  believes that the allowance for loan losses is
adequate  for these  loans and the  remainder  of the lending  portfolio.  As of
December 31, 1999 there were no other  interest  bearing  assets which  required
classification.  Management  is not aware of any  recommendations  by regulatory
agencies,  which if  implemented,  would have a material impact on the Company's
liquidity, capital or results of operations.

     The table below presents the interest income that would have been earned on
non-performing  loans outstanding at December 31, 1999, 1998, and 1997 had those
loans been accruing  interest in accordance  with the original terms of the loan
agreement  (pro forma  interest)  and the  amount of  interest  income  actually
included in net interest income for those years.


Table 11 - Foregone Interest on Non-Performing Loans
<TABLE>
                                                               For the Year Ended December 31
                                                                       (in thousands)

                                            1999                              1998                             1997
                                 Non-accrual      Restructured     Non-accrual      Restructured     Non-accrual       Restructured
<S>                                 <C>               <C>              <C>              <C>              <C>               <C>
Pro forma interest                  $139              $ -              $33              $ -              $11               $25
Interest earned                      108                -               32                -                8                25
                                    ----
Foregone interest income            $ 31              $ -              $ 1              $ -              $ 3               $ 0
                                    ====
</TABLE>

Table 12 - Loan Loss Experience (in thousands)

     The following is a summary of loan balances (excluding loans held for sale)
at the end of each  period  and their  daily  average  balances,  changes in the
allowance for the loan losses  arising from loans charged off and  recoveries on
loans  previously  charged off, and additions to the  allowance  which have been
expensed.

     Starting  in the 2nd  quarter of 1998 the bank  aggressively  targeted  the
indirect  consumer loan market,  primarily auto loans. The program has increased
the consumer loan portfolio balance  substantially and has raised the net charge
off percentage.  Indirect lending results in higher credit risk then does direct
lending.  Consumer loan net charge-offs  increased  $528,000 in 1999 compared to
1998. The increased indirect loan charge-offs resulted in additional  provisions
being  allocated to the allowance for loan losses.  Management  will continue to
monitor the results and make changes to the program as needed.

                                      -25-
<PAGE>
<TABLE>
                                                                                     Year Ended December 31
                                                                            1999              1998             1997
                                                                            ----              ----             ----
<S>                                                                        <C>               <C>               <C>
Loans:
  Average daily balance of loans for the year.................             $245,349          $190,472          $155,286
  Amount of loans outstanding at end of period................             $287,829          $222,133          $168,953

Allowance for loan losses
  Balance at beginning of year................................               $2,879            $2,565         $   2,376
  Loans charged off:
    Real estate...............................................                    0                 0                 0
    Commercial................................................                   45                90                 0
    Consumer..................................................                  625               117               124
                                                                         ----------         ---------         ---------
        Total charge-offs.....................................                  670               207               124
  Recoveries of loans previously charged off
    Real estate...............................................                    0                 0                 0
    Commercial................................................                   24                33               224
    Consumer..................................................                   68                88                39
                                                                         ----------         ---------         ---------
        Total recoveries......................................                   92               121               263
                                                                         ----------         ---------         ---------

  Net (charge off) recoveries.................................                 (578)              (86)              139
  Additions to allowance charged to operations................                1,250               400                50
                                                                           --------         ---------          --------
        Balance at end of year................................               $3,551         $   2,879          $  2,565
                                                                           ========         =========          ========
Ratios:
  Net (charge offs) recoveries to average daily balance
     of loans for the year....................................               (.24%)            (.05%)              .09%
  Allowance for loan losses to loans outstanding at year end..               1.23%             1.30%              1.52%
</TABLE>

Table 13 - Allocation of the Allowance for Loan Losses

     The allowance for loan losses is analyzed  quarterly by  management.  In so
doing,  management  assigns a portion of the allowance to specific  credits that
have been  identified  as problem  loans and reviews past loss  experience.  The
local economy and particular  concentrations are considered, as well as a number
of other factors.
<TABLE>
                                                                     Year ended December 31
                                               1999                           1998                         1997
                                               ----                           ----                         ----
                                                      % of each                      % of each                      % of each
                                                      category                        category                      category
                                      Allowance       to total        Allowance       to total      Allowance       to total
                                       Amount          loans           Amount          loans          Amount          loans
<S>                                   <C>              <C>            <C>             <C>           <C>             <C>
Commercial.................             $2,723         69.3%          $2,175          69.8%         $1,895           68.9%
Real estate mortgages......                151         14.6              310          16.5             205           23.0
Consumer...................                637         16.1              378          13.7             179            8.1
Unallocated................                 40           .0               16            .0             286             .0
                                        ------        -----           ------         ------         ------          ------
  Total....................             $3,551        100.0%          $2,879         100.0%         $2,565          100.0%
                                        ======        =====           ======         ======         ======          ======
</TABLE>
     The above allocations are not intended to imply limitations on usage of the
allowance. The entire allowance is available for any future loans without regard
to loan type. Management has provided additions to the allowance for loan losses
to support the 1999 loan growth and to replenish  the  allowance  for  unusually
high charge-offs of consumer loans.

                                      -26-
<PAGE>
Investment Securities

     Securities  are purchased and  classified  as  "available-for-sale."  These
securities  may be sold to meet the Bank's  liquidity  needs or to  improve  the
quality of the  investment  portfolio.  The primary  objective of the  Company's
investing  activities  is to  provide  for  safety  of the  principal  invested.
Secondary  considerations include earnings,  liquidity, and the overall exposure
to  changes  in  interest  rates.  The  Company's  net  holdings  of  investment
securities  increased  $7.3 million in 1999 and decreased  $5.4 million in 1998.
The mortgage  backed  securities  are issues of the Federal  Home Loan  Mortgage
Corporation,  GNMA and FNMA which pay monthly  amortized  principal and interest
payments.


Table 14 - Available-for-Sale Securities Portfolio
<TABLE>
                                                                                    Year Ended December 31
                                                                            1999              1998              1997
                                                                            ----              ----              ----
<S>                                                                      <C>                <C>              <C>
U. S. Treasury and U.S. Government Agencies..................              $37,578           $32,453         $  39,176
State and political subdivisions.............................               23,201            21,007            19,604
Other........................................................                2,871             2,887             3,013
                                                                         ---------          --------         ---------
                                                                           $63,650           $56,347         $  61,793
                                                                         =========          ========         =========
</TABLE>
     Excluding those holdings of the investment  portfolio in U.S.  Treasury and
U.S.  Government Agency  Securities,  there were no investments in securities of
any one issuer which exceeded 10% of shareholders' equity.


Table 15 - Schedule of Maturities of Investment Securities and Weighted Average
           Yields

     The following is a schedule of maturities and their weighted  average yield
of each category of investment  securities as of December 31, 1999. The weighted
average interest rates have been computed on a fully taxable  equivalent  basis,
based on  amortized  cost.  The rates shown on  securities  issued by states and
political  subdivisions are stated on a taxable equivalent basis using a 34% tax
rate.
<TABLE>
                                                                      Maturing
                                                                (Dollars in Thousands)
                                                                                                               Investments With
                          Due Within               One to               Five to                After            No Contractual
                           One Year              Five Years            Ten Years             Ten Years             Maturity
                        Fair       Avg.        Fair       Avg.       Fair      Avg.        Fair       Avg.      Fair        Avg.
                       Value       Yield       Value      Yield     Value      Yield      Value      Yield      Value      Yield
Available for Sale:
<S>                    <C>         <C>         <C>        <C>       <C>        <C>        <C>        <C>        <C>        <C>
U.S. Treasury
and U.S.
Government
Agencies               $1,945      5.20%      $19,298     6.59%    $12,517     6.30%      $3,818     7.27%      $    -        -
States and
Political
Subdivisions            1,229     10.42%        6,631     8.09%     11,196     7.39%       4,145     7.45%           -        -
Other Securities            -         -             -        -           -        -            -         -         871     7.40%
                       ------     ------      -------     -----    -------     ----       ------     -----      ------     -----
                       $3,174      7.22%      $25,929     6.96%    $23,713     6.83%      $7,963     7.36%        $871     7.40%
                       ======     ======      =======     =====    =======     =====      ======     =====      ======     =====
</TABLE>

Deposits

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

                                      -27-
<PAGE>
     Table 16  indicates a  relatively  stable base of deposits  spread over the
Bank's  product  lines.  Average total deposits grew 20.2% from 1998 to 1999 and
grew 13.0% from 1997 to 1998.  The  increase  in 1999  resulted  primarily  from
gaining market share in the Bank's market areas.

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


Table 16 - Average Daily Deposits (in thousands)
<TABLE>
                                                                       Average for the Year
                                                  1999                          1998                          1997
                                          Amount       % of Assets       Amount       % of Assets       Amount       % of Assets
<S>                                        <C>             <C>         <C>                 <C>        <C>                 <C>
Noninterest bearing demand........         $  36,452         11%       $ 29,324            11%        $ 22,764             10%
NOW accounts......................            18,038          6          15,352             6           12,687              6
MMDA/Savings .....................            65,702         20          56,306            21           51,240             22
Time..............................           120,114         37          98,870            37           90,180             40
                                           ---------        ----       --------           ---         --------             ---
   Total Deposits.................          $240,306         73%       $199,852           75%         $176,871             78%
                                            ========        ====       ========           ===         ========             ===
</TABLE>

Table 17 - Average Deposit Balances

     The  following  table  sets  forth the  average  deposit  balances  and the
weighted average rates paid thereon:
<TABLE>
                                                                            Average for the Year
                                                        1999                          1998                          1997
                                            Average            Average       Average         Average        Average       Average
                                            Balance             Rate         Balance           Rate         Balance         Rate
<S>                                         <C>                 <C>         <C>                <C>        <C>               <C>
Noninterest bearing demand.........         $  36,452                        $29,324                      $ 22,764
NOW Accounts.......................            18,038           2.19%         15,352           2.45%        12,687          2.44%
MMDA/Savings.......................            65,702           2.68          56,306           2.93         51,240          3.16
Time...............................           120,114           5.17          98,870           5.61         90,180          5.69
                                            ---------           -----       --------           -----      --------          -----
   Total Deposits..................          $240,306           3.48%       $199,852           3.79%      $176,871          3.99%
                                            =========           =====       ========           =====      ========          =====
</TABLE>

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

     The following table summarizes time deposits in amounts of $100,000 or more
by time remaining until maturity as of December 31, 1999:
<TABLE>
                                                                                       Amount
                     <S>                                                             <C>
                     Three months or less...........................                   $16,326
                     Over 3 months through 6 months.................                     6,189
                     Over 6 months through 1 year..................                      6,095
                     Over 1 year....................................                     4,001
                                                                                       -------
                                                                                       $32,611
                                                                                       =======
</TABLE>
     The Bank operates in a very competitive  environment.  Management  monitors
rates at other  financial  institutions  in the area to ascertain that its rates
are  competitive  with the  market.  Management  also  attempts  to offer a wide
variety  of  products  to meets  the  needs of its  customers.  The Bank  offers
business  and  consumer  checking  accounts,  regular and money  market  savings
accounts, and certificates having many options in their terms.

                                      -28-
<PAGE>
Market Risk

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

Capital

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

     In 1999, the Company paid cash dividends totaling $1,674,256, approximately
37% of  earnings.  Special  cash  dividends  were  paid in each of the two prior
years.   In  1998  the  Company  paid  cash   dividends   totaling   $2,350,000,
approximately 46% of earnings. In 1997, the Company paid cash dividends totaling
$3,115,620,  approximately  67% of earnings.  The Company remains in all the top
regulatory  categories for adequately and  well-capitalized  institutions  after
paying such dividends.


Table 19 - Capital Resources (in thousands)
<TABLE>
                                                  Regulatory Requirements                        December 31
                                                Adequately         Well
                                               Capitalized      Capitalized      1999             1998              1997
                                               -----------      -----------      ----             ----              ----
<S>                                                <C>              <C>       <C>                <C>              <C>
Tier 1 capital..................                                                $41,183          $39,232          $35,689
Tier 2 capital..................                                                  3,551            2,879            2,293
                                                                              ---------        ---------         --------
  Total qualifying capital......                                                $44,734          $42,111          $37,982
                                                                              =========        =========         ========

Tier 1 leverage ratio...........                   4%                5%          12.64%           14.74%           15.03%
Tier 1 risk-based capital.......                   4%                6%          13.07%           16.02%           19.48%
Total risk-based capital........                   8%               10%          14.19%           17.20%           20.74%
</TABLE>

Asset/Liability Management

     The Bank's Asset/Liability Management committee ("ALCO") meets regularly to
evaluate  the Bank's  interest  rate  sensitivity  position,  address  issues of
liquidity,  and review the interest margin,  analyzing causes for changes in net
interest  income.  During  1999 the  Bank's  one year gap  position  averaged  a
negative gap.

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

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

                                      -29-
<PAGE>
Table 20 - Asset/Liability Gap Position (in thousands)
<TABLE>
                                                                          December 31, 1999
                                                   0-3               4-12           1-5             5+
                                                  Months            Months         Years          Years           Total
<S>                                              <C>               <C>          <C>              <C>             <C>
Interest earning assets:
  Loans................................          $  68,824          $13,708       $174,493        $30,805        $287,830
  Securities (including restricted
         investments)                               12,418            2,502          9,234         39,496          63,650
  Loans held for sale..................                632                -              -              -             632
                                                 ---------         --------      ---------       --------       ---------
  Total interest earning assets........          $  81,874          $16,210       $183,727        $70,301        $352,112
                                                 =========         ========      =========       ========       =========

Interest bearing liabilities:
  Savings & NOW........................          $  32,185         $      -      $      -         $56,850       $  89,035
  Time.................................             38,658           57,466         30,001              -         126,125
                                                 ---------         --------      ---------       --------       ---------
  Total deposits.......................             70,843           57,466         30,001         56,850         215,160
  Other borrowings.....................             58,624            8,000         12,206              -          78,830
                                                 ---------        ---------      ---------       --------       ---------
   Total interest bearing liabilities..           $129,467          $65,466      $  42,207        $56,850        $293,990
                                                 =========        =========      =========       ========       =========

Rate sensitivity gap and ratios:
  Gap for period.......................            (47,593)         (49,256)       141,520         13,451
  Cumulative gap.......................            (47,593)         (96,849)        44,671         58,122
Ratio for period as a % of assets......            (13.52)%         (13.99)%        40.19%          3.82%
Cumulative rate sensitive ratio as
   a % of assets.......................            (13.52)%         (27.51)%        12.69%         16.51%
</TABLE>
     The savings and NOW accounts are  categorized in the above table based upon
the Bank's historical experience.

Impact of Inflation

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

Year 2000

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

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

     To date, the Company has not experienced any Year 2000 compliance problems.
Although  considered  unlikely,   unanticipated  problems,   including  problems
associated with non-compliant third parties, could still occur.

                                      -30-
<PAGE>
Forward Looking Statements

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


Recent Legislation

     Reference is made to the "Supervision and Regulation - Recent  Legislation"
section of Item 1 which notes the potential competitive impact of the GLB Act on
the Company.

                                      -31-
<PAGE>
ITEM 7A:  Quantitative and Qualitative Disclosures About Market Risk

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

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

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


                                      -32-
<PAGE>
Item 8.  Financial Statements and Supplementary Data.


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


                                                                            PAGE

Independent Auditors' Report                                                 34

Consolidated Financial Statements

   Consolidated Balance Sheets                                               35

   Consolidated Statements of Income                                         36

   Consolidated Statements of Comprehensive Income                           37

   Consolidated Statements of Changes in Stockholders' Equity                38

   Consolidated Statements of Cash Flows                                     39

   Notes to Consolidated Financial Statements                              40-56
<PAGE>
                          INDEPENDENT AUDITORS' REPORT




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

We have audited the accompanying consolidated balance sheets of O.A.K. Financial
Corporation  and  Subsidiary  as of December 31, 1999 and 1998,  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,  1999.  These  consolidated  financial  statements  are the
responsibility of O.A.K. Financial Corporation's management.  Our responsibility
is to express an opinion on these consolidated financial statements based on our
audits.

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

In our opinion, the consolidated  financial statements referred to above present
fairly, in all material  respects,  the financial  position of O.A.K.  Financial
Corporation  and Subsidiary as of December 31, 1999 and 1998, and the results of
their  operations and their cash flows for each of the three years in the period
ended  December  31,  1999 in  conformity  with  generally  accepted  accounting
principles.


                                        /s/Rehmann Robson, P.C.


Grand Rapids, Michigan
January 28, 2000
                                      -34-
<PAGE>
O.A.K. FINANCIAL CORPORATION                 CONSOLIDATED BALANCE SHEETS
     AND SUBSIDIARY
--------------------------------------------------------------------------------
<TABLE>
                                                                                              December 31
       ASSETS                                                                         1999                  1998
<S>                                                                                <C>                    <C>
Cash and due from banks                                                            $ 10,054,389           $ 8,913,513
Available-for-sale securities - amortized cost of
     $62,592,629 ($53,815,639 - 1998)                                                61,649,881            55,082,668
Loans receivable, net                                                               284,279,189           219,253,824
Loans held for sale                                                                     632,038             4,679,962
Accrued interest receivable                                                           2,716,837             2,026,185
Premises and equipment, net                                                          10,618,570             7,092,765
Restricted investments                                                                2,000,000             1,263,900
Other assets                                                                          4,121,705             3,181,173
                                                                                  -------------          ------------
Total assets                                                                      $ 376,072,609          $301,493,990
                                                                                  =============          ============

                    LIABILITIES AND STOCKHOLDERS' EQUITY

Deposits
     Interest bearing                                                              $215,159,729         $ 181,789,253
     Noninterest bearing                                                             39,006,319            35,501,554
                                                                                  -------------          ------------
Total deposits                                                                      254,166,048           217,290,807

Borrowed funds                                                                       54,405,599            27,752,803
Securities sold under agreements to repurchase                                       24,424,351            14,373,304
Other liabilities                                                                     1,819,097             2,124,091
                                                                                  -------------          ------------
Total liabilities                                                                   334,815,095           261,541,005
                                                                                  -------------          ------------
Stockholders' equity
     Common stock, $1 par value; 4,000,000 shares authorized,
        2,041,775 shares issued and outstanding
        (2,000,000 shares in 1998)                                                    2,041,775             2,000,000
     Additional paid-in capital                                                       6,259,681             5,622,680
     Retained earnings                                                               34,078,585            31,494,055
     Accumulated other comprehensive (loss) income                                     (622,527)              836,250
     Unallocated common stock held by ESOP                                             (500,000)                    -
                                                                                  -------------          ------------
Total stockholders' equity                                                           41,257,514            39,952,985
                                                                                  -------------          ------------
Total liabilities and stockholders' equity                                        $ 376,072,609          $301,493,990
                                                                                  =============          ============
</TABLE>
The  accompanying  notes are an integral  part of these  consolidated  financial
statements.
                                      -35-
<PAGE>
O.A.K. FINANCIAL CORPORATION                 CONSOLIDATED STATEMENTS OF INCOME
     AND SUBSIDIARY
--------------------------------------------------------------------------------
<TABLE>
                                                                               Year Ended December 31
                                                                    1999                1998               1997
<S>                                                              <C>                 <C>                <C>
Interest income
     Loans                                                       $21,656,573         $17,629,417        $14,858,954
     Available-for-sale securities                                 3,264,615           3,396,933          3,610,882
     Restricted investments                                          106,473              88,281             86,830
     Federal funds sold                                               52,644              19,827             67,073
                                                                 -----------         -----------         ----------
Total interest income                                             25,080,305          21,134,458         18,623,739
                                                                 -----------         -----------         ----------
Interest expense
     Deposits                                                      8,368,069           7,574,458          7,058,031
     Borrowed funds                                                1,327,843             849,088            314,015
     Securities sold under agreements to repurchase                  832,353             492,626            320,519
                                                                 -----------         -----------         ----------
Total interest expense                                            10,528,265           8,916,172          7,692,565
                                                                 -----------         -----------         ----------
Net interest income                                               14,552,040          12,218,286         10,931,174

Provision for loan losses                                          1,250,000             400,000             50,000
                                                                 -----------         -----------         ----------
Net interest income after provision for
     loan losses                                                  13,302,040          11,818,286         10,881,174
                                                                 -----------         -----------         ----------
Noninterest income
     Service charges                                                 811,369             587,786            527,099
     Net gain on sales of loans held for sale                        599,935           1,367,075            414,364
     Loan servicing fees                                             148,042             183,735            203,295
     Net gain on sales of availiable-for-sale securities             532,915             204,076             66,190
     Insurance premiums                                            1,042,618                   -                  -
     Brokerage fees                                                  321,615             165,801            206,296
     Other                                                           164,311             150,832            124,830
                                                                 -----------         -----------         ----------
Total noninterest income                                           3,620,805           2,659,305          1,542,074
                                                                 -----------         -----------         ----------
Noninterest expenses
     Salaries and employee benefits                                5,933,049           3,917,992          3,028,338
     Occupancy                                                       785,886             465,271            384,237
     Furniture and fixtures                                          941,788             678,055            512,896
     Michigan Single Business Tax                                    192,397             192,042            220,000
     Printing and supplies                                           286,216             267,682            117,941
     Other                                                         2,463,516           1,813,030          1,518,862
                                                                 -----------         -----------         ----------
Total noninterest expenses                                        10,602,852           7,334,072          5,782,274
                                                                 -----------         -----------         ----------
Income before federal income taxes                                 6,319,993           7,143,519          6,640,974

Federal income taxes                                               1,791,000           2,068,000          2,015,000
                                                                 -----------         -----------         ----------
Net income                                                        $4,528,993          $5,075,519         $4,625,974
                                                                 ===========         ===========         ==========
Net income per share of common
     stock (basic and diluted)                                       $2.23              $2.54               $2.30
                                                                     =====              =====               =====
</TABLE>
The  accompanying  notes are an integral  part of these  consolidated  financial
statements.
                                      -36-
<PAGE>

O.A.K. FINANCIAL CORPORATION                       CONSOLIDATED STATEMENTS OF
     AND SUBSIDIARY                                  COMPREHENSIVE INCOME
--------------------------------------------------------------------------------
<TABLE>
                                                                                     Year Ended December 31
                                                                         1999                 1998               1997
<S>                                                                     <C>                   <C>                <C>
Other comprehensive (loss) income

Unrealized (losses) gains on available-
     for-sale securities arising during the year                        $(2,742,692)          $ 676,764          $ 491,830

Reclassification adjustment for realized
     gains included in net income                                          (532,915)           (204,076)           (66,190)
                                                                        -----------         -----------         ----------
Comprehensive (loss) income
     before income taxes                                                 (2,209,777)            472,688            425,640

Income tax (benefit) expense related to
     comprehensive income                                                  (751,000)            160,000            145,000
                                                                        -----------         -----------         ----------
Other comprehensive (loss) income                                        (1,458,777)            312,688            280,640

Net income                                                                4,528,993           5,075,519          4,625,974
                                                                        -----------         -----------         ----------
Comprehensive income                                                    $ 3,070,216         $ 5,388,207        $ 4,906,614
                                                                        ===========         ===========        ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.

                                      -37-
<PAGE>
O.A.K. FINANCIAL CORPORATION                  CONSOLIDATED STATEMENTS OF
     AND SUBSIDIARY                        CHANGES IN STOCKHOLDERS' EQUITY
--------------------------------------------------------------------------------
<TABLE>
                                                                                     Year Ended December 31
                                                                           1999                 1998                 1997
<S>                                                                    <C>                   <C>                  <C>
Shares of common stock issued and outstanding
     Balance, beginning of year                                          2,000,000            1,000,000            1,006,174
     Common stock dividends                                                      -            1,000,000                    -
     Repurchases and retirements                                                 -                    -               (6,174)
     Common stock issued                                                    13,000                    -                    -
     Issuance of common stock for business combination                      28,775                    -                    -
                                                                      ------------          -----------          -----------
     Balance, end of year                                                2,041,775            2,000,000            1,000,000
                                                                      ============          ===========          ===========
Common stock
     Balance, beginning of year                                        $ 2,000,000          $ 1,000,000          $ 1,006,174
     Common stock dividends                                                      -            1,000,000                    -
     Repurchases and retirements                                                 -                    -               (6,174)
     Common stock issued                                                    13,000                    -                    -
     Issuance of common stock for business combination                      28,775                    -                    -
                                                                      ------------          -----------          -----------
     Balance, end of year                                                2,041,775            2,000,000            1,000,000
                                                                      ------------          -----------          -----------
Additional paid-in-capital
     Balance, beginning of year                                          5,622,680            5,622,680            6,036,338
     Repurchases and retirements                                                 -                    -             (413,658)
     Common stock issued                                                   637,001                    -                    -
                                                                      ------------          -----------          -----------
     Balance, end of year                                                6,259,681            5,622,680            5,622,680
                                                                      ------------          -----------          -----------
Retained earnings
     Balance, beginning of year                                         31,494,055           29,768,536           28,258,182
     Accumulated deficit in business combination                          (270,207)                   -                    -
     Net income                                                          4,528,993            5,075,519            4,625,974
     Common stock dividends                                                      -           (1,000,000)                   -
     Cash dividends                                                     (1,674,256)          (2,350,000)          (3,115,620)
                                                                      ------------          -----------          -----------
     Balance, end of year                                               34,078,585           31,494,055           29,768,536
                                                                      ------------          -----------          -----------
Accumulated other comprehensive (loss) income
     Balance, beginning of year                                            836,250              523,562              242,922
     Other comprehensive (loss) income                                  (1,458,777)             312,688              280,640
                                                                      ------------          -----------          -----------
     Balance, end of year                                                 (622,527)             836,250              523,562
Unallocated common stock held by ESOP                                 ------------          -----------          -----------
     Balance, beginning of year                                                  -                    -                    -
     Unearned ESOP compensation                                           (500,000)                   -                    -
                                                                      ------------          -----------          -----------
     Balance, end of year                                                 (500,000)                   -                    -
                                                                      ------------          -----------          -----------
Total stockholders' equity                                             $41,257,514          $39,952,985          $36,914,778
                                                                      ============          ===========          ===========
</TABLE>
The  accompanying  notes are an integral  part of these  consolidated  financial
statements.

                                      -38-
<PAGE>







O.A.K. FINANCIAL CORPORATION                        CONSOLIDATED STATEMENTS OF
AND SUBSIDIARY                                               CASH FLOWS
--------------------------------------------------------------------------------
<TABLE>
                                                                                   Year Ended December 31
                                                                        1999                1998                1997
<S>                                                                   <C>                 <C>                 <C>
Cash flows from operating activities
     Net income                                                        $ 4,528,993         $ 5,075,519         $ 4,625,974
     Adjustments to reconcile net income to net
        cash provided by operating activities
            Depreciation and amortization                                  916,515             553,789             459,915
            Provision for loan losses                                    1,250,000             400,000              50,000
            Proceeds from sales of loans held
            for sale                                                    45,364,562          73,442,003          20,981,500
            Originations of loans held for sale                        (40,716,703)        (75,409,274)        (19,979,751)
            Net gain on sales of available-for-sale
            securities                                                    (532,915)           (204,076)            (66,190)
            Net gain on sales of loans held for sale                      (599,935)         (1,367,075)           (414,364)
            Net amortization of investment premiums                        163,506             203,231             196,390
            Loss on sales of property and equipment                          7,769                   -                   -
            Deferred income taxes (benefit)                                (85,000)            121,000              61,300
            Changes in operating assets and liabilities
            which (used) provided cash
            Accrued interest receivable                                   (690,652)           (513,039)            (59,748)
            Other assets                                                  (186,327)         (1,034,556)           (223,816)
            Other liabilities                                             (304,994)            487,860             229,216
                                                                      ------------        ------------        ------------
Net cash provided by operating activities                                9,114,819           1,755,382           5,860,426
                                                                      ------------        ------------        ------------
Cash flows from investing activities
     Available-for-sale securities
        Proceeds from maturities                                        11,425,763          11,773,936          10,278,679
        Proceeds from sales                                              3,313,371           2,213,374           7,445,638
        Purchases                                                      (23,146,715)         (8,163,135)        (21,219,616)
     Purchases of restricted investments                                  (736,100)            (65,300)            (80,300)
     Net increase in loans held for investment                         (66,275,365)        (53,266,174)        (23,744,280)
     Purchases of premises and equipment                                (4,361,920)         (3,111,510)           (335,955)
     Proceeds from the sale of premises and equipment                       11,858                   -                   -
                                                                      ------------        ------------        ------------
Net cash used in investing activities                                  (79,769,108)        (50,618,809)        (27,655,834)
                                                                      ------------        ------------        ------------
Cash flows from financing activities
     Net increase in deposits                                           36,875,241          32,590,479          14,479,421
     Net borrowed funds                                                 26,393,132          16,452,803           8,099,006
     Net increase in securities sold under agreements
        to repurchase                                                   10,051,047           5,715,721           1,321,285
     Dividends paid                                                     (1,674,256)         (2,350,000)         (3,115,620)
     Repurchase and retirement of common shares                                  -                   -            (419,832)
     Proceeds from issuance of common stock                                150,001                   -                   -
                                                                      ------------        ------------        ------------
Net cash provided by financing activities                               71,795,165          52,409,003          20,364,260
                                                                      ------------        ------------        ------------
Net increase (decrease) in cash and
     cash equivalents                                                    1,140,876           3,545,576          (1,431,148)

Cash and cash equivalents, beginning of year                             8,913,513           5,367,937           6,799,085
                                                                      ------------        ------------        ------------
Cash and cash equivalents, end of year                                $ 10,054,389          $8,913,513          $5,367,937
                                                                      ============        ============        ============
Supplementary cash flows information
     Interest paid                                                    $ 10,320,794         $ 8,838,116         $ 7,583,946
     Income taxes paid                                                   1,948,430           1,795,773           1,941,029
</TABLE>
The  accompanying  notes are an integral  part of these  consolidated  financial
statements.

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


1.   BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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

The Bank's  primary  deposit  products  are  interest  and  noninterest  bearing
checking  accounts,  savings  accounts and time deposits and its primary lending
products are commercial loans, real estate mortgages, and consumer loans. Note 3
further  describes  the types of lending the Bank engages in and Note 6 provides
additional information on deposits. Note 2 discusses the types of securities the
Corporation invests in.

The Bank is a state chartered bank and a member of the Federal Deposit Insurance
Corporation's  ("FDIC")  Bank  Insurance  Fund.  The  Bank  is  subject  to  the
regulations and supervision of the FDIC,  Federal Reserve Bank and the Financial
Institutions  Bureau and undergoes  periodic  examinations  by these  regulatory
authorities (see Note 12).

Business Combination - Effective February 1, 1999, the Corporation issued 28,775
shares of its common stock in exchange for all of the  outstanding  common stock
of Dornbush Insurance Company, Inc. (DIC) based on a conversion ratio of .719475
shares of the Corporation's common stock. DIC, now a wholly-owned  subsidiary of
the Bank,  operates in the general  insurance  agency  business  and sells life,
health, property and casualty insurance.  The merger has been accounted for as a
pooling of interests.  Due to the insignificance of the financial  statements of
DIC, the Corporation's  consolidated financial statements have not been restated
for all periods  prior to the  business  combination  to reflect  the  financial
position and results of operations of DIC, and pro-forma  financial  information
has not been disclosed.

Use of Estimates - In preparing  consolidated financial statements in conformity
with generally accepted  accounting  principles,  management is required to make
estimates  and  assumptions  that  affect  the  reported  amounts  of assets and
liabilities  at the date of the  consolidated  balance  sheet  and the  reported
amounts of revenues and expenses  during the reporting  period.  Actual  results
could differ from those  estimates.  The material  estimate that is particularly
susceptible to significant  change in the near term relates to the determination
of the allowance for loan losses.

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

Principles of Consolidation

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

Cash and Cash Equivalents

Cash and cash  equivalents  include  cash on hand,  amounts  due from  banks and
federal funds sold. Generally,  federal funds are sold for a one-day period. The
Corporation  maintains deposit accounts in various financial  institutions which
generally exceed FDIC insured limits or are not insured. Management believes the
Corporation is not exposed to any  significant  interest rate or other financial
risk as a result of these deposits.

Available-For-Sale Securities

Available-for-sale  securities  consist  of  bonds,  notes  and  debentures  not
classified as  held-to-maturity  securities and recorded at their estimated fair
value. Unrealized  appreciation and depreciation,  net of the effect of deferred
income taxes, on  available-for-sale  securities are reported as a net amount in
other  comprehensive  income.  Premiums and discounts are recognized in interest
income  using the interest  method over the period to maturity.  Declines in the
fair  value of  securities  below  cost  that are  determined  to be other  than
temporary are reflected in earnings as realized  losses.  Gains or losses on the
sale  of  available-for-sale   securities  are  determined  using  the  specific
identification method.


Loans Held for Investment and Related Income

Loans that  management  has the intent and  ability to hold for the  foreseeable
future or until  maturity or pay-off 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  on  impaired  loans  is  discontinued  when,  in  the  opinion  of
management, the borrower may be unable to meet payments as scheduled. When the

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

accrual of  interest  is  discontinued,  all  uncollected  accrued  interest  is
reversed.  Interest  income on such loans is recognized  only to the extent cash
payment is received. Loans are returned to accrual status when all the principal
and interest amounts  contractually  due are brought current and future payments
are  reasonably  assured.  For  impaired  loans not  classified  as  nonaccrual,
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.

Mortgage Banking Activities

Mortgage  loans  originated  and intended for sale in the  secondary  market are
carried at the lower of cost or estimated  market value in the aggregate.  Gains
and  losses on sales of such  loans are  recognized  at the time of sale and are
determined  by the  difference  between  the net sales  proceeds  and the unpaid
principal  balance  of the loans  sold,  adjusted  for any  yield  differential,
servicing fees and servicing  costs  applicable to future years.  Net unrealized
losses are recognized in a valuation allowance by charges to income.

The Bank currently  retains  servicing on all loans originated and sold into the
secondary  market.  Originated  mortgage  servicing rights ("OMRS") retained are
recognized for loans sold by allocating  total costs  incurred  between the loan
and the  servicing  rights based on their  relative  fair  values.  The mortgage
servicing  rights  are  amortized  in  proportion  to,  and over the  period of,
estimated net future servicing revenue. The expected period of the estimated net
servicing  income is based,  in part,  on the  expected  prepayment  rate of the
underlying  mortgage.  The carrying  value of the mortgage  servicing  rights is
periodically evaluated for impairment.

Loan  administration  fees earned for  servicing  loans for others are generally
calculated  based on the outstanding  principal  balances for the loans serviced
and are recorded as revenue when received.

Allowance for Loan Losses

The  allowance  for loan losses is  established  as losses are estimated to have
occurred  through a provision for loan losses  charged to earnings.  Loan losses
are charged against the allowance when management believes the  uncollectibility
of the loan balance is confirmed. Subsequent recoveries, if any, are credited to
the allowance.

The allowance for loan losses is evaluated on a regular basis by management  and
is based upon management's periodic review of the collectibility of the loans in
light of  historical  experience,  the nature and volume of the loan  portfolio,
adverse  situations that may affect the borrower's  ability to repay,  estimated
value of any  underlying  collateral and prevailing  economic  conditions.  This
evaluation  is  inherently   subjective  as  it  requires   estimates  that  are
susceptible to significant revision as more information becomes available.

A loan is considered  impaired when, based on current information and events, it
is probable  that the Bank will be unable to collect the  scheduled  payments of
principal or interest  when due according to the  contractual  terms of the loan
agreement.  Factors  considered by management in determining  impairment include
payment status,  collateral  value, and the probability of collecting  scheduled
principal and interest  payments when due. Loans that  experience  insignificant
payment delays and payment shortfalls  generally are not classified as impaired.
Management  determines the significance of payment delays and payment shortfalls
on a case-by-case  basis,  taking into  consideration  all of the  circumstances
surrounding  the loan and the borrower,  including the length of the delay,  the
reasons for the delay,  the borrower's  prior payment record,  and the amount of
the  shortfall in relation to the  principal  and interest  owed.  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.


Foreclosed Real Estate


Real estate  properties  acquired  through,  or in lieu of, loan foreclosure are
held for sale and  initially  recorded at fair value at the date of  foreclosure
less estimated cost to sell, thereby  establishing a new cost basis.  Subsequent
to foreclosure, valuations are periodically performed by management and the real
estate is recorded  at the lower of carrying  amount or fair value less costs to
sell.  Revenue  and  expenses  from  operations  and  changes  in the  valuation
allowance are included in net expenses fro foreclosed assets.

                                      -41-
<PAGE>
O.A.K. FINANCIAL CORPORATION                         NOTES TO CONSOLIDATED
     AND SUBSIDIARY                                  FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

Credit Related Financial 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.

Premises and Equipment

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

Net Income Per Share

Net income per share of common stock is  calculated on the basis of the weighted
average number of common shares outstanding,  which was approximately  2,031,000
in 1999,  2,000,000  in 1998 and  2,010,000  in 1997.  The effect of the assumed
issuance  of the  performance  based  incentive  share  awards  and the  assumed
exercise of the  outstanding  stock options had no effect in the  calculation of
net income per share assuming dilution.

Federal Income Taxes

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

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

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 ("FRB"). 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.

Reclassifications

Certain  amounts  as  originally  reported  in the 1998  and  1997  consolidated
financial   statements   have  been   reclassified  to  conform  with  the  1999
presentation.

New Accounting Standards

The  Financial   Accounting  Standards  Board  adopted  Statement  of  Financial
Accounting Standard No. 133, "Accounting for Derivative  Instruments and Hedging
Activities"  ("SFAS #133") in June 1998. SFAS #133 requires  companies to record
derivatives  on the  balance  sheet as assets and  liabilities  measured at fair
value.  The accounting for changes in value of derivatives  will depend upon the
use of derivatives and whether they qualify for hedge accounting.

This  statement is effective for all fiscal  quarters of fiscal years  beginning
after  June 15,  2000 with  earlier  applications  allowed  and is to be applied
prospectively.  The  Corporation  does  not use  interest  rate  swaps  or other
derivatives  in its  management of risk and  accordingly  this  statement is not
expected to have a material impact on the Corporation's financial statements.

                                      -42-
<PAGE>
O.A.K. FINANCIAL CORPORATION                        NOTES TO CONSOLIDATED
     AND SUBSIDIARY                                 FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

2.   AVAILABLE-FOR-SALE SECURITIES

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

                                                                          Gross                   Gross
                                               Amortized                Unrealized              Unrealized              Fair
1999                                             Cost                  Appreciation            Depreciation            Value
<S>                                          <C>                      <C>                      <C>                 <C>
U.S. government and
    federal agency                             $38,328,604            $       55,647           $   805,829           $37,578,422
States and political subdivisions               23,393,327                   162,987               355,553            23,200,761
Other                                              870,698                         -                     -               870,698
                                             -------------            --------------           -----------         -------------
Total                                          $62,592,629            $      218,634            $1,161,382           $61,649,881
                                             =============            ==============           ===========         =============


1998

U.S. government and
    federal agency                             $32,109,957            $       391,951           $  48,809            $32,453,099
States and political subdivisions               20,083,303                    927,464               3,577             21,007,190
Other                                            1,622,379                          -                   -              1,622,379
                                             -------------            ---------------          ----------         --------------
Total                                          $53,815,639            $     1,319,415           $  52,386            $55,082,668
                                             =============            ===============          ==========         ==============
</TABLE>

The  amortized  cost  and  fair  value  of   available-for-sale   securities  by
contractual  maturity at December 31, 1999 is shown below.  Expected  maturities
will differ from contractual  maturities because borrowers may have the right to
call or prepay obligations with or without call or prepayment penalties.
<TABLE>
                                                                                      Amortized           Fair
                                                                                        Cost              Value
<S>                                                                                  <C>                 <C>
Due in one year or less                                                              $  1,219,110        $  1,228,584

Due after one year through five years                                                   8,412,203           8,485,850
Due after five years through ten years                                                 20,643,525          20,191,066

Due after ten years                                                                     4,272,434           4,102,641
                                                                                     ------------        ------------
Subtotal                                                                               34,547,272          34,008,141
Mortgage-backed securities                                                             28,045,357          27,641,740
                                                                                     ------------        ------------
Total                                                                                 $62,592,629         $61,649,881
                                                                                     ============        ============
</TABLE>
Investment  income from taxable and  nontaxable  securities  for the years ended
December 31, is as follows:
<TABLE>
                                                                        1999                1998                 1997
<S>                                                                   <C>                 <C>                 <C>
Taxable                                                               $2,173,429           $2,322,330          $2,622,734
Nontaxable                                                             1,091,186            1,074,603             988,148
                                                                      ----------          -----------         -----------
Total                                                                 $3,264,615           $3,396,933          $3,610,882
                                                                      ==========          ============        ===========
</TABLE>

                                      -43-
<PAGE>
O.A.K. FINANCIAL CORPORATION                         NOTES TO CONSOLIDATED
     AND SUBSIDIARY                                  FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

Proceeds from sales of available-for-sale  securities during 1999, 1998 and 1997
were $3,313,371,  $2,213,374 and $7,445,638,  respectively.  The gross gains and
gross losses realized on sales for the years ended December 31 are as follows:

<TABLE>
                                                            1999                1998               1997
<S>                                                    <C>                 <C>                 <C>
Gross realized gains                                      $532,915          $231,259           $  87,375

Gross realized losses                                            -           (27,183)            (21,185)
                                                       -----------         ---------           ---------
Net realized gain on sales of
     available-for-sale securities                        $532,915          $204,076           $  66,190
                                                       ===========         =========           =========
</TABLE>
The  tax  provision   applicable  to  these  net  realized   gains  amounted  to
approximately  $181,000,  $69,000 and $23,000 for the years ended  December  31,
1999, 1998 and 1997, respectively.

Investment  securities  with carrying  values of  approximately  $53,069,000 and
$34,943,000 at December 31, 1999 and 1998, respectively,  were pledged to secure
public deposits or for other purposes as required or permitted by law.


3.   LOANS

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


Major loan classifications at December 31 are as follows:
<TABLE>
                                                                                     1999                1998
<S>                                                                             <C>                 <C>
Commercial real estate                                                           $140,647,468        $114,248,448

Residential real estate                                                            41,985,097          36,554,021
Commercial                                                                         58,792,864          40,825,169
Consumer                                                                           46,404,313          30,505,562
                                                                                -------------       -------------
Total loans receivable, net of deferred loan
    fees of $135,189 ($142,131 - 1998)                                            287,829,742          222,133,200

Less allowance for loan losses                                                      3,550,553            2,879,376
                                                                                -------------       --------------
Loans receivable, net                                                            $284,279,189         $219,253,824
                                                                                =============       ==============
</TABLE>

At December 31, 1999, scheduled maturities of loans with fixed rates of interest
are as follows:
<TABLE>
<S>                                                              <C>
One year or less                                                 $   24,863,104
One to five years                                                   174,492,566
Over five years                                                      30,805,360
                                                                 --------------
Total                                                              $230,161,030
                                                                 ==============
</TABLE>

                                      -44-
<PAGE>
O.A.K. FINANCIAL CORPORATION                          NOTES TO CONSOLIDATED
     AND SUBSIDIARY                                   FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

Variable  rate loans in the amount of  $57,668,712  at December 31, 1999 reprice
quarterly or more frequently.

The Bank  services  loans for others  which  generally  consists  of  collecting
mortgage payments, maintaining escrow accounts, disbursing payments to investors
and taxing authorities, and processing foreclosures.  Loans being serviced as of
December 31, 1999, 1998 and 1997,  approximated  $146,000,000,  $127,000,000 and
$93,000,000,  respectively;  such  loans are not  included  in the  accompanying
consolidated balance sheets.

The  following  table  summarizes  mortgage  servicing  rights  capitalized  and
amortized  and the fair value of  mortgage  servicing  rights  included in other
assets in the accompanying consolidated balance sheets as of December 31:
<TABLE>
                                                                 1999                 1998                1997
<S>                                                            <C>                  <C>                   <C>
Balance, beginning of year                                     $     918,093        $    213,827        $          -
  Mortgage servicing rights capitalized                              491,995             798,975             226,289
  Amortization                                                      (194,715)            (94,709)            (12,462)
Balance, end of year                                           $   1,215,373        $    918,093        $    213,827
                                                               =============        ============        ============
</TABLE>
Information  regarding  impaired loans is as follows for the year ended December
31:
<TABLE>
                                                              1999                     1998                  1997
<S>                                                         <C>                      <C>                    <C>
Balance of impaired loans at year-end                       $5,474,469               $570,280               $478,250

Allowance for loan losses allocated
    to the impaired loan balance                               401,467                202,021                 47,716

Average investment in impaired loans                         1,607,204                445,645                620,890

Interest income recognized on
    impaired loans (no interest
    income was recognized on the
    cash basis)                                                151,414                 44,818                 42,940
</TABLE>
No additional  funds are  committed to be advanced in  connection  with impaired
loans.

4.   ALLOWANCE FOR LOAN LOSSES

The following is an analysis of changes in the allowance for loan losses for the
years ended December 31:
<TABLE>
                                                              1999                    1998                  1997
<S>                                                        <C>                    <C>                  <C>
Balance, beginning of year                                 $2,879,376             $2,565,430           $2,375,970

Provision for loan losses                                   1,250,000                400,000               50,000
Recoveries                                                     91,451                121,382              263,109
Loans charged off                                            (670,274)              (207,436)            (123,649)
                                                          -----------            -----------          -----------
Balance, end of year                                       $3,550,553             $2,879,376           $2,565,430
                                                          ===========            ===========          ===========
</TABLE>

                                      -45-
<PAGE>
O.A.K. FINANCIAL CORPORATION                         NOTES TO CONSOLIDATED
     AND SUBSIDIARY                                  FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

5.   PREMISES AND EQUIPMENT

A summary of premises and equipment at December 31 follows:
<TABLE>
                                                                                   1999                  1998
<S>                                                                             <C>                 <C>
Land                                                                             $2,164,869         $  2,099,757

Buildings and improvements                                                        8,206,963            5,252,099
Furniture and equipment                                                           4,924,288            3,714,796
                                                                                -----------         ------------
Total premises and equipment                                                     15,296,120           11,066,652

Less accumulated depreciation                                                     4,677,550            3,973,887
                                                                                -----------         ------------
Premises and equipment, net                                                     $10,618,570         $  7,092,765
                                                                                ===========         ============
</TABLE>

6.   DEPOSITS

The following is a summary of the distribution of deposits at December 31:
<TABLE>
                                                                                   1999                     1998
<S>                                                                             <C>                     <C>
Interest bearing
  NOW accounts                                                                  $  19,812,110           $  17,182,308
  Savings                                                                          38,760,645              36,980,476
  Money market demand                                                              30,461,552              26,508,552
  Time, $100,000 and over                                                          32,610,542              14,676,281
  Other time                                                                       93,514,880              86,441,636
                                                                                -------------            ------------
Total interest bearing                                                            215,159,729             181,789,253

Noninterest bearing demand                                                         39,006,319              35,501,554
                                                                                -------------            ------------
Total deposits                                                                  $ 254,166,048            $217,290,807
                                                                                =============            ============
</TABLE>

At December 31, 1999, scheduled maturities of time deposits are as follows:
<TABLE>
<S>                                                                             <C>
2000                                                                            $  96,123,802
2001                                                                               16,721,710
2002                                                                                7,296,290
2003                                                                                1,607,325
2004                                                                                4,376,295
                                                                                -------------
Total time deposits                                                              $126,125,422
                                                                                =============
</TABLE>
Interest  expense on time deposits issued in  denominations  of $100,000 or more
was approximately $1,365,000 in 1999, $721,000 in 1998 and $520,000 in 1997.

                                      -46-
<PAGE>
O.A.K. FINANCIAL CORPORATION                          NOTES TO CONSOLIDATED
     AND SUBSIDIARY                                   FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

7.   BORROWED FUNDS

Borrowed funds at December 31, consist of the following obligations:
<TABLE>
                                                                                     1999                   1998
<S>                                                                             <C>                      <C>
Federal funds purchased                                                           $22,200,000             $14,200,000

Federal Home Loan Bank advances                                                    28,000,000              12,000,000
Treasury tax and loan note option                                                   4,000,000               1,552,803
Other borrowings                                                                      205,599                       -
                                                                                -------------            ------------
Total borrowed funds                                                              $54,405,599             $27,752,803
                                                                                =============            ============
</TABLE>
The Federal Home Loan Bank  borrowings are  collateralized  by a blanket lien on
all qualified  1-to-4 family whole  mortgage  loans and U.S.  government  agency
securities  with a combined  carrying  value of  approximately  $39,898,000  and
$12,749,000 at December 31, 1999 and 1998, respectively.

The  Treasury  Tax and Loan Note  option is  collateralized  by U.S.  government
agency  securities  with  a  carrying  value  of  approximately  $4,521,000  and
$2,714,000  at December  31, 1999 and 1998,  respectively.  The Treasury Tax and
Loan Note option is a daily  borrowing  with the Federal  Reserve  Bank,  due on
demand at 25 basis points below the national  federal fund  interest rate (5.50%
at December 31, 1999).

The Federal  Home Loan Bank  advances  at  December  31, 1999 and 1998 and their
contractual maturities are as follows:
<TABLE>
                                                  Rate at
                                                 December 31                 1999                    1998
Putable fixed rate advances:
<S>                                                 <C>                       <C>                  <C>
December 14, 1999                                   6.18%                     $        -           $  2,000,000
December 22, 1999                                   6.02%                              -              2,000,000
July 10, 2000                                       6.20%                      2,000,000              2,000,000
September 25, 2000                                  6.05%                      2,000,000                      -
December 13, 2000                                   6.26%                      4,000,000                      -
January 22, 2001                                    5.57%                      2,000,000              2,000,000
May 4, 2001                                         5.96%                      2,000,000              2,000,000
September 24, 2001                                  6.26%                      2,000,000                      -
November 2, 2001                                    6.36%                      2,000,000                      -
May 1, 2002                                         6.44%                      2,000,000                      -
August 21, 2003                                     5.73%                      2,000,000              2,000,000
                                                                       -----------------       ----------------
                                                                              20,000,000             12,000,000
Short-term variable rate advances:

January 31, 2000                                    4.05%                      6,000,000                      -
July 12, 2000                                       5.13%                      2,000,000                      -
                                                                       -----------------       ----------------
                                                                             $28,000,000            $12,000,000
                                                                       =================       ================
</TABLE>

8.   SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE

Securities  sold under  agreements  to  repurchase at December 31, 1999 and 1998
mature  within one day from the  transaction  date and have an average  interest
rate of 4.29% and 3.0%,  respectively.  The U.S.  government  agency  securities
underlying  the   agreements   have  a  carrying  value  and  a  fair  value  of
approximately  $29,049,000  and  $19,480,000  at  December  31,  1999 and  1998,
respectively.  Such securities remain under the control of the Bank. The maximum
amount outstanding at any month end during the years ended December 31, 1999 and
1998 was $28,965,000 and  $17,272,000,  respectively;  the daily average balance
was $21,221,000 and $12,195,000, respectively.

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

9.  FEDERAL INCOME TAXES

The provision for federal  income taxes for the years ended December 31 consists
of:
<TABLE>
                                                          1999                  1998                1997
<S>                                                    <C>                 <C>                 <C>
Current                                                 $1,876,000            $1,947,000         $1,953,700
Deferred (benefit)                                         (85,000)              121,000             61,300
                                                       -----------         -------------       ------------
Federal income tax expense                              $1,791,000            $2,068,000         $2,015,000
                                                       ===========         =============       ============
</TABLE>

A  reconciliation  between federal income tax expense and the amount computed by
applying the statutory federal income tax rate of 34% to income before taxes for
the years ended December 31, is as follows:
<TABLE>
                                                          1999                    1998                  1997
<S>                                                    <C>                 <C>                 <C>
Statutory rate applied to income
      before income taxes                               $2,148,798            $2,428,756          $2,257,829
Effect of tax-exempt interest
      income                                              (341,898)             (387,285)           (355,031)
Change in valuation allowance                              (20,000)                    -              64,000
Other - net                                                  4,100                26,529              48,202
                                                       -----------         -------------       -------------
Federal income tax expense                              $1,791,000            $2,068,000          $2,015,000
                                                       ===========         =============       =============
</TABLE>
The net deferred income tax asset (liability) as of December 31, is comprised of
the tax effect of the following temporary differences:
<TABLE>
                                                                                     1999                  1998
<S>                                                                             <C>                 <C>
Deferred tax assets
         Allowance for loan losses                                               $1,106,000         $   878,000
      Deferred compensation plan                                                    264,000             245,000
      Deferred loan fees                                                              2,000               3,000
                                                                                -----------         -----------
Total deferred tax assets                                                         1,372,000           1,126,000
Valuation allowance                                                                (699,000)           (719,000)
                                                                                -----------         -----------
Net deferred tax assets                                                             673,000             407,000

Deferred tax liabilities
      Depreciation                                                                  (74,000)                  -
      Discount accretion                                                            (31,000)            (25,000)
      Loan servicing rights                                                        (413,000)           (312,000)
                                                                                -----------         -----------
Total deferred tax liabilities                                                     (518,000)           (337,000)
                                                                                -----------         -----------
Net deferred tax assets entering into the determination
      of the provision for federal income taxes                                     155,000              70,000

Additional deferred tax asset (liability) related to
      other comprehensive income                                                    321,000            (430,000)
                                                                                -----------         -----------
Net deferred tax asset (liability) included in other assets
(liabilities) on the accompanying consolidated balance sheets                   $   476,000         $  (360,000)
                                                                                ===========         ===========

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


10.  RELATED PARTY TRANSACTIONS

Loans

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   $5,282,000  and
$6,420,000 at December 31, 1999 and 1998, respectively; new loans and repayments
during 1999 were approximately $2,626,000 and $3,764,000, respectively.

Deposits

Deposits of Bank directors,  executive officers and their related interests were
approximately   $1,863,000  and  $1,004,000  at  December  31,  1999  and  1998,
respectively.


11.  OFF-BALANCE SHEET ACTIVITIES

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,  1999 and  1998,  the  following  financial  instruments  were
outstanding whose contract amounts represent credit risk:
<TABLE>
                                                                    Contract Amount
                                                               1999                   1998
<S>                                                         <C>                    <C>
Commitments to grant loans                                  $22,056,000            $46,556,000
Unfunded commitments under lines of credit                   82,005,000             48,603,000
Commercial and standby letters of credit                      2,506,000              2,532,000
</TABLE>

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  are
uncollateralized  and usually do not contain a specified  maturity  date and may
not be drawn upon to the total extent to which the Bank is committed.

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.

                                      -49-
<PAGE>
O.A.K. FINANCIAL CORPORATION                         NOTES TO CONSOLIDATED
     AND SUBSIDIARY                                  FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

12.  REGULATORY MATTERS

The  Corporation  (on a consolidated  basis) and the Bank are subject to various
regulatory  capital  requirements  administered  by its primary  regulator,  the
Federal Reserve Bank ("FRB").  Failure to meet minimum capital  requirements can
initiate certain mandatory and 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, 1999, that the  Corporation and the Bank meet all capital  adequacy
requirements to which they are subject.  As of December 31, 1999 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,  1999 and 1998 are als  presented  in the
table.
<TABLE>
                                                                                           Minimum To Be Well
                                                                                           Capitalized Under
                                                              Minimum Capital              Prompt Corrective
                                     Actual                      Requirement               Action Provisions
                              Amount         Ratio          Amount         Ratio          Amount         Ratio
                                                          (Dollars in thousands)
<S>                           <C>            <C>            <C>            <C>            <C>            <C>
As of December 31, 1999
Total capital to risk
  weighted assets
   Consolidated               $44,734        14.19%         $25,216        8.0%           $  N/A         N/A%
   Bank                        43,131        13.70           25,190        8.0            31,164         10.0
Tier 1 capital to risk
  weighted assets
   Consolidated                41,183        13.07           12,608        4.0               N/A         N/A
   Bank                        39,580        12.57           12,595        4.0            18,893          6.0
Tier 1 capital to
  average assets
   Consolidated                41,183        12.64           13,038        4.0               N/A         N/A
   Bank                        39,580        12.15           13,027        4.0            16,284          5.0
</TABLE>
                                      -50-
<PAGE>
O.A.K. FINANCIAL CORPORATION                         NOTES TO CONSOLIDATED
     AND SUBSIDIARY                                  FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
<TABLE>
                                                                                          Minimum To Be Well
                                                                                          Capitalized Under
                                                                Minimum Capital          Prompt Corrective
                                     Actual                       Requirement             Action Provisions
                              Amount           Ratio         Amount      Ratio            Amount     Ratio
                                                           (Dollars in thousands)
<S>                              <C>        <C>             <C>            <C>       <C>              <C>
As of December 31, 1998
Total capital to risk
  weighted assets
   Consolidated                  $42,111    17.20%          $19,587        8.0%      $   N/A          N/A%
   Bank                           39,305    16.22            19,386        8.0        24,232          10.0
Tier 1 capital to risk
  weighted assets
   Consolidated                   39,232    16.02             9,776        4.0           N/A           N/A
   Bank                           36,426    14.97             9,733        4.0        14,600           6.0
Tier 1 capital to
  average assets
   Consolidated                   39,232    14.74            10,646        4.0           N/A           N/A
   Bank                           36,426    13.73            10,612        4.0        13,265           5.0
</TABLE>
The Bank is required to deposit  certain  amounts with the Federal Reserve Bank.
These  reserve  balances  vary  depending  upon the  level of  certain  customer
deposits in the Bank.  At December  31, 1999 and 1998,  those  required  reserve
balances were $2,711,000 and $1,737,000, respectively.

The Bank is also  subject to  limitations  under the Federal  Reserve Act on the
amount  of loans  or  advances  that  can be  extended  to the  Corporation  and
dividends  that can be paid to the  Corporation.  The total  amount of dividends
which may be paid at any date is generally  limited to the retained  earnings of
the Bank,  and loans or advances are limited to 10 percent of the Bank's capital
stock and  surplus on a secured  basis.  Approval  is needed if total  dividends
declared in any calendar  year exceed the  retained  "net profit" (as defined in
the Federal  Reserve  Act) of that year plus the  retained  "net  profit" of the
preceding  two years.  The amount  that was not subject to this  restriction  is
approximately $6,019,000 at January 1, 2000. 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.


13.  EMPLOYEE BENEFIT PLANS

401(k),  Profit  Sharing and  Employee  Stock  Ownership  Plan (ESOP) - The Bank
maintains a 401(k) Profit Sharing and Employee Stock Ownership Plan (the "Plan")
for substantially all employees. Under the 401(k) feature of the Plan, employees
may make voluntary  contributions based on a percentage of covered compensation.
The  Bank,  at the  discretion  of the  Board of  Directors,  may make  matching
contributions  and/or a profit  sharing  contribution.  The Bank's  matching and
profit sharing  contributions were $200,332 $240,200 and $203,055 for 1999, 1998
and 1997, respectively.

The 401(k) and Profit Sharing Plan was amended as of January 29, 1999 to include
the ESOP.  Under the  guidelines  of the  amended  Plan,  any  employee  who has
attained the age of 21 and has completed six months of employment is eligible to
participate in the ESOP. The ESOP borrowed $500,000 from the Company to purchase
10,000 shares of O.A.K.  Financial  Corporation's common stock at a price of $50
per share.  The loan is  collateralized  by the unearned  shares of common stock
purchased by the ESOP; interest is charged at 7.5%. The loan will be repaid over
a period of 10 years  principally  from the portion of the Bank's  discretionary
contribution and with any dividends received on the unallocated shares of common
stock.  Shares  purchased by the ESOP are held in suspense until allocated among
Plan participants as the loan is repaid.  Contributions to the ESOP were $63,415
during the year ended December 31, 1999.

                                      -51-
<PAGE>
O.A.K. FINANCIAL CORPORATION                         NOTES TO CONSOLIDATED
     AND SUBSIDIARY                                  FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

Contributions to the ESOP and shares released from suspense  proportional to the
repayment of the ESOP loan are allocated among Plan participants on the basis of
compensation  in the year of allocation.  Benefits are vested as the participant
accumulates  years of service  with the Bank. A  participant  becomes 20% vested
after three  years of service  and is 100% vested  after seven years of credited
service.  Prior to the seven years of credited service,  a person who terminates
employment for reasons other than death,  normal  retirement or disability  will
receive  only  their  vested  portion  of  the  ESOP  benefit.  Forfeitures  are
reallocated  among remaining  participating  employees in the same proportion as
contributions.  Benefits  are  payable  in stock  or cash  upon  termination  of
employment.  The Bank's  contributions  to the ESOP are not fixed,  so  benefits
under the ESOP cannot be estimated. ESOP participants receive distributions from
their ESOP accounts only upon termination of service.

For the year ended  December 31, 1999,  1,153 common shares with an average fair
value of $55 per share,  were  committed  to be  released.  No shares  have been
allocated  as of that date.  The fair value of unearned  shares at December  31,
1999 was $550,000.

Stock  Compensation  and  Stock  Option  Plans - A Stock  Compensation  Plan was
established as of January 28, 1999 to enable key employees to participate in the
future growth and  profitability  of the  Corporation by offering them incentive
compensation through the issuance of stock options and performance share awards,
which are vested based on achievement of performance goals.

Performance  share  awards are earned and vested at the rate of 10% per year and
become  exercisable  after the first  anniversary  of the award date. The option
exercise  price is at least 100% of the market  value of the common stock at the
grant date.  During 1999,  9,250  performance  shares were awarded at an average
weighted fair value of $50 per share totaling $462,500.

The Company also has a Stock Option Plan for non-employee  directors in addition
to the Stock Compensation plan for key employees.

The following table summarizes information about stock option transactions:
<TABLE>
                                                                        Available           Options              Exercise
                                                                        For Grant          Outstanding             Price
<S>                                                                     <C>               <C>                    <C>
Outstanding, January 1, 1999                                                     -                 -                   -

Shares available for grant                                                 200,000                 -              $50.00

Granted under Stock Option Plan                                            (2,500)             2,500               50.00
Granted under Stock Compensation Plan                                      (9,250)             9,250               50.00
                                                                      -----------         ----------            --------
Outstanding, December 31, 1999                                            188,250             11,750              $50.00
                                                                      ===========         ==========            ========
</TABLE>
Under the terms of the Plans none of the options  were  exercisable  at December
31, 1999.

All  options  expire 10 years  after the date of the grant;  155,750  shares are
reserved for future issuance under the Stock Compensation Plan and 32,500 shares
are reserved for future  issuance  under the Stock Option Plan for  non-employee
directors.

The  Corporation  has elected to apply the  provisions of Accounting  Principles
Board  Opinion  No.  25  "Accounting   for  Stock  Issued  to  Employees"   and,
accordingly,  stock  options  do  not  constitute  compensation  expense  in the
determination  of net income.  Had stock  compensation  expense been  determined
pursuant  to the  methodology  provided in  Statement  of  Financial  Accounting
Standards No. 123,  "Accounting for Stock-Based  Compensation"  there would have
been no proforma effect on the consolidated results of operations.

Deferred  Compensation - The Bank sponsors a deferred  compensation plan for all
directors who wish to participate.  The cost of the plan was $204,000,  $152,000
and  $109,000  in  1999,  1998  and  1997,  respectively.  The  accrued  benefit
obligation  for this plan was  $775,707 and $717,578 as of December 31, 1999 and
1998, respectively, and is included in other liabilities. The Bank has purchased
life insurance policies on participating directors.

                                      -52-
<PAGE>







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


14.  CONTINGENCIES

The Bank is party to litigation arising in the normal course of business. In the
opinion of management,  based on  consultation  with legal counsel,  liabilities
from  such  litigation,  if  any,  would  not  have  a  material  effect  on the
Corporation's  consolidated financial statements.  As a result of acquiring real
estate from foreclosure proceedings, the Bank is subject to potential claims and
possible legal proceedings involving  environmental matters. No such claims have
been asserted at December 31, 1999.


15.  FAIR VALUES OF FINANCIAL INSTRUMENTS

The fair value of a financial  instrument  is the  current  amount that would be
exchanged  between willing  parties,  other than in a forced  liquidation.  Fair
value is best  determined  based upon quoted  market  prices.  However,  in many
instances,  there are no quoted  market  prices  for the  Corporation's  various
financial  instruments.  In cases where quoted market prices are not  available,
fair  values  are based on  estimates  using  present  value or other  valuation
techniques. Those techniques are significantly affected by the assumptions used,
including the discount rate and estimates of future cash flows. Accordingly, the
fair value  estimates  may not be realized  in an  immediate  settlement  of the
instrument.   The  fair  values  of  certain   financial   instruments  and  all
nonfinancial  instruments  are excluded from  disclosure.  These include,  among
other  elements,  the  estimated  earning  power of core deposit  accounts,  the
trained  work force,  customer  goodwill  and similar  items.  Accordingly,  the
aggregate fair values ar not necessarily  indicative of the underlying  value of
the Corporation.

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

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

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

Restricted  Investments - The carrying value of Federal Home Loan Bank stock and
Federal  Reserve  Bank stock  approximates  fair value  based on the  redemption
provisions of the Federal Home Loan Bank and the Federal Reserve Bank.

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

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

Deposit  Liabilities - The fair values for demand deposits  (e.g.,  interest and
noninterest checking, passbook savings, and money market accounts) which have no
stated  maturity  are,  by  definition,  equal to the amount  payable on demand.
Approximately  65% and 53% of the Bank's deposits at December 31, 1999 and 1998,
respectively have fair values equal to carrying values. The carrying amounts for
variable  rate  certificates  of deposit and other  variable  rate time deposits
approximate  their fair values at the reporting date. Fair values for fixed rate
time deposits and other time deposits with stated maturities are estimated using
a discounted cash flow  calculation  that applies interest rates currently being
offered for deposits of similar remaining maturities to a schedule of aggregated
expected monthly maturities.

                                      -53-
<PAGE>
O.A.K. FINANCIAL CORPORATION                        NOTES TO CONSOLIDATED
     AND SUBSIDIARY                                 FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

Securities  Sold Under  Agreements to  Repurchase  Fair value  approximates  the
carrying value since the majority of these  instruments were entered into at our
near December 31, 1999 and 1998.

Borrowed Funds - The carrying amounts of federal funds  purchased,  treasury tax
and loan note options, and variable rate advances approximate their fair values.
The fair values of the  Corporation's  long-term  borrowings are estimated using
discounted  cash flow analyses based on the  Corporation's  current  incremental
borrowing rates for similar types of borrowing  arrangements.  Off-Balance-Sheet
Instruments  - Commitments  to extend  credit were  evaluated and fair value was
estimated  using the fees  currently  charged to enter into similar  agreements,
taking into  consideration the remaining terms of the agreements and the present
credit worthiness of the counterparties.  For fixed-rate loan commitments,  fair
value also considers the difference between current levels of interest rates and
the committed  rates. As the Bank does not charge fees for lending  commitments,
it is not practicable to estimate the fair value of these instruments.


The estimated  fair values of the Bank's  financial  instruments at December 31,
are as follows:
<TABLE>
1999                                                                                Carrying                  Fair
                                                                                     Amount                  Value
<S>                                                                             <C>                      <C>
Financial assets
    Cash and cash equivalents                                                   $  10,054,389           $  10,054,389

    Available-for-sale securities                                                  61,649,881              63,649,881
    Loans receivable, net                                                         284,279,189             282,255,966
    Loans held for sale                                                               632,038                 632,038
    Accrued interest receivable                                                     2,716,837               2,716,837
    Restricted investments                                                          2,000,000               2,000,000

Financial liabilities
    Deposits                                                                      254,166,048             254,105,180
    Borrowed funds                                                                 54,405,599              54,230,776
    Securities sold under agreements
      to repurchase                                                                24,424,351              24,424,351
    Other liabilities                                                               1,819,097               1,819,097

1998

Financial assets
    Cash and cash equivalents                                                   $   8,913,513            $  8,913,513

    Available-for-sale securities                                                  55,082,668              55,082,668
    Loans receivable, net                                                         219,253,824             223,293,988
    Loans held for sale                                                             4,679,962               4,679,962
    Accrued interest receivable                                                     2,026,185               2,026,185
    Restricted investments                                                          1,263,900               1,263,900

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

                                      -54-
<PAGE>
O.A.K. FINANCIAL CORPORATION                          NOTES TO CONSOLIDATED
     AND SUBSIDIARY                                  FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

16.  O.A.K. FINANCIAL CORPORATION (PARENT COMPANY ONLY) CONDENSED FINANCIAL
     INFORMATION

The following  summarizes  parent  company only  condensed  balance sheets as of
December 31, 1999 and 1998 and the related  condensed  statements  of income and
cash flows for each of the three years in the period ended December 31, 1999:
<TABLE>
                                               Condensed Balance Sheets


                                                                                      1999                  1998
<S>                                                                             <C>
Assets
    Cash                                                                         $  1,346,061       $       416,959
    Investment in subsidiary                                                       39,655,037            37,983,469
    Available-for-sale securities                                                     832,023             1,612,479
                                                                                -------------       ---------------
Total assets                                                                      $41,833,121           $40,012,907
                                                                                =============       ===============

Other borrowed funds                                                             $    500,000       $        59,922

Other liabilities                                                                      75,607                     -

Stockholders' equity                                                               41,257,514            39,952,985
                                                                                -------------       ---------------
Total liabilities and stockholders' equity                                        $41,833,121           $40,012,907
                                                                                =============       ===============
</TABLE>
<TABLE>
                         Condensed Statements of Income

                                                              1999                   1998                  1997
Income
<S>                                                         <C>                 <C>                    <C>
    Dividends from subsidiary                                $  816,710           $2,362,500            $4,543,040
    Interest from available-for-sale securities                  36,045               59,065                38,876
    Net realized gain on sale of
      available-for-sale securities                             507,134              209,722                     -
                                                            -----------         ------------           -----------
Total income                                                  1,359,889            2,631,287             4,581,916

Other expenses                                                  202,937              119,307                38,876
                                                            -----------         ------------           -----------
Income before equity in undistributed net
    income of subsidiary                                      1,156,952            2,511,980             4,543,040
Equity in undistributed net income of
    subsidiary                                                3,372,041            2,563,539                82,934
                                                            -----------         ------------           -----------
Net income                                                   $4,528,993           $5,075,519            $4,625,974
                                                            ===========         ============           ===========
</TABLE>
                                      -55-
<PAGE>
O.A.K. FINANCIAL CORPORATION                       NOTES TO CONSOLIDATED
     AND SUBSIDIARY                                FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
<TABLE>

                                               Condensed Statements of Cash Flows

                                                                  1999              1998                 1997
<S>                                                         <C>                 <C>                 <C>
Cash flows from operating activities
    Net income                                               $4,528,993          $ 5,075,519         $ 4,625,974
    Adjustments to reconcile net income
      to net cash provided by operating
      activities
         Net gain on available-for-sale securities             (507,134)                   -                   -
         Undistributed earnings of subsidiary                (3,372,041)          (2,563,539)            (82,934)
         Changes in other liabilities                            15,685               59,922                   -
                                                            -----------         ------------        ------------
Net cash provided by operating
    activities                                                  665,503            2,571,902           4,543,040
                                                            -----------         ------------        ------------
Cash flows from investing activities
    Available-for-sale securities
      Proceeds from sales                                     1,287,854              204,823                   -
      Purchases                                                       -              (12,500)         (1,011,272)
                                                            -----------         ------------        ------------
Net cash provided by (used in)
    investing activities                                      1,287,854              192,323          (1,011,272)

Cash flows from financing activities
    Proceeds from common stock issued                           650,001                    -                   -
    Repurchase and retirement of common
      shares                                                          -                    -            (419,832)
    Dividends paid                                           (1,674,256)          (2,350,000)         (3,115,620)
                                                            -----------         ------------        ------------
Net cash used in financing activities                        (1,024,255)          (2,350,000)         (3,535,452)
                                                            -----------         ------------        ------------
Net increase (decrease) in cash and cash
    equivalents                                                 929,102              414,225              (3,684)

Cash and cash equivalents, beginning of year                    416,959                2,734               6,418
                                                            -----------         ------------        ------------
Cash and cash equivalents, end of year                       $1,346,061         $    416,959          $    2,734
                                                            ===========         =============       ============
</TABLE>
                                      -56-
<PAGE>
Item 9. Changes in and Disagreements with Accountants on Accounting and
        Financial Disclosure.

        None

PART III


Item 10.  Directors and Executive Officers of the Registrant.

Directors

     The  information  with respect to Directors and Nominees of the Registrant,
set forth under the caption  "Information About Directors and Nominees" on pages
4 through 5 of the  Company's  definitive  proxy  statement,  as filed  with the
Commission  and dated  March 17,  2000,  relating  to the April 27,  2000 Annual
Meeting of Shareholders, is incorporated herein by reference.

Executive Officers

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

Item 11.  Executive Compensation.

     The  information  set  forth  under  the  caption  "Executive  Compensation
Summary" on page 6 of the Company's  definitive proxy  statement,  as filed with
the Commission  and dated March 17, 2000,  relating to the April 27, 2000 Annual
Meeting of Shareholders, is incorporated herein by reference.  Information under
the  caption  "Committee  Report  on  Executive  Compensation"  on page 6 of the
definitive  proxy statement is not  incorporated by reference  herein and is not
deemed to be filed with the Securities and Exchange Commission.

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

     The  information  set  forth  under  the  caption  "Voting  Securities  and
Beneficial  Ownership of Management" on page 3 of the Company's definitive proxy
statement,  as filed with the Commission  and dated March 17, 2000,  relating to
the April 27, 2000 Annual Meeting of  Shareholders,  is  incorporated  herein by
reference.

Item 13.  Certain Relationships and Related Transactions.

     The information set forth under the caption "Certain  Transactions" on page
7 of the Company's definitive proxy statement,  as filed with the Commission and
dated  March 17,  2000,  relating  to the  April  27,  2000  Annual  Meeting  of
Shareholders, is incorporated herein by reference.

                                      -57-
<PAGE>
Item 14.  Exhibits, Financial Statement Schedules and Report on Form 8-K.

(a)       1.       Financial Statements

                   Independent Auditors' Report
                   Consolidated Financial Statements
                       Consolidated Balance Sheets as of
                           December 31, 1999 and 1998
                       Consolidated Statements of Income for the Years Ended
                           December 31, 1999, 1998 and 1997
                       Consolidated Statements of Comprehensive Income for the
                           Years Ended December 31, 1999, 1998 and 1997
                       Consolidated   Statements  of  Changes  in  Stockholders'
                           Equity for the Years Ended  December 31,  1999,  1998
                           and 1997
                       Consolidated  Statements  of Cash  Flows  for each of the
                           Years Ended December 31, 1998, 1998 and 1997
                       Notes to Consolidated Financial Statements

          2.       Financial Statement Schedules
                   Not applicable

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

(b) Reports on Form 8-K

     No  reports on Form 8-K were  filed  during the fourth  quarter of the year
ended December 31, 1999.

                                      -58-
<PAGE>
                                   SIGNATURES

     Pursuant  to the  requirements  of  Section  13 or 15(d) of the  Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, dated March 9, 2000.

                                    O.A.K. FINANCIAL CORPORATION


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

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


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

        Signature                                                      Date


/s/ Robert Deppe                                                   March 9, 2000
Robert Deppe

/s/ Norm Fifelski                                                  March 9, 2000
Norman Fifelski

/s/ Dellvan Hoezee                                                 March 9, 2000
Dellvan Hoezee

/s/ John Peterson                                                  March 9, 2000
John Peterson

/s/ Lois Smalligan                                                 March 9, 2000
Lois Smalligan

/s/ John A. Van Singel                                             March 9, 2000
John A. Van Singel

/s/ David Van Solkema                                              March 9, 2000
David Van Solkema

____________________________                                       March 9, 2000
Gerald Williams

                                      -59-
<PAGE>
                                  EXHIBIT INDEX

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

Exhibit
Number
------

10        Director Deferred Compensation Plan

21        Subsidiaries of Registrant

27        Financial Data Schedule


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

Exhibit
Number
------

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

3.2       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.

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

10.2      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.

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


                                      -60-
<PAGE>
EXHIBIT 10 - FORM OF DIRECTOR DEFERRED COMPENSATION PLAN

                         DEFERRED COMPENSATION AGREEMENT

     THIS  DEFERRED   COMPENSATION   AGREEMENT  dated  this  __________  day  of
_________________  by and  between  BYRON  CENTER  STATE BANK,  hereinafter  the
"Company", and __________________________________, hereinafter the "Director".

                                    RECITALS

     WHEREAS, Director is a director of the Company; and

     WHEREAS,  the  services  of  Director  and  Director's  experience  and the
knowledge of the affairs of the Company are  extremely  valuable to the Company;
and

     WHEREAS, the Company desires that Director remain in its service, wishes to
continue to receive the benefit of Director's  knowledge and experience,  and is
willing to offer Director an incentive in the form of deferred compensation.

                                    AGREEMENT

     NOW, THEREFORE, the parties hereto agree as follows:

          1. Duties and  Compensation.  Director  shall remain a director of the
     Company with  Director's  duties,  compensation  and terms of employment in
     that  capacity  to be such as may be  determined  from  time to time by the
     Board of Directors  until such service is  terminated by either the Company
     or  Director.  If  Director  remains as a  director  of the  Company  until
     retirement,  Director shall further be entitled to such amounts of deferred
     compensation as are provided hereinafter.

          2. Deferred Compensation Account.

               (a) In lieu  of  paying  the  Director  an  annual  retainer  for
          services as a director  of the  Company,  the Company  shall each year
          credit as deferred  compensation to an account for Director's  benefit
          an amount  equal to the  amount of the  annual  retainer  which  would
          otherwise  be payable to the Director for service as a director of the
          Company for the following  twelve  months.  The Company shall maintain
          the account on its records and designated as the Deferred Compensation
          Account  for  Director.  Director  shall be informed in writing by the
          Company of the  amount of  deferred  compensation,  and the time as of
          which such deferred  compensation  is credited to Director's  Deferred
          Compensation Account. Any amounts of deferred compensation credited to
          Director's  Deferred  Compensation  Account  may be  kept  in  cash or
          invested and reinvested in mutual funds, stocks, bonds,  securities, a
          policy or policies of life insurance on Director's  life, or any other
          assets,  or such amount may be used by th Company in  connection  with
          the  operation of its  business,  as may be determined by the Board of
          Directors of the Company.

               (b)  As  an  investment  for  Director's  Deferred   Compensation
          Account,  the Board of Directors  may direct the Company to purchase a
          policy of life  insurance on the life of  Director.  In the event that
          such a life  insurance  policy  is  purchased  for  purposes  of  this
          Agreement,  the Company shall be the applicant,  owner and beneficiary
          of the policy.  The Company shall have all rights under the policy and
          all incidents of ownership under the policy.

          3. Payment of Deferred  Compensation  at Retirement.  Upon  Director's
     retirement,  the Company shall pay Director deferred  compensation in equal
     annual  installments for 15 years certain,  an amount  determined to be the
     greater of (a) or (b) as follows:

               (a)  One-fifteenth  (1/15) of the amount  credited to  Director's
          Deferred Compensation Account, if any, upon the date Director retires.

                                      -61-
<PAGE>
               (b) The sum of the following:

                    (i) An  amount  equal to  one-fifteenth  (1/15)  of the cash
               value,  if any,  on the date  Director  retires of any  insurance
               policy  purchased  by  the  Company  on  Director's  life  as  an
               investment for purposes of this Deferred Compensation  Agreement;
               plus

                    (ii) An amount equal to the increase, if any, in cash value,
               from the policy anniversary date in the year of retirement to the
               policy anniversary date following the year of retirement.

          4.   Commencement   of  Deferred   Compensation   Payments.   Deferred
     Compensation payments shall commence at retirement of the Director.  Normal
     retirement shall be age 65.

          At the request of the Director and subject to approval of the Board of
     Directors, retirement of the Director can commence at an age other than 65.

          The amount of such payments will be determined in accordance  with the
     formula in paragraph 3, as of the date the Director actually retires.

          Postponing  or  accelerating  the  normal  retirement  age under  this
     paragraph  is subject to the sole and absolute  discretion  of the Board of
     Directors.  The Director  shall not  participate  in any way in the Board's
     decision as to any such  postponement  or  acceleration.  Once the Director
     attains normal  retirement age, or is granted early retirement by the Board
     of  Directors  of the  Company,  benefits  will not be subject to a risk of
     forfeiture.

          5. Payment of Deferred  Compensation In Event of Director's  Total And
     Permanent  Disability.  In the  event of  Director's  total  and  permanent
     disability prior to commencement of payments provided under paragraphs 3 or
     4, the Company  shall pay Director the  deferred  compensation  in the same
     amount and the same manner and schedule as set forth in  paragraphs 3 and 4
     when the Director attains normal retirement age.

          6. Payment of Death Benefit In Lieu Of Deferred  Compensation.  In the
     event of Director's death when Director has not begun receiving payments of
     deferred  compensation  under  paragraphs  3 or 4, the  Company  shall  pay
     Director's  designated  beneficiary  a death  benefit,  in lieu of deferred
     compensation,  in an amount  determined  to be the greater of (a) or (b) as
     follows:

               (a) The  amount  credited  to  Director's  Deferred  Compensation
          Account, if any, upon the date of Director's death.

               (b) An amount equal to 10 percent of the death  benefit,  if any,
          received  by the  Company  as a result of  Director's  death  from any
          insurance  policy  purchased by the Company on  Director's  life as an
          investment  for  purposes  of this  Deferred  Compensation  Agreement,
          payable each year for 10 years.

          Payment under this paragraph shall commence within 6 months  following
     the date of the Director's death.  Payment of this benefit shall be in lieu
     of deferred  compensation benefits described in paragraphs 3 and 4. Payment
     under this paragraph will constitute complete and total satisfaction of the
     obligations of the Company provided under this Agreement.

          7. Payment of Deferred  Compensation In Event of Director's Death When
     Director Has Begun Receiving Payments Under Paragraphs 3 or 4. In the event
     of  Director's  death when  Director  has begun  receiving  payments  under
     paragraphs 3 or 4, the Company shall pay Director's designated  beneficiary
     the remaining annual deferred  compensation  payments,  if any, to complete
     the 15 year certain requirement.

          Any payments  becoming due to the  Director's  designated  beneficiary
     shall be made in the same  amount  and at the same time as would  have been
     paid to the  Director,  until  the  Company  has paid a total of 15  annual
     installments to the Director and/or the Director's designated beneficiary.

                                      -62-
<PAGE>
          8. No  Duplication  of Deferred  Compensation.  Deferred  compensation
     shall not be paid to  Director,  or to his  designated  beneficiary,  under
     greater than one of the following paragraphs of the Agreement:  3, 4, 6 and
     7.

          9.  Designated  Beneficiary.  For  purposes  of  this  Agreement,  the
     designated beneficiary shall be as provided on Exhibit "A" attached to this
     Agreement.  Director  may change the  designated  beneficiary  by notice in
     writing to the Company at any time. If the designated beneficiary shall die
     after  commencement  of payments to the designated  beneficiary,  remaining
     payments,   if  any,  shall  be  paid  to  the  estate  of  the  designated
     beneficiary.

          10.  Prohibition  Against  Assignment.  Except as otherwise  expressly
     provided herein,  Director agrees on behalf of himself and on behalf of his
     personal  representatives,  heirs,  legatees,  distributees  and any  other
     person  or  persons  claiming  any  benefits  under  him by  virtue of this
     Agreement,  that this  Agreement  and the rights,  interests  and  benefits
     hereunder  shall not be assigned,  transferred,  pledged or hypothecated in
     any  way  by  Director  or  any  personal  representative,  heir,  legatee,
     distributee  or other  person  claiming  under  Director  by virtue of this
     Agreement  and shall not be subject  to  execution,  attachment  or similar
     process.  Any attempted  assignment,  transfer,  pledge or hypothecation or
     other  disposition  of the  Agreement  or of  such  rights,  interests  and
     benefits  contrary  to  the  foregoing  provisions,  or  the  levy  of  any
     attachment or similar process thereupon, shall be null and void and without
     effect and the Company shall have no further liability hereunder.

          11.  Notices  and  Elections.  Any  notice  or  election  to be  given
     hereunder shall be sent by certified mail, return receipt requested, to the
     Company at its  registered  office and to  Director  at such  address as is
     carried on the records of the Company.  Either party may change the address
     to which  notices  are to be  addressed  by notice in writing  given to the
     other in accordance  with the terms hereof.  The effective date of any such
     notice shall be the date of mailing, as determined by postmark.

          12.  Funds.  Nothing  contained in this  Agreement and no action taken
     pursuant to the provisions of this  Agreement  shall create or be construed
     to create a trust of any kind, a fund,  or fiduciary  relationship  between
     the Company  and the  Director,  his  designated  beneficiary  or any other
     person.  Any  funds,  including  all  investments  and any  life  insurance
     policies,  used to determine payment under the Agreement shall be a part of
     the  general  funds and assets of the  Company and subject to the claims of
     the Company's  general creditors and no person other than the Company shall
     by virtue of the provisions of this Agreement have any right,  interest, or
     title in such  funds.  To the extent  that any  person  acquires a right to
     receive payments from the Company under this Agreement, such right shall be
     not  greater  than  the  right of any  unsecured  general  creditor  of the
     Company.  Benefits  provided  by  this  Agreement  are  separate  from  and
     unrelated to the proceeds or value of any insurance policy purchased by the
     Company to  informally  fund this  Agreement.  Director  shall not have any
     present  right or interest  in, nor any  deferred  claim to, or  beneficial
     ownership of, any insurance policy held by the Company with respect to this
     Agreement.

          13.  Acceleration  of  Benefits.  At the  discretion  of the  Board of
     Directors of the Company acting without any  participation by the Director,
     the  Company  shall  retain  the right to  accelerate  the  payment  of any
     benefits  remaining  due  to the  Director  or  the  Director's  designated
     beneficiaries  under this agreement.  Any acceleration of benefits shall be
     discounted  at an  interest  rate equal to the  "Federal  Funds Rate" which
     shall be the mean of the high and low rates quoted for Federal  Funds in th
     "Money  Rates"  column of The Wall  Street  Journal  for the  business  day
     preceding  the date on which  the  Company  notifies  the  Director  or the
     Director's   designated   beneficiaries  of  the  Company=s   intention  to
     accelerate  payment.  Any such payment will  constitute  complete and total
     satisfaction  of  the  obligations  of  the  Company  provided  under  this
     Agreement.

          14. Effect Upon Director Relationship. Nothing in this Agreement shall
     be construed  as granting  Director the right to be continued as a director
     of the Company, or as a limitation on the right of the Company to terminate
     the service of Director at any time.

          15. Binding Effect.  This Agreement shall be binding upon and inure to
     the benefit of any successor of the Company and any such successor shall be
     deemed  substituted for the Company under the terms of this  Agreement.  As
     used in this  agreement,  the term  "successor"  shall  include any person,
     firm,  corporation,  or other business entity which at any time, whether by
     merger,  purchase or otherwise,  acquires all or  substantially  all of the
     assets or business of the Company.

                                      -63-
<PAGE>
          16.  Governing Law. This Agreement  shall be  interpreted,  construed,
     enforced,  and  performed  in  accordance  with  the  laws of the  State of
     Michigan.

          IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
     of the day and year first written above.

DIRECTOR:                                COMPANY:




___________________________             By: ____________________________________

                                           Its _________________________________







                                      -64-
<PAGE>
                                   EXHIBIT "A"

                         DEFERRED COMPENSATION AGREEMENT

                           BENEFICIARY DESIGNATION FOR

                        --------------------------------


In the event of my death, my primary beneficiary shall be:

____________________________________________________________

In the event my primary  beneficiary  predeceases  me my contingent  beneficiary
shall be:

____________________________________________________________



__________________________________           ________________________________
Print Witness Name                                  Print Director Name



__________________________________           ________________________________
Witness Signature                                   Director Signature


                                                Date:___________________________


                                      -65-
<PAGE>
Exhibit 21 - Subsidiaries of Registrant - 100% Owned

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

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

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






                                      -66-

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