<PAGE>
                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-KSB

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

For the fiscal year ended December 31, 2002          Commission File No. 0-25079

                       MICHIGAN COMMUNITY BANCORP LIMITED
                 (Name of small business issuer in its charter)

            MICHIGAN                                        38-3390193
    (State of Incorporation)                             I.R.S. Employer
                                                        Identification No.

                              43850 Schoenherr Road
                           Sterling Heights, MI 48313
                    (Address of principal executive offices)

                                  586-532-8000
                         (Registrant's telephone number)

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


Securities registered under Section 12(g) of the Exchange Act:

             TITLE OF EACH CLASS       NAME OF EACH EXCHANGE ON WHICH REGISTERED
        COMMON STOCK, NO PAR VALUE                 OTC BULLETIN BOARD

    Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15 (d) of the Exchange Act of 1934 during the past 12 months (or
for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days. Yes
[X] No [ ]

    Check if there is no disclosure of delinquent filers in response to Item 405
of Regulation S-B not contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of the Form 10-KSB
or any amendment to this Form 10-KSB. [X]

    Registrants revenues for its most recent fiscal year.  $5,707,000

    As of March 21, 2003, 1,184,843 shares of common stock of the registrant
were outstanding. The aggregate market value of the voting stock of the
registrant held by non-affiliates was approximately $4,169,700 as of March 21,
2003; based on the average of the bid and asked prices (4 1/4) on that date.
(For purposes of this calculation, 203,737 shares owned by the members of the
Corporation's Board of Directors and Executive Officers have been excluded.)

    Transitional Small Business Disclosure Format:    Yes  [ ]    No  [X]

    Portions of the registrant's Proxy Statement of its 2003 Annual Meeting of
Shareholders to be held on June 9, 2003 to the extent expressly so stated
herein, are incorporated by reference into Part III of this Report.



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                                    CONTENTS

<TABLE>
<S>               <C>                                                                                           <C>
Part I:

Item 1            Description of Business                                                                       Page  3

Item 2            Description of Property                                                                       Page 12

Item 3            Legal Proceedings                                                                             Page 13

Item 4            Submissions of Matters to a Vote of Stockholders                                              Page 13


Part II:

Item 5            Market for Common Equity and Related Stockholder Matters                                      Page 13

Item 6            Management's Discussion and Analysis of Financial Condition and Results of Operations         Page 14

Item 7            Consolidated Financial Statements                                                             Page 26

Item 8            Changes in and Disagreements with Accountants on Accounting and Financial Disclosure          Page 26


Part III:

Item 9            Directors, Executive Officers, Promoters and Control Persons:  Compliance with
                  Section 16(A) of the Exchange Act                                                             Page 26

Item 10           Executive Compensation                                                                        Page 26

Item 11           Security Ownership of Certain Beneficial Owners and Management                                Page 26

Item 12           Certain Relationships and Related Transactions                                                Page 26

Item 13           Exhibits and Reports of Form 8-K                                                              Page 27


                  Signatures

                  Certifications
</TABLE>




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                                     PART I


ITEM 1: BUSINESS

The Corporation

        Michigan Community Bancorp Limited (the "Corporation") was incorporated
    on January 28, 1998 under Michigan law and is a two-bank holding company,
    owning all of the outstanding common stock of Lakeside Community Bank
    ("Lakeside") and North Oakland Community Bank ("North Oakland"),
    (collectively, the "Banks"). The Banks were each organized as a Michigan
    chartered bank with depository accounts insured by the Federal Deposit
    Insurance Corporation (the "FDIC"). The Banks opened for business on January
    5, 1999.

        Lakeside Community Bank offers its banking services throughout Macomb
    County, Michigan, but primarily in Clinton Township, Macomb Township, Ray
    Township, Shelby Township, Washington Township, Mt. Clemens, Sterling
    Heights and Utica. North Oakland Community Bank offers its banking services
    throughout Oakland County, Michigan, but primarily in Rochester, Rochester
    Hills, Pontiac, Troy, Auburn Hills, Oakland Township, Orion Township and
    Lake Orion Village.

        Lakeside and North Oakland were both approved by the Office of Financial
    Institution Services (formerly known as Financial Institutions Bureau) of
    the State of Michigan. In January 1999 Lakeside received an initial
    capitalization of $4,550,000 and North Oakland received an initial
    capitalization of $4,600,000 from the proceeds of the initial public
    offering, which was completed in December 1998. The Corporation and the
    Banks have also been approved by the FDIC and the Board of Governors of the
    Federal Reserve System.

        The Corporation's office and the office of Lakeside is located at 43850
    Schoenherr Road, Sterling Heights, Michigan 48313. The main office of North
    Oakland is located at 1467 North Rochester Road, Rochester Hills, Michigan
    48307.

        As of December 31, 2002, the Corporation had total assets of $78.4
    million, total deposits of $71.1 million, and stockholders' equity of $5.6
    million.


    Products and Services

        Commercial Loans. Commercial loans are made primarily to small and
    mid-sized businesses. These loans may be either secured or unsecured and are
    made available for general operating purposes, acquisition of property
    including real estate, purchases of equipment and machinery, financing of
    inventory and accounts receivable, as well as any other purposes considered
    appropriate. The Banks generally look to a borrower's business operations as
    the principal source of repayment, but will also receive, when appropriate,
    mortgages on real estate, security interests in inventory, accounts
    receivable and other personal property and/or personal guarantees.

        Commercial real estate lending involves more risk than residential
    lending, because loan balances are greater and repayment is dependent upon
    the borrower's operation. In making such loans, the Banks are subject to
    written policies, reviewed and approved at least annually by the respective
    Bank's Board of Directors, pursuant to federal law and regulations. The
    policies address loan portfolio diversification and prudent underwriting
    standards, loan administration procedures, and documentation, approval and
    reporting requirements. In addition, federal regulations impose supervisory
    loan-to-value ratios which are applicable to each type of loan secured by
    real estate.

        Residential Real Estate Loans. From time to time the Banks originate
    residential mortgage loans, which are generally short-term with maturities
    of five years or less. The Banks' mortgage lending policy is subject to
    review by management as a result of changing market and economic conditions.
    Approved long-term fixed rate mortgages are originated and subsequently sold
    with servicing released to an unrelated mortgage company. Requests for these
    long-term fixed rate mortgages while held by the Banks for pending sale are
    subject to interest rate risk and if rates increase before the loans are
    sold, a loss may be recognized. The Banks also offer home equity lines of
    credit to their credit worthy borrowers.



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        Personal Loans. The Banks make personal loans and lines of credit
    available to consumers for various purposes, such as the purchase of
    automobiles, boats and other recreational vehicles, home improvements and
    personal investments. The Banks retain substantially all of these loans.

        Consumer loans generally have shorter terms and higher interest rates
    than residential mortgage loans and usually involve more credit risk than
    mortgage loans because of the type and nature of the collateral. While the
    Banks do not use a formal credit scoring system, they do underwrite their
    loans carefully, with a strong emphasis on the amount of the down payment,
    credit quality, employment outlook and monthly income. These loans are
    generally expected to be repaid on a monthly payment schedule with the
    source of repayment tied to the borrower's periodic income. In addition
    consumer collections are dependent on the borrower's continuing financial
    stability, and are thus likely to be adversely affected by job loss, illness
    and personal bankruptcy. In many cases, repossessed collateral for a
    defaulted consumer loan will not provide an adequate source of repayment of
    the outstanding loan balance because of depreciation of the underlying
    collateral. The Banks believe that the generally higher yields earned on
    consumer loans help compensate for the increased credit risk associated with
    such loans and that consumer loans are important to the Banks' efforts to
    serve the credit needs of the communities and customers they currently
    serve.

        Loan Policy. As a routine part of the Banks business, the Banks make
    loans to individuals and businesses located within the respective Banks'
    market areas. The Banks have adopted a Loan Policy that contains general
    lending guidelines and is periodically subject to review and revision by the
    Board of Directors. The Banks seek to make sound loans, while recognizing
    that lending money involves a degree of business risk.

        Regulatory and supervisory loan-to-value limits are established by
    Section 304 of the Federal Deposit Insurance Corporation Improvement Act of
    1991 ("FDICIA"). The Banks internal limitations follow those limits and in
    certain cases are more restrictive than those required by the regulators.

        Deposit Services. The Banks offer a broad range of deposit services,
    including interest bearing and non-interest bearing checking accounts, money
    market savings accounts, regular savings accounts and time deposits of
    various types. Transaction accounts and time certificates are tailored to
    the principal market area at rates competitive with those offered in the
    area. All deposit accounts are insured by the FDIC up to the maximum amount
    permitted by law. The Banks solicit these accounts from individuals,
    businesses, associations, financial institutions and government authorities.

        Throughout 2002, the Banks have relied on out-of market or internet
    certificates of deposit as a source of liquidity. These funds are generally
    higher in rate and more volatile than a certificate of deposit gathered from
    the local communities. During the coming year, the Banks expect to focus on
    increasing core deposits and relying less on out-of-market and internet
    certificates of deposits.

        Other Services. The Banks may establish relationships with correspondent
    banks and other independent financial institutions to provide other services
    requested by its customers, including loan participations where the
    requested loan amounts exceed the Banks policies or legal lending limits.
    The Banks also provide an at-home banking product. Management believes that
    the Banks personalized service approach benefits from customer visits to the
    Banks.

        Competition. The Banks face competition from thrift institutions, credit
    unions, and other banks as well as finance companies, insurance companies,
    mortgage companies, securities brokerage firms, mutual fund companies and
    other providers of financial services. Most of the Banks competitors have
    been in business a number of years, have established customer bases, are
    larger and have higher lending limits than the Banks. The Banks compete for
    loans principally through their ability to communicate effectively and to
    understand and meet the needs of their customers. Management believes that
    its personal service philosophy enhances the Banks ability to compete
    favorably in attracting individuals and small businesses. The Banks actively
    solicit retail customers and the Banks compete for deposits by offering
    customers personal attention, professional service, ATM capability, and
    competitive interest rates.


    Market Area

        Lakeside Community Bank provides banking services to Macomb County,
    primarily Clinton Township, Shelby Township, Washington Township, Sterling
    Heights, Ray Township, Mt. Clemens and Utica. Macomb County is comprised of
    27 cities, villages or townships, ranks third in population out of
    Michigan's 83 counties and covers 482 square miles. North Oakland Community
    Bank provides banking services to Oakland County, primarily Rochester,
    Rochester Hills, Troy, Auburn Hills, Pontiac, Oakland Township, Orion
    Township and Lake Orion Village. Oakland County is comprised of 61 cities,
    villages, and


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    townships, ranks second in population out of Michigan's 83 counties and
    covers 910 square miles.

    Environmental Matters

        The Corporation does not believe that existing environmental regulations
    will have a material effect upon the capital expenditures, earnings, and
    competitive position of the Corporation.

    Employees

        As of December 31, 2002, Michigan Community Bancorp, Limited has 8
    full-time and 3 part-time employees. In addition, the Banks employ
    experienced professional staff. Lakeside currently has 9 full-time
    employees, while North Oakland currently has 6 full-time and 1 part-time
    employees.

    Business Strategy

        The Corporation emphasizes experienced local management with a strong
    commitment to the communities located within the primary market areas served
    by the Banks. The Banks are located in communities that are growing rapidly
    and where there has been a significant impact from the consolidation in the
    banking industry. The communities noted have a history of locally owned and
    operated banks but no longer have as many of those types of entities to
    choose from. The Corporation believes that the small to medium-sized
    industrial and commercial businesses that have been targeted as our future
    customers are not being adequately served by the larger banks. The
    Corporation also believes that it has chosen communities where the officers
    and directors of Michigan Community Bancorp, Lakeside Community Bank and
    North Oakland Community Bank are active and where community and business
    leaders are anxious to welcome a locally owned and managed financial
    institution. The Corporation is committed to providing outstanding customer
    service and banking products and intends to compete aggressively for banking
    business through a systematic program of directly calling on both customers
    and referral sources such as attorneys, accountants, mortgage brokers,
    insurance agents and other business people, many of whom are already known
    to our officers and directors.

        Our experienced staff provides personalized service and generates
    competitively priced loans and deposits. The staff is provided with access
    to current software and database systems so that they can more easily
    deliver high-quality products and provide responsive service to customers.
    Lakeside and North Oakland have entered into agreements with third-party
    service providers that enable customers to have convenient electronic access
    to their accounts and other bank products through debit cards, telephone and
    home banking. The Banks use third-party service providers to deliver the
    most up to date technology so that the Bank can be at the forefront of
    technology while minimizing the costs of delivering services to our
    customers.

    Investments

       The principal investment of the Corporation is the ownership of all the
    common stock of the Banks. Any funds retained by the Corporation from time
    to time may be invested in various debt instruments, including but not
    limited to obligations of, or guaranteed by the United States, general
    obligations of states or political subdivisions thereof, bankers'
    acceptances or certificates of deposit of U.S. commercial banks, or
    commercial paper of U.S. issuers rated in the highest category by a
    nationally-recognized investment rating service. Although the Corporation is
    permitted to make limited portfolio investments in equity securities and to
    make equity investments in subsidiary corporations engaged in certain
    non-banking activities, which may include real estate-related activities,
    such as mortgage banking, community development, real estate appraisals,
    arranging equity financing for commercial real estate, and owning and
    operating real estate used substantially by the Banks or acquired for its
    future use, the Corporation has no present plans to do so. The Corporation's
    Board of Directors may alter the investment policy without shareholder
    approval.

         The Banks may invest their funds in a variety of debt instruments and
    may participate in the federal funds market with other depository
    institutions. Subject to certain exceptions, the Banks are prohibited from
    investing in equity securities. Under one such exception, in certain
    circumstances and with the prior approval of the FDIC, a Bank can invest up
    to 10% of its total assets in the equity securities of a subsidiary
    corporation engaged in certain real estate-related activities. The Banks
    have no present plans to make such an investment. Real estate acquired by
    the Banks in satisfaction of or in foreclosure upon loans may be held by the
    Banks, subject to a determination by a majority of the respective Bank's
    Board of Directors as to the advisability of retaining the property, for a
    period not to exceed 60 months after the date of acquisition or such longer
    period as the appropriate regulators may approve. The Banks are also
    permitted to invest an aggregate amount not in excess of two-thirds of the
    capital and surplus of the Banks in such real estate as is necessary for the
    convenient transaction of its business. The Banks have no present plans to
    make


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    any such investment. The Board of Directors of each Bank may alter the
    Bank's investment policy without shareholder approval.

    Community Involvement

        In order to assure that the Banks are true community banks, the
    Corporation has sought local community leaders to serve as members of the
    Board of Directors of each bank.

    Lakeside Community Bank. The following individuals serve on the Board of
    Directors of Lakeside Community Bank:

        PAUL "BUD" E. BALTZER, JR, is President of Pebco Sales, Inc. a Michigan
    corporation located in Clinton Township primarily engaged in the
    representation of manufacturers in the installation and design of
    specialized industrial products. Mr. Baltzer is active in the community and
    is Treasurer of Epiphany Lutheran Church and a member of the Construction
    Association of Michigan. Mr. Baltzer resigned from the Board effective March
    12, 2003.

        GARY DAVISON, is owner of Davison & Associates, P.C., a Troy, Michigan
    based accounting firm with numerous clients located in the target market
    areas of Lakeside. Mr. Davison was previously a partner with Grant Thornton
    in Southfield, Michigan.

        PHILLIP T. HERNANDEZ, is currently a business consultant and was
    previously President of Efficient Sanitation, a division of Waste
    Management, Inc. located in Clinton Township, Michigan. Mr. Hernandez is a
    member of the board of directors of Mt. Clemens General Hospital and a past
    director of Macomb Community Bank.

        JOSEPH S. LENTINE, is Vice President of Golden Dental Plans, Inc. a
    dental delivery system located in Warren, Michigan and President of LeCom,
    Inc. a communications contracting firm located in Warren, Michigan.

        ROBERT R. PELEMAN, M.D., is head of the anesthesiology department at St.
    Joseph's Hospital, Clinton Township, Michigan. Dr. Peleman is a past
    director of Macomb Community Bank, a board member of St. Joseph's Mercy
    Foundation and the past secretary of the Mt. Clemens Medical Association.

        J. WILLIAM SUMNER, is Chief Executive Officer of Michigan Community
    Bancorp Limited, Lakeside Community Bank and North Oakland Community Bank.
    Mr. Sumner is also President of Health Management Systems located in
    Eastpointe, Michigan. Health Management Systems provide employee health care
    administration and behavioral health programs to various businesses
    nationwide. Mr. Sumner is also a member of the Employee Assistance
    Professionals Association and the St. John Hospital Men's Guild.

        JEFF TAMAROFF, is President of Jeffrey Buick-Nissan, Tamaroff Dodge and
    Tamaroff Buick automobile dealerships located in Southfield and Roseville,
    Michigan.

        FRANK D. BLOWERS, is the President and Chief Operations Officer of
    Michigan Community Bancorp Limited, Lakeside Community Bank and North
    Oakland Community Bank. Prior to joining Lakeside, Mr. Blowers was employed
    by First of America Bank, N.A. as a Senior Vice President where he was
    responsible for branch product sales for a region with approximately $750
    million in assets. Mr. Blowers has over 30 years of banking experience and
    previously served as Senior Vice President for Security Bank, St. Clair
    Shores, Michigan.














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North Oakland Community Bank. In addition to Mr. Sumner and Mr. Blowers, the
following individuals serve on the board of directors of North Oakland Community
Bank:

    FREDERICK MAIBAUER, M.D., is President of Rochester Hills Orthopaedics, P.C.

    JOHN W. MELSTROM, is an accountant and partner in the certified public
accounting firm of Fenner, Melstrom & Dooling, located in Auburn Hills,
Michigan. Mr. Melstrom works with businesses in the market area and is active in
the community and serves on a variety of community boards. Mr. Melstrom resigned
from the Board effective February 14, 2003.

    DAVID F. SHELLENBARGER, is President of Macro Computer Products, a
Rochester, Michigan based software/systems integration company which provides
imaging services to financial institutions. Mr. Shellenbarger resigned from the
Board effective March 12, 2003.

    RUSSELL M. SHELTON, is chief Executive Officer and President of Shelton
Pontiac-Buick, Incorporated, an automobile dealership located in Rochester
Hills, Michigan.



                           SUPERVISION AND REGULATION


    The following is a summary of certain statutes and regulations affecting the
Corporation and the Banks. 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 Corporation, the Banks and the business of the
Corporation and the Banks.

General

     Financial institutions and their holding companies are regulated under
federal and state law. Consequently, the growth and earnings performance of the
Corporation and the Banks 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 Office of Financial and Insurance Services, Department of
Financial Institutions ("Commissioner" "OFIS"), the Internal Revenue Service,
and state taxing authorities. The effect of such statutes, regulations and
policies can be significant, and cannot be predicted with a high degree of
certainty.

     Federal and state laws and regulations generally applicable to financial
institutions and their holding companies regulate, among other things, the scope
of business, investments, reserves against deposits, capital levels relative to
operations, lending activities and practices, the nature and amount of
collateral for loans, the establishment of branches, mergers, consolidations and
dividends. The system of supervision and regulation applicable to the
Corporation and the Banks 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 Banks, the public, and
shareholders of the Corporation.

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

The Corporation

     General. The Corporation 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
Corporation 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 Corporation is
expected to act as a source of financial strength to the Banks and to commit
resources to support the Banks in circumstances where the Corporation might not
do so absent such policy. In addition, if the Commissioner deems the Banks
capital to be impaired, the Commissioner may require the Banks to restore their
capital by a



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special assessment upon the Corporation as the Banks sole shareholder. If the
Corporation were to fail to pay any such assessment, the directors of the Banks
would be required, under Michigan law, to sell the shares of the Banks' stock
owned by the Corporation to the highest bidder at either a public or private
auction and use the proceeds of the sale to restore the Banks' capital.

     Investments and Activities. In general, any direct or indirect acquisition
by the Corporation of any voting shares of any bank, which would result in the
Corporations 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
Corporation 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
Corporation with another bank, or the acquisition by such a subsidiary of assets
of another bank, or the assumption of liability by such a subsidiary to pay any
deposits in another bank, will require the prior written approval of the
responsible Federal depository institution regulatory agency under the Bank
Merger Act, based upon a consideration of statutory factors similar to those
outlined above with respect to the BHCA. In addition, in certain such cases an
application to, and the prior approval of, the Federal Reserve Board under the
BHCA and/or the Commissioner under the Michigan Banking Code, may be required.

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

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

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

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

     The risk-based and leverage standards presently used by the Federal Reserve
Board are minimum requirements, and higher capital levels will be required if
warranted by the particular circumstances or risk profiles of individual banking
organizations. For example, Federal Reserve Board regulations provide that
additional capital may be required to take adequate account of, among other
things, interest rate risk and the risks posed by concentrations of credit,
nontraditional activities or securities trading activities. Further, any banking
organization experiencing or anticipating significant growth would be expected
to maintain capital ratios, including tangible capital positions (i.e., Tier 1
capital less all intangible assets), well above the minimum levels. The Federal
Reserve Board ("FRB")

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had advised the Corporation of a specific minimum Tier 1 Capital leverage ratio
of 8.0% during the Banks' De novo status. The Banks are no longer under a De
novo status as of January 2002. It is the Banks intent to continue to maintain a
capital ratio no lower then a minimum of 8.0% to continue to be considered
adequately capitalized by the FRB. The Federal Reserve Board continues to have
the regulatory authority to impose a specific minimum Tier 1 Capital leverage
ratio should the situation require it.

     Dividends. The Corporation is a separate and distinct company from the
Banks. Most of the Corporation's revenues will be received by it in the form of
dividends, if any, paid by the Banks. Thus, the Corporation's ability to pay
dividends to its shareholders will indirectly be limited by statutory
restrictions on its 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
corporation'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 Banks 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 Corporation 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
this Corporation, 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 Corporation is authorized to
issue preferred stock and may issue preferred stock with the Board of Directors
approval.

The Banks

     General. The Banks are Michigan banking corporations and their deposit
accounts are insured by the Bank Insurance Fund (the "BIF") of the FDIC. As a
BIF-insured Michigan chartered bank, the Banks are 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 Banks and
their 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 Banks are 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 are made by the FDIC for each semi-annual assessment period.

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

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

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


                                       9
<PAGE>
     FICO Assessments. Pursuant to federal legislation enacted September 30,
1996, the Banks, 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 re-capitalization 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 Banks: a leverage requirement consisting of a minimum ratio of Tier 1
capital to total assets of 3% for the most highly-rated banks with minimum
requirements of 4% to 5% for all others, and a risk-based capital requirement
consisting of a minimum ratio of total capital to total risk-weighted assets of
8%, at least one-half of which must be Tier 1 capital. Tier 1 capital consists
principally of shareholders' equity. These capital requirements are minimum
requirements. Higher capital levels will be required if warranted by the
particular circumstances or risk profiles of individual institutions. For
example, FDIC regulations provide that higher capital may be required to take
adequate account of, among other things, interest rate risk and the risks posed
by concentrations of credit, nontraditional activities or securities trading
activities. As a condition to regulatory approval of the Banks' formation, the
Banks were each required to have an initial capitalization sufficient to provide
a ratio of Tier 1 capital to total estimated assets of at least 8% at the end of
the third year of operation.

     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>
<CAPTION>
                                               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>


     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 Banks are restricted as to the maximum
amount of dividends it may pay on their common stock. The Banks 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


                                       10
<PAGE>
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 the vote of shareholder's 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 banks surplus equals at least 20%
of their capital stock, as increased. The Banks 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.

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

     Insider Transactions. The Banks are subject to certain restrictions imposed
by the Federal Reserve Act on any extensions of credit to the Corporation, on
investments in the stock or other securities of the Corporation and the
acceptance of the stock or other securities of the Corporation as collateral for
loans. Certain limitations and reporting requirements are also placed on
extensions of credit by the Banks to their directors and officers, to directors
and officers of the Corporation, to principal shareholders of the Corporation,
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 Corporation or one of its
subsidiaries or a principal shareholder of the Corporation may obtain credit
from banks with which the Banks maintain 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
banks meets, and continues to meet, their minimum regulatory capital
requirements and the FDIC determines the activity would not pose a significant
risk to the deposit insurance fund of which the banks are 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 Banks.

     Consumer Protection Laws. The Banks business includes making a variety of
types of loans to individuals. In making these loans, the Banks are 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 there under, which prohibit
discrimination, specify disclosures to be made to borrowers regarding credit and
settlement costs, and regulate the mortgage loan servicing activities of the
Banks, including the maintenance and operation of escrow accounts and the
transfer of mortgage loan servicing. In receiving deposits, the Banks are
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 Banks and their directors and officers.

     Branching Authority. Michigan banks, such as the Banks, 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


                                       11
<PAGE>
banks, subject to certain conditions, including certain limitations on the
aggregate amount of deposits that may be held by the surviving bank and all of
its insured depository institution affiliates. The establishment of de novo
interstate branches or the acquisition of individual branches of a bank in
another state (rather than the acquisition of an out-of-state bank in its
entirety) is allowed by IBBEA only if specifically authorized by state law. The
legislation allowed individual states to "opt-out" of interstate branching
authority by enacting appropriate legislation prior to June 1, 1997.

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


ITEM 2. PROPERTY

    The Corporation has a ten-year lease for approximately 11,000 square feet in
a one-story building located at 43850 Schoenherr, Sterling Heights, Michigan.
Effective August 4, 2000, the Corporation leased additional space adjacent to
the existing facility. Accordingly, the amended lease requires a monthly rent of
$11,080 and expires on August 1, 2008. The facility is equipped with an
automated teller machine ("ATM"), a drive through teller window and teller
stations inside the building. The space provided by this building is expected to
be adequate for our needs and the needs of Lakeside Community Bank for the
foreseeable future.

    The Corporation has entered into an assignment of a lease for a building
which is utilized for North Oakland's branch operations with approximately 3,100
square feet of office space located at 1467 North Rochester Road, Rochester
Hills, Michigan, until December 31, 2004. This facility serves as the main
office of North Oakland Community Bank. North Oakland prepaid the entire amount
of the lease by making a single payment of $250,000 in August 1998. The
prepayment of the rent will be expensed over the lease assignment term that
expires on December 31, 2004. North Oakland is also obligated to make monthly
ground lease payments of $600 until December 31, 2004. The facility is equipped
with an ATM, a drive through teller window and teller stations inside the
building. The space provided by this building is expected to be adequate for the
needs of North Oakland Community Bank for the foreseeable future.

    The Corporation has a lease for a building in St. Clair County, Michigan
that it planned to utilize for possible future expansion. During 2001, the
Corporation decided to exit from the St. Clair County project. Management
concluded that expansion into St. Clair County was not economically feasible at
that time. In 2001, the Corporation charged-off development cost expenditures
totaling approximately $290,000 related to the abandoned project. In 2002,
management has recorded an accrual of $180,000 related to remaining lease
obligations it expects to pay as it pursues options regarding lease termination
or sublease of the building. The Corporation remains liable for the lease of the
St. Clair County building at December 31, 2002. There are seven years remaining
on the lease term. The lease requires a monthly payment of $3,750 for the next
two years and $4,125 per month for the last five-year period.

    The Corporation believes its facilities are well maintained and adequately
insured.





                                       12
<PAGE>
ITEM 3. LEGAL PROCEEDINGS

    As a depository of funds, the Banks may be named as a defendant in a lawsuit
(such as garnishment proceedings) involving claims to the ownership of funds in
particular accounts. All such litigation is incidental to the business of the
Banks.

    The Corporation is involved in routine litigation incidental to its
business. The Corporation is defending for its interest and is contesting the
claims against it. Management believes the ultimate disposition of these matters
will not have a material adverse affect on the consolidated financial
statements.


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

    None


                                    PART II


ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS


    Michigan Community Bancorp Limited common stock is traded under the symbol
"MCBP" in the over-the-counter market and transactions are reported in the
National Association of Securities Dealers reporting system known as the "OTC
Bulletin Board". As of December 31, 2002, there were approximately 335 record
holders of the Corporation's Common Stock. The following table sets forth, for
the periods indicated, the range of sales prices as reported on the OTC Bulletin
Board for each quarter for the last two years.


<TABLE>
<CAPTION>
                                      2002
                          -----------------------------
                          HIGH         LOW     DIVIDEND
                          ----         ---     --------

<S>                       <C>          <C>     <C>
FIRST QUARTER             $ 4.50       $ 3.60  $    -
SECOND QUARTER              5.75         3.95       -
THIRD QUARTER               5.00         4.15       -
FOURTH QUARTER              4.25         4.06       -

<Caption>
                                      2001
                          -----------------------------
                          HIGH         LOW     DIVIDEND
                          ----         ---     --------
<S>                       <C>          <C>     <C>
FIRST QUARTER             $ 6.38       $ 5.06  $    -
SECOND QUARTER              6.13         5.05       -
THIRD QUARTER               5.50         4.25       -
FOURTH QUARTER              4.75         3.80       -
</TABLE>







      No cash dividends have been declared to date on the Corporation's common
stock. The Corporation expects that all earnings, if any, will be retained to
finance the growth of the Corporation and the Banks and that no cash dividend
will be paid for the foreseeable future. If and when dividends are declared, the
Corporation will be dependent upon dividends paid to it by the Banks for funds
to pay dividends on the common stock.


                                       13
<PAGE>
     Information required by Item 701 of Regulation SB regarding unregistered
securities sales are listed in Management's Discussion and Analysis ("MD&A")
under Capital.



ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

                           Forward Looking Statements

     This report contains certain forward-looking statements within the meaning
of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. The Corporation 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 Corporation, are
generally identifiable by use if the words "believe," "expect," " intend,"
"anticipate," "estimate," "project," or similar expressions. The Corporation'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 Corporation and the subsidiaries include,
but are not limited to, changes in: interest rates, general economic conditions,
legislative/regulatory changes, monetary and fiscal policies of the U. S. Board,
the quality or composition of the loan or investment portfolios, demand for loan
products, deposit flows, competition, demand for financial services in the
Corporation'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 Corporation and it business, including additional
factors that could materially affect the Corporation's financial results, is
included in the Corporation's filings with the Securities and Exchange
Commission.

    Management's discussion and analysis of financial condition and results of
operations contains forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995. Actual results could differ materially
from those projected in such forward-looking statements.

    The following section presents additional information to assess the
financial condition and results of operations of the Corporation and the Banks.
This section should be read in conjunction with the consolidated financial
statements and the supplemental financial data.


    OVERVIEW

    Michigan Community Bancorp Limited (the "Corporation") was incorporated on
January 28,1998 under Michigan law and is a bank holding company, owning all of
the outstanding common stock of Lakeside Community Bank and North Oakland
Community Bank, (collectively, the "Banks"). The Banks were organized as
Michigan chartered banks with depository accounts insured by the Federal Deposit
Insurance Corporation. The Banks opened for business on January 5, 1999 and
provide a full range of commercial and consumer banking services, primarily in
Sterling Heights and Rochester and their surrounding market areas.

    The Corporation's plan of operation has been to establish its management
team and to grow in a prudent manner, primarily providing prompt, quality
service. Management believes that it has been successful in establishing a
management team that can administer the Corporation's growth in such a manner.

    A summary of significant accounting policies affecting the Corporation are
presented in Note 1 to the consolidated financial statement. Also, in
management's discussion and analysis.

    The following is management's discussion and analysis of the financial
condition and results of operations for the Corporation. This discussion and
analysis is intended to provide a better understanding of the financial
statements and statistical data included elsewhere in the Annual Report.



                                       14
<PAGE>
    CRITICAL ACCOUNTING POLICIES

    The Corporation's significant accounting policies are set forth in Note 1 of
the Consolidated Financial Statements. Of these significant accounting policies,
the Corporation considers its policy regarding the allowance for loan losses to
be its most critical accounting policy. The allowance for loan losses requires
management's most subjective and complex judgment. Changes in economic
conditions can have a significant impact on the allowance for loan losses and
therefore the provision for loan losses and results of operations. The
Corporation has developed appropriate policy and procedures for assessing the
adequacy of the allowance for loan losses, recognizing that this process
requires a number of assumptions and estimates with respect to its loan
portfolio. The Corporation's assessments may be impacted in future periods by
changes in economic conditions, the impact of regulatory examinations, and the
discovery of information with respect to borrowers which is not known to
management at the time of the issuance of the consolidated financial statements.
For additional discussion concerning the Corporation's allowance for loan losses
and related matters, see Provision for Loan Losses and Allowance for Loan
Losses.

    FINANCIAL CONDITION

    Summary. Total assets of the Corporation increased to $78.4 million at
December 31, 2002, from $77.3 million at December 31, 2001. The increase in
assets is primarily attributable to the Banks increase in deposit balances from
$69.5 million at December 31, 2001 to $71.1 million as of December 31, 2002.

    Cash and Cash Equivalents. Cash and cash equivalents, which include federal
funds sold and short-term investments, decreased $570,000, or 10.5% to $4.9
million at December 31, 2002, from $5.4 million at December 31, 2001. The
decrease was primarily the result of the increase in loans.

    Securities. All securities are classified as available-for-sale.
Available-for-sale securities were $5.0 million for December 31, 2002 and 2001.
The securities may be sold to meet the Banks liquidity needs. The primary
objective of the Banks' investing activities is to provide for the safety of the
principal invested. Secondary considerations include earnings, liquidity and
overall protection from exposure to changes in interest rates.

    Maturities of securities and the weighted average yield for each range of
maturities as of December 31, 2002 and 2001 are disclosed in the table below.
Yields are computed without respect to federal income tax equivalency. The Banks
had no tax-exempt securities within its portfolios.


<TABLE>
<CAPTION>
                                                    AT DECEMBER 31,
                                         -----------------------------------------
                                               2002                  2001
                                         ------------------   --------------------
(000's omitted)
                                         Fair Value   Yield    FAIR VALUE   YIELD
                                         ----------   -----    ----------   -----
<S>                                      <C>          <C>      <C>          <C>
Due in one year or less                    $1,733     2.64 %     $1,030     6.56 %
Due after one year through five years       3,239     2.76        3,594     3.26
Due after five years through ten years         --       --          407     2.93
                                           ------     ----       ------     ----
Total                                      $4,972     2.71 %     $5,031     3.91 %
                                           ======                ======
</TABLE>





    Loans Held for Sale. At December 31, 2002, the Banks had $2.2 million in
loans classified as loans held for sale compared to $2.9 million at December 31,
2001. The fair value of loans held for sale is based on commitments on hand from
investors or prevailing market prices. Loans held for sale are subject to
interest rate risk and if rates increase before the loans are sold a loss may be
recognized.

    Loan Portfolio. The loan portfolio grew $3.1 million, or 4.9% to $66.4
million at December 31, 2002 from $63.3 million at December 31, 2001. The
majority of loans are made to businesses in the form of commercial real estate
loans and commercial loans. As of December 31, 2002 commercial real estate loans
accounted for approximately 53.2% of the Banks' total loan portfolio, commercial
non-real estate accounts for 24.6% of the portfolio, and residential real estate
loans account for 7.4% of the portfolio. The following table shows the loan
portfolio composition at December 31, 2002 and December 31, 2001.




                                       15
<PAGE>
<TABLE>
<CAPTION>
                                                  AT DECEMBER 31,
                                   ---------------------------------------------
(000's omitted)                            2002                   2001
                                   ---------------------------------------------
                                   AMOUNT          %      AMOUNT            %
                                   -------     -------    -------       --------
Mortgage loans on real estate:
<S>                                <C>         <C>        <C>           <C>
Residential 1-4 family             $ 4,882         7.4 %  $ 5,200         8.2 %
Commercial                          35,321        53.2     31,486        49.8
Construction                         4,422         6.7      4,575         7.2
Equity lines of credit               2,782         4.2      3,100         4.9
                                   -------     -------    -------       --------
    Total mortgage loans            47,407        71.5     44,361        70.1

Commercial loans                    16,353        24.6     15,261        24.1
Consumer installment loans           2,596         3.9      3,661         5.8
                                   -------     -------    -------       --------
    Total loans                     66,356       100.1     63,283       100.0

Less allowance for loan losses       1,766        (2.7)     1,398        (2.2)
                                   -------     -------    -------       --------
Net loans                          $64,590        97.3 %  $61,885        97.8%
                                   =======     =======    =======       ========
</TABLE>


    The following is a schedule of the loan amounts maturing or repricing which
are also classified according to their sensitivity to changes in interest rates.


<TABLE>
<CAPTION>
                                          AT DECEMBER 31, 2002
                             --------------------------------------------
                             WITHIN      ONE TO        AFTER
                             ONE YEAR   FIVE YEARS   FIVE YEARS   TOTAL
                             -------     -------     -------     --------
(000's omitted)
<S>                          <C>         <C>         <C>         <C>
Residential 1 - 4 family     $   955     $ 3,049     $   878     $ 4,882
Commercial Mortgage           22,146      12,713         462      35,321
Commercial                    12,576       3,777           -      16,353
Construction Mortgage          4,422           -           -       4,422
Equity lines of credit         2,605         164          13       2,782
Consumer installment           1,016       1,483          97       2,596
                             -------     -------     -------     --------
Total                        $43,720     $21,186     $ 1,450     $66,356
                             =======     =======     =======     ========


Loans above with:
Fixed rates                  $ 6,683     $21,186     $ 1,450     $29,319
Floating rates                37,037           -           -      37,037
                             -------     -------     -------     --------
Total                        $43,720     $21,186     $ 1,450     $66,356
                             =======     =======     =======     ========
</TABLE>



    Non-performing Assets. Nonperforming assets are comprised of impaired loans
in nonaccrual status, loans past due 90 days or more and other repossessed
assets. A loan is considered impaired when, based on current information and
events, it is probable a creditor will be unable to pay all amount due (interest
as well as principal) according to the contractual terms of the loan agreement.



                                       16
<PAGE>
    As of December 31, 2002, there were two residential construction loans
totaling $664,000 classified as nonaccrual loans. As of December 31, 2001, there
were eight commercial loans totaling $1.2 million classified as nonaccrual
loans. Management actively manages the loan portfolio, seeking to identify and
resolve problem assets at an early stage.

<TABLE>
<CAPTION>
NONPERFORMING ASSETS                                AT DECEMBER  31,
                                                   -----------------
(000's omitted)                                      2002       2001
                                                   ------     ------
<S>                                                <C>        <C>
NONACCRUAL LOANS
    Commercial loans                               $    -     $1,215
    Residential mortgages                             664          -
    Consumer loans                                      -         77
                                                   ------     ------
Total nonaccrual loans                                664      1,292

ACCRUING LOANS PAST DUE 90 DAYS OR MORE
    Commercial loans                                    -        248
    Commercial mortgages                              655          -
    Residential mortgages                              92          -
    Consumer loans                                      -         18
                                                   ------     ------
Total accruing loans past due 90 days or more         747        266
                                                   ------     ------

Total nonperforming loans                           1,411      1,558

REAL ESTATE OWNED AND OTHER REPOSSESSED ASSETS
    Residential real estate owned                     161          -
    Other repossessed assets                           17        176
                                                   ------     ------
Total nonperforming assets                         $1,589     $1,734
                                                   ======     ======
</TABLE>


    If the loans shown above had been paying in accordance with their
contractual terms, an additional $14,451 in 2002 and $223,101 in 2001 would have
been recorded in interest income. Management is unaware of any loans that have
not been disclosed above that causes them to have doubts about the ability of
such borrowers to comply with the contractual loan terms or which may have a
material affect on the Corporation's consolidated balance sheet or results of
operations.

    The Banks' policies regarding nonaccrual loans reflect the importance of
identifying troubled loans early. Consumer loans are normally charged off no
later than 120 days past due, or earlier if deemed uncollectible. Loans other
than consumer are generally placed on nonaccrual status when management
determines that principal or interest may not be fully collectible, unless they
are fully collateralized and in the process of collection. Interest previously
accrued but not collected on nonaccrual loans is reversed and charged against
current income. Thereafter, income on such loans is then recognized only to the
extent that cash is received and where the future collection of principle is
probable.

    Allowance for Loan Losses. The following table shows the allocation of the
allowance for loan losses by specific category as of the dates indicated.
Management considers various qualitative and quantitative factors in its
determination of the level of the allowance for loan losses.


                                       17
<PAGE>
<TABLE>
<CAPTION>
                                                                          AT DECEMBER 31,
                                     -------------------------------------------------------------------------------------------
                                                        2002                                            2001
                                     -------------------------------------------------------------------------------------------
                                                  PERCENT OF                                       PERCENT OF
                                                  ALLOCATED         PERCENT OF                     ALLOCATED        PERCENT OF
                                                 ALLOWANCE TO       ALLOCATED                     ALLOWANCE TO       ALLOCATED
                                                 TOTAL LOANS       ALLOWANCE TO                    TOTAL LOANS     ALLOWANCE TO
                                      AMOUNT     OUTSTANDING     TOTAL ALLOWANCE         AMOUNT      OUTSTANDING  TOTAL ALLOWANCE
(000's omitted)                       ------     -----------     ---------------      ------      -----------     ---------------
<S>                                  <C>         <C>               <C>               <C>          <C>            <C>
Commercial Loans                     $ 1,489             2.3  %          84.3 %      $ 1,281             2.0 %           91.6 %
Residential Real Estate Loans            222             0.3             12.6             16             0.0              1.2
Consumer Loans                            34             0.1              1.9             62             0.1              4.4
Unallocated                               21             0.0              1.2             39             0.1              2.8
                                     -------     -----------       ----------        -------      ----------         ----------
Total                                $ 1,766             2.7  %         100.0 %      $ 1,398             2.2 %          100.0%
                                     =======     ===========       ==========        =======      ==========         ==========
</TABLE>


    The above allocations are not intended to imply limitations on usage of the
allowance. The entire allowance is available for any outstanding loans without
regard to loan type.

     Loan quality is continually monitored and is reviewed by management on a
monthly basis. Additions to the allowance for loan losses, which are charged to
earnings through the provision for loan losses, is determined based on a variety
of factors, including assessment of the credit risk of the portfolio, analysis
of individual loans via a loan review process, delinquent loans, evaluation of
current economic conditions in the market area, actual charge-offs during the
year and historical loss experience. The unallocated portion of the allowance
involves the exercise of judgment by management and reflects various
considerations, including management's view that the allowance should have a
margin that recognizes the imprecision inherent in the process of estimating
credit losses.

    The Banks maintain an allowance for loan losses believed to be sufficient to
absorb credit losses inherent in their loan portfolio. The allowance for loan
losses represents our best estimate of probable losses inherent in the portfolio
at each balance sheet date and is supported by all the relevant information
available to management. The allowance contains provisions for probable losses
that have been identified relating to specific borrowing relationships as well
as probable losses believed to be inherent in our loan portfolio and credit
undertakings that are not specifically identified. We believe that the allowance
for loan losses will be adequate to provide for estimated probable credit losses
inherent in our existing loan portfolio.

    The allowance for loan losses as a percentage of loans was 2.7% at December
31, 2002 and 2.2% as of December 31, 2001. Net charge offs for the years 2002
and 2001 were $1.2 million and $432,000, respectively. Net charge offs to
average total loans were 1.79% and .68% in 2002 and 2001, respectively. There
were two commercial loan relationships that resulted in charge offs totaling
$915,000 or 72.8% of the total charge-offs in 2002. There were four commercial
loan relationships that resulted in charge offs totaling $339,000 or 78.5% of
the total charge-offs in 2001. Accordingly, management increased the provision
for loan losses to offset these charge offs. The allowance as a percentage of
total loans increased due to management's assessment of risk inherent in the
portfolio. Management believes the current allowance is adequate at December 31,
2002, nonetheless, it expects to add to the provision in 2003, commensurate with
loan growth, if any.

    Deposits. Deposits increased by 2.3%, or $1.6 million, to $71.1 million at
December 31, 2002, from $69.5 million at December 31, 2001.

    The following table sets forth the average deposit balances outstanding
during each year, interest incurred and the weighted average rates paid thereon.


                                       18
<PAGE>
<TABLE>
<CAPTION>
                                                                       AT DECEMBER 31,
                                              -------------------------------------------------------------------
                                                           2002                               2001
                                              -------------------------------   ---------------------------------
                                              AVERAGE                 AVERAGE   AVERAGE                   AVERAGE
                                              BALANCE    INTEREST      RATE     BALANCE     INTEREST        RATE
(000'S OMITTED)                               -------    --------      ----     -------     --------        ----
<S>                                           <C>        <C>          <C>       <C>         <C>           <C>
Noninterest bearing demand deposits           $ 8,474     $     -      0.00%    $ 8,510     $     -        0.00%
Interest-bearing demand and money markets      17,287         285      1.65      16,748         565        3.37
Savings accounts                                2,012          28      1.39       1,425          37        2.60
Time deposits less than $100,000               27,590       1,194      4.33      28,200       1,665        5.90
Time deposits $100,000 and over                18,530         540      2.91      18,829       1,005        5.34
                                              -------     -------               -------     -------

  Total average deposits                      $73,893     $ 2,047      2.77%    $73,712     $ 3,272        4.44%
                                              =======     =======               =======     =======
</TABLE>

    The Banks operate in very competitive environments. Management monitors
rates at other financial institutions in the Banks' market areas to ascertain
that the rates are competitive. Management also attempts to offer a wide variety
of products to meet the needs of its customers. The Banks offer business and
consumer checking accounts, regular and money market savings accounts and
certificates having many options in their terms.

    Premises and Equipment. The Banks net premises and equipment were $935, 000
at December 31, 2002 and $1.2 million at December 31, 2001.

    Capital. To be considered a "well-capitalized" bank by the FDIC, the
institution must have a total risk-based capital ratio of at least 10%, a Tier 1
capital ratio of at least 6%, and a leverage ratio of at least 5%, and must not
be subject to any written agreement from any regulatory agency requiring it to
meet or maintain any specific capital levels. To be considered an
"adequately-capitalized" bank by the FDIC, the institution must have a total
risk-based capital ratio of at least 8%, a Tier 1 capital ratio of at least 4%,
and a leverage ratio of at least 4%, and must not be subject to any written
agreement from any regulatory agency requiring it to meet or maintain any
specific capital levels. As of December 31, 2002 Lakeside Community Bank had a
total risk-based capital ratio of 9.37%, a Tier 1 capital ratio of 8.10%, and a
leverage ratio of 6.68%. At December 31, 2002 Lakeside is considered
"adequately-capitalized". As of December 31, 2002 North Oakland Community Bank
had a total risk-based capital ratio of 11.27%, a Tier 1 capital ratio of
10.01%, and a leverage ratio of 8.63%. At December 31, 2002 North Oakland is
considered "well-capitalized". See Note 13 of "Notes to Consolidated Financial
Statements" for further information.

    On February 9, 2001, the Corporation sold 15,674 shares of common stock to
one investor, in a private offering, at a price of $6.38 per share. On May 11,
2001, the Corporation sold 3,750 shares of common stock to one investor, in a
private offering, at a price of $6.00 per share. On May 24, 2001, the
Corporation sold 9,804 shares of common stock to one investor, in a private
offering, at a price of $5.10 per share. On June 12, 2001, the Corporation sold
5,000 shares of common stock to one investor, in a private offering, at a price
of $6.00 per share.

    The private sales constitute "restricted" securities and cannot be resold or
transferred without registration under the Securities Act of 1933, the Michigan
Uniform Securities Act and the securities law of any other applicable
jurisdiction, unless an exception from registration under each such applicable
act is available.

    Rights Offering. Effective August 23, 2001, the Corporation granted rights
to its stockholders to purchase up to 335,787 units. Each unit consisted of two
shares of its common stock and one class A common stock purchase warrant and was
offered at a price of $9.00 per unit. Each warrant entitles the holder thereof
to purchase 1.2 shares of common stock at $5.50 per share, subject to adjustment
in certain circumstances, for a period of 60 months, at which time the warrant
expires. In addition, at the same time it was granting rights to its existing
shareholders, the Corporation also offered 100,000 units on a best efforts basis
to the general public. Both offerings expired on December 31, 2001. As of
December 31, 2001 the Corporation sold 155,059 units that represented 310,118
shares of common stock.

    As of July 3, 2002 the Corporation agreed to convey 25,454 shares of common
stock to Landmark Financial Group as settlement to the plaintiffs in a case by
Daniel J. DuVernay, Joseph C. Fournier and Dennis Guiser against Michigan
Community Bancorp



                                       19
<PAGE>
Limited filed on August 6, 2001 in the Circuit Court of St. Clair County
Michigan (Case No. D 1002114). Michigan Community Bancorp Limited remains liable
to repurchase the shares at a price of $5.50 per share one year from the date of
settlement.

    On May 3, 2002, the Corporation sold 20,834 shares of Series A Voting
Convertible Preferred Stock, in a private offering, at a price of $12.00 per
share. As of December 31, 2002, there are 62,502 shares of common stock reserved
for issuance upon the conversion of the Series A Voting Convertible Preferred
Stock.



                              RESULTS OF OPERATIONS

    Summary of Results. The Corporation incurred a net loss of $1.7 million, or
($1.44) per share in 2002 as compared to a net loss of $1.9 million, or ($2.17)
per share in 2001. Significant additions to the allowance for loan losses
contributed to the net loss in both 2002 and 2001. The provision for loan losses
was $1.6 million for 2002 as compared to $995,000 for 2001. Total salaries and
employee benefits decreased by 9.9% in 2002 as compared to the previous year's
decrease of 13.0% from 2000 to 2001.

    The following table contains selected performance ratios (in thousands,
except per share data).


<TABLE>
<CAPTION>
                                              AT DECEMBER 31,
                                            ------------------
EARNINGS (LOSS) RATIOS:                     2002          2001
                                            ----          ----
<S>                                         <C>           <C>
Loss on average assets                      - 2.1%         -2.3%
Loss on average equity                      -24.2         -26.7
Average equity to average assets              8.5           8.6
Dividend payout ratio                         NA             NA
</TABLE>


    Net Interest Income. The following table presents our consolidated average
balances of earning assets, interest bearing liabilities and the amount of
interest income or interest expense attributable to each category, the average
yield or rate for each category and the net interest margin for the periods
indicated. Average loans exclude the allowance for loan losses. Interest on
loans includes loan fees. Interest income is presented on a non-tax equivalent
basis.




                                       20
<PAGE>
<TABLE>
<CAPTION>
                                                                                   YEAR ENDED DECEMBER 31,
                                                           -------------------------------------------------------------------
                                                                       2002                               2001
                                                           -------------------------------------------------------------------
(000'S OMITTED)                                             AVERAGE                YIELD/     AVERAGE                   YIELD/
                                                            BALANCE   INTEREST      RATE      BALANCE    INTEREST        RATE
                                                           --------   --------     ------     -------    --------       ------
<S>                                                        <C>        <C>          <C>        <C>        <C>            <C>
ASSETS
Interest-bearing balances with banks                       $    906   $     19      2.10%     $   681    $      7        1.03%
Federal funds sold                                            2,673         46      1.72%       6,844         287        4.19%
Securities                                                    4,722        168      3.56%       5,517         307        5.56%
Loans, including fees                                        69,233      5,085      7.34%      63,767       5,574        8.74%
                                                           --------   --------     ------     -------    --------       ------
   Total earning assets and interest income                  77,534      5,318      6.86%      76,809       6,175        8.04%

Cash and due from banks                                       3,562                             3,675
Allowance for loan losses                                    (1,321)                           (1,062)
Other assets                                                  1,838                             2,016
                                                           --------                           -------
   Total assets                                            $ 81,613                           $81,438
                                                           ========                           =======
LIABILITIES AND EQUITY
Interest-bearing demand and money markets                  $ 17,287   $   285       1.65%     $16,748    $    565        3.37%
Savings accounts                                              2,012        28       1.39%       1,425          37        2.60%
Time deposits less than $100,000                             27,590     1,194       4.33%      28,200       1,665        5.90%
Time deposits $100,000 and over                              18,530       540       2.91%      18,829       1,005        5.34%
                                                           --------   --------     ------     -------    --------       ------
   Total interest-bearing liabilities and interest expense   65,419     2,047       3.13%      65,202       3,272        5.02%
                                                                      --------     ------                --------       ------
Noninterest bearing demand deposits                           8,474                             8,510
Other liabilities                                               746                               705
Shareholders' equity                                          6,974                             7,021
                                                           --------                           -------
   Total liabilities and shareholders'
   equity                                                    81,613                           $81,438
                                                           ========                           =======
Net interest income                                                   $  3,271                           $  2,903
                                                                      ========                           ========
Net interest spread                                                                 3.73%                                3.02%
                                                                                   ======                               ======
Net interest margin                                                                 4.22%                                3.78%
                                                                                   ======                               ======
</TABLE>

     Volume/Rate Analysis of Net Interest Income. The following table shows the
dollar amount of changes in net interest income for each major category of
interest earning asset and interest bearing liability, and the amount of change
attributable to changes in average balances (Volume) or average rates
(Rate/Yield) for the periods shown.

     One of management's focuses during 2002 was to improve the net interest
margin. The plan was to reduce the reliance on costly out-of-market deposits,
while increasing core deposits. In addition, lenders were very selective in the
quality of the new loans that were booked during the year and obtained proper
interest rates and loan fees on commercial loans. These disciplines resulted in
a 44 basis-point increase in the net interest margin during 2002, from 3.78% in
2001 to 4.22% in 2002. This improvement was accomplished in spite of a 525
basis-point drop in managed interest rates in the last eighteen months.


                                       21
<PAGE>
<TABLE>
<CAPTION>
                                                               2002/2001                                2001/2000
                                                ------------------------------------------------------------------------------
                                                        INCREASE/(DECREASE)* IN               INCREASE/(DECREASE)* IN
(000's omitted)                                   VOLUME     RATE/YIELD          NET       VOLUME      RATE/YIELD         NET
                                                ---------     --------        --------     -------      -------         ------
<S>                                             <C>           <C>             <C>          <C>          <C>             <C>
Interest-bearing balances with banks            $       3     $      9        $     12     $     7      $     -         $    7
Federal funds sold                                   (123)        (118)           (241)       (141)        (169)          (310)
Securities                                            (40)         (99)           (139)         44          (25)            19
Loans, including fees                                 572       (1,061)           (489)      1,368       (1,511)          (143)
                                                ---------     --------        --------     -------      -------         ------
Total interest income                                 412       (1,269)           (857)      1,278       (1,705)          (427)
                                                ---------     --------        --------     -------      -------         ------
Interest-bearing demand and MMDA                       19         (299)           (280)        118          (58)            60
Savings accounts                                     (137)         128              (9)         10           (3)             7
Time deposits < $100,000                              (35)        (436)           (471)        (69)        (266)          (335)
Time deposits > $100,000                              (16)        (449)           (465)        (12)         (65)           (77)
                                                ---------     --------        --------     -------      -------         ------
Total interest expense                               (169)      (1,056)         (1,225)         47         (392)          (345)
                                                ---------     --------        --------     -------      -------         ------

Net interest income                             $     581     $   (213)       $    368     $ 1,231      $(1,313)        $  (82)
                                                =========     ========        ========     =======      =======         ======
</TABLE>

*   The change in interest due to both volume and rate has been allocated
    between the factors in proportion to the relationship of the absolute dollar
    amounts of the change in each.

    Allowance for Loan Losses. The Corporation maintained an allowance for loan
losses of approximately 2.7% and 2.2% of loans at December 31, 2002 and 2001,
respectively. The provision for loan losses for 2002 and 2001 was $1.6 million
and $995,000, respectively.

    Non-Interest Income. Non-interest income in 2002 and 2001 was $389,000 and
$281,000, respectively. The Corporation, during the last half of 2001 and
throughout 2002, actively originated residential mortgage loans primarily
classified as held for sale. This strategy resulted in a gain of $100,000 and
$71,000 on sale of these loans in 2002 and 2001, respectively. Service charges
on deposit accounts also increase by 70.4% or $93,000 when comparing the year
ended 2002 and 2001.

    Non-Interest Expense. Non-interest expense in 2002 was $3.8 million and in
2001 was $4.1 million. The main components of non-interest expense were salaries
and benefits, which totaled $1.7 million in 2002 and $1.9 million in 2001. The
Corporation accrued approximately $180,000 and $290,000 in additional occupancy
expense for estimated costs related to the abandoned expansion project in St
Clair County, Michigan in 2002 and 2001, respectively. Other significant
components of non-interest expense consisted of professional fees, data
processing fees and marketing costs.


                         Liquidity and Capital Resources

    The Corporation obtained its initial equity capital in an initial public
offering of its common stock in December 1998. As a result of Lakeside Community
Bank being at an adequately capitalized position, management is taking various
measures to improve its capital. As part of the process, in February 2003, the
Board of Directors of the Corporation approved a plan to raise additional
capital,  which included the hiring of an investment banking firm to analyze
various options including the possibility of selling North Oakland Community
Bank. Management believes that its current capital and liquidity will provide
the Corporation with adequate capital to support its expected levels of deposit
and loan growth and to otherwise meet its cash and capital requirements for at
least the next twelve months.




                                       22
<PAGE>
<TABLE>
<CAPTION>
                                                                                    TO BE ADEQUATELY            TO BE WELL
                                                              ACTUAL                   CAPITALIZED             CAPITALIZED
                                                     -----------------------     -----------------------   --------------------
                                                       AMOUNT        RATIO         AMOUNT         RATIO     AMOUNT       RATIO
(000's omitted)                                      ----------     --------     ----------      -------   --------     -------
<S>                                                  <C>              <C>        <C>              <C>       <C>          <C>
Total capital to risk weighted assets                $    6,751         9.9%     $    5,444        8.0 %      6,805      10.00 %
Tier I capital to risk weighted assets                    5,892         8.7           2,722        4.0        4,083       6.00
Tier I capital to average assets (leverage)               5,892         7.3           3,239        4.0        4,049       5.00
</TABLE>

    The Corporation's sources of liquidity include loan payments by borrowers,
maturity and sales of securities available for sale, growth of deposits and
deposits equivalents, federal funds, and the issuance of common stock. An
additional source of liquidity, as the need arises, is out-of-market or internet
certificates of deposits. The out-of-market and internet certificates of
deposits usually require a higher interest rate and are a more volatile source
of liquidity. As of December 31, 2002 the Banks have $11.8 million in
out-of-market certificates of deposits compared to $14.5 million at December 31,
2001. Management plans to continue to reduce the use of out-of-market
certificates of deposits in 2003. The Corporation had borrowing capability on an
unused line of credit with Bank One at December 31, 2002 of $950,000. Liquidity
management involves the ability to meet the cash flow requirements of the Banks'
customers. These customers may be either borrowers with credit needs or
depositors wanting to withdraw funds.

    The liquidity of a bank allows it to provide funds to meet loan requests, to
accommodate possible outflows in deposits, and to take advantage of other
investment opportunities. Funding of loan requests, providing for liability
outflows, and managing interest rate margins require continuous analysis to
match the maturities of specific categories of loans and investments with
specific types of deposits and borrowings. Bank liquidity depends upon the mix
of the banking institution's potential sources and uses of funds. The major
sources of liquidity have been deposits, federal funds sold, loans which mature
within one year, and advances from the Federal Home Loan Bank of Indianapolis
("FHLB"). Our larger deposit balances, which might be more likely to fluctuate
in response to rate changes, are closely monitored. These deposits consist
mainly of certificates of deposit over $100,000.



               Asset Liability Management and Market Risk Analysis

    Asset liability management aids the Corporation in maintaining liquidity
while maintaining a balance between interest earning assets and interest bearing
liabilities. Management of interest rate sensitivity attempts to avoid widely
varying net interest margins and to achieve consistent net interest income
through periods of changing interest rates. Management monitors the
Corporation's exposure to interest rate change using a rate sensitive GAP
analysis.









                                       23
<PAGE>

    The following table shows the maturity and re-pricing distribution of the
Corporation's interest-earning assets and interest-bearing liabilities as of
December 31, 2002. This table displays the interest rate sensitivity gap (i.e.,
interest rate sensitive assets less interest rate sensitive liabilities),
cumulative interest rate sensitivity gap, the interest rate sensitivity gap
ratio (i.e., interest rate sensitive assets divided by interest rate sensitive
liabilities), and cumulative interest rate sensitivity gap ratio. For purposes
of this table, an asset or liability is considered rate sensitive within a
period when it matures or could be re-priced within such period, generally
according to its contractual terms.


<TABLE>
<CAPTION>
                                                       AFTER THREE     AFTER ONE
                                           WITHIN      MONTHS BUT      YEAR BUT        AFTER
(000's omitted)                            THREE       WITHIN ONE     WITHIN FIVE      FIVE
                                           MONTHS         YEAR          YEARS          YEARS        TOTAL
                                         ----------    ----------     ----------    ----------    ----------
<S>                                      <C>           <C>            <C>           <C>           <C>
INTEREST EARNING ASSETS:
Federal funds sold                       $      450    $        -     $        -    $        -    $      450
Securities, at amortized cost                     -         1,719          3,200             -         4,919
Federal Home Loan Bank stock                    143             -              -             -           143
Loans Held for Sale                           2,188                                                    2,188
Loans, excluding non-accruals                37,875         3,028         23,318         1,471        65,692
                                         ----------    ----------     ----------    ----------    ----------
Total                                        40,656         4,747         26,518         1,471        73,392
                                         ----------    ----------     ----------    ----------    ----------
INTEREST BEARING LIABILITIES:
NOW and money market accounts                15,179             0              0             0        15,179
Savings deposits                              1,986             -              -             -         1,986
Time deposits less than $100,000              4,241        13,859         10,861             -        28,961
Time deposits of $100,000 or more            10,785         6,194          1,836             -        18,815
Other borrowed funds                            800             -              -             -           800
                                         ----------    ----------     ----------    ----------    ----------
Total                                        32,991        20,053         12,697             0        65,741
                                         ----------    ----------     ----------    ----------    ----------
Rate sensitivity gap                     $    7,665    $  (15,306)    $   13,821    $    1,471    $    7,651
                                         ----------    ----------     ----------    ----------    ----------
Cumulative rate sensitivity gap          $    7,665    $   (7,641)    $    6,180    $    7,651
                                         ==========    ==========     ==========    ==========
Rate sensitivity gap ratio                     10.3%        -20.6%          18.6%          2.0%
                                         ----------    ----------     ----------    ----------
Cumulative rate sensitivity gap                              10.3%           8.3%         10.3%
                                                       ==========     ==========    ==========
</TABLE>

    The table above does not necessarily indicate the impact that general
interest rate movements would have on our net interest margin, because the
re-pricing of various categories of assets and liabilities is discretionary, and
is subject to competitive and other pressures. As a result, various assets and
liabilities indicated as re-pricing within the same period may, in fact,
re-price at different times and by different increments. At December 31, 2002,
the Corporation is considered "asset sensitive" within the one-year window
according to the preceding table. In a rising rate environment, we might not be
able to increase rates on interest-earning assets as fast as the increase in
rates on interest-bearing liabilities.

    The Corporation uses various modeling techniques to measure sensitivity to
changes in interest rates in addition to the schedule of maturities and
re-pricing shown above. Our internal policy limits our exposure to a 100 basis
point change in interest rates in one year, to 5% of net interest income. At
December 31, 2002 based upon our calculations, we are within our policy
guidelines. We also have policies limiting our exposure to changes in the
economic value of equity, (often referred to as the "EVE" analysis) whereby our
policy states that the change in the economic value of our equity shall be
limited to 20% in an environment where there is a 100 basis point change in
interest rates and 30% where there is a 200 basis point change in interest
rates. At December 31, 2002 the Banks are well within these policy limits.






                                       24
<PAGE>

RISK FACTORS THAT MAY AFFECT FUTURE RESULTS


The Corporation is subject to regulatory action

         North Oakland Community Bank formally entered into an agreement with
its primary regulatory examiners, which provided for the following requirements,
among others:

     -    Formulate and implement earnings and strategic plans.
     -    Formulate, adopt, and submit a written action plan to lessen the
          Bank's risk position in each asset classified "Substandard" or
          "Doubtful".
     -    Maintain Tier 1 capital level equal to or exceeding 8 %.
     -    Limit total asset growth to not more than 3% during any consecutive
          three-month period without first providing at least 30 days advance
          written notice.
     -    The Bank shall not declare or pay any dividends without prior written
          consent.

     Management believes that North Oakland Community Bank has addressed these
concerns with the regulators and is corresponding with them to maintain
compliance with these requirements.

     A joint examination of the banks was completed during the first quarter of
2003. At the exit conference the regulatory examiners indicated that as a result
of their most recent examination, corrective actions, as yet to be determined
will be forthcoming, as it relates to Lakeside Community Bank.

The Corporation has experienced significant losses from operations

         Lakeside and North Oakland have been operating since January 5, 1999
and to date have not been able to generate sufficient revenue to fund
operations. In 2002, 2001 and 2000, MCB has sustained consolidated operating
losses of $1.7 million, $1.9 million, and $840,000 or ($1.44), ($2.17), and
($1.09) per share, respectively.

The Corporation is exposed to a cyclical local economy

         Michigan Community Bancorp Limited's success and profitability is
directly dependent on the success and profitability of the Banks. The operations
of Lakeside and North Oakland are materially dependent upon, and sensitive to,
the economy of their market areas in southeastern Michigan. Adverse economic
developments can impact the collectability of loans and have a negative effect
on earnings and financial condition. The economies of Macomb and Oakland County
include many businesses that manufacture products for, or provide goods or
services to, the automobile industry. No assurance can be made that future
economic changes will not have a significant adverse effect on MCB.

The Corporation is subject to government regulation and monetary policy

         The Corporation the Banks have received all regulatory approvals and
satisfied all conditions necessary to organize and establish the Banks. These
conditions included, among other things, that: (i) beginning paid-in capital of
North Oakland not be less than $4.6 million and beginning paid-in-capital of
Lakeside not be less than $4.55 million; (ii) each Bank maintains a ratio of
Tier 1 leverage capital to total assets for the first three years after
commencing business of at least 8.0% and an adequate valuation reserve; (iii)
each Bank has its financial statements audited by a public accountant for at
least the first three years; (iv) each Bank file its Certificate of Paid in
Capital and Surplus with the OFIS; and (v) any changes in executive management
of each Bank be submitted to the bank regulatory agencies in advance for their
approval. Regulatory capital requirements imposed on the Banks may have the
effect of constraining future growth, absent the infusion of additional capital.
The Tier 1 capital to average assets ratio at December 31, 2002 was 6.27% and
8.63% for Lakeside Community Bank and North Oakland Community Bank,
respectively.

         MCB and each of the Banks are subject to extensive state and federal
government supervision and regulation. State and federal banking laws subject
the Banks to substantial limitations with respect to loans, purchase of
securities, payment of dividends and many other aspects of their banking
business. Applicable laws, regulations, interpretations and enforcement policies
have been subject to significant and sometimes retroactively applied changes and
may be subject to significant future changes. Many of these regulations are
intended to protect depositors, the public, and the FDIC, not shareholders.
There can be no assurance that future legislation or government policy will not
adversely affect the banking industry, the operations of the Banks, or
shareholders. The burden imposed by federal and state regulations may place
banks in general, and MCB and the Banks specifically, at a competitive
disadvantage compared to less regulated competitors. Federal economic and
monetary policy may affect the Banks' ability to attract deposits, make loans
and achieve satisfactory interest rate spreads.


                                       25
<PAGE>


The Corporation doesn't anticipate paying dividends for the foreseeable future

         MCB anticipates that no dividends will be paid on the Common Stock for
the foreseeable future. MCB will be largely dependent upon the dividends paid by
Lakeside and North Oakland to provide funds to pay cash dividends if and when
such dividends are declared. No assurance can be given that future earnings of
the Banks, and resulting dividends to MCB, will be sufficient to permit the
legal payment of dividends to shareholders at any time in the future. Even if
MCB may legally declare dividends, the amount and timing of such dividends will
be at the discretion of MCB's Board of Directors. The Board may in its sole
discretion decide not to declare dividends.

The Corporation is dependent upon the Banks' operations for operating funds

         MCB is a bank holding company and substantially dependent upon
dividends from Lakeside and North Oakland, for funds to pay its expenses,
including debt repayment, and to pay cash dividends to shareholders. Lakeside
and North Oakland are subject to regulatory limitations upon the payment of
dividends. No cash dividends are anticipated from the Banks during the initial
years of operation.

The Corporation faces strong competition from a variety of competitors

         MCB faces strong competition for deposits, loans and other financial
services from other community banks, regional banks, out-of-state national
banks, savings banks, thrifts, credit unions and other financial institutions as
well as other entities which provide financial services, including consumer
finance companies, securities brokerage firms, mortgage brokers, insurance
companies, mutual funds, and other lending sources and investment alternatives.
Some of these financial institutions and financial services organizations are
not subject to the same degree of regulation as the Banks. Many financial
institutions aggressively compete for business in the market areas of the Banks.
Most of these competitors have been in business for many years, have established
customer bases, are larger, have substantially higher lending limits than the
Banks will have in the foreseeable future, and will be able to offer certain
services that the Banks do not expect to provide in the foreseeable future,
including multiple branches, trust services, and international banking services.
In addition, most of these entities have greater capital resources than the
Banks, which among other things, may allow them to price their services at
levels more favorable to the customer and to provide larger credit facilities
than will be available from the Banks.

The Corporation faces lending risks and lending limits

         The risk of nonpayment of loans is inherent in commercial banking, and
nonpayment, if it occurs, would likely have a material adverse effect on MCB's
earnings and overall financial condition as well as the value of the common
stock. Lakeside and North Oakland have a limited operating history and therefore
our customers do not have a long established credit history with the Banks.
Management attempts to minimize credit exposure by carefully monitoring the
concentration of loans within specific industries and through prudent loan
application and approval procedures, but there can be no assurance that such
monitoring and procedures will reduce such lending risks. Credit losses can
cause insolvency and failure of a financial institution, and in such event,
shareholders could lose their entire investment. The general per customer
lending limit of each Bank is approximately $900,000. Accordingly, the size of
the loans, which the Banks can offer to potential customers, is less than the
size of loans which most of the Banks' competitors with larger lending limits
are able to offer. This limit initially may affect the ability of the Banks to
seek relationships with the area's larger businesses. The Banks expect to
accommodate loan volumes in excess of its lending limit through the sale of
participations in such loans to other banks. However, there can be no assurance
that the Banks will be successful in attracting or maintaining customers seeking
larger loans or that the Banks will be able to engage in participations of such
loans on terms favorable to the Banks.

The Corporation could be negatively impacted by changes in interest rates and
economic conditions

         The results of operations for financial institutions, including the
Banks, may be materially and adversely affected by changes in prevailing
economic conditions, including declines in real estate market values, rapid
changes in interest rates and the monetary and fiscal policies of the federal
government. Profitability is partly a function of the spread between the
interest rates earned on investments and loans and the interest rates paid on
deposits and other interest-bearing liabilities. In the early 1990s, many
banking organizations experienced historically high interest rate spreads. More
recently, interest rate spreads have generally narrowed due to changing market
conditions and competitive pricing pressure. There can be no assurance that such
factors will not continue to exert such pressure or that high interest rate
spreads will return. Although economic conditions in the Banks' target market
areas have been



                                       26
<PAGE>

generally favorable, there can be no assurance that such conditions will
continue to prevail. Like most banking institutions, the net interest spread and
margin are affected by general economic conditions and other factors that
influence market interest rates and the Banks' ability to respond to changes in
such rates. At any given time, the Banks' assets and liabilities will be such
that they are affected differently by a given change in interest rates. As a
result, an increase or decrease in rates could have a material adverse effect on
the Banks' net income, capital and liquidity. While management takes measures to
guard against interest rate risk, there can be no assurance that such measures
will be effective in minimizing the exposure to interest rate risk.

The Corporation may need to spend significant money to keep up with technology
to remain competitive

         The banking industry is undergoing rapid technological changes with
frequent introductions of new technology-driven products and services. In
addition to providing better service to customers, the effective use of
technology increases efficiency and enables financial institutions to reduce
costs. MCB's future success depends in part on its ability to address the needs
of its customers by using technology to provide products and services that will
satisfy customer demands for convenience as well as to create additional
efficiencies in the operation of the Banks. Many of MCB's competitors have
substantially greater resources to invest in technological improvements. Such
technology may permit competitors to perform certain functions at a lower cost
than the Banks. There can be no assurance that the Banks will be able to
effectively implement new technology-driven products and services or be
successful in marketing such products and services to its customers


ITEM 7. FINANCIAL STATEMENTS

    The consolidated financial statements of Michigan Community Bancorp Limited
together with the reports of Rehmann Robson and Plante & Moran, LLP included in
this document under this Item are listed under Item 13 of this document and can
be found beginning on page 30.


ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

    On October 11, 2002, the Corporation filed a Form 8-K reporting that on
October 8, 2002, the Corporation was notified by Plante & Moran, LLP of its
decision to resign as the Corporation's independent public accountants. Plante &
Moran, LLP has not included, in either of the past two years, an adverse opinion
or a disclaimer of opinion, or a qualification or modification on the
consolidated statements of the Corporation. During the two most recent fiscal
years of the Corporation ended December 2001, and subsequent interim periods
through October 8, 2002, there were no disagreements between the Corporation and
Plante & Moran LLP on any matter of accounting principles or practices,
financial disclosure or auditing scope or procedure, which disagreements, if not
resolved to Plante & Moran, LLP's satisfaction would have caused Plante & Moran,
LLP to make reference to the subject matter of the disagreement in connection
with its reports.

    On December 5, 2002, the Corporation filed a Form 8-K reporting that the
Corporation had retained Rehmann Robson to provide audit services to the
Corporation for the fiscal year ended December 31, 2002. The Corporation expects
to seek shareholder ratification of the appointment of Rehmann Robson at its
2003 Annual Meeting of Shareholders.

                                    PART III


ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTORS AND CONTROL PERSONS; COMPLIANCE
WITH SECTION 16(A) OF THE EXCHANGE ACT

    The information required by this Item is included in the Proxy Statement
under the captions "Information About Directors and Nominees as Directors" and
"Section 16(a) Beneficial Ownership Reporting Compliance". As permitted by the
rules of the Securities and Exchange Commission it is incorporated into this
document by reference.


ITEM 10. EXECUTIVE COMPENSATION

    The information required by this Item is included in the Proxy Statement
under the caption "Compensation of Executive Officers".



                                       27
<PAGE>

As permitted by the rules of the Securities and Exchange Commission it is
incorporated into this document by reference.


ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

    The information required by this Item is included in the Proxy Statement
under the caption "Stock Ownership of Certain Beneficial Owners and Management".
As permitted by the rules of the Securities and Exchange Commission it is
incorporated into this document by reference.


ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

    The information required by this Item is included in the Proxy Statement
under the caption "Related Party Transactions". As permitted by the rules of the
Securities and Exchange Commission it is incorporated into this document by
reference.







                                       28
<PAGE>

ITEM 13. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES, AND REPORTS ON FORM 8-K.


EXHIBIT           EXHIBIT DESCRIPTION NUMBER

3.1*              Restated Articles of Incorporation of the Corporation

3.2*              Bylaws of the Corporation

4.1*              See Exhibits 3.1 and 3.2 for provisions of the Restated
                  Articles of Incorporation and Restated Bylaws of the
                  Corporation defining rights of the holders of Common Stock of
                  the Corporation.

10.1*             Sublease between the Corporation and Rite Aid of Michigan,
                  Inc. for the property located at 43850 Schoenherr, Sterling
                  Heights, Michigan.

10.2*             Assignment and Acceptance of Lessee's Interest with Lessor's
                  Consent between the Corporation, First of America, National
                  Association and North Hill Center, for property located at
                  1467 North Rochester Road, Rochester Hills, Michigan.

10.3*             Data Processing Agreement between Lakeside Community Bank and
                  Rurbanc Data Services, Inc.

10.4*             Data Processing Agreement between North Oakland Community Bank
                  and Rurbanc Data Services, Inc.

10.5*             1998 Non-Employee Director Stock Option Plan

10.6*             1998 Employee Incentive Stock Option Plan

10.7**            Lease Agreement between the Corporation and Nimrod Corporation
                  for property located at 800 Pointe Tremble Road, St. Clair
                  County, Michigan.

10.8**            Amendment to Lease* between the Corporation and Rite Aid of
                  Michigan for property located at 43850 Schoenherr, Sterling
                  Heights, Michigan.

22*               Subsidiaries of the Registrant

99.1              906 Certification of Chief Executive Officer

99.2              906 Certification of Chief Financial Officer


* Incorporated by reference from the registrant's registration on Form SB-2,
Commission File Number 333-17317.

** Incorporated by reference from the registrant's Form 10KSB for the year ended
December 31, 2000, Commission File Number 0-25079







                                       29
<PAGE>
                       MICHIGAN COMMUNITY BANCORP LIMITED

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

                        CONSOLIDATED FINANCIAL STATEMENTS
                  YEARS ENDED DECEMBER 31, 2002, 2001 AND 2000






MICHIGAN COMMUNITY BANCORP LIMITED


                                    CONTENTS

<TABLE>
<S>                                                                      <C>
INDEPENDENT AUDITORS' REPORT (REHMANN ROBSON)                            F - 1

INDEPENDENT AUDITORS' REPORT (PLANTE & MORAN, LLP)                       F - 2

CONSOLIDATED FINANCIAL STATEMENTS

    Consolidated Balance Sheets                                          F - 3

    Consolidated Statements of Operations                                F - 4

    Consolidated Statements of Changes in Stockholders' Equity           F - 5

    Consolidated Statements of Cash Flows                                F - 6

    Notes to Consolidated Financial Statements                           F - 7 to F - 25
</TABLE>





                                       30
<PAGE>

                          INDEPENDENT AUDITORS' REPORT

Board of Directors
Michigan Community Bancorp Limited
Sterling Heights, Michigan

We have audited the consolidated balance sheet of Michigan Community Bancorp
Limited and subsidiaries as of December 31, 2002 and the related consolidated
statements of operations, changes in stockholders' equity, and cash flows for
the year then ended. These consolidated financial statements are the
responsibility of Michigan Community Bancorp Limited's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audit.

We conducted our audit in accordance with auditing standards generally accepted
in the United States of America. 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
audit provides a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Michigan Community Bancorp Limited and subsidiaries at December 31, 2002 and the
consolidated results of their operations and their cash flows for the year then
ended in conformity with accounting principles generally accepted in the United
States of America.



                                                              /s/ REHMANN ROBSON


Troy, Michigan
March 20, 2003





                                      F - 1

<PAGE>



                          INDEPENDENT AUDITOR'S REPORT

To the Board of Directors
Michigan Community Bancorp Limited

We have audited the consolidated balance sheet of Michigan Community Bancorp
Limited and subsidiaries as of December 31, 2001 and the related consolidated
statements of changes in stockholders' equity, operations, and cash flows for
each year in the two-year period ended December 31, 2001. These consolidated
financial statements are the responsibility of the Bancorp'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 auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audits to obtain reasonable assurance about whether the consolidated
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the consolidated financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Michigan Community Bancorp Limited and subsidiaries as of December 31, 2001 and
the consolidated results of their operations and their cash flows for each year
in the two-year period ended December 31, 2001, in conformity with accounting
principles generally accepted in the United States of America.





Plante & Moran, PLLC
Auburn Hills, Michigan
February 20, 2002






                                      F - 2


<PAGE>
MICHIGAN COMMUNITY BANCORP LIMITED



                           CONSOLIDATED BALANCE SHEETS


<TABLE>
<CAPTION>
                                                                                     DECEMBER 31,
                                                                                 --------------------
(000's omitted, except per share data)                                             2002         2001
                                                                                 --------    --------
<S>                                                                              <C>         <C>
ASSETS
Cash and due from banks                                                          $  3,771    $  2,201
Federal funds sold                                                                    450       3,100
Interest-bearing deposits in banks                                                    647         137
                                                                                 --------    --------
    Total cash and cash equivalents                                                 4,868       5,438
Available-for-sale securities                                                       4,972       5,031
Federal Home Loan Bank stock, at cost                                                 143         108
Loans held for sale                                                                 2,188       2,946
Loans                                                                              66,356      63,283
Less allowance for loan losses                                                      1,766       1,398
                                                                                 --------    --------
    Net loans                                                                      64,590      61,885
Premises and equipment, net                                                           935       1,189
Other real estate owned                                                               161         -
Interest receivable and other assets                                                  521         700
                                                                                 --------    --------
    Total assets                                                                 $ 78,378    $ 77,297
                                                                                 ========    ========
LIABILITIES AND STOCKHOLDERS' EQUITY

LIABILITIES

Noninterest-bearing deposits                                                     $  6,207    $  3,739
Interest-bearing deposits                                                          64,941      65,799
                                                                                 --------    --------
    Total deposits                                                                 71,148      69,538
Borrowings                                                                            800         -
Interest payable and other liabilities                                                791         762
                                                                                 --------    --------
    Total liabilities                                                              72,739      70,300
Common stock subject to redemption, 25,454 shares                                     141         -

STOCKHOLDERS' EQUITY:
Preferred stock- $12.00 stated value; authorized 1,000,000 shares,
  issued and outstanding - 20,834 shares at December 31, 2002                         250         -
Common stock - $ 5.00 stated value; no par value; authorized 9,000,000 shares,
  issued and outstanding - 1,184,843 shares and 1,159,389 shares at
  December 31, 2002 and 2001                                                        5,797       5,797
Additional paid-in capital                                                          6,195       6,250
Accumulated deficit                                                                (6,797)     (5,108)
Accumulated other comprehensive income                                                 53          58
                                                                                 --------    --------
    Total stockholders' equity                                                      5,498       6,997
                                                                                 --------    --------
    Total liabilities and stockholders' equity                                   $ 78,378    $ 77,297
                                                                                 ========    ========
</TABLE>



See Notes to Consolidated Financial Statements.


                                     F - 3

<PAGE>
MICHIGAN COMMUNITY BANCORP LIMITED

                      CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                                YEAR ENDED DECEMBER 31,
                                                      -----------------------------------------
                                                         2002            2001          2000
(000's omitted, except per share data)                -----------    -----------    -----------
<S>                                                   <C>            <C>            <C>
INTEREST INCOME
Interest and fees on loans                            $     5,085    $     5,574    $     5,717
Interest on securities                                        187            314            288
Interest on federal funds sold                                 46            287            597
                                                      -----------    -----------    -----------
    Total interest income                                   5,318          6,175          6,602

INTEREST EXPENSE
Interest expense on deposits                                2,047          3,272          3,617
                                                      -----------    -----------    -----------
Net interest income                                         3,271          2,903          2,985
Provision for loan losses                                   1,554            995            141
                                                      -----------    -----------    -----------
Net interest income after provision for loan losses         1,717          1,908          2,844

NONINTEREST INCOME
Service charges on deposits                                   225            132             97
Gain on sale of loans                                         100             71              -
Other service charges and fees                                 57             54             62
Other                                                           7             24             11
                                                      -----------    -----------    -----------
    Total noninterest income                                  389            281            170

NONINTEREST EXPENSES
Salaries and employee benefits                              1,723          1,913          2,200
Occupancy and equipment                                     1,079          1,024            647
Marketing and business development                             80            143             88
Professional fees                                             353            421            394
Data processing fees                                          246            112             48
Write off of foreclosed assets                                191              -              -
Defaulted loan expense                                         93             33              1
Other                                                          30            419            476
                                                      -----------    -----------    -----------
    Total noninterest expenses                              3,795          4,065          3,854
                                                      -----------    -----------    -----------

Net loss                                              $    (1,689)   $    (1,876)   $      (840)
                                                      ===========    ===========    ===========
Average common shares outstanding                       1,172,116        864,496        768,618
LOSS PER COMMON SHARE:
    Basic and fully diluted                           $     (1.44)   $     (2.17)   $     (1.09)
                                                      ===========    ===========    ===========
</TABLE>





See Notes to Consolidated Financial Statements.



                                      F - 4


<PAGE>
MICHIGAN COMMUNITY BANCORP LIMITED

           CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
                                                                                                 ACCUMULATED
                                                                   ADDITIONAL                       OTHER             TOTAL
                                           PREFERRED      COMMON     PAID-IN     ACCUMULATED    COMPREHENSIVE     STOCKHOLDERS'
(000's omitted, except per share data)       STOCK        STOCK      CAPITAL       DEFICIT       INCOME (LOSS)        EQUITY
                                         ------------    --------  ---------       ---------    --------------      ----------
<S>                                      <C>             <C>        <C>          <C>           <C>                <C>
BALANCES - JANUARY 1, 2000               $       -       $  3,780     $ 6,410       $ (2,392)       $     (10)       $   7,788
Private placement of common stock
  (59,043 shares)                                             295         155                                              450
Comprehensive loss:
   Net loss                                                                             (840)                             (840)
 Change in unrealized gain on
   available-for-sale securities                                                                           32               32
                                                                                                                    ----------
   Comprehensive loss                                                                                                     (808)
                                         ------------    --------     -------       --------        ---------       ----------
 BALANCES - DECEMBER 31, 2000                    -          4,075       6,565         (3,232)              22            7,430
Private placement of common stock
  (34,228 shares)                                             171          31                                              202
Common stock rights offering
  (310,118 shares)                                          1,551        (155)                                           1,396
Cost of rights offering                                                  (191)                                            (191)
Comprehensive loss:
   Net loss                                                                           (1,876)                           (1,876)
 Change in unrealized gain on
   available-for-sale securities                                                                           36               36
                                                                                                                    ----------
   Comprehensive loss                                                                                                   (1,840)
                                         ------------    --------     -------       --------        ---------       ----------
BALANCES - DECEMBER 31, 2001                     -          5,797       6,250         (5,108)              58            6,997
Cost of rights offering from prior year                                   (55)                                             (55)
Private placement of preferred
stock (20,834 shares)                            250                                                                       250
Comprehensive loss:
   Net loss                                                                           (1,689)                           (1,689)
   Change in unrealized loss on
     available-for-sale securities                                                                         (5)              (5)
                                                                                                                    ----------
   Comprehensive loss                                                                                                   (1,694)
                                         ------------    --------     -------       --------        ---------       ----------
BALANCES - DECEMBER 31, 2002             $       250     $  5,797     $ 6,195       $ (6,797)       $      53        $   5,498
                                         ============    ========     =======       ========        =========       ==========
</TABLE>


See Notes to Consolidated Financial Statements.


                                      F - 5


<PAGE>
MICHIGAN COMMUNITY BANCORP LIMITED

                      CONSOLIDATED STATEMENTS OF CASH FLOWS


<TABLE>
<CAPTION>
                                                                                YEAR ENDED DECEMBER 31,
                                                                           --------------------------------
                                                                             2002        2001       2000
(000's omitted)                                                            --------    --------    --------
<S>                                                                        <C>         <C>         <C>
OPERATING ACTIVITIES
  Net loss                                                                 $ (1,689)   $ (1,876)   $   (840)
  Adjustments to reconcile net loss to net cash provided by (used in)
      operating activities:
     Depreciation and amortization                                              278         285         266
     Provision for loan losses                                                1,554         995         141
     Write-off of foreclosed assets                                             191           -           -
     Common stock issued for legal settlement                                   141           -           -
     Net accretion of securities                                                (76)        (88)        (14)
     Decrease (increase) in loans held for sale                                 758      (2,946)          -
     Increase (decrease) in accrued interest receivable and other assets        (12)          9        (157)
     Increase in accrued interest payable and other liabilities                  29          54         368
                                                                           --------    --------    --------
Net cash provided by (used in) operating activities                           1,174      (3,567)       (236)

INVESTING ACTIVITIES
  Purchases of available for sale securities                                 (3,770)     (4,905)     (3,482)
  Proceeds from maturities of available for sale securities                   3,900       5,000       1,500
  Net increase in loans                                                      (4,420)     (1,126)    (15,983)
  Purchase of Federal Home Loan Bank stock                                      (35)         (5)          -
  Purchase of premises and equipment                                            (24)        (17)       (127)
                                                                           --------    --------    --------
Net cash used in investing activities                                        (4,349)     (1,053)    (18,092)

FINANCING ACTIVITIES
  Net increase (decrease) in deposits                                         1,610      (5,567)     23,468
  Proceeds from borrowings                                                      800           -           -
  Proceeds from sale of preferred stock                                         250           -           -
  Net proceeds from cost of common stock offerings                              (55)      1,407         450
                                                                           --------    --------    --------
Net cash provided by (used in) financing activities                           2,605      (4,160)     23,918
                                                                           --------    --------    --------
Net (decrease) increase in cash and cash equivalents                           (570)     (8,780)      5,590
Cash and cash equivalents, beginning of year                                  5,438      14,218       8,628
                                                                           --------    --------    --------
Cash and cash equivalents, end of year                                     $  4,868    $  5,438    $ 14,218
                                                                           ========    ========    ========

SUPPLEMENTAL DISCLOSURES OF CASH FLOWS INFORMATION
Cash paid for:
  Interest                                                                 $  2,158    $  2,940    $  3,346
  Federal income taxes                                                            -           -           -
Non-cash investing and financing activities
  Transfer from loans to real estate owned (net)                           $    352           -           -
  Common stock issued in connection with legal settlement                  $    141           -           -
</TABLE>


See Notes to Consolidated Financial Statements.


                                     F - 6

<PAGE>



MICHIGAN COMMUNITY BANCORP LIMITED


                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


           NOTE 1 -  BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES


           BASIS OF PRESENTATION AND CONSOLIDATION - The consolidated financial
           statements include the accounts of Michigan Community Bancorp Limited
           (the "Corporation") and its wholly owned subsidiaries, Lakeside
           Community Bank and North Oakland Community Bank (Collectively, the
           "Banks"). All significant intercompany accounts and transactions have
           been eliminated in consolidation.

           USE OF ESTIMATES - The accounting and reporting policies of the
           Corporation and its subsidiaries conform to generally accepted
           accounting principles. Management is required to make estimates and
           assumptions that affect the reported amounts in the financial
           statements and accompanying notes. 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.

           NATURE OF OPERATIONS - Michigan Community Bancorp Limited is a
           two-bank holding company which owns and operates Lakeside Community
           Bank ("Lakeside") in Sterling Heights, Michigan and North Oakland
           Community Bank ("North Oakland") in Rochester Hills, Michigan. The
           Banks operate and serve customers in Oakland and Macomb counties in
           the state of Michigan. The Banks are engaged in the business of
           general commercial and retail banking. The Banks offer a variety of
           deposit products including checking accounts, saving accounts and
           time deposits. The Banks conduct lending activities in the
           residential and commercial mortgage markets and the consumer
           installment marketplace. The Corporation's results of operations can
           be significantly affected by changes in interest rates.

           CASH AND CASH EQUIVALENTS -- Cash and cash equivalents include
           federal funds sold and short-term investments. Generally, federal
           funds are sold for a one-day period. The Corporation maintains
           deposit accounts in various financial institutions which at times may
           exceed FDIC insured limits or are not insured.

           SECURITIES - Securities that the Corporation intends to hold for an
           indefinite period of time, but not necessarily to maturity, are
           classified as available-for-sale and recorded at fair value. Any
           decision to sell an available-for-sale security is based on various
           factors, including significant movements in interest rates, changes
           in the maturity mix of the Corporation's assets and liabilities,
           liquidity demands, regulatory capital considerations, and other
           similar factors. Cost is adjusted for accretion of discounts to
           maturity and amortization of premiums. Unrealized gains and losses on
           available-for-sale securities are excluded from earnings and
           recorded, net of tax, as a component of comprehensive income in
           stockholders' equity.

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

           LOANS -- Loans are reported at their outstanding unpaid principal
           balance adjusted for charge-offs, the allowance for loan losses, and
           any deferred fees or costs on originated loans. Interest income is
           accrued on the unpaid principal balance. Net loan origination fees
           are not material.

           The accrual of interest on impaired loans is discontinued at the time
           the loan is 90 days' delinquent unless the credit is well secured and
           in the process of collection. In all cases, loans are placed on
           nonaccrual or charged-off at an earlier date if collection of
           principal or interest is considered doubtful.




                                      F - 7


<PAGE>



           NOTE 1 -- BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
           (continued)

           All interest accrued but not collected for loans that are placed on
           nonaccrual or charged off is reversed against interest income. The
           interest on these loans is accounted for on a cash basis or
           cost-recovery method, until qualifying for return to accrual status.
           Loans are returned to accrual status when all the principal and
           interest amounts contractually due are brought current and future
           payments are reasonably assured.

           BORROWINGS -- At December 31, 2002 borrowings relates to federal
           funds purchased for a one-day period at an interest rate of 1.375%.

           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 a 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 on 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 Banks 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 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
           less costs to sell of the collateral if the loan is collateral
           dependent.

           Large groups of homogeneous loans are collectively evaluated for
           impairment. Accordingly, the Corporation does not separately identify
           individual consumer and residential loans for impairment disclosures.

           CREDIT RELATED FINANCIAL INSTRUMENTS -- In the ordinary course of
           business, the Corporation has entered into commitments to extend
           credit, including commitments under commercial letters of credit and
           standby letters of credit. Such financial instruments are recorded
           when they are funded.

           FORECLOSED ASSETS -- Foreclosed assets include property acquired
           through, or in lieu of, loan foreclosure. Foreclosed assets are
           recorded in other assets at the lower of the amount of the loan
           balance plus unpaid accrued interest or the estimated fair value less
           selling costs at the time of foreclosure. Any write-down of the loan
           balance to estimated fair value when the property is acquired is
           charged to the allowance for loan losses. Impairment losses on
           property to be held and used are measured as the amount by which the
           carrying amount of the property exceeds its fair value. Subsequent
           market write-downs, operating expenses, and gains or losses on
           disposition of the foreclosed assets are charged or credited to other
           operating expense.

           PREMISES AND EQUIPMENT - Premises and equipment are stated at cost,
           less accumulated depreciation. The provision for depreciation is
           primarily computed using the straight-line method. Building
           improvements and furniture and equipment are amortized over their
           estimated useful lives. Management annually reviews these assets to
           determine whether carrying values have been impaired.

                                      F - 8


<PAGE>
           NOTE 1 -- BUSINESS AND SUMMARY OF SIGNIFICANT POLICIES (continued)

           INCOME TAXES - The Corporation files a consolidated federal income
           tax return with its subsidiary banks. The Corporation uses the asset
           and liability method of accounting for income taxes. Current taxes
           are measured by applying the provisions of enacted tax laws to
           taxable income to determine the amount of taxes receivable or
           payable. Deferred income tax assets and liabilities are recorded
           based on the difference between the tax bases of assets and
           liabilities and their carrying amounts for financial reporting
           purposes.

           COMMON STOCK OPTIONS - The Corporation has two common stock option
           plans (see Note 9). Options granted to directors and key employees
           under both plans are accounted for using the intrinsic value method,
           under which compensation expense is recorded at the amount by which
           the market price of the underlying stock at grant date exceeds the
           exercise price of an option. Under the Corporation's plans, the
           exercise price on all options granted equals or exceeds the fair
           value of the stock at the grant date. Accordingly, no compensation
           cost is recorded as a result of the stock option awards under the
           plan.

           LOSS PER COMMON SHARE -- Loss per share is calculated in accordance
           with Statement of Financial Accounting Standards No. 128, ("SFAS
           128"), Earnings per Share. Accordingly, for basic loss per share, the
           weighted average number of shares outstanding is based on the actual
           number of shares issued and outstanding during the period. For fully
           diluted earnings per share, the dilutive potential common shares from
           the Corporation's stock option plan and the warrants issued would be
           added to the weighted average shares using the treasury stock method.
           However, those potential shares have not been included in 2002, 2001,
           or 2000 because the effect would be antidilutive.

           Earnings per common share have been computed based on the following:


<TABLE>
<CAPTION>
                                           2002          2001         2000
                                      --------------  -----------  ------------
<S>                                   <C>             <C>          <C>
           Weighted average shares -
              Basic                   $    1,172,116  $   864,496  $    768,618

</TABLE>

           OTHER COMPREHENSIVE INCOME - Accounting principles generally require
           that recognized revenue, expenses, gains, and losses be included in
           net income. Certain changes in assets and liabilities, however, such
           as unrealized gains and losses on available-for-sale securities, are
           reported as a direct adjustment of the equity section of the balance
           sheet. Such items, along with net income or loss, are components of
           comprehensive income or loss. The only item included in "accumulated
           other comprehensive income" at December 31, 2002, 2001, and 2000 and
           for the years then ended is the net unrealized gains and losses on
           available-for-sale securities.

           RETIREMENT PLAN - The Corporation maintains a deferred compensation
           plan under Section 401(k) of the Internal Revenue Code. Under this
           plan, eligible employees are permitted to contribute into the
           retirement plan up to a maximum determined by the Internal Revenue
           Code. The Corporation, at its descretion, may make matching
           contributions and profit sharing contributions as specified in the
           plan document. The Corporation has made no such contribution since
           the inception of the plan.

           RECLASSIFICATION - Certain prior year amounts have been reclassified
           to conform with the current year presentation.

           RECENT ACCOUNTING PRONOUNCEMENTS - In April 2002, the Financial
           Accounting Standards Board (FASB) issued Statement of Financial
           Accounting Standards (SFAS) No. 145 that requires gains and losses
           from extinguishment of debt to be classified as extraordinary items
           only if they meet the criteria defined in APB Opinion No. 30 which
           are that the event or transaction is both unusual in nature and
           infrequent in occurrence. Events considered unusual should have a
           high degree of abnormality and be clearly unrelated to the company's
           normal operations and infrequency is defined as not expected to recur
           in the foreseeable future. Adoption of SFAS No. 145 will not have a
           material effect on the Corporation's financial statements.







                                      F - 9



<PAGE>



           NOTE 1 -- BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
           (continued)

           In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs
           Associated with Exit or Disposal Activities," which is effective for
           exit or disposal activities that are initiated after December 31,
           2002. This Statement addresses financial accounting and reporting for
           costs associated with exit or disposal activities and nullifies
           Emerging Issues Task Force (EITF) Issue No. 94-3, "Liability
           Recognition for Certain Employee Termination Benefits and Other Costs
           to Exit an Activity (including Certain Costs Incurred in a
           Restructuring)." SFAS No. 146 requires that a liability for a cost
           associated with an exit or disposal activity be recognized with the
           liability is incurred. Under Issue EITF 94-3, a liability for an exit
           cost as defined in Issue 94-3 was recognized at the date of an
           entity's commitment to an exit plan. It is not expected that the
           provisions of SFAS No. 146 will have a material impact on the
           financial position or results of operations of the Corporation.

           In October 2002, the FASB issued SFAS No. 147 which amends FASB
           Statements No. 72 and 144, "Accounting for Certain Acquisitions of
           Banking or Thrift Institutions" and "Accounting for the Impairment or
           Disposal of Long-Lived Assets," respectively, and FASB Interpretation
           No. 9, "Applying APB Opinions No. 16 and 17 "When a Savings and Loan
           Association or a Similar Institution is Acquired in a Business
           Combination Accounted for by the Purchase Method." The provisions of
           this standard generally became effective October 1, 2002. SFAS No.
           147 had no impact on the financial position or results of operations.

           In November 2002, the FASB issued Interpretation No. 45 (FIN 45),
           "Guarantor's Accounting and Disclosure Requirements for Guarantees,
           Including Indirect Guarantees of Indebtedness of Others," which
           addresses the disclosure to be made by a guarantor in its interim and
           annual financial statements about its obligations under guarantees.
           FIN 45 requires the guarantor to recognize a liability for the
           non-contingent component of the guarantee, this is the obligation to
           stand ready to perform in the event that specified triggering events
           or conditions occur. The initial measurement of this liability is the
           fair value of the guarantee at inception. The recognition of the
           liability is required even if it is not probable that payments will
           be required under the guarantee or if the guarantee was issued with a
           premium payment or as part of a transaction with multiple events. The
           initial recognition and measurement provisions are effective for all
           guarantees within the scope of FIN 45 issued or modified after
           December 31, 2002. The impact of adoption is not expected to have a
           significant impact on the Corporation's financial reporting.

           In December 2002, the FASB issued SFAS 148, "Accounting for
           Stock-Based Compensation -- Transition and Disclosure -- an Amendment
           of FASB Statement No. 123," which is effective for years ending after
           December 15, 2002. This Statement amends FASB SFAS 123, "Accounting
           for Stock-Based Compensation," to provide alternative methods of
           transition for a voluntary change to the fair value based method of
           accounts for stock-based employee compensation. In addition, this
           Statement amends the disclosure requirements of Statement No. 123 to
           require prominent disclosure in both annual and interim financial
           statements about the method of accounting for stock-based employee
           compensation and the effect of the method used on reported results.
           Implementation of SFAS No. 148 will not have a material impact on the
           Corporation's financial position or results of operations.














                                     F - 10

<PAGE>


NOTE 2 - MICHIGAN COMMUNITY BANCORP LIMITED (PARENT CORPORATION ONLY)

         The condensed financial information that follows presents the financial
condition of the parent corporation only, along with the results of its
operations and its cash flows. The parent corporation has recorded its
investment in the subsidiaries at cost plus its share of the undistributed
earnings (losses) of the subsidiaries since acquisition. Management considers
the operations of the Banks to be one segment. The parent corporation financial
information should be read in conjunction with the Corporation's consolidated
financial statements.


                                 BALANCE SHEETS

<TABLE>
<CAPTION>

(000's omitted, except per share data)                       AT DECEMBER 31,
                                                       --------------------------
                                                          2002           2001
                                                       -----------    -----------
<S>                                                    <C>            <C>
ASSETS
Cash and due from banks                                 $       15     $      122
Investment in subsidiaries                                   5,945          7,104
Premises and equipment                                          23             55
Other assets                                                    40             65
                                                       -----------    -----------
TOTAL ASSETS                                            $    6,023     $    7,346
                                                       ===========    ===========


LIABILITIES AND STOCKHOLDERS' EQUITY
Interest payable and other liabilities                  $      384     $      349
                                                       -----------    -----------

Common stock subject to redemption                             141            -


SHAREHOLDERS' EQUITY
Preferred stock - $12 stated value                             250            -
Common stock - $5 stated value                               5,797          5,797
Capital surplus                                              6,195          6,250
Accumulated deficit                                         (6,797)        (5,108)

Accumulated other comprehensive income                          53             58
                                                       -----------    -----------
Total shareholders' equity                                   5,498          6,997
                                                       -----------    -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY              $    6,023     $    7,346
                                                       ===========    ===========
</TABLE>







                                     F - 11
<PAGE>

NOTE 2 - MICHIGAN COMMUNITY BANCORP LIMITED (PARENT CORPORATION ONLY, continued)

                            STATEMENTS OF OPERATIONS



<TABLE>
<CAPTION>
                                                          YEAR ENDED DECEMBER 31,
                                                   -------------------------------------
(000's omitted)                                       2002         2001         2000
                                                   ----------   ----------    ----------
<S>                                                <C>          <C>           <C>
Interest income                                    $       1    $       2     $      12
NONINTEREST INCOME
Management fees                                          783          811           636
NONINTEREST EXPENSES
Salaries and employee benefits                           835          898           782
Premises and equipment                                   387          246           175
Professional fees                                         24          225           192
Business development                                      22           43            44
Supplies                                                   7           11            13
Outside processing charges                                27           21            13
Telephone and communications expenses                      9           10            10
Insurance                                                  6           11             8
Advertising                                                1            8             7
Other                                                      1          272            18
                                                   ----------   ----------    ----------
Total noninterest expenses                             1,319        1,745         1,262
Loss before equity in losses of subsidiary banks        (535)        (932)         (614)
Equity in losses of subsidiary banks                  (1,154)        (944)         (226)
                                                   ----------   ----------    ----------
Net loss                                           $  (1,689)   $  (1,876)    $    (840)
                                                   ==========   ==========    ==========
</TABLE>


                                     F - 12
<PAGE>

NOTE 2 - MICHIGAN COMMUNITY BANCORP LIMITED (PARENT CORPORATION ONLY, continued)

                            STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                                        YEAR ENDED DECEMBER 31,
                                                                                 -------------------------------------
(000's omitted)                                                                     2002          2001          2000
                                                                                 ---------     ---------     ---------
<S>                                                                              <C>           <C>           <C>
OPERATING ACTIVITIES
Net loss                                                                         $  (1,689)    $  (1,876)    $    (840)
Adjustments to reconcile net loss to cash provided by operating activities:
     Equity in losses of subsidiary banks                                            1,154           944           226
     Depreciation                                                                       32            35            33
     Common stock issued for legal settlement                                          141           -             -
     Decrease (increase) in other assets                                                25           (1)           (58)
     Increase in other liabilities                                                      35           274            48
                                                                                 ---------     ---------     ---------
Net cash used in operating activities                                                 (302)         (624)         (591)
INVESTING ACTIVITIES
  Investment in subsidiary                                                             -            (850)          -
  Purchases of premises and equipment                                                  -             (4)           (14)
                                                                                 ---------     ---------     ---------
Net cash used in investing activities                                                  -            (854)          (14)
FINANCING ACTIVITIES
Proceeds from sale of preferred stock issuance                                         250           -             -
Net proceeds from (cost of) common stock offerings                                     (55)        1,407           450
                                                                                 ---------     ---------     ---------
Net cash provided by financing activities                                              195         1,407           450
                                                                                 ---------     ---------     ---------
Net decrease in cash and cash equivalents                                             (107)          (71)         (155)
Cash and cash equivalents, beginning of year                                           122           193           348
                                                                                 ---------     ---------     ---------
Cash and cash equivalents, end of year                                           $      15     $     122     $     193
                                                                                 =========     =========     =========
</TABLE>




                                     F - 13
<PAGE>

NOTE 3 - SECURITIES

         The amortized cost and estimated fair value of available-for-sale
securities are as follows:

<TABLE>
<CAPTION>
                                                                      AT DECEMBER 31, 2002
                                                   --------------------------------------------------------
(000's omitted)                                                      GROSS           GROSS
                                                    AMORTIZED      UNREALIZED      UNREALIZED       FAIR
                                                       COST          GAINS           LOSSES         VALUE
                                                   -----------    ------------    -------------    --------
<S>                                                <C>            <C>             <C>              <C>
U.S. Treasury securities and obligations of
     U.S. Government corporations and agencies     $     4,654    $         51    $         -      $  4,705
Corporate bonds                                            265               2              -           267
                                                   -----------    ------------    -------------    --------
Total                                              $     4,919    $         53    $         -      $  4,972
                                                   ===========    ============    =============    ========

<CAPTION>
                                                                      AT DECEMBER 31, 2002
                                                   --------------------------------------------------------
(000's omitted)                                                      GROSS           GROSS
                                                    AMORTIZED      UNREALIZED      UNREALIZED       FAIR
                                                       COST          GAINS           LOSSES         VALUE
                                                   -----------    ------------    -------------    --------
<S>                                                <C>            <C>             <C>              <C>
U.S. Treasury securities and obligations of
     U.S. Government corporations and agencies     $     4,973    $         60    $           2    $  5,035
                                                   ===========    ============    =============    ========

</TABLE>

         The amortized cost and estimated fair value of available-for-sale
securities at December 31, 2002, by contractual maturity, are shown below.
Expected maturities will differ from contractual maturities because issuers may
have the right to call or prepay obligations with or without call or prepayment
penalties:


<TABLE>
<CAPTION>
         (000's omitted)                                                      AMORTIZED          FAIR
                                                                                 COST           VALUE
                                                                            -------------      --------
<S>                                                                         <C>                <C>
Due in one year or less                                                     $       1,719      $  1,733
Due after one year through five years                                               3,200         3,239
                                                                            -------------      --------
Total                                                                       $       4,919      $  4,972
                                                                            =============      ========
</TABLE>

         At December 31, 2002 and 2001, U.S. government agency securities
carried at $2.6 million and $3.5 million, respectively, were pledged to secure
borrowings and for other purposes required or permitted by law.

         Other than securities of the U.S. government agency, there were no
securities of any one issuer aggregating 10 percent of consolidated
stockholders' equity at December 31, 2002.









                                     F - 14
<PAGE>

NOTE 4 - LOANS

         A summary of the balances of loans is as follows:

<TABLE>
<CAPTION>
                                                          AT DECEMBER 31,
                                                 --------------------------------
(000's omitted)                                      2002                2001
                                                 ------------        ------------
<S>                                              <C>                 <C>
Mortgage loans on real estate:
Residential 1-4 family                           $      4,882        $      5,200
Commercial                                             35,321              31,486
Construction                                            4,422               4,575
Equity lines of credit                                  2,782               3,100
                                                 ------------        ------------
    Total mortgage loans                               47,407              44,361
Commercial loans                                       16,353              15,261
Consumer installment loans                              2,596               3,661
                                                 ------------        ------------
    Total loans                                        66,356              63,283

Less allowance for loan losses                          1,766               1,398
                                                 ------------        ------------
Net loans                                        $     64,590        $     61,885
                                                 ============        ============
</TABLE>

         In the ordinary course of business, the Banks have granted loans to
principal officers and directors and their affiliates with outstanding balances
of $2.1 million and $2.0 million at December 31, 2002 and 2001, respectively.
During the year ended December 31, 2002, total principal additions were $1.1
million and total principal payments were $1.0 million.


         An analysis of the allowance for loan losses is as follows:



<TABLE>
<CAPTION>
                                               YEAR ENDED DECEMBER 31,
                                         ----------------------------------
(000'S omitted)                            2002         2001        2000
                                         ---------    --------    ---------
<S>                                      <C>          <C>         <C>
Balance beginning of year                $   1,398    $    835    $     715
Provision for loan losses                    1,554         995          141
Charge-offs                                 (1,257)       (432)         (25)
Recoveries                                      71         -              4
                                         ---------    --------    ---------
Net charge-offs                             (1,186)       (432)         (21)
                                         ---------    --------    ---------
Balance end of year                      $   1,766    $  1,398    $     835
                                         =========    ========    =========
ALLOWANCE AS A PERCENTAGE OF:
    Loans                                      2.7%        2.2%         1.4%
    Net charge-offs                          148.9%      323.6%      3976.2%
</TABLE>




                                     F - 15
<PAGE>

NOTE 4 -- LOANS (continued)

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

<TABLE>
<CAPTION>
                                                                                            AT DECEMBER 31,
                                                                         ----------------------------------------------------
(000's omitted)                                                              2002                2001                2000
                                                                         ------------        ------------        ------------
<S>                                                                      <C>                 <C>                 <C>
Impaired loans with a valuation allowance                                $      2,820        $      1,699        $
                                                                         ------------        ------------        ------------
   Total impaired loans                                                  $      2,820        $      1,699        $
                                                                         ============        ============        ============
Valuation allowance related to impaired loans                            $        491        $        670        $          -
Average investment in impaired loans                                            2,588               1,768                   -
Interest income recognized on impaired loans                                      194                 132                   -
Interest income recognized on a cash basis on impaired loans                        -                   -                   -
</TABLE>

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

NOTE 5 - PREMISES AND EQUIPMENT

Bank premises and equipment consisted of the following:


<TABLE>
<CAPTION>
                                                                                  AT DECEMBER 31,
                                                                         --------------------------------
(000's omitted)                                                              2002                2001
                                                                         ------------        ------------
<S>                                                                      <C>                 <C>
Leasehold improvements                                                   $        887        $        887
Furniture and equipment                                                         1,107               1,084
                                                                         ------------        ------------
Total premises and equipment                                                    1,994               1,971
Less accumulated depreciation                                                   1,059                 782
                                                                         ------------        ------------
Premises and equipment, net                                              $        935        $      1,189
                                                                         ============        ============
</TABLE>

    The Corporation has a ten-year lease for approximately 11,000 square feet in
a one-story building located at 43850 Schoenherr, Sterling Heights, Michigan.
Effective August 4, 2000, the Corporation leased additional space adjacent to
the existing facility. Accordingly, the amended lease requires a monthly rent of
$11,080 and expires on August 1, 2008.

    The Corporation has entered into an assignment of a lease for a building
which is utilized for North Oakland's branch operations with approximately 3,100
square feet of office space located at 1467 North Rochester Road, Rochester
Hills, Michigan, until December 31, 2004. This facility serves as the main
office of North Oakland Community Bank. North Oakland prepaid the entire amount
of the lease by making a single payment of $250,000 in August 1998. The
prepayment of the rent will be expensed on a straight line basis over the lease
assignment term that expires on December 31, 2004. North Oakland is also
obligated to make monthly ground lease payments of $600 until December 31, 2004.


                                     F - 16
<PAGE>

NOTE 5 - PREMISES AND EQUIPMENT (continued)


    The Corporation has a lease for a building in St. Clair County, Michigan
that it planned to utilize for possible future expansion. During 2001, the
Corporation decided to exit from the St. Clair County project. Management
concluded that expansion into St. Clair County was not economically feasible at
that time. In 2001, the Corporation charged-off expenditures related to the
abandoned project totaling approximately $290,000 related to development costs.
In 2002 management has recorded an accrual of $180,000 related to remaining
lease obligations it expects to pay as it pursues options regarding lease
termination or sublease of the building. The Corporation remains liable for the
lease of the St. Clair County building at December 31, 2002. There are seven
years remaining on the lease term. The lease requires a monthly payment of
$3,750 for the next two years and $4,125 per month for the last five-year
period.


    The annual future minimum lease payments required under these noncancelable
operating leases as of December 31, 2002 are as follows:


<TABLE>
<CAPTION>
                            YEAR                       AMOUNT
                         ----------                 -----------
               <S>                                  <C>
                               2003                 $   185,160
                               2004                     185,535
                               2005                     182,460
                               2006                     182,460
                               2007                     182,460
                         Thereafter                     183.515
                                                    -----------
                              Total                 $ 1,101,590
                                                    ===========
</TABLE>

    Total rent expense for 2002, 2001 and 2000 was approximately $382,000,
$238,000 and 159,000, respectively.


NOTE 6 - DEPOSITS

    The following is a summary of the total deposits:



<TABLE>
<CAPTION>
                                                          AT DECEMBER 31,
                                                 --------------------------------
(000's omitted)                                      2002                2001
                                                 ------------        ------------
<S>                                              <C>                 <C>
NOW accounts                                     $      2,008        $      2,951
Money market deposits                                  13,171              17,598
Savings deposits                                        1,986               2,359
Certificates of deposit under $100,000                 28,961              25,660
Certificates of deposit $100,000 and over              18,815              17,231
                                                 ------------        ------------
Total interest bearing deposits                        64,941              65,799
Noninterest bearing demand deposits                     6,207               3,739
                                                 ------------        ------------
    Total deposits                               $     71,148        $     69,538
                                                 ============        ============
</TABLE>




                                     F - 17
<PAGE>

NOTE 6 - DEPOSITS (continued)

     Scheduled maturities of time deposits outstanding at December 31, 2002 are
as follows (000s omitted):

<TABLE>
<CAPTION>
                         YEAR         AMOUNT
                         ----         ------
                         <S>        <C>
                         2003       $    35,084
                         2004            11,141
                         2005             1,375
                         2006               176
                                    -----------
                         Total      $    47,776
                                    ===========
</TABLE>

NOTE 7 - INCOME TAXES

         No tax benefit has been reported related to gross deferred tax assets.
The Corporation does not have a history of earnings and, accordingly, a
valuation allowance has been recognized for the full amount of the net deferred
tax assets.

         Deferred income taxes are provided for the temporary differences
between the financial reporting basis and the tax basis of the Corporation's
assets and liabilities. The sources of such temporary differences and the
resulting net deferred tax assets for the years ended December 31, 2002, 2001
and 2000 are as follows (000s omitted):

<TABLE>
<CAPTION>
                                                      2002           2001          2000
                                                   -----------    ----------    ----------
<S>                                                <C>            <C>           <C>
Net operating loss carryforwards                   $     1,683    $    1,224    $      777
Allowance for loan losses                                  571           446           271
Other, net                                                   7            33            41
    Total deferred tax assets                            2,261         1,703         1,089
 Valuation allowance                                    (2,261)       (1,703)       (1,089)
                                                   -----------    ----------    ----------
      Net deferred tax assets                      $       -      $      -      $      -
                                                   ===========    ==========    ==========
</TABLE>

         The corporation has available for carryforward to offset future federal
taxable income, if any, net operating loss carryforwards approximating $4.9
million as of December 31, 2002. These carryforwards expire between the years
2014 and 2018.







                                     F - 18
<PAGE>

NOTE 8 - CAPITAL STOCK

         PREFERRED STOCK PRIVATE PLACEMENT - On May 3, 2002, the Corporation
sold 20,834 shares of Series A Voting Convertible Preferred Stock, in a private
offering, at a price of $12.00 per share. There are 62,502 shares of common
stock reserved for issuance upon the conversion of the Series A Voting
Convertible Preferred Stock.

         COMMON STOCK RIGHTS OFFERING - Effective August 23, 2001, the
Corporation granted rights to its stockholders to purchase up to 335,787 units.
Each unit consisted of two shares of its common stock and one class A common
stock purchase warrant and was offered at a price of $9.00 per unit. Each
warrant entitles the holder thereof to purchase 1.2 shares of common stock at
$5.50 per share, subject to adjustment in certain circumstances, for a period of
60 months, at which time the warrant expires. In addition, at the same time it
was granting rights to its existing shareholders, the Corporation also offered
100,000 units on a best efforts basis to the general public. As of December 31,
2001 the Corporation had sold 155,059 units that represented 310,118 shares of
common stock. Both offerings expired on December 31, 2001.

         COMMON STOCK PRIVATE PLACEMENT - On February 9, 2001, the Corporation
sold 15,674 shares of common stock to one investor, in a private offering, at a
price of $6.38 per share. On May 11, 2001, the Corporation sold 3,750 shares of
common stock to one investor, in a private offering, at a price of $6.00 per
share. On May 24, 2001, the Corporation issued 9,804 shares of common stock to
one investor, in a private offering, at a price of $5.10 per share. On June 12,
2001, the Corporation sold 5,000 shares of common stock to one investor, in a
private offering, at a price of $6.00 per share.

         On September 27, 2000, the Corporation sold 34,043 shares of common
stock to one investor, in a private offering, at a price of $5.875 per share. On
November 8, 2000, the Corporation sold 25,000 shares of common stock to one
investor at a price of $10.00 per share in private offering.

         On October 1, 1999, the Corporation sold 91,000 common stock units, in
a private offering, at a price of $11.00 per unit. Each unit consists of one
share of MCB's common stock and one redeemable common stock purchase warrant.
Each warrant entitles the holder thereof to purchase one and one half shares of
common stock at $11.00 per share subject to adjustment in certain circumstances
for 36 months. The warrants may be immediately separated from the common stock.
The warrants will be redeemable at five cents per warrant upon 30 days notice
mailed within 20 days after the closing bid price of the common stock has
equaled or exceeded $15.00 per share for a period of twenty consecutive trading
days. The units constitute "restricted" securities and cannot be resold or
transferred without registration under the Securities Act of 1933, the Michigan
Uniform Securities Act and the securities law of any other applicable
jurisdiction, unless an exception from registration under each such applicable
act is available.

         The private sales constitute "restricted" securities and cannot be
resold or transferred without registration under the Securities Act of 1933, the
Michigan Uniform Securities Act and the securities law of any other applicable
jurisdiction, unless an exception from registration under each such applicable
act is available.

         COMMON STOCK SUBJECT TO REDEMPTION -- During 2002 the Corporation
issued 25,454 shares of common stock in connection with the settlement of
certain litigation filed by certain former officers of the Corporation/Banks.
Since the Corporation remains liable to repurchase the shares at $5.50 per share
for one year from the settlement date, the shares are presented outside of
stockholders' equity on the accompanying December 31, 2002 balance sheet at an
amount which approximates redemption value.

NOTE 9 - STOCK-BASED COMPENSATION

         The Corporation has two common stock-based compensation plans. Under
the 1998 Employee Stock Compensation Plan (the "Employee Plan"), the Corporation
can grant options to key employees for the purchase of up to 29,000 shares of
common stock. Under the 1998 Nonemployee Director Plan (the "Nonemployee Plan"),
the Corporation can grant options for the purchase of up to 73,000 shares of
common stock. Under both plans, there is a minimum vesting period of between one
to three years before the options can be exercised, and all options expire 10
years after the date of their grant.

         Under both plans, the exercise price of each option equals the market
price of the Corporation's common stock on the date of the grant. These options
vest as follows: 70 percent on the effective date of the stock offering, 15
percent on the first anniversary of the stock offering, 5 percent on the second
anniversary and 10 percent on the third anniversary.

         On April 4, 2000, the options granted in 1998 were cancelled.


                                     F - 19
<PAGE>

NOTE 9 - STOCK-BASED COMPENSATION (continued)

         On November 6, 2000, the Corporation issued options under the Employee
and Nonemployee Plans for the purchase of 16,067 and 59,255 shares,
respectively. In addition, the vesting terms were slightly modified to 75
percent at the date of grant, 15 percent on the first anniversary of the date of
grant and 5 percent on both the second and third anniversaries of the date of
grant. An additional 1,200 options were issued on December 31, 2000 under the
Employee Plan.

         On January 1, 2002, the Corporation granted 9,000 options under the
Employee Plan.

         On December 31, 2002, the Corporation granted 600 options under the
Employee Plan.

         The Corporation has adopted the disclosure-only provisions of SFAS
No. 123, Accounting for Stock-Based Compensation, and applies APB 25 and related
interpretations in accounting for its plan. The fair value of each option grant
is estimated on the date of grant using the Black-Scholes option pricing model.
The following presents the weighted average fair value of options granted and
the assumptions used to estimate those fair values:

<TABLE>
<CAPTION>
                                                      2002           2001          2000
                                                   -----------    ----------    ----------
<S>                                                <C>            <C>           <C>
Weighted average fair value of options granted     $    3.87      $      -      $     4.55
Assumptions:
    Dividend yield                                         -             -               -
    Expected average life (years)                          5             -               5
    Volatility                                         27.73%            -           78.86%
    Risk-free interest rate                             3.75%            -            6.00%
</TABLE>


















                                      F - 20
<PAGE>
         NOTE 9 - STOCK-BASED COMPENSATION (continued)

         If the Corporation had elected to recognize compensation costs for the
plans based on the fair value of awards at the grant date, net loss per share on
a pro forma basis would have been as follows:

<TABLE>
<CAPTION>
(000'S OMITTED, EXCEPT PER SHAREHOLDER)               2002                         2001                         2000
                                            ------------------------     -------------------------     ------------------------
                                               AS                           AS                            AS
                                            REPORTED       PRO FORMA     REPORTED        PRO FORMA     REPORTED       PRO FORMA
                                            --------       ---------     --------        ---------     --------       ---------
<S>                                         <C>            <C>          <C>             <C>           <C>            <C>
Net loss                                    $  (1,689)     $  (1,701)    $  (1,876)     $   (1,928)   $    (840)     $     (958)
Net loss per common share                       (1.44)         (1.45)        (2.17)          (2.23)       (1.09)          (1.25)
</TABLE>

         The following table summarizes stock transactions for both plans and
the related average exercise price for each of the years in the period from
January 1, 2000 through December 31, 2002:


<TABLE>
<CAPTION>
                                                     2002                          2001                         2000
                                            -----------------------      ------------------------     ------------------------
                                                           WEIGHTED                      WEIGHTED                    WEIGHTED
                                                           AVERAGE                       AVERAGE                     AVERAGE
                                            NUMBER OF      EXERCISE      NUMBER OF       EXERCISE     NUMBER OF      EXERCISE
                                             SHARES         PRICE         SHARES          PRICE        SHARES        PRICE
                                            ---------    ----------      ---------      ---------     ---------   ------------
<S>                                         <C>          <C>             <C>            <C>           <C>         <C>
Options outstanding, beginning of period       74,122    $   6.74           76,522      $    6.73       41,331    $     15.00
Options granted                                 9,000        3.80              -              -         76,522           6.73
Options granted                                   600        4.10
Options forfeited                             (22,783)       6.75           (1,800)          6.75            -              -
Options forfeited                              (2,400)       3.80             (600)          5.63            -              -
Options cancelled                                                              -              -        (41,331)        (15.00)
                                             -------     --------         --------      ---------      -------    ------------
Options outstanding, end of period            58,539     $   6.32           74,122      $    6.74       76,522    $      6.73
                                             =======     ========         ========      =========      =======    ============
</TABLE>


           The following table shows summary information about fixed stock
options outstanding at December 31, 2002:


<TABLE>
<CAPTION>
                                                        OPTIONS OUTSTANDING                      OPTIONS EXERCISABLE
                                             ------------------------------------------     ----------------------------
                                                              WEIGHTED         WEIGHTED
                              RANGE OF                        AVERAGE          AVERAGE                       WEIGHTED
                              EXERCISE        NUMBER OF      REMAINING         EXERCISE      NUMBER OF       AVERAGE
                               PRICES          SHARES     CONTRACTUAL LIFE      PRICE         SHARES      EXERCISE PRICE
`                           -------------    ----------   ----------------    ---------     -----------   --------------

<S>                         <C>               <C>         <C>                 <C>           <C>           <C>
       Employee Plan        $3.80 - $6.75      15,100           7.85           $   5.09        10,877     $         5.09

       Nonemployee Plan              6.75      43,439           7.85               6.75        43,439               6.75
                                               ------                          --------      --------     --------------
                                               58,539                          $   6.32        54,316     $         6.42
                                               ======                          ========      ========     ==============
</TABLE>











                                     F - 21
<PAGE>
NOTE 10 - RESTRICTIONS ON CASH BALANCES AND UNDIVIDED PROFITS

         The Banks are required to maintain legal reserve requirements based on
the level of balances in deposit categories. Reserve requirements vary according
to the amount and type of deposit and generally range from 3 percent to 10
percent.

         Federal and state banking regulations place certain restrictions on
dividends paid and loans or advances made by the Banks to the Corporation.
Currently, the Banks and the Corporation are restricted from paying dividends
and the Corporation is restricted from borrowing funds, unless federal and state
approval is obtained.

NOTE 11 -- OFF BALANCE SHEET ACTIVITIES

CREDIT-RELATED FINANCIAL INSTRUMENTS -- The Banks are 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 Banks exposure to credit loss is represented by the contractual amount of
these commitments. The Banks follows the same credit policies in making
commitments as it does for on-balance-sheet instruments.

At December 31, the following financial instruments were outstanding whose
contract amounts represent credit risk (000's omitted):

<TABLE>
<CAPTION>
                                                           CONTRACT AMOUNT
                                                      --------------------------
                                                        2002             2001
                                                      ---------       ---------
<S>                                                   <C>            <C>
Commitments to grant loans                            $   2,603       $   2,775
Unfunded commitments under lines of credit                9,874           9,461
Commercial and standby letters of credit                      -              40
                                                      ---------       ---------
Total                                                 $  12,477       $  12,276
                                                      =========       =========
</TABLE>


Commitments to grant loans 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 Banks, 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
collateralized and contain maturity dates.

Commercial and standby letters of credit are conditional commitments issued by
the Banks to guarantee the performance of a customer to a third party. Those
letters of credit are primarily used to support public and private borrowing
arrangements. Essentially all letters of credit issued have expiration dates
within one year. The Banks generally hold collateral supporting those
commitments if deemed necessary.

To reduce credit risk related to the use of credit-related financial
instruments, the Banks might deem it necessary to obtain collateral. The amount
and nature of the collateral obtained is based on the Banks credit evaluation of
the customer. Collateral held varies but may include cash, securities, accounts
receivable, inventory, property, plant and equipment, and real estate.



                                     F - 22

<PAGE>
NOTE 12 - 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 on quoted market prices. However, in many
instances, there are no quoted market prices for the Banks 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 instruments.
Statement of Financial Standards No. 107 ("SFAS 107"), Disclosures abut Fair
Value of Financial Instruments, excludes certain financial instruments and all
nonfinancial instruments from its disclosure requirements. Accordingly, the
aggregate fair value amounts presented may not necessarily represent the
underlying fair value of the Banks.

         The following methods and assumptions were used in estimating the fair
values of financial instruments:

         CASH AND CASH EQUIVALENTS - The carrying amounts reported in the
consolidated balance sheets for cash and short-term instruments approximate
those assets' fair values.

         SECURITIES - Fair values for securities, excluding Federal Home Loan
Bank stock, are based on quoted market prices. The carrying value of Federal
Home Loan Bank stock approximates fair value based on the redemption provisions
of the Federal Home Loan Bank.

         LOANS HELD FOR SALE -- Fair values of mortgage loans held for sale are
based on commitments on hand from investors or prevailing market prices.

         LOANS - For variable rate loans that reprice frequently and with no
significant change in credit risk, fair values are based on carrying values.
Fair values for certain mortgage loans (e.g., one to four family residential)
and other consumer loans are based on quoted market prices of similar loans sold
in conjunction with securitization transactions, adjusted for differences in
loan characteristics. Fair values for other loans (e.g., commercial real estate
and investment property mortgage loans, commercial and industrial loans) are
estimated using discounted cash flow analysis, using interest rates currently
being offered for loans with similar terms to borrowers of similar credit
quality. Fair values for impaired loans are estimated using discounted cash flow
analyses or underlying collateral values, where applicable.

         DEPOSIT LIABILITIES - The fair values disclosed for demand deposits
(e.g., interest and noninterest checking, passbook savings and certain types of
money market accounts) are, by definition, equal to the amount payable on demand
at the reporting date (i.e., their carrying amounts). Fair values for fixed rate
certificates of deposit are estimated using a discounted cash flow calculation
that applies interest rates currently being offered on certificates to a
schedule of aggregated expected monthly maturities on time deposits.

         ACCRUED INTEREST -- The carrying amounts of accrued interest
approximates fair value.

         BORROWINGS - Estimated fair value equals carrying value as the
borrowing was a one day federal fund purchase.

         OFF-BALANCE-SHEET INSTRUMENTS - Fair values for off-balance-sheet
lending commitments are based on fees currently charged to enter into similar
agreements, taking into consideration the remaining terms of the agreements and
the counterparties' credit standings. The Banks do not charge fees for lending
commitments; thus it is not practicable to estimate the fair value of these
instruments.












                                     F - 23
<PAGE>
NOTE 12 - FAIR VALUES OF FINANCIAL INSTRUMENTS (continued)

         The estimated fair values and related carrying or notional amounts of
the Banks financial instruments are as follows:



<TABLE>
<CAPTION>
                                                                 AT DECEMBER 31,
                                              -------------------------------------------------
                                                       2002                      2001
                                              -------------------------------------------------
(000's omitted)                               CARRYING    ESTIMATED     CARRYING      ESTIMATED
                                                AMOUNT    FAIR VALUE      AMOUNT     FAIR VALUE
<S>                                            <C>       <C>           <C>          <C>
ASSETS
Cash and cash equivalents                      $ 4,868   $     4,868   $    5,438   $    5,438
FHLB stock                                         143   $       143   $      108   $      108
Securities                                       4,972         4,972        5,031        5,031
Loans                                           64,590        65,537       61,885       62,106
Loans held for sale                              2,188         2,188        2,946        2,946
Accrued interest receivable                        351           351          357          357
LIABILITIES - DEPOSITS
Interest bearing                                64,940        65,482       65,799       66,368
Noninterest-bearing                              6,208         6,208        3,739        3,739
Other borrowings                                   800           800          -            -
Accrued interest payable                           221           221          332          332
</TABLE>


NOTE 13 - REGULATORY MATTERS

         The Corporation (on a consolidated basis) and the Banks are subject to
various regulatory capital requirements administered by the federal banking
agencies. Failure to meet minimum capital requirements can initiate certain
mandatory and possibly additional discretionary actions by regulators that, if
undertaken, could have a direct material effect on the Corporation's and Banks'
financial statements. Under capital adequacy guidelines and the regulatory
framework for prompt corrective action, the Corporation and the Banks must meet
specific capital guidelines that involve quantitative measures of their assets,
liabilities, and certain off-balance-sheet items as 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.

     North Oakland Community Bank formally entered into an agreement with its
primary regulatory examiners, which provided for the following requirements,
among others:

     -   Formulate and implement earnings and strategic plans.

     -   Formulate, adopt, and submit a written action plan to lessen the Bank's
         risk position in each asset classified "Substandard" or "Doubtful".

     -   Maintain Tier 1 capital level equal to or exceeding 8%.

     -   Limit total asset growth to not more than 3% during any consecutive
         three-month period without first providing at least 30 days advance
         written notice.

     -   Not declare or pay any dividends without prior written consent.

     Management believes North Oakland Community Bank has addressed these
concerns with the regulators and is corresponding with them to maintain
compliance with these requirements.

     A joint examination of the banks was completed during the first quarter of
2003. At the exit conference the regulatory examiners indicated that as a result
of this examination, corrective actions, as yet to be determined will be
forthcoming, as it relates to Lakeside Community Bank.

     Quantitative measures established by regulation to ensure capital adequacy
require the Corporation and the Banks to maintain minimum amounts and ratios
(set forth in the following table) of total and Tier 1 capital to risk-weighted
assets and of Tier 1 capital to average assets. Management believes, as of
December 2002 and 2001, that the Corporation and the Banks met all capital
adequacy requirements to which they are subject, except for Lakeside Community
Bank which at December 2002 was considered adequately capitalized. Management
has taken steps to increase its capital to a well capitalized position including
selling loans, shrinking the deposit base and other measures (See Note 15).


                                     F - 24
<PAGE>
NOTE 13 - REGULATORY MATTERS (Continued)

         As of December 31, 2002, the most recent notification from the Federal
Deposit Insurance Corporation categorized North Oakland Community Bank as
well-capitalized and Lakeside Community Bank as adequately capitalized under the
regulatory framework for prompt corrective action. To be categorized as
well-capitalized or adequately capitalized, an institution must maintain minimum
total risk-based, Tier 1 risked-based and Tier 1 leverage ratios as set forth in
the following table. There are no conditions or events since the notification
that management believes have changed the Banks' category. The Corporation and
the Banks' actual capital amounts and ratios as of December 31, 2002 and 2001
are also presented in the following table.


<TABLE>
<CAPTION>
                                                                          TO BE ADEQUATELY               TO BE  WELL
                                                   ACTUAL                   CAPITALIZED                  CAPITALIZED
                                             ----------------             ----------------            ----------------
                                             AMOUNT     RATIO             AMOUNT     RATIO            AMOUNT     RATIO
                                             ------     -----             ------     -----            ------     -----
<S>                                          <C>        <C>               <C>        <C>              <C>        <C>
AS OF DECEMBER 31, 2002
Total risk-based capital
  (to risk weighted assets):
      Consolidated                           $6,751       9.92  %         $5,444       8.00 %          N/A       N/A
      Lakeside Community Bank                 3,378       8.91             3,047       8.00            3,809     10.00
      North Oakland Community Bank            3,373      11.27             2,394       8.00            2,993     10.00
Tier 1 capital (to risk-weighted assets:)
      Consolidated                           $5,892       8.66  %         $2,722       4.00 %          N/A       N/A
      Lakeside Community Bank                 2,897       7.64             1,524       4.00            2,286      6.00
      North Oakland Community Bank            2,995      10.01             1,197       4.00            1,796      6.00
Tier 1 capital (to average assets:)
      Consolidated                           $5,892       7.28  %         $3,239       4.00 %          N/A       N/A
      Lakeside Community Bank                 2,897       6.27             1,949       4.00            2,312      5.00
      North Oakland Community Bank            2,995       8.63             1,388       4.00            1,735      5.00

AS OF DECEMBER 31, 2001
Total risk-based capital
  (to risk weighted assets):
      Consolidated                           $6,940      10.50  %         $5,296       8.00 %          N/A       N/A
      Lakeside Community Bank                 4,417      11.90             2,964       8.00            3,705     10.00
      North Oakland Community Bank            3,463      11.90             2,322       8.00            2,903     10.00
Tier 1 capital (to risk-weighted assets:)
      Consolidated                           $6,107       9.20  %         $2,648       4.00 %          N/A       N/A
      Lakeside Community Bank                 3,953      10.70             1,482       4.00            2,223      6.00
      North Oakland Community Bank            3,094      10.70             1,161       4.00            1,742      6.00
Tier 1 capital (to average assets:)
      Consolidated                           $6,107       7.40  %         $3,282       4.00 %          N/A       N/A
      Lakeside Community Bank                 3,953       8.60             1,833       4.00            2,292      5.00
      North Oakland Community Bank            3,094       8.60             1,443       4.00            1,804      5.00
</TABLE>



NOTE 14 - LITIGATION

         The Corporation is involved in routine litigation incidental to its
business. The Corporation is defending for its interest and is contesting the
claims against it. Management believes the ultimate disposition of these matters
will not have a material adverse affect on the financial statements.


NOTE 15 - SUBSEQUENT EVENT

         In February 2003, the Board of Directors of the Corporation approved a
plan to raise additional capital, which included the hiring of an investment
banking firm to analyze various options including the possibility of selling
North Oakland Community Bank.


                                     F - 25
<PAGE>
                                   SIGNATURES

    In accordance with Section 13 or 15(d) of the Securities Exchange Act of
1934, the registrant has caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized on March 29, 2003.

                       MICHIGAN COMMUNITY BANCORP LIMITED

            /s/ J. William Sumner                      /s/ Gail L. Partee
            ----------------------                     ------------------------
            J. William Sumner                          Gail L. Partee
            Chairman and Chief Executive Officer       VP, Controller


In accordance with the Securities Exchange Act of 1934, this report has been
signed by the following persons on behalf of the Corporation in the capacities
indicated on April 9, 2003.
----------------------
SIGNATURE                    CAPACITY

 /s/ J. William Sumner        Chairman and Chief Executive Officer and Director
-------------------------     (Principal Executive Officer)
J. William Sumner

/s/ Frank Blowers            President and Chief Operations Officer and Director
-------------------------    (Principal Operations Officer)
Frank Blowers                (Principal Financial Officer)


/s/ Gary Davison             Director
-------------------------
Gary Davison

/s/ Phillip T. Hernanndez    Director
-------------------------
Phillip T. Hernanndez

/s/ Joseph S. Lentine        Director
-------------------------
Joseph S. Lentine

/s/ Frederick Maibauer       Director
-------------------------
Frederick Maibauer

/s/ Robert R. Peleman        Director
-------------------------
Robert R. Peleman

/s/ Russell M. Shelton       Director
-------------------------
Russell M. Shelton

/s/ Jeff Tamaroff            Director
-------------------------
Jeff Tamaroff
<PAGE>
I, J. William Sumner, certify that:

     1.   I have reviewed this annual report on Form 10-KSB of Michigan
          Community Bancorp;

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

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

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

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

              b.  Evaluated the effectiveness of the registrant's disclosure
                  controls and procedures as of a date within 90 days prior to
                  the filing date of this annual report (the "Evaluation Date");
                  and

              c.  Presented in this annual report our conclusions about the
                  effectiveness of the disclosure controls and procedures based
                  on our evaluation as of the Evaluation Date;

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

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

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

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

/s/      J. William Sumner
   ---------------------------------
         J. William Sumner
         Chief Executive Officer
         April 9, 2003
<PAGE>
I, Gail L. Partee, certify that:

     1.   I have reviewed this annual report on Form 10-KSB of Michigan
          Community Bancorp;

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

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

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

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

              b.  Evaluated the effectiveness of the registrant's disclosure
                  controls and procedures as of a date within 90 days prior to
                  the filing date of this annual report (the "Evaluation Date");
                  and

              c.  Presented in this annual report our conclusions about the
                  effectiveness of the disclosure controls and procedures based
                  on our evaluation as of the Evaluation Date;

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

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

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

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

/s/ Gail L. Partee
   -----------------------------
         Gail L. Partee
         -----------------------
         VP, Controller
         April 9, 2003
<PAGE>
                               10-K EXHIBIT INDEX

EXHIBIT NO.         DESCRIPTION

EX-99.1             Certification pursuant to 18 U.S.C. Section 1350, as adopted
                    pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

EX-99.2             Certification pursuant to 18 U.S.C. Section 1350, as adopted
                    pursuant to Section 906 of the Sarbanes-Oxley Act of 2002