VALLEY RIDGE FINANCIAL CORP
10QSB, 1998-08-14
STATE COMMERCIAL BANKS
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<PAGE>
                  U.S. SECURITIES AND EXCHANGE COMMISSION

                          Washington, D.C. 20549

                                FORM 10-QSB

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

               For the quarterly period ended June 30, 1998

                                    OR

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

          For the transition period from _________ to __________

                    Commission File Number:  333-00724

                       VALLEY RIDGE FINANCIAL CORP.
     (Exact Name of Small Business Issuer as Specified in its Charter)

            MICHIGAN                              38-2888214
(State or Other Jurisdiction of      (I.R.S. Employer Identification No.)
Incorporation or Organization)

          450 WEST MUSKEGON                       (616) 678-5911
       KENT CITY, MICHIGAN  49330          (Issuer's Telephone Number,
(Address of Principal Executive Offices)       Including Area Code)

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

There were 619,979 shares of Common Stock ($10 par value) outstanding as of
July 31, 1998.

Transitional Small Business Disclosure Format (check one):  Yes ___No __X___









<PAGE>
                       VALLEY RIDGE FINANCIAL CORP.
                                   INDEX



PART 1.        Financial Information                             PAGE NO.

       Item 1.FINANCIAL STATEMENTS

     Condensed Consolidated Balance Sheets
       June 30, 1998 (Unaudited) and December 31, 1997 . . . .         3

     Condensed Consolidated Statements of Income
       Three and Six Months Ended June 30, 1998 (Unaudited) and
       June 30, 1997 (Unaudited) . . . . . . . . . . . . . . .         4

     Consolidated Statements of Comprehensive Income   Three
       and Six Months Ended June 30, 1998 (Unaudited) and
       June 30, 1997 (Unaudited) . . . . . . . . . . . . . . .         5

     Condensed Consolidated Statements of Cash Flows
       Six Months Ended June 30, 1998 (Unaudited) and
       June 30, 1997 (Unaudited) . . . . . . . . . . . . . . .         6

     Notes to Condensed Consolidated Financial
        Statements (Unaudited) . . . . . . . . . . . . . . . .         7


     Item 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF
              OPERATION . . . . . . . . . . . . . . . . . . .         10


PART II.    Other Information

     Item 2.  CHANGES IN SECURITIES AND USE OF PROCEEDS . . .         12

     Item 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY
              HOLDERS . . . . . . . . . . . . . . . . . . . .         12

     Item 6.  EXHIBITS AND REPORTS ON FORM 8-K. . . . . . . .         14

     Signatures . . . . . . . . . . . . . . . . . . . . . . .         15








<PAGE>
                      PART I.   FINANCIAL INFORMATION

ITEM 1.   FINANCIAL STATEMENTS

<TABLE>
                       VALLEY RIDGE FINANCIAL CORP.

                   CONDENSED CONSOLIDATED BALANCE SHEETS

- ---------------------------------------------------------------------------
<CAPTION>
                                                                       JUNE 30,          DECEMBER 31,
                                                                         1998                1997
                                                                         ----                ----
                                                                                (Unaudited)
<S>                                                                 <C>                 <C>
ASSETS
    Cash and due from banks                                          $  5,972,544        $  5,502,762
    Federal funds sold                                                  1,300,000           3,000,000
                                                                     ------------        ------------
        Total cash and cash equivalents                                 7,272,544           8,502,762

    Securities                                                         25,790,553          24,645,876
    Total loans                                                        96,666,468          92,417,342
    Allowance for loan losses                                          (1,229,667)         (1,186,772)
                                                                     ------------        ------------
                                                                       95,436,801          91,230,570
    Premises and equipment - net                                        5,041,432           3,428,200
    Other assets                                                        3,181,387           3,067,101
                                                                     ------------        ------------

        Total assets                                                 $136,722,717        $130,874,509
                                                                     ============        ============

LIABILITIES AND SHAREHOLDERS' EQUITY
    Deposits
        Noninterest-bearing                                          $ 17,469,271        $ 16,465,625
        Interest-bearing                                               92,516,644          88,709,310
                                                                     ------------        ------------
                                                                      109,985,915         105,174,935

    Other borrowings                                                   11,000,000          11,000,000
    Accrued expenses and other liabilities                              1,898,124           1,402,198
                                                                     ------------        ------------
        Total liabilities                                             122,884,039         117,577,133




                                      -3-
<PAGE>
Shareholders' equity
    Common stock, $10 par value: 2,000,000 shares
      authorized; 619,979 shares outstanding at June 30, 1998
      and December 31, 1997, respectively                               6,199,790           6,199,790
    Surplus                                                             1,396,736           1,396,736
    Retained earnings                                                   5,509,812           5,002,083
    Net unrealized gain on securities available for sale                  732,340             698,767
                                                                     ------------        ------------
        Total shareholders' equity                                     13,838,678          13,297,376
                                                                     ------------        ------------

        Total liabilities and shareholders' equity                   $136,722,717        $130,874,509
                                                                     ============        ============
</TABLE>

  See accompanying notes to condensed consolidated financial statements.

































                                      -4-
<PAGE>
<TABLE>
                        VALLEY RIDGE FINANCIAL CORP.

                CONDENSED CONSOLIDATED STATEMENTS OF INCOME
                                (Unaudited)

- ---------------------------------------------------------------------------
<CAPTION>
                                              -----THREE MONTHS ENDED------     ------SIX MONTHS ENDED-------
                                              JUNE 30, 1998   JUNE 30, 1997     JUNE 30, 1998   JUNE 30, 1997
                                              -------------   -------------     -------------   -------------
<S>                                           <C>             <C>               <C>             <C>
Interest income
      Loans, including fees                    $2,233,940      $2,134,029        $4,412,333      $4,159,684
      Federal funds sold                           39,848          40,263           109,131          76,718
      Investment securities                       370,718         285,543           716,128         563,286
                                               ----------      ----------        ----------      ----------
                                                2,644,506       2,459,835         5,237,592       4,799,688
Interest expense
   Deposits                                       887,799         873,420         1,821,569       1,699,029
   Other                                          165,200         114,861           330,870         231,725
                                               ----------      ----------        ----------      ----------
                                                1,052,999         988,281         2,152,439       1,930,754
                                               ----------      ----------        ----------      ----------

   NET INTEREST INCOME                          1,591,507       1,471,554         3,085,153       2,868,934

Provision for loan losses                          37,500          30,000            75,000          60,000
                                               ----------      ----------        ----------      ----------

   NET INTEREST INCOME AFTER PROVISION
    FOR LOAN LOSSES                             1,554,007       1,441,554         3,010,153       2,808,934

Other income
   Service charges and other income               248,792         244,881           506,626         490,966
   Gain (loss) on sales of investment
      securities                                     (139)                           80,438          18,077
   Gain on sale of loans                            8,566           5,398            22,299          12,536
                                               ----------      ----------        ----------      ----------
                                                  257,219         250,279           609,363         521,579









                                      -5-
<PAGE>
Other expense
   Salaries and benefits                          686,631         647,115         1,378,175       1,258,012
   Occupancy                                       76,134          78,634           151,169         157,712
   Furniture and fixtures                          62,387          65,932           123,203         131,545
   FDIC insurance premium                           4,721                             7,783           4,644
   Supplies                                        43,021          54,371            74,541         121,837
   Other                                          476,683         397,273           839,118         784,901
                                               ----------      ----------        ----------      ----------
                                                1,349,577       1,243,325         2,573,989       2,458,651
                                               ----------      ----------        ----------      ----------
INCOME BEFORE FEDERAL INCOME TAX                  461,649         448,508         1,045,527         871,862

Federal income tax expense                         98,352          94,160           227,808         168,699
                                               ----------      ----------        ----------      ----------

NET INCOME                                     $  363,297      $  354,348        $  817,719      $  703,163
                                               ==========      ==========        ==========      ==========

Basic and diluted earnings per share           $      .59      $      .57        $     1.32      $     1.13
                                               ==========      ==========        ==========      ==========
</TABLE>

  See accompanying notes to condensed consolidated financial statements.


























                                      -6-
<PAGE>
<TABLE>
                       VALLEY RIDGE FINANCIAL CORP.

              CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
                                (Unaudited)

- ---------------------------------------------------------------------------
<CAPTION>
                                                  --THREE MONTHS ENDED--        ---SIX MONTHS ENDED---
                                                  JUNE 30,      JUNE 30,        JUNE 30,      JUNE 30,
                                                    1998          1997            1998          1997
                                                    ----          ----            ----          ----
<S>                                              <C>           <C>             <C>           <C>
Net income                                        $363,297      $354,348        $817,719      $703,163

Other comprehensive income:
    Change in unrealized gains on
      securities                                    99,574       109,740          50,868       (58,938)
                                                  --------      --------        --------      --------


Comprehensive income                              $462,871      $464,088        $868,587      $644,225
                                                  ========      ========        ========      ========
</TABLE>

  See accompanying notes to condensed consolidated financial statements.























                                      -7-
<PAGE>
<TABLE>
                       VALLEY RIDGE FINANCIAL CORP.
              CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                (Unaudited)

- ---------------------------------------------------------------------------
<CAPTION>
                                                        --------SIX MONTHS ENDED-------
                                                         JUNE 30, 1998    JUNE 30, 1997
                                                        --------------    -------------
<S>                                                       <C>              <C>
CASH FLOWS FROM OPERATING ACTIVITIES
   Net income                                              $   817,719      $   703,163
   Adjustments to reconcile net income
     to net cash from operating activities
      Depreciation                                             100,593          108,047
      Amortization of:
         Premiums and discounts on securities, net              14,459           24,439
         Goodwill and core deposit intangibles                   8,292           17,444
      Provision for loan losses                                 75,000           60,000
      Gain on sale of securities                               (80,438)         (18,077)
      Gain on sale of loans                                    (22,299)         (12,536)
      Loans originated for sale                             (3,461,167)      (1,629,650)
      Proceeds from loans sold                               3,408,900        1,582,548
      Net change in:
         Accrued interest receivable                            90,292          (94,281)
         Other assets                                         (212,870)           4,689
         Accrued expenses and other liabilities                762,377          403,962
                                                           -----------      -----------
            Net cash from operating activities               1,500,858        1,149,748

CASH FLOWS FROM INVESTING ACTIVITIES
   Net change in loans                                      (4,206,665)      (6,285,081)
   Proceeds from:
      Sales of securities available for sale                 4,328,446        2,611,198
      Repayments and maturities of securities
        available for sale                                   2,033,217        2,095,374
   Purchase of:
      Securities available for sale                         (7,389,494)      (3,620,368)
      Premises and equipment, net                           (1,713,825)        (172,916)
                                                           -----------      -----------
         Net cash used in investing activities              (6,948,321)      (5,371,793)

CASH FLOWS FROM FINANCING ACTIVITIES
   Net increase in deposits                                $ 4,527,235      $ 6,399,767
   Dividends paid                                             (309,990)        (198,436)
                                                           -----------      -----------
      Net cash from financing activities                     4,217,245        6,201,331
                                                           -----------      -----------
                                      -8-
<PAGE>
Net change in cash and cash equivalents                     (1,230,218)       1,979,286
Cash and cash equivalents at beginning of year               8,502,762        7,516,367
                                                           -----------      -----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD                 $ 7,272,544      $ 9,495,653
                                                           ===========      ===========

Supplemental disclosures of cash flow information
   Cash paid during the year for:
      Interest                                             $ 2,165,516      $ 1,914,960
      Income taxes                                             311,150           78,400
</TABLE>









  See accompanying notes to condensed consolidated financial statements.




























                                      -9-
<PAGE>
                       VALLEY RIDGE FINANCIAL CORP.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                (Unaudited)

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


1.   BASIS OF PRESENTATION

          The unaudited financial statements for the three and six months ended
     June 30, 1998 and June 30, 1997 include the consolidated results of
     operations of Valley Ridge Financial Corp. (the "Corporation") and its
     wholly-owned subsidiary, Valley Ridge Bank ("the Bank").  These
     consolidated financial statements have been prepared in accordance with
     the Instructions for Form 10-QSB and Item 310(b) of Regulation S-B and
     do not include all disclosures required by generally accepted accounting
     principles for a complete presentation of the Corporation's financial
     condition and results of operations. In the opinion of management, the
     information reflects all adjustments (consisting only of normal
     recurring accruals) which are necessary in order to make the financial
     statements not misleading and for a fair presentation of the results of
     operations for such periods.  The results for the period ended June 30,
     1998 should not be considered as indicative of results that may be
     achieved for a full year.  For further information, refer to the
     consolidated financial statements and footnotes included in the
     Corporation's Annual Report on Form 10-KSB for the year ended December
     31, 1997.


2.   ALLOWANCE FOR LOAN LOSSES

          The following is a summary of the activity in the allowance for loan
     losses account for the six months ended June 30, 1998:
<TABLE>
<CAPTION>
<S>        <C>                                               <C>
            Balance at January 1, 1998                        $1,186,772
                Provision for loan losses charged
                  to operating expense                            75,000
                Recoveries on loans previously charged
                  to the allowance                                21,188
                Loans charged off                                (53,293)
                                                              ----------

            Balance at June 30, 1998                          $1,229,667
                                                              ==========
</TABLE>


                                      -10-
<PAGE>
                       VALLEY RIDGE FINANCIAL CORP.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                (Unaudited)

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

3.   PREMISES AND EQUIPMENT - NET

     Premises and equipment at June 30, 1998 and December 31, 1997 were as
follows:

<TABLE>
<CAPTION>
                                                             ACCUMULATED         CARRYING
                                               COST          DEPRECIATION         VALUE
                                               ----          ------------         -----
<S>                                        <C>              <C>               <C>
JUNE 30, 1998
    Land                                    $  305,422                         $  305,422
    Building and improvements                2,393,103       $  (954,625)       1,438,478
    Construction in progress                 2,630,029                          2,630,029
    Furniture and equipment                  2,769,354        (2,101,851)         667,503
                                            ----------       -----------       ----------

                                            $8,097,908       $(3,056,476)      $5,041,432
                                            ==========       ===========       ==========

DECEMBER 31, 1997
    Land                                    $  305,422                         $  305,422
    Building and improvements                2,398,275       $  (928,748)       1,469,525
    Construction in progress                   965,194                            965,194
    Furniture and equipment                  2,734,763        (2,046,706)         688,057
                                            ----------       -----------       ----------

                                            $6,403,654       $(2,975,454)      $3,428,200
                                            ==========       ===========       ==========
</TABLE>

4.   OTHER BORROWINGS

          At June 30, 1998, the Corporation had the following advances from the
     Federal Home Loan Bank (the "FHLB"):







                                      -11-
<PAGE>
                       VALLEY RIDGE FINANCIAL CORP.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                (Unaudited)

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

<TABLE>
<CAPTION>
         TYPE            INTEREST RATE           MATURITY DATE             AMOUNT
         ----            -------------           -------------             ------
<S>     <C>                 <C>             <C>                        <C>
         Variable            5.779%            October 22, 1998         $ 3,000,000
         Fixed               5.260             February 1, 1999           2,000,000
         Fixed               5.230             February 1, 1999           1,000,000
         Fixed               6.070                 July 9, 1999           2,000,000
         Fixed               6.080           September 22, 1999           3,000,000
                                                                        -----------

                                                                        $11,000,000
                                                                        ===========
</TABLE>

          Each advance requires monthly interest payments at either fixed or
     adjustable rates.  The variable rate is based on the FHLB overnight rate
     and adjusts quarterly.  These borrowings are collateralized by
     nonspecific loans within the mortgage portfolio up to the principal
     outstanding.


5.   EARNINGS PER COMMON SHARE

          Basic earnings and diluted earnings per share are calculated on the
     basis of the weighted average number of shares outstanding.  Earnings
     per share amounts are based on 619,979 shares outstanding for the three
     and six months ended June 30, 1998 and 1997.  All share amounts have
     been restated to reflect stock dividends and splits.













                                      -12-
<PAGE>
ITEM 2.   MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

The following discussion is designed to provide a review of the
consolidated financial condition and results of operations of Valley Ridge
Financial Corp. (the "Corporation").  This discussion should be read in
conjunction with the consolidated financial statements and related notes.


RESULTS OF OPERATIONS

NET INCOME:  The Corporation reported net income of $363,297 or $0.59 per
share for the second quarter of 1998 compared to $354,348 or $0.57 per
share for the same period in 1997.  Year-to-date net income was $817,719 or
$1.32 per share for 1998 compared to $703,163 or $1.13 per share for 1997.
The improvement was primarily a result of improved net interest income,
partially offset by increased noninterest expense.  Management is not aware
of any existing trends, events, uncertainties or current recommendations by
regulatory authorities that are expected to have a material impact on the
Corporation's future operating results.

NET INTEREST INCOME:  Net interest income increased $119,953 or 8.15% to
$1,591,507 for the three-month period ended June 30, 1998 and $216,219 or
7.54% to $3,085,153 for the six-month period ended June 30, 1998 compared
to the same periods in 1997.  The increases in net interest income are
primarily attributable to increases in net loans of $5,847,235 or 6.53%
from June 30, 1997 to June 30, 1998.

PROVISION FOR LOAN LOSSES:  The provision for loan losses represents the
adjustment to the allowance for loan losses needed to maintain the
allowance at a level determined by management to cover inherent losses
within the Corporation's loan portfolio.  The allowance for loan losses is
based on the application of projected loss ratios to the risk-ratings of
loans, both individually and by category.  Projected loss ratios
incorporate such factors as recent loss experience, current economic
conditions and trends, trends in past due and impaired loans, and risk
characteristics of various categories and concentrations of loans.  The
provision increased slightly to $37,500 for the three months ended June 30,
1998 from $30,000 for the same period in 1997 and increased to $75,000 for
the six months ended June 30, 1998 from $60,000 for the same period in
1997.  Net charge-offs were $40,501 for the second quarter of 1998 compared
to net charge-offs of $28,000 for the same period in 1997.  Net charge-offs
year-to-date were $32,105 as of June 30, 1998 compared to net charge-offs
of $31,420 for the same period in 1997.  Management will continue to
monitor the allowance for loan losses and make additions to the allowance
through the provision for loan losses as economic conditions dictate.

NONINTEREST INCOME:  Noninterest income for the three months ended June 30,
1998 was $257,219 as compared to $250,279 for the same period in 1997.

                                      -13-
<PAGE>
Noninterest income for the six months ended June 30, 1998 increased to
$609,353 from $521,579 at June 30, 1997.

NONINTEREST EXPENSE: Noninterest expense increased to approximately
$1,350,000 and $2,574,000 for the three and six months ended June 30, 1998,
respectively, compared to $1,243,000 and $2,459,000 for the same periods in
1997, respectively.  Salaries and benefits increased 6.11% from $647,115
for the three months ended June 30, 1997 to $686,631 for the same period in
1998 and increased 9.55% from $1,258,012 for the six months ended June 30,
1997 to $1,378,175 for the same period in 1998.  Supplies expense decreased
by $11,350 or 20.88% and $47,296 or 38.82% for the three- and six-month
periods ended June 30, 1998 compared to the same periods in 1997,
respectively.  The decrease in supplies is due to the Bank's name change
that took place in late 1996.  Other expenses increased from $784,901 for
the six months ended June 30, 1997 to $839,118 for the same period in 1998
and increased from $397,273 for the three months ended June 30, 1997 to
$476,683 for the same period in 1998.

FINANCIAL CONDITION, LIQUIDITY, AND CAPITAL RESOURCES

Total assets increased approximately 4.47% or by $5.8 million to $136.7
million at June 30, 1998 compared to $130.9 million at December 31, 1997.
Total liabilities increased by 4.51% or $5.3 million to $122.9 million at
June 30, 1998 compared to $117.6 million at December 31, 1997.  Total
shareholders' equity increased by approximately $541,000 to approximately
$13,800,000 at June 30, 1998.  The increase in shareholders' equity is
primarily related to the retention of earnings after dividend payouts as
well as an increase in the unrealized gain on securities available for
sale.

Total loans increased by approximately $4.2 million or 4.60% to $96.7
million. Deposits increased by approximately $4.8 million or 4.57% to
$109.9 million.  The net loan to deposit ratio has remained constant at
approximately 86.7% for both periods presented.  The allowance for loan
losses increased by approximately $43,000 while maintaining a reserve of
1.27% of outstanding loans.

Premises and equipment increased by approximately $1.6 million, or 47.1%,
during the period as a result of the construction of a new main office
building in Kent City.  The new facility was completed in July 1998.

The Corporation paid dividends of $309,990 during the six months ended June
30, 1998, compared to $198,436 paid during the same period in 1997.

Shareholders' equity as a percent of total assets was 10.12% at June 30,
1998 compared to 10.16% at December 31, 1997.  The Corporation's capital
ratios continue to exceed the minimum regulatory levels prescribed by the
Board of Governors of the Federal Reserve System.

                                      -14-
<PAGE>
Total cash and cash equivalents and investment securities totaled
approximately $7.3 million at June 30, 1998, or approximately 5.32% of
total assets.  Deposits increased 4.57% during the first six months of 1998
and management believes its deposit base will remain a stable source of
funds for the remainder of 1998.  Other sources of funding include normal
loan repayments, sales and maturities of securities, federal funds
available from correspondent banks, and additional advances available from
the Federal Home Loan Bank of Indianapolis (the "FHLB").  As of June 30,
1998, the Corporation had outstanding advances from the FHLB totaling
$11,000,000.  Management believes that the current level of liquidity is
sufficient to meet the normal operating needs of the Bank.






































                                      -15-
<PAGE>
                        PART II.  OTHER INFORMATION

Item 2.   Changes in Securities and Use of Proceeds

On May 19, 1998, the Corporation held its 1998 Annual Meeting of
Shareholders.  At the meeting, the shareholders voted to approve an
amendment to the Corporation's Restated Articles of Incorporation to
increase the Corporation's authorized capital from 1,000,000 shares of
common stock, $10.00 par value per share ("Common Stock"), to 2,000,000
shares of Common Stock.

All of the additional shares resulting from the increase in the
Corporation's authorized Common Stock are of the same class, with the same
dividend, voting and liquidation rights, as shares of Common Stock
previously outstanding.

The newly authorized shares of Common Stock are unreserved and available
for issuance.  No further shareholder authorization is required prior to
the issuance of such shares by the Corporation.  Shareholders have no
preemptive rights to acquire shares issued by the Corporation under its
Restated Articles of Incorporation, and shareholders did not acquire any
such rights with respect to such additional shares of Common Stock under
the amendment to the Corporation's Restated Articles of Incorporation.
Under some circumstances, the issuance of additional shares of Common Stock
could dilute the voting rights, equity and earnings per share of existing
shareholders.

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

On May 19, 1998, the Corporation held its 1998 Annual Meeting of
Shareholders.  The purposes of the meeting were:  to elect four directors
for three-year terms expiring in 2001; to consider and approve an amendment
to the Corporation's Restated Articles of Incorporation to increase the
number of authorized shares of capital stock from 1,000,000 shares of
Common Stock to 2,000,000 shares of Common Stock; and to consider and
approve the Stock Incentive Plan of 1998.

Four candidates nominated by management were elected by the shareholders to
serve as directors of the Corporation at the meeting.  The following sets
forth the results of the voting with respect to each candidate:

     NAME OF CANDIDATE                       SHARES VOTED
     -----------------                       ------------

     Gary Gust                     For                       501,713
                                   Authority Withheld          9,539
                                   Broker Non-Votes                0


                                      -16-
<PAGE>
     NAME OF CANDIDATE                       SHARES VOTED
     -----------------                       ------------

     Ronald L. Hansen              For                       500,998
                                   Authority Withheld         10,254
                                   Broker Non-Votes                0

     Robert C. Humphreys           For                       503,235
                                   Authority Withheld          8,017
                                   Broker Non-Votes                0

     Ben J. Landheer               For                       499,611
                                   Authority Withheld         11,641
                                   Broker Non-Votes                0

The following persons remained as directors of the Corporation with terms
expiring in 1999:  Michael E. McHugh, Dennis C. Nelson, John J. Niederer,
Paul K. Spoelman, Donald Swanson and Donald VanSingel.  The following
persons remained as directors of the Corporation with terms expiring in
2000:  Jerome B. Arends, K. Timothy Bull, Richard L. Edgar, and Fred J.
Finkbeiner.

The shareholders also voted to approve the amendment to the Restated
Articles of Incorporation to increase the amount of authorized capital
stock as described in Item 2 of Part II of this Report on Form 10-QSB.  The
following sets forth the results of the voting with respect to that matter:
<TABLE>
<CAPTION>
                                 SHARES VOTED
<S>                     <C>               <C>
                         For               489,398
                         Against            18,678
                         Abstentions         3,176
                         Broker Non-Votes        0

</TABLE>

The shareholders also voted to approve the Stock Incentive Plan of 1998.
The following sets forth the results of the voting with respect to that
matter:
<TABLE>
<CAPTION>
                                 SHARES VOTED
<S>                     <C>               <C>
                         For               479,513
                         Against            23,627
                         Abstentions         8,112
                         Broker Non-Votes        0

                                      -17-
<PAGE>
ITEM 6.   Exhibits and Reports on Form 8-K

     (a)  The following exhibits are filed as part of this report:

     EXHIBIT NO.                   DOCUMENT

     3.1     RESTATED ARTICLES OF INCORPORATION.

     3.2     BYLAWS.  Previously filed as Exhibit 3(b) to the
             Corporation's Form S-4 Registration Statement filed January
             30, 1996.  Here incorporated by reference.

     4.1     FORM OF STOCK CERTIFICATE.  Previously filed as Exhibit 4(a)
             to the Corporation's Form S-4 Registration Statement filed
             January 30, 1996.  Here incorporated by reference.

     4.2     LONG-TERM DEBT.  The Corporation is a party to several long-
             term debt agreements which at the time of this report do not
             exceed 10% of the Corporation's total consolidated assets.
             The Corporation agrees to furnish copies of the agreements
             defining the rights of the parties thereto to the Securities
             and Exchange Commission upon request.

     4.3     RESTATED ARTICLES OF INCORPORATION.  See 3.1
             above.

     10.1   STOCK INCENTIVE PLAN OF 1998.

       27   FINANCIAL DATA SCHEDULE.

     (b)  REPORTS ON FORM 8-K.  No reports on Form 8-K were filed during
the quarter covered by this report.

















                                      -18-
<PAGE>
                                SIGNATURES

In accordance with the requirements of the Exchange Act, the Registrant
caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.


                               VALLEY RIDGE FINANCIAL CORP.
                               Registrant

Date: August 14, 1998          /S/RICHARD L. EDGAR
                               Richard L. Edgar, President and Chief
                                 Executive Officer (Principal Executive
                                 Officer)


Date: August 14, 1998          /S/MICHAEL MCHUGH
                               Michael McHugh, Secretary and Treasurer
                                 (Principal Financial and Accounting
                                  Officer)



























                    

                                      -19-
<PAGE>
                               EXHIBIT INDEX

     EXHIBIT NO.                     DOCUMENT

      3.1      RESTATED ARTICLES OF INCORPORATION.

      3.2      BYLAWS.  Previously filed as Exhibit 3(b) to the
               Corporation's Form S-4 Registration Statement filed January
               30, 1996.  Here incorporated by reference.

     4.1       FORM OF STOCK CERTIFICATE.  Previously filed as Exhibit 4(a)
               to the Corporation's Form S-4 Registration Statement filed
               January 30, 1996.  Here incorporated by reference.

     4.2       LONG-TERM DEBT.  The Corporation is a party to several long-
               term debt agreements which at the time of this report do not
               exceed 10% of the Corporation's total consolidated assets.
               The Corporation agrees to furnish copies of the agreements
               defining the rights of the parties thereto to the Securities
               and Exchange Commission upon request.

     4.3       RESTATED ARTICLES OF INCORPORATION.  See 3.1
               above.

     10.1      STOCK INCENTIVE PLAN OF 1998.

     27        FINANCIAL DATA SCHEDULE.


</TABLE>

<PAGE>
                                EXHIBIT 3.1

                    RESTATED ARTICLES OF INCORPORATION

                                    OF

                       VALLEY RIDGE FINANCIAL CORP.



          The following Restated Articles of Incorporation are executed by
the undersigned Corporation pursuant to the provisions of Act 284, Public
Acts of 1972, as amended:

          1.   The present name of the Corporation is:  Valley Ridge
               Financial Corp.

          2.   The corporation identification number (CID) assigned by the
               Bureau is:  361-141.

          3.   All former names of the Corporation are:  None.

          4.   The date of filing of the Corporation's original Articles of
               Incorporation was:  May 20, 1988.

          The following Restated Articles of Incorporation supercede the
Articles of Incorporation as amended and shall be the Articles of
Incorporation for the Corporation:


                                 ARTICLE I

          The name of the Corporation is:  Valley Ridge Financial Corp.


                                ARTICLE II

          The purpose, or purposes, for which the Corporation is organized
is to engage in the business of a bank holding company to be registered
under the Bank Holding Company Act of 1956, being 12 U.S.C. sections 1841
to 1850 and, without in any way being limited by the foregoing specially
enumerated purpose, to engage in any activity within the purposes for which
corporations may be organized under the Michigan Business Corporation Act.


                                ARTICLE III

          The total authorized capital stock is 2,000,000 shares of a
single class of common stock.  Each such share shall be equal to every
other such share.
<PAGE>
                                ARTICLE IV

          The address of the registered office is 6 North Main Street, Kent
City, Michigan 49330.  The mailing address of the Corporation is 6 North
Main Street, P.O. Box 248, Kent City, Michigan 49330-0248.  The name of the
resident agent is Richard L. Edgar.


                                 ARTICLE V

          When a compromise or arrangement, or a plan of reorganization of
the Corporation, is proposed between the Corporation and its creditors, or
any class of them, or between the Corporation and its shareholders, or any
class of them, a court of equity jurisdiction within the state, on
application of the Corporation, a creditor or shareholder thereof, or a
receiver appointed for the Corporation, may order a meeting of the
creditors, or class of creditors, or of the shareholders, or class of
shareholders, to be affected by the proposed compromise, arrangement, or
reorganization, to be summoned in such manner as the court directs.  If a
majority in number representing three-fourths in value of the creditors or
class of creditors, or of the shareholders to be affected by the proposed
compromise, arrangement, or reorganization, agree to a compromise or
arrangement or to a reorganization of the Corporation as a consequence of
the compromise or arrangement, the compromise or arrangement and the
reorganization, if sanctioned by the court to which the application has
been made, shall be binding on all the creditors or class of creditors, or
on all the shareholders or class of shareholders, and also on the
Corporation.


                                ARTICLE VI

          No director of the Corporation shall be personally liable to the
Corporation or any of its shareholders for monetary damages for a breach of
fiduciary duty as a director.  However, this Article VI shall not eliminate
or limit the liability of a director for any breach of duty, act or
omission for which the elimination or limitation of liability is not
permitted by the Michigan Business Corporation Act, as amended from time to
time.  No amendment, alteration, modification, repeal or adoption of any
provision in these Restated Articles of Incorporation inconsistent with
this Article VI shall have any effect to increase the liability of any
director of the Corporation with respect to any act or omission of such
director occurring prior to such amendment, alteration, modification,
repeal or adoption.





                                      -2-
<PAGE>
                                ARTICLE VII

          Directors and officers of the Corporation shall be indemnified as
of right to the fullest extent now or hereafter permitted by law in
connection with any actual or threatened civil, criminal, administrative or
investigative action, suit or proceeding (whether brought by or in the name
of the Corporation, a subsidiary or otherwise) in which a director or
officer is a witness or which is brought against a director or officer in
his or her capacity as a director, officer, employee, agent or fiduciary of
the Corporation or of any corporation, partnership, joint venture, trust,
employee benefit plan or other enterprise of which the director or officer
was serving at the request of the Corporation.  Persons who are not
directors or officers of the Corporation may be similarly indemnified in
respect of such service to the extent authorized at any time by the Board
of Directors of the Corporation.  The Corporation may purchase and maintain
insurance to protect itself and any such director, officer or other person
against any liability asserted against him or her and incurred by him or
her in respect of such service whether or not the Corporation would have
the power to indemnify him or her against such liability by law or under
the provisions of this Article.  The provisions of this Article shall be
applicable to actions, suits or proceedings, whether arising from acts or
omissions occurring before or after the adoption hereof, and to directors,
officers and other persons who have ceased to render such service, and
shall inure to the benefit of the heirs, executors and administrators of
the directors, officers and other persons referred to in this Article.  The
right of indemnity provided pursuant to this Article shall not be exclusive
and the Corporation may provide indemnification to any person, by agreement
or otherwise, on such terms and conditions as the Board of Directors may
approve.  Any agreement for indemnification of any director, officer,
employee or other person may provide indemnification rights which are
broader than or otherwise different from those set forth in, or provided
pursuant to, or in accordance with, this Article.  Any amendment,
alteration, modification, repeal or adoption of any provision in the
Restated Articles of Incorporation inconsistent with this Article VII shall
not adversely affect any indemnification right or protection of a director
or officer of the Corporation existing at the time of such amendment,
alteration, modification, repeal or adoption.


                               ARTICLE VIII

                            BOARD OF DIRECTORS

     SECTION 1.  AUTHORITY AND SIZE OF BOARD.  The business and affairs of
the Corporation shall be managed by or under the direction of the Board of
Directors.  The number of directors of the Corporation that shall
constitute the Board of Directors shall be determined from time to time by
resolution adopted by the affirmative vote of:

                                      -3-
<PAGE>
          A.   At least eighty percent (80%) of the Board of Directors, and

          B.   A majority of the Continuing Directors (as hereinafter
     defined).

     SECTION 2.  CLASSIFICATION OF BOARD AND FILLING OF VACANCIES.  Subject
to applicable law, the directors shall be divided into three (3) classes,
each class to be as nearly equal in number as possible.  The term of office
of directors of the first class shall expire at the annual meeting of
shareholders to be held in 1997 and until their respective successors are
duly elected and qualified or their resignation or removal.  The term of
office of directors of the second class shall expire at the annual meeting
of shareholders to be held in 1998 and until their respective successors
are duly elected and qualified or their resignation or removal.  The term
of office of directors of the third class shall expire at the annual
meeting of shareholders to be held in 1999 and until their respective
successors are duly elected and qualified or their resignation or removal.
Subject to the foregoing, at each annual meeting of shareholders,
commencing at the annual meeting to be held in 1997, the successors to the
class of directors whose term shall then expire shall be elected to hold
office for a term expiring at the third succeeding annual meeting and until
their successors shall be duly elected and qualified or their resignation
or removal.  Any vacancies in the Board of Directors for any reason, and
any newly created directorships resulting from any increase in the number
of directors, may be filled only by the Board of Directors, acting by an
affirmative vote of a majority of the Continuing Directors (as hereinafter
defined) and an eighty percent (80%) majority of all of the directors then
in office, although less than a quorum, and any directors so chosen shall
hold office until the next annual meeting of shareholders and until their
respective successors shall be duly elected and qualified or their
resignation or removal.  No decrease in the number of directors shall
shorten the term of any incumbent director.

     SECTION 3.  REMOVAL OF DIRECTORS.  Notwithstanding any other
provisions of these Restated Articles of Incorporation or the Bylaws of the
Corporation (and notwithstanding the fact that some lesser percentage may
be specified by law or by these Restated Articles of Incorporation or the
Bylaws of the Corporation), any one or more directors of the Corporation
may be removed at any time, with or without cause, but only by either (i)
the affirmative vote of a majority of the Continuing Directors and at least
eighty percent (80%) of the Board of Directors or (ii) the affirmative
vote, at a meeting of the shareholders called for that purpose, of the
holders of at least eighty percent (80%) of the voting power of the then
outstanding shares of capital stock of the Corporation entitled to vote
generally in an election of directors (the "Voting Stock") voting together
as a single class.

     SECTION 4.  CERTAIN DEFINITIONS.  For the purposes of this Article
VIII:
                                      -4-
<PAGE>
          A.   A "person" shall mean any individual, firm, corporation or
     other entity.

          B.   "Interested Shareholder" shall mean any person (other than
     the Corporation or any Subsidiary of the Corporation, or any person
     who is or was the beneficial owner of ten percent (10%) or more of the
     Common Stock of any of Kent City State Bank, The Grant State Bank,
     Community Bank Corporation, or the Corporation prior to the
     acquisition of Kent City State Bank by the Corporation, the
     acquisition of The Grant State Bank by Community Bank Corporation, or
     the merger of Community Bank Corporation with the Corporation) who or
     which:

               (i)  is the beneficial owner, directly or indirectly, of ten
          percent (10%) or more of the voting power of the outstanding
          Voting Stock; or

              (ii)  is an Affiliate of the Corporation and at any time
          within the two-year period immediately prior to the date in
          question was the beneficial owner, directly or indirectly, of ten
          percent (10%) or more of the voting power of the then outstanding
          Voting Stock; or

             (iii)  is an assignee of or has otherwise succeeded to any
          shares of Voting Stock which were at any time within the two-year
          period immediately prior to the date in question beneficially
          owned by any Interested Shareholder, if such assignment or
          succession shall have occurred in the course of a transaction or
          series of transactions not involving a public offering within the
          meaning of the Securities Act of 1933, as amended.

          C.   A person shall be a "beneficial owner" of any Voting Stock:

               (i)  which such person or any of its Affiliates or
          Associates (as hereinafter defined) beneficially owns, directly
          or indirectly; or

              (ii)  which such person or any of its Affiliates or
          Associates has (a) the right to acquire (whether such right is
          exercisable immediately or only after the passage of time),
          pursuant to any agreement, arrangement or understanding or upon
          the exercise of conversion rights, exchange rights, warrants or
          options, or otherwise, or (b) the right to vote pursuant to any
          agreement, arrangement or understanding; or

             (iii)  which are beneficially owned, directly or indirectly,
          by any other person with which such person or any of its
          Affiliates or Associates has any agreement, arrangement or

                                      -5-
<PAGE>
          understanding for the purpose of acquiring, holding, voting or
          disposing of any shares of Voting Stock.

          D.   For the purposes of determining whether a person is an
     Interested Shareholder pursuant to paragraph B of this Section 4, the
     number of shares of Voting Stock deemed to be outstanding shall
     include shares deemed owned through application of paragraph C of this
     Section 4 but shall not include any other shares of Voting Stock which
     may be issuable pursuant to any agreement, arrangement or
     understanding, or upon exercise of conversion rights, warrants or
     options, or otherwise.

          E.   "Affiliate" or "Associate" shall have the respective
     meanings ascribed to such terms in Rule 12b-2 of the General Rules and
     Regulations under the Securities Exchange Act of 1934, as in effect on
     the date these Restated Articles of Incorporation are adopted by the
     Board of Directors of the Corporation.

          F.   "Subsidiary" means any corporation of which a majority of
     any class of equity security is owned, directly or indirectly, by the
     Corporation; provided, that for the purposes of the definition of
     Interested Shareholder set forth in paragraph B of this Section 4, the
     term "Subsidiary" shall mean only a corporation of which a majority of
     each class of equity security is owned, directly or indirectly, by the
     Corporation.

          G.   "Continuing Director" means each member of the Board of
     Directors of the Corporation or Community Bank Corporation immediately
     prior to the effective date of these Restated Articles of
     Incorporation (the "Board") and any member of the Board who is
     unaffiliated with the Interested Shareholder and was a member of the
     Board prior to the time that the Interested Shareholder became an
     Interested Shareholder, and any successor of a Continuing Director who
     is unaffiliated with the Interested Shareholder and is recommended to
     succeed a Continuing Director by a majority of Continuing Directors
     then on the Board.

     SECTION 5.  POWERS OF CONTINUING DIRECTORS.  A majority of the
Continuing Directors of the Corporation shall have the power and duty to
determine, on the basis of information known to them after reasonable
inquiry, all facts necessary to determine compliance with this
Article VIII, including without limitation (i) whether a person is an
Interested Shareholder, (ii) the number of shares of Voting Stock
beneficially owned by any person and (iii) whether a person is an Affiliate
or Associate of another; and the good faith determination of a majority of
the Continuing Directors on such matters shall be conclusive and binding
for all the purposes of this Article VIII.


                                      -6-
<PAGE>
     SECTION 6.  AMENDMENT, REPEAL, ETC.  Notwithstanding any other
provisions of these Restated Articles of Incorporation or the Bylaws of the
Corporation (and notwithstanding the fact that a lesser percentage may be
specified by law, these Restated Articles of Incorporation or the Bylaws of
the Corporation), the affirmative vote of the holders of eighty percent
(80%) or more of the then outstanding Voting Stock, voting together as a
single class, shall be required to amend, repeal or adopt any provisions
inconsistent with this Article VIII of these Restated Articles of
Incorporation; provided, that the preceding provisions of this Section 6
shall not be applicable to any amendment to this Article VIII of these
Restated Articles of Incorporation, and such amendment shall require only
such affirmative vote as is required by law and any other provisions of
these Restated Articles of Incorporation, if such amendment shall have been
approved by a majority of the Continuing Directors.


                                ARTICLE IX

                    BOARD EVALUATION OF CERTAIN OFFERS

     SECTION 1.  MATTERS TO BE EVALUATED.  The Board of Directors of this
Corporation shall not approve, adopt or recommend any offer of any person
or entity, other than the Corporation, to make a tender or exchange offer
for any capital stock of the Corporation, to merge or consolidate the
Corporation with any other entity or to purchase or otherwise acquire all
or substantially all of the assets or business of the Corporation unless
and until the Board of Directors shall have first evaluated the offer and
determined that the offer would be in compliance with all applicable laws
and that the offer is in the best interests of the Corporation and its
shareholders.  In connection with its evaluation as to compliance with
laws, the Board of Directors may seek and rely upon an opinion of legal
counsel independent from the offeror and it may test such compliance with
laws in any state or federal court or before any state or federal
administrative agency which may have appropriate jurisdiction.  In
connection with its evaluation as to the best interests of the Corporation
and its shareholders, the Board of Directors shall consider all factors
which it deems relevant, including without limitation:  (i) the adequacy
and fairness of the consideration to be received by the Corporation and/or
its shareholders under the offer considering historical trading prices of
the Corporation's stock, the price that might be achieved in a negotiated
sale of the Corporation as a whole, premiums over trading prices which have
been proposed or offered with respect to the securities of other companies
in the past in connection with similar offers and the future prospects for
this Corporation and its business; (ii) the potential social and economic
impact of the offer and its consummation on this Corporation, its
employees, customers and vendors; and (iii) the potential social and
economic impact of the offer and its consummation on the communities in
which the Corporation and any subsidiaries operate or are located.

                                      -7-
<PAGE>
     SECTION 2.  AMENDMENT, REPEAL, ETC.  Notwithstanding any other
provision of these Restated Articles of Incorporation or the Bylaws of the
Corporation to the contrary (and notwithstanding the fact that a lesser
percentage may be specified by law, these Restated Articles of
Incorporation or the Bylaws of the Corporation), the affirmative vote of
the holders of eighty percent (80%) or more of the outstanding shares of
capital stock entitled to vote for the election of directors, voting
together as a single class, shall be required to amend, repeal or adopt any
provision inconsistent with this Article IX; provided, that this Article IX
shall be of no force or effect if the proposed amendment, repeal or other
action has been recommended for approval by at least eighty percent (80%)
of all directors then holding office.


                                 ARTICLE X

                     APPROVAL OF BUSINESS COMBINATIONS

     The shareholder vote required to approve Business Combinations
(hereinafter defined) shall be as set forth in this Article X.

     SECTION 1.  HIGHER VOTE FOR BUSINESS COMBINATIONS.  In addition to
any affirmative vote required by law or these Restated Articles of
Incorporation, and except as otherwise expressly provided in Section 3
of this Article X:

          A.   any merger or consolidation of the Corporation or any
     Subsidiary (as hereinafter defined) with (i) any Interested
     Shareholder (as hereinafter defined) or (ii) any other corporation
     (whether or not itself an Interested Shareholder) which is, or after
     such merger or consolidation would be, an Affiliate (as hereinafter
     defined) of an Interested Shareholder; or

          B.   any sale, lease, exchange, mortgage, pledge, transfer or
     other disposition (in one transaction or a series of transactions in
     any 12-month period) to or with any Interested Shareholder or any
     Affiliate of any Interested Shareholder of any assets of the
     Corporation or any Subsidiary having, measured at the time the
     transaction or transactions are approved by the Board of Directors of
     the Corporation, an aggregate Fair Market Value as of the end of the
     Corporation's most recently ended fiscal quarter of 10% or more of its
     net worth; or

          C.   the issuance or transfer by the Corporation or any
     Subsidiary (in one transaction or a series of transactions) of any
     equity securities of the Corporation or any Subsidiary (or any
     securities convertible into equity securities of the Corporation or
     any Subsidiary) to any Interested Shareholder or any Affiliate of an

                                      -8-
<PAGE>
     Interested Shareholder in exchange for cash, securities or other
     property (or a combination thereof) having an aggregate Fair Market
     Value of 5% or more of the total market value of the outstanding
     shares of the Corporation; or

          D.   the adoption of any plan or proposal for the liquidation or
     dissolution of the Corporation proposed by or on behalf of an
     Interested Shareholder or any Affiliate of any Interested Shareholder,
     or in which anything other than cash will be received by an Interested
     Shareholder or any Affiliate of any Interested Shareholder; or

          E.   any reclassification of securities (including any reverse
     stock split), or recapitalization of the Corporation, or any merger or
     consolidation of the Corporation with any of its Subsidiaries or any
     other transaction (whether or not with or into or otherwise involving
     an Interested Shareholder) which has the effect, directly or
     indirectly, of increasing the proportionate share of the outstanding
     shares of any class of equity or convertible securities of the
     Corporation or any Subsidiary which is directly or indirectly owned by
     any Interested Shareholder or any Affiliate of any Interested
     Shareholder;

shall require the affirmative vote of the holders of at least ninety
percent (90%) of the voting power of the then outstanding shares of capital
stock of the Corporation entitled to vote generally in the election of
directors (the "Voting Stock"), voting together as a single class,
including the affirmative vote of the holders of not less than two-thirds
(2/3) of the outstanding Voting Stock not owned directly or indirectly by
any Interested Shareholder or an Affiliate or Associate of the Interested
Shareholder.  Such affirmative vote shall be required notwithstanding the
fact that no vote may be required, or that a lesser percentage may be
specified, by law, in any other Article of these Restated Articles of
Incorporation or in any agreement with any national securities exchange or
otherwise.

     SECTION 2.  DEFINITION OF "BUSINESS COMBINATION".  The term "Business
Combination" as used in this Article X shall mean any transaction which is
referred to in any one or more of paragraphs A through E of Section 1.

     SECTION 3.  WHEN HIGHER VOTE IS NOT REQUIRED.  The provisions of
Section 1 of this Article X shall not be applicable to any particular
Business Combination, and such Business Combination shall require only such
affirmative vote as is required by law and any other provision of these
Restated Articles of Incorporation, if in the case of a Business
Combination that does not involve any cash or other consideration being
received by the Shareholders of the Corporation, solely in their capacities
as Shareholders, the condition specified in the following paragraph A is
met, or if in the case of any other Business Combination, the conditions
specified in either of the following paragraphs A or B are met:
                                      -9-
<PAGE>
          A.   APPROVAL BY CONTINUING DIRECTORS.  The Business Combination
     shall have been approved by a majority of the Continuing Directors (as
     hereinafter defined).

          B.   PRICE AND PROCEDURE REQUIREMENTS.  All of the following
     shall have been met:

               (i)  The aggregate amount of the cash and the Fair
          Market Value (as hereinafter defined) as of the date of the
          consummation of the Business Combination (the "Consummation
          Date") of the consideration other than cash to be received
          per share by holders of Common Stock in such Business
          Combination shall be an amount at least equal to the higher
          of the following (it being intended that the requirements of
          this paragraph B(i) shall be required to be met with respect
          to all shares of Common Stock outstanding, whether or not
          the Interested Shareholder has previously acquired any
          shares of the Common Stock):

                    (a)  the highest per share price (including any
               brokerage commissions, transfer taxes and soliciting
               dealers' fees) paid by the Interested Shareholder for
               any shares of Common Stock acquired by it (1) within
               the two-year period immediately prior to the first
               public announcement of the proposal of the Business
               Combination (the "Announcement Date") or (2) in the
               transaction in which it became an Interested
               Shareholder, whichever is  higher, PLUS interest
               compounded annually from the date on which the
               Interested Shareholder became an Interested Shareholder
               through the Consummation Date at the prime rate of
               interest of Citibank, N.A. (or other major bank
               headquartered in New York City selected by a majority
               of the Continuing Directors) from time to time in
               effect in New York City, LESS the aggregate amount of
               any cash dividends paid, and the Fair Market Value of
               any dividends paid in other than cash, per share of
               Common Stock from the date on which the Interested
               Shareholder became an Interested Shareholder through
               the Consummation Date in an amount up to but not
               exceeding the amount of such interest payable per share
               of Common Stock; or

                    (b)  the Fair Market Value per share of Common
               Stock on the Announcement Date or the Determination
               Date, whichever is higher.

              (ii)  The consideration to be received by holders of
          outstanding Voting Stock shall be in cash or in the same
                                      -10-
<PAGE>
          form as the Interested Shareholder has previously paid for
          shares of Voting Stock.  If the Interested Shareholder has
          paid for shares of Voting Stock with varying forms of
          consideration, the form of consideration for such Voting
          Stock shall be either cash or the form used to acquire the
          largest number of shares of Voting Stock previously acquired
          by it.

             (iii)  After such Interested Shareholder has become an
          Interested Shareholder and prior to the consummation of such
          Business Combination: (a) there shall have been (1) no
          reduction in the annual rate of dividends paid on the Common
          Stock (except as necessary to reflect any subdivision of the
          Common Stock), except as approved by a majority of the
          Continuing Directors, and (2) an increase in such annual
          rate of dividends as necessary to reflect any
          reclassification (including any reverse stock split),
          recapitalization, reorganization or any similar transaction
          which has the effect of reducing the number of outstanding
          shares of the Common Stock, unless the failure so to
          increase such annual rate is approved by a majority of the
          Continuing Directors; and (b) such Interested Shareholder
          shall have not become the beneficial owner of any additional
          shares of Voting Stock except as part of the transaction
          which results in such Interested Shareholder becoming an
          Interested Shareholder.

              (iv)  After such Interested Shareholder has become an
          Interested Shareholder, such Interested Shareholder shall
          not have received the benefit, directly or indirectly
          (except proportionately as a Shareholder), of any loans,
          advances, guarantees, pledges or other financial assistance
          or any tax credits or other tax advantages provided by the
          Corporation.

               (v)  A proxy or information statement describing the
          proposed Business Combination and complying with the
          requirements of the Securities Exchange Act of 1934, as
          amended, and the rules and regulations thereunder (or any
          subsequent provisions replacing such Act, rules or
          regulations) shall be mailed to all Shareholders of the
          Corporation at least 30 days prior to the Consummation Date
          (whether or not such proxy or information statement is
          required to be mailed pursuant to such Act or subsequent
          provisions).

              (vi)  There shall have elapsed five (5) years from the
          Determination Date to the Consummation Date.

                                      -11-
<PAGE>
     SECTION 4.  CERTAIN DEFINITIONS.  For the purpose of this Article X:

          A.   A "person" shall mean any individual, firm, Corporation
     or other entity.

          B.   "Interested Shareholder" shall mean any person (other
     than the Corporation or any Subsidiary of the Corporation, or any
     person who is or was the beneficial owner of ten percent (10%) or
     more of the Common Stock of any of Kent City State Bank, The
     Grant State Bank, Community Bank Corporation or the Corporation
     prior to the acquisition of Kent City State Bank by the
     Corporation, the acquisition of The Grant State Bank by Community
     Bank Corporation, or the merger of Community Bank Corporation
     with the Corporation) who or which:

               (i)  is the beneficial owner, directly or indirectly,
          of ten percent (10%) or more of the voting power of the
          outstanding Voting Stock; or

              (ii)  is an Affiliate of the Corporation and at any time
          within the two-year period immediately prior to the date in
          question was the beneficial owner, directly or indirectly,
          of ten percent (10%) or more of the voting power of the then
          outstanding Voting Stock; or

             (iii)  is an assignee of or has otherwise succeeded to
          any shares of Voting Stock which were at any time within the
          two-year period immediately prior to the date in question
          beneficially owned by any Interested Shareholder, if such
          assignment or succession shall have occurred in the course
          of a transaction or series of transactions not involving a
          public offering within the meaning of the Securities Act of
          1933, as amended.

          C.   A person shall be a "beneficial owner" of any Voting Stock:

               (i)  which such person or any of its Affiliates or
          Associates (as hereinafter defined) beneficially owns,
          directly or indirectly; or

              (ii)  which such person or any of its Affiliates or
          Associates has (a) the right to acquire (whether such right
          is exercisable immediately or only after the passage of
          time), pursuant to any agreement, arrangement or
          understanding or upon the exercise of conversion rights,
          exchange rights, warrants or options, or otherwise, or (b)
          the right to vote pursuant to any agreement, arrangement or
          understanding; or

                                      -12-
<PAGE>
             (iii)  which are beneficially owned, directly or
          indirectly, by any other person with which such person or
          any of its Affiliates or Associates has any agreement,
          arrangement or understanding for the purpose of acquiring,
          holding, voting or disposing of any shares of Voting Stock.

          D.   For the purposes of determining whether a person is an
     Interested Shareholder pursuant to paragraph B of this Section 4,
     the number of shares of Voting Stock deemed to be outstanding
     shall include shares deemed owned through application of
     paragraph C of this Section 4 but shall not include any other
     shares of Voting Stock which may be issuable pursuant to any
     agreement, arrangement or understanding, or upon the exercise of
     conversion rights, warrants or options, or otherwise.

          E.   "Affiliate" or "Associate" shall have the respective
     meanings ascribed to such terms in Rule 12b-2 of the General
     Rules and Regulations under the Securities Exchange Act of 1934,
     as in effect on the date of adoption of these Restated Articles
     of Incorporation by the Board of Directors of the Corporation.

          F.   "Subsidiary" means any Corporation of which a majority
     of any class of equity security is owned, directly or indirectly,
     by the Corporation; provided, that for the purposes of the
     definition of Interested Shareholder set forth in paragraph B of
     this Section 4, the term "Subsidiary" shall mean only a
     corporation of which a majority of each class of equity security
     is owned, directly or indirectly, by the Corporation.

          G.   "Continuing Director" means any member of the Board of
     Directors of the Corporation or Community Bank Corporation
     immediately prior to the effective date of these Restated
     Articles of Incorporation (the "Board") who is unaffiliated with
     the Interested Shareholder and was a member of the Board prior to
     the time that the Interested Shareholder became an Interested
     Shareholder, and any successor of a Continuing Director who is
     unaffiliated with the Interested Shareholder and is recommended
     to succeed a Continuing Director by a majority of Continuing
     Directors then on the Board.

          H.   "Fair Market Value" means:  (i) in the case of stock,
     the highest closing sale price during the 30-day period
     immediately preceding the date in question of a share of such
     stock on the Composite Tape for New York Stock Exchange-Listed
     Stocks, or, if such stock is not quoted on the Composite Tape, on
     the New York Stock Exchange, or, if such stock is not listed on
     such Exchange, on the principal United States securities exchange
     registered under the Securities Exchange Act of 1934 on which

                                      -13-
<PAGE>
     such stock is listed, or, if such stock is not listed on any such
     exchange, the highest closing bid quotation with respect to a
     share of such stock during the 30-day period preceding the date
     in question on the NASDAQ Stock Market or any system then in use,
     or if no such quotations are available, the fair market value on
     the date in question of a share of such stock as determined by a
     majority of the Continuing Directors in good faith; and (ii) in
     the case of property other than cash or stock, the fair market
     value of such property on the date in question as determined by a
     majority of the Continuing Directors in good faith.

          I.   In the event of any Business Combination in which the
     Corporation survives, the phrase "consideration other than cash
     to be received" as used in paragraph B(i) of Section 3 of this
     Article X shall include the shares of Common Stock retained by
     the holders of such shares.

          J.   "Determination Date" shall mean the date on which the
     Interested Shareholder first became an Interested Shareholder.

     SECTION 5.  POWERS OF CONTINUING DIRECTORS.  A majority of the
Continuing Directors of the Corporation shall have the power and duty to
determine, on the basis of information known to them after reasonable
inquiry, all facts necessary to determine compliance with this Article X,
including without limitation (i) whether a person is an Interested
Shareholder, (ii) the number of shares of Voting Stock beneficially owned
by any person, (iii) whether a person is an Affiliate or Associate of
another, (iv) whether the requirements of paragraph B of Section 3 have
been met with respect to any Business Combination, (v) whether the assets
which are the subject of any Business Combination have an aggregate Fair
Market Value of 10% or more of the Corporation's net worth, and (vi)
whether the consideration to be received for the issuance or transfer of
securities by the Corporation or any Subsidiary in any Business Combination
has an aggregate Fair Market Value of 5% or more of the total Fair Market
Value of the outstanding shares of the Corporation; and the good faith
determination of a majority of the Continuing Directors on such matters
shall be conclusive and binding for all the purposes of this Article X.

     SECTION 6.  NO EFFECT ON FIDUCIARY OBLIGATIONS OF INTERESTED
SHAREHOLDERS.  Nothing contained in this Article X shall be construed to
relieve the Board of Directors or any Interested Shareholder from any
fiduciary obligation imposed by law.

     SECTION 7.  AMENDMENT, REPEAL, ETC.  Notwithstanding any other
provisions of these Restated Articles of Incorporation or the Bylaws of the
Corporation (and notwithstanding the fact that a lesser percentage may be
specified by law, these Restated Articles of Incorporation or the Bylaws of
the Corporation), the affirmative vote of the holders of ninety percent

                                      -14-
<PAGE>
(90%) or more of the voting power of the shares of the then outstanding
Voting Stock, voting together as a single class, including the affirmative
vote of the holders of not less than two-thirds (2/3) of the Voting Stock
not owned directly or indirectly by any Interested Shareholder, shall be
required to amend, repeal, or adopt any provisions inconsistent with this
Article X of these Restated Articles of Incorporation; provided, that the
preceding provisions of this Section 7 shall not be applicable to any
amendment to this Article X of these Restated Articles of Incorporation,
and such amendment shall require only such affirmative vote as is required
by law and any other provisions of these Restated Articles of
Incorporation, if such amendment shall have been approved by a majority of
the Continuing Directors.


     IN WITNESS WHEREOF, the Corporation has executed these Restated
Articles of Incorporation on this _________ day of _________________, 1996.


                                   VALLEY RIDGE FINANCIAL CORP.


                                   By _____________________________________

                                      Its _________________________________

























                                      -15-

<PAGE>
                               EXHIBIT 10.1

                       VALLEY RIDGE FINANCIAL CORP.

                       STOCK INCENTIVE PLAN OF 1998


                                 SECTION 1

                  ESTABLISHMENT OF PLAN; PURPOSE OF PLAN

     1.1  ESTABLISHMENT OF PLAN.  The Corporation hereby establishes the
STOCK INCENTIVE PLAN OF 1998 (the "Plan") for its directors, corporate and
Subsidiary officers and other key employees.  The Plan permits the grant
and award of Stock Options, Restricted Stock and Stock Awards.

     1.2  PURPOSE OF PLAN.  The purpose of the Plan is to provide
directors, officers and key management employees of the Corporation and its
Subsidiaries with an increased incentive to make significant contributions
to the long-term performance and growth of the Corporation and its
Subsidiaries, to join the interests of directors, officers and key
employees with the interests of the Corporation's shareholders through the
opportunity for increased stock ownership and to attract and retain
officers and key employees of exceptional abilities.  The Plan is further
intended to provide flexibility to the Corporation in structuring long-term
incentive compensation to best promote the foregoing objectives.

                                 SECTION 2

                                DEFINITIONS

          The following words have the following meanings unless a
different meaning is plainly required by the context:

     2.1  "Act" means the Securities Exchange Act of 1934, as amended.

     2.2  "Appraisal" means the appraisal of the value of shares of Common
          Stock obtained by the Corporation annually for purposes of
          Corporation contributions to the Corporation's Employee Stock
          Ownership Plan.

     2.3  "Board" means the Board of Directors of the Corporation.

     2.4  "Cause," when used in connection with termination of employment
          or officer status, shall have the meaning given to such term in
          any employment or other similar agreement between the Corporation
          and the applicable Participant.  In the absence of any agreement
          between the Corporation and a Participant that provides any
          definition of "cause," the term "Cause" for the purposes of the
          Plan shall mean a Participant's neglect, continued failure or

<PAGE>
          inability to perform, or poor performance of, duties, consistent
          failure to attain assigned objectives, misappropriation of
          Corporation property, intentional damage to Corporation property,
          activities in aid of a competitor, insubordination, dishonesty,
          conviction of a crime involving moral turpitude or performance of
          any act (including any dishonest or fraudulent act) detrimental
          to the interests of the Corporation.

     2.5  "Change in Control" means (a) the failure of the Continuing
          Directors at any time to constitute at least a majority of the
          members of the Board; (b) the acquisition by any Person other
          than an Excluded Holder of beneficial ownership (within the
          meaning of Rule 13d-3 issued under the Act) of 20% or more of the
          outstanding Common Stock or the combined voting power of the
          Corporation's outstanding securities entitled to vote generally
          in the election of directors; (c) the approval by the
          shareholders of the Corporation of a reorganization, merger or
          consolidation, unless with or into a Permitted Successor; or
          (d) the approval by the shareholders of the Corporation of a
          complete liquidation or dissolution of the Corporation or the
          sale or disposition of all or substantially all of the assets of
          the Corporation other than to a Permitted Successor.

     2.6  "Code" means the Internal Revenue Code of 1986, as amended.

     2.7  "Committee" means the Compensation Committee of the Board or such
          other committee as the Board shall designate to administer the
          Plan.  The Committee shall consist of at least two members of the
          Board and all of its members shall be "Non-Employee Directors" as
          defined in Rule 16b-3 issued under the Act.

     2.8  "Common Stock" means the Common Stock of the Corporation.

     2.9  "Corporation" means Valley Ridge Financial Corp. and its
          successors and assigns.

     2.10 "Continuing Directors" mean the individuals constituting the
          Board as of the date this Plan was adopted and any subsequent
          directors whose election or nomination for election by the
          Corporation's shareholders was approved by a vote of two-thirds
          of the individuals who are then Continuing Directors, but
          specifically excluding any individual whose initial assumption of
          office occurs as a result of either an actual or threatened
          election contest (as the term is used in Rule 14a-11 of
          Regulation 14A issued under the Act) or other actual or
          threatened solicitation of proxies or consents by or on behalf
          of a Person other than the Board.


                                     -2-
<PAGE>
     2.11 "Employee Benefit Plan" means any plan or program established by
          the Corporation or a Subsidiary for the compensation or benefit
          of employees of the Corporation or any of its Subsidiaries.

     2.12 "Excluded Holder" means the Corporation, a Subsidiary or any
          Employee Benefit Plan or any trust holding Common Stock or other
          securities pursuant to the terms of an Employee Benefit Plan.

     2.13 "Incentive Award" means the award or grant of a Stock Option,
          Restricted Stock or Stock Award to a Participant pursuant to the
          Plan.

     2.14 "Market Value" shall have the following meanings.  If Common
          Stock is listed for trading on The Nasdaq Stock Market (or any
          successor exchange that is the primary stock exchange for trading
          of Common Stock), "Market Value" shall equal the mean of the
          highest and lowest sales prices of shares of Common Stock
          reported on The Nasdaq Stock Market (or any successor exchange
          that is the primary stock exchange for trading of Common Stock)
          on the date of grant, or if The Nasdaq Stock Market (or any such
          successor) is closed on that date, the last preceding date on
          which The Nasdaq Stock Market (or any such successor) was open
          for trading and on which shares of Common Stock were traded.  If
          Common Stock is not listed on The Nasdaq Stock Market, "Market
          Value" of Common Stock shall be an amount determined by the
          Committee, in its discretion; PROVIDED, that if the Board does
          not determine a specific amount, "Market Value" shall mean the
          per share value of Common Stock reflected in the most recent
          Appraisal.  The Board shall be entitled to rely on the value set
          forth in an Appraisal with regard to any Incentive Awards granted
          during the 12-month period after the date of the Appraisal.

     2.15 "Participant" means a corporate officer or any employee of the
          Corporation or its Subsidiaries who the Committee determines is
          eligible to participate in the Plan and who is designated to be
          granted an Incentive Award under the Plan.

     2.16 "Permitted Successor" means a corporation which, immediately
          following the consummation of a transaction specified in clauses
          (c) and (d) of the definition of "Change in Control" above,
          satisfies each of the following criteria:  (a) 60% or more of the
          outstanding common stock of the corporation and the combined
          voting power of the outstanding securities of the corporation
          entitled to vote generally in the election of directors (in each
          case determined immediately following the consummation of the
          applicable transaction) is beneficially owned, directly or
          indirectly, by all or substantially all of the Persons who were
          the beneficial owners of the Corporation's outstanding Common

                                     -3-
<PAGE>
          Stock and outstanding securities entitled to vote generally in
          the election of directors (respectively) immediately prior to the
          applicable transaction; (b) no Person other than an Excluded
          Holder beneficially owns, directly or indirectly, 20% or more of
          the outstanding common stock of the corporation or the combined
          voting power of the outstanding securities of the corporation
          entitled to vote generally in the election of directors (for
          these purposes the term Excluded Holder shall include the
          corporation, any subsidiary of the corporation and any employee
          benefit plan of the corporation or any such subsidiary or any
          trust holding common stock or other securities of the corporation
          pursuant to the terms of any such employee benefit plan); and (c)
          at least a majority of the board of directors is comprised of
          Continuing Directors.

     2.17 "Person" has the same meaning as set forth in Sections 13(d) and
          14(d)(2) of the Act.

     2.18 "Restricted Period" means the period of time during which
          Restricted Stock awarded under the Plan is subject to
          restrictions.  The Restricted Period may differ among
          Participants and may have different expiration dates with respect
          to shares of Common Stock covered by the same Incentive Award.

     2.19 "Restricted Stock" means Common Stock awarded to a Participant
          pursuant to Section 6 of the Plan.

     2.20 "Retirement" means the voluntary termination of all employment by
          a Participant, or the voluntary termination of a Participant as a
          director of the Corporation (as applicable), after the
          Participant has attained 62 years of age, or such other age as
          shall be determined by the Committee in its sole discretion or as
          otherwise may be set forth in the Incentive Award agreement or
          other grant document with respect to a Participant and a
          particular Incentive Award.

     2.21 "Stock Award" means an award of Common Stock awarded to a
          Participant pursuant to Section 7 of the Plan.

     2.22 "Stock Option" means the right to purchase Common Stock at a
          stated price for a specified period of time.  For purposes of the
          Plan, a Stock Option may be either an incentive stock option
          within the meaning of Section 422(b) of the Code or a
          nonqualified stock option.

     2.23 "Subsidiary" means any corporation or other entity of which 50%
          or more of the outstanding voting stock or voting ownership
          interest is directly or indirectly owned or controlled by the
          Corporation or by one or more Subsidiaries of the Corporation.
                                     -4-
<PAGE>
                                 SECTION 3

                              ADMINISTRATION

     3.1  POWER AND AUTHORITY.  The Committee shall administer the Plan,
shall have full power and authority to interpret the provisions of the Plan
and Incentive Awards granted under the Plan and shall have full power and
authority to supervise the administration of the Plan and Incentive Awards
granted under the Plan.  All determinations, interpretations and selections
made by the Committee regarding the Plan shall be final and conclusive.
The Committee shall hold its meetings at such times and places as it deems
advisable.  Action may be taken by a written instrument signed by a
majority of the members of the Committee and any action so taken shall be
fully as effective as if it had been taken at a meeting duly called and
held.  The Committee shall make such rules and regulations for the conduct
of its business as it considers advisable.

     3.2  GRANTS OR AWARDS TO PARTICIPANTS.  In accordance with and subject
to the provisions of the Plan, the Committee shall have the authority to
determine all provisions of Incentive Awards as the Committee may consider
necessary or desirable and as are consistent with the terms of the Plan,
including, without limitation, the following: (a) the persons who shall be
selected as Participants; (b) the nature and the extent of the Incentive
Awards to be made to each Participant (including the number of shares of
Common Stock to be subject to each Incentive Award, any exercise price, the
manner in which an Incentive Award will vest or become exercisable and the
form of payment for the Incentive Award); (c) the time or times when
Incentive Awards will be granted; (d) the duration of each Incentive Award;
and (e) the restrictions and other conditions to which payment or vesting
of Incentive Awards may be subject.

     3.3  AMENDMENTS OR MODIFICATIONS OF AWARDS.  The Committee shall have
the authority to amend or modify the terms of any outstanding Incentive
Award in any manner, provided that the amended or modified terms are not
prohibited by the Plan as then in effect, including, without limitation,
the authority to: (a) modify the number of shares or other terms and
conditions of an Incentive Award; (b) extend the term of an Incentive
Award; (c) accelerate the exercisability or vesting or otherwise terminate
any restrictions relating to an Incentive Award; (d) accept the surrender
of any outstanding Incentive Award; and (e) to the extent not previously
exercised or vested, authorize the grant of new Incentive Awards in
substitution for surrendered Incentive Awards.  Notwithstanding the
foregoing or any other provision of the Plan, the terms of Stock Options
automatically granted to nonemployee directors under the Plan shall not be
amended or modified without the approval of the Board, except as necessary
or desirable to comply with applicable laws, rules and regulations.



                                     -5-
<PAGE>
     3.4  INDEMNIFICATION OF COMMITTEE MEMBERS.  Each person who is or
shall have been a member of the Committee shall be indemnified and held
harmless by the Corporation from and against any cost, liability or expense
imposed or incurred in connection with such person's or the Committee's
taking or failing to take any action under the Plan.  Each such person
shall be justified in relying on information furnished in connection with
the Plan's administration by any appropriate person or persons, including
without limitation an Appraisal.

                                 SECTION 4

                        SHARES SUBJECT TO THE PLAN

     4.1  NUMBER OF SHARES.  Subject to adjustment as provided in Section
4.2 of the Plan, a maximum of thirty thousand (30,000) shares of Common
Stock shall be available for Incentive Awards under the Plan.  Such shares
shall be authorized and may be either unissued or treasury shares.

     4.2  ADJUSTMENTS.  If the number of shares of Common Stock outstanding
changes by reason of a stock dividend, stock split, recapitalization,
merger, consolidation, combination, exchange of shares or any other change
in the corporate structure or shares of the Corporation, the number and
kind of securities subject to and reserved under the Plan, together with
applicable exercise prices, shall be appropriately adjusted.  No fractional
shares shall be issued pursuant to the Plan and any fractional shares
resulting from adjustments shall be eliminated from the respective
Incentive Awards, with an appropriate cash adjustment for the value of any
Incentive Awards eliminated.  If an Incentive Award is canceled,
surrendered, modified, exchanged for a substitute Incentive Award or
expires or terminates during the term of the Plan but prior to the exercise
or vesting of the Incentive Award in full, the shares subject to but not
delivered under such Incentive Award shall be available for other Incentive
Awards.  If shares of Common Stock are surrendered to the Corporation in
connection with the exercise or vesting of an Incentive Award, the
surrendered shares shall be available for other Incentive Awards under the
Plan.

                                 SECTION 5

                               STOCK OPTIONS

     5.1  GRANT.  A Participant may be granted one or more Stock Options
under the Plan. The Committee, in its discretion, may provide in the
initial grant of a Stock Option for the subsequent automatic grant of
additional Stock Options for the number of shares, if any, that are subject
to the initial Stock Option and surrendered to the Corporation in
connection with the exercise of the initial or any subsequently granted
Stock Option.  Stock Options shall be subject to such terms and conditions,

                                     -6-
<PAGE>
consistent with the other provisions of the Plan, as may be determined by
the Committee in its sole discretion.  In addition, the Committee may vary,
among Participants and among Stock Options granted to the same Participant,
any and all of the terms and conditions of the Stock Options granted under
the Plan.  The Committee shall have complete discretion in determining the
number of Stock Options granted to each Participant.  The Committee may
designate whether or not a Stock Option is to be considered an incentive
stock option as defined in Section 422(b) of the Code.

     5.2  GRANTS TO NONEMPLOYEE DIRECTORS.  All nonemployee directors who
are serving on the applicable date shall automatically receive annually, on
the later of the date of the close of the annual meeting of shareholders or
the date on which the Corporation receives the appraisal of the Common
Stock for purposes of contributions to the Corporation's Employee Stock
Ownership Plan (the "Appraisal"), a Stock Option to purchase a number of
shares of Common Stock equal to (a) the sum of (i) the annual cash retainer
fees payable to a director in effect on the date of grant and (ii) the
amount of the normal meeting fees payable to a director for attendance at a
regular monthly meeting of the Board in effect on the date of grant
multiplied by 12, divided by (b) the Market Value per share if Common Stock
is listed for trading on The Nasdaq Stock Market or, if not listed, the per
share value of Common Stock set forth in the Appraisal.  Such Stock Options
shall be issued for a term of 5 years using a form of agreement
substantially similar to the standard form of Stock Option agreement
established by the Committee for executive officer Participants, adjusted
as necessary due to the recipient's status as a nonemployee director.
These formula grant provisions for nonemployee directors may be amended by
the Board of Directors not more than once every six months, other than to
comply with changes to the Code, the Act or the rules thereunder.
Nonemployee directors may pay the exercise price in any manner permitted
for exercises by other Participants.  Stock Options granted to nonemployee
directors of the Company shall not qualify as incentive stock options.

     5.3  STOCK OPTION AGREEMENTS.  Stock Options shall be evidenced by
stock option agreements containing such terms and conditions, consistent
with the provisions of the Plan, as the Committee shall from time to time
determine. To the extent not covered by the stock option agreement, the
terms and conditions of this Section 5 shall govern.

     5.4  STOCK OPTION PRICE.  The per share Stock Option price shall be
determined by the Committee; provided, that the per share Stock Option
price for any shares designated as incentive stock options shall be equal
to or greater than 100% of the Market Value on the date of grant.

     5.5  MEDIUM AND TIME OF PAYMENT.  The exercise price for each share
purchased pursuant to a Stock Option granted under the Plan shall be
payable in cash or, if the Committee consents, in shares of Common Stock
(including Common Stock to be received upon a simultaneous exercise) or

                                     -7-
<PAGE>
other consideration substantially equivalent to cash.  The time and terms
of payment may be amended with the consent of a Participant before or after
exercise of a Stock Option.  The Committee may from time to time authorize
payment of all or a portion of the Stock Option price in the form of a
promissory note or other deferred payment installments according to such
terms as the Committee may approve.  The Board may restrict or suspend the
power of the Committee to permit such loans and may require that adequate
security be provided.

     5.6  STOCK OPTIONS GRANTED TO 10% SHAREHOLDERS.  No Stock Option
granted to any Participant who at the time of such grant owns, together
with stock attributed to such Participant under Section 424(d) of the Code,
more than 10% of the total combined voting power of all classes of stock of
the Corporation or any of its Subsidiaries may be designated as an
incentive stock option, unless such Stock Option provides an exercise price
equal to at least 110% of the Market Value of the Common Stock and the
exercise of the Stock Option after the expiration of 5 years from the date
of grant of the Stock Option is prohibited by its terms.

     5.7  LIMITS ON EXERCISABILITY.  Stock Options shall be exercisable for
such periods, not to exceed 10 years from the date of grant, as may be
fixed by the Committee.  At the time of exercise of a Stock Option, the
holder of the Stock Option, if requested by the Committee, must represent
to the Corporation that the shares are being acquired for investment and
not with a view to the distribution thereof.  The Committee may in its
discretion require a Participant to continue the Participant's service with
the Corporation and its Subsidiaries for a certain length of time as a
condition to a Stock Option becoming exercisable and may eliminate such
delayed vesting provisions.

     5.8  RESTRICTIONS ON TRANSFERABILITY.

          (a)  GENERAL.  Unless the Committee otherwise consents
     (before or after the option grant) or unless the stock option
     agreement or grant provides otherwise; (i) no incentive stock
     option granted under the Plan may be sold, exchanged,
     transferred, pledged, assigned or otherwise alienated or
     hypothecated except by will or the laws of descent and
     distribution; and (ii) all Stock Options that are not incentive
     stock options may be transferred; PROVIDED, that as a condition
     to any such transfer the transferee must execute a written
     agreement permitting the Corporation to withhold from the shares
     subject to the Incentive Award a number of shares having a Market
     Value at least equal to the amount of any federal, state or local
     withholding or other taxes associated with or resulting from the
     exercise of a Stock Option.

          (b)  OTHER RESTRICTIONS.  The Committee may impose other
     restrictions on any shares of Common Stock acquired pursuant to
                                     -8-
<PAGE>
     the exercise of a Stock Option under the Plan as the Committee
     considers advisable, including, without limitation, restrictions
     under applicable federal or state securities laws.

     5.9  TERMINATION OF EMPLOYMENT OR DIRECTOR OR OFFICER STATUS.

          (a)  GENERAL.  If a Participant ceases to be employed by or
     an officer of the Corporation or one of its Subsidiaries for any
     reason or if a director ceases to serve as a director of the
     Corporation for any reason, other than the Participant's or
     director's death, disability, Retirement or termination for
     cause, the Participant or director may exercise his or her Stock
     Options only for a period of 3 months after such termination of
     employment or director or officer status, but only to the extent
     the Participant or director was entitled to exercise the Stock
     Options on the date of termination, unless the Committee
     otherwise consents or the terms of the stock option agreement or
     grant provide otherwise.  For purposes of the Plan, the following
     shall not be considered a termination of employment or director
     or officer status:  (i) a transfer of an employee from the
     Corporation to any Subsidiary; (ii) a leave of absence, duly
     authorized in writing by the Corporation, for military service or
     for any other purpose approved by the Corporation if the period
     of such leave does not exceed 90 days; (iii) a leave of absence
     in excess of 90 days, duly authorized in writing by the
     Corporation, provided that the employee's right to reemployment
     is guaranteed either by statute or contract; or (iv) a
     termination of employment with continued service as a director or
     officer.

          (b)  DEATH.  If a Participant dies either while an employee
     or officer of the Corporation or one of its Subsidiaries or after
     the termination of employment other than for cause but during the
     time when the Participant could have exercised a Stock Option
     under the Plan, or if a director dies while serving as a director
     of the Corporation or after ceasing to be a director but during
     the time the director or former director could have exercised a
     Stock Option under the Plan, the Stock Option issued to such
     Participant, director or former director shall be exercisable by
     the personal representative of such Participant, director or
     former director or other successor to the interest of the
     Participant, director or former director for 1 year after the
     Participant's, director's or former director's death, but only to
     the extent that the Participant, director or former director was
     entitled to exercise the Stock Option on the date of death or
     termination of employment or status as a director or officer,
     whichever first occurred, unless the Committee otherwise consents
     or the terms of the stock option agreement or grant provide
     otherwise.
                                     -9-
<PAGE>
          (c)  DISABILITY.  If a Participant ceases to be an employee
     or officer of the Corporation or one of its Subsidiaries, or a
     director ceases to be a director, due to the Participant's or
     director's disability, the Participant or director may exercise a
     Stock Option for a period of 1 year following such termination of
     employment or director or officer status, but only to the extent
     that the Participant or director was entitled to exercise the
     Stock Option on the date of such event, unless the Committee
     otherwise consents or the terms of the stock option agreement or
     grant provide otherwise.

          (d)  PARTICIPANT RETIREMENT.  If a Participant Retires as an
     employee or officer of the Corporation or one of its Subsidiaries
     or if a director retires, any Stock Option granted under the Plan
     may be exercised during the remaining term of the Stock Option,
     unless the terms of the stock option agreement or grant provide
     otherwise.

          (e)  TERMINATION FOR CAUSE.  If a Participant is terminated
     for cause, the Participant shall have no further right to
     exercise any Stock Option previously granted, unless the
     Committee and the Board determine otherwise.

                                 SECTION 6

                             RESTRICTED STOCK

     6.1  GRANT.  A Participant may be granted Restricted Stock under the
Plan.  Restricted Stock shall be subject to such terms and conditions,
consistent with the other provisions of the Plan, as shall be determined by
the Committee in its sole discretion.  The Committee may impose such
restrictions or conditions, consistent with the provisions of the Plan, to
the vesting of Restricted Stock as it considers appropriate.

     6.2  TERMINATION OF EMPLOYMENT OR OFFICER STATUS.

          (a)  GENERAL.  In the event of termination of employment or
     officer status during the Restricted Period for any reason other
     than death, disability, Retirement, termination by the
     Corporation other than for Cause or termination for cause, then
     any shares of Restricted Stock still subject to restrictions at
     the date of such termination shall automatically be forfeited and
     returned to the Corporation, unless the Committee determines
     otherwise, waives the automatic forfeiture or waives or modifies
     the restrictions.  For purposes of the Plan, the following shall
     not be considered a termination of employment or officer status:
     (i) a transfer of an employee from the Corporation to any
     Subsidiary; (ii) a leave of absence, duly authorized in writing

                                     -10-
<PAGE>
     by the Corporation, for military service or for any other purpose
     approved by the Corporation if the period of such leave does not
     exceed 90 days; (iii) a leave of absence in excess of 90 days
     duly authorized in writing by the Corporation, provided that the
     employee's right to reemployment is guaranteed either by statute
     or contract; and (iv) a termination of employment with continued
     service as an officer.

          (b)  TERMINATION BY CORPORATION OTHER THAN FOR CAUSE.  In
     the event of a voluntary or involuntary termination of the
     employment or officer status of a Participant by the Corporation
     other than for Cause, the restrictions applicable to the shares
     of Restricted Stock shall terminate automatically with respect to
     that number of shares (rounded to the nearest whole number) equal
     to the total number of shares of Restricted Stock granted to such
     Participant multiplied by the number of full months that have
     elapsed since the date of grant divided by the maximum number of
     full months of the Restricted Period.  All remaining shares shall
     be forfeited and returned to the Corporation; PROVIDED, that the
     Committee may, in its sole discretion, waive the automatic
     forfeiture of any or all such shares of Restricted Stock and/or
     may modify the restrictions to such shares of Restricted Stock as
     it considers appropriate with the consent of the Participant.

          (c)  DEATH, RETIREMENT OR DISABILITY.  Unless the terms of
     the restricted stock agreement or grant provide otherwise, in the
     event a Participant terminates his employment with the
     Corporation because of death, disability or Retirement during the
     Restricted Period, the restrictions applicable to the shares of
     Restricted Stock shall terminate automatically with respect to
     all shares of Restricted Stock.

          (d)  TERMINATION FOR CAUSE.  If a Participant's employment
     is terminated for cause, the Participant shall have no further
     right to exercise or receive any Restricted Stock and all
     Restricted Stock still subject to restrictions at the date of
     such termination shall automatically be forfeited and returned to
     the Corporation, unless the Committee and the Board determine
     otherwise.

     6.3  RESTRICTIONS ON TRANSFERABILITY.

          (a)  GENERAL.  Unless the Committee otherwise consents or
     unless the terms of the restricted stock agreement or grant
     provide otherwise:  (i) shares of Restricted Stock shall not be
     sold, exchanged, transferred, pledged, assigned or otherwise
     alienated or hypothecated during the Restricted Period except by
     will or the laws of descent and distribution; and (ii) all rights

                                     -11-
<PAGE>
     with respect to Restricted Stock granted to a Participant under
     the Plan shall be exercisable during the Participant's lifetime
     only by such Participant, his guardian or legal representative.

          (b)  OTHER RESTRICTIONS.  The Committee may impose other
     restrictions on any shares of Common Stock acquired pursuant to
     an award of Restricted Stock under the Plan as the Committee
     considers advisable, including, without limitation, restrictions
     under applicable federal or state securities laws.

     6.4  LEGENDING OF RESTRICTED STOCK.  Any certificates evidencing
shares of Restricted Stock awarded pursuant to the Plan shall bear the
following legend:

          The shares represented by this certificate were issued
     subject to certain restrictions under the Valley Ridge Financial
     Corp. Stock Incentive Plan of 1998 (the "Plan").  A copy of the
     Plan is on file in the office of the Secretary of the
     Corporation.  This certificate is held subject to the terms and
     conditions contained in a restricted stock agreement that
     includes a prohibition against the sale or transfer of the stock
     represented by this certificate except in compliance with that
     agreement and that provides for forfeiture upon certain events.

     6.5  REPRESENTATIONS AND WARRANTIES.  A Participant who is awarded
Restricted Stock shall represent and warrant that the Participant is
acquiring the Restricted Stock for the Participant's own account and
investment and without any intention to resell or redistribute the
Restricted Stock.  The Participant shall agree not to resell or distribute
such Restricted Stock after the Restricted Period except upon such
conditions as the Corporation may reasonably specify to ensure compliance
with federal and state securities laws.

     6.6  RIGHTS AS A SHAREHOLDER.  A Participant shall have all voting,
dividend, liquidation and other rights with respect to Restricted Stock
held of record by such Participant as if the Participant held unrestricted
Common Stock; PROVIDED, that the unvested portion of any award of
Restricted Stock shall be subject to any restrictions on transferability or
risks of forfeiture imposed pursuant to Sections 6.2 and 6.3 of the Plan.
Unless the Committee otherwise determines or unless the terms of the
restricted stock agreement or grant provide otherwise, any noncash
dividends or distributions paid with respect to shares of unvested
Restricted Stock shall be subject to the same restrictions as the shares to
which such dividends or distributions relate.





                                     -12-
<PAGE>
                                 SECTION 7

                               STOCK AWARDS

     7.1  GRANT.  A Participant may be granted one or more Stock Awards
under the Plan.  Stock Awards shall be subject to such terms and
conditions, consistent with the other provisions of the Plan, as may be
determined by the Committee in its sole discretion.

     7.2  REPRESENTATIONS AND WARRANTIES.  A Participant who is awarded a
Stock Award shall represent and warrant that the Participant is acquiring
the stock for the Participant's own account and investment and without any
intention to resell or redistribute the stock.  The Participant shall agree
not to resell or distribute such stock except upon such conditions as the
Corporation may reasonably specify to ensure compliance with federal and
state securities laws.

     7.3  RIGHTS AS A SHAREHOLDER.  A Participant shall have all voting,
dividend, liquidation and other rights with respect to shares of Common
Stock issued to the Participant as a Stock Award under this Section 7 upon
the Participant becoming the holder of record of the Common Stock granted
pursuant to such Stock Award; provided, that the Committee may impose such
restrictions on the assignment or transfer of Common Stock awarded pursuant
to a Stock Award as it considers appropriate.

                                 SECTION 8

                             CHANGE IN CONTROL

     8.1  ACCELERATION OF VESTING.  If a Change in Control of the
Corporation shall occur, then, unless the Committee or the Board otherwise
determines with respect to one or more Incentive Awards, without action by
the Committee or the Board:  (a) all outstanding Stock Options shall become
immediately exercisable in full and shall remain exercisable during the
remaining term thereof, regardless of whether the Participants to whom such
Stock Options have been granted remain in the employ or service of the
Corporation or any Subsidiary; and (b) all other outstanding Incentive
Awards shall become immediately fully vested and nonforfeitable.

     8.2  CASH PAYMENT FOR STOCK OPTIONS.  If a Change in Control of the
Corporation shall occur, then the Committee, in its sole discretion, and
without the consent of any Participant affected thereby, may determine that
some or all Participants holding outstanding Stock Options shall receive,
with respect to some or all of the shares of Common Stock subject to such
Stock Options, as of the effective date of any such Change in Control of
the Corporation, cash in an amount equal to the greater of the excess of
(a) the highest sales price of the shares immediately prior to the
effective date of such Change in Control of the Corporation or (b) the

                                     -13-
<PAGE>
highest price per share actually paid in connection with any Change in
Control of the Corporation over the exercise price per share of such Stock
Options.

                                 SECTION 9

                            GENERAL PROVISIONS

     9.1  NO RIGHTS TO AWARDS.  No Participant or other person shall have
any claim to be granted any Incentive Award under the Plan and there is no
obligation of uniformity of treatment of Participants or holders or
beneficiaries of Incentive Awards under the Plan.  The terms and conditions
of Incentive Awards of the same type and the determination of the Committee
to grant a waiver or modification of any Incentive Award and the terms and
conditions thereof need not be the same with respect to each Participant or
even the same Participant.

     9.2  WITHHOLDING.  The Corporation or a Subsidiary shall be entitled
to:  (a) withhold and deduct from future wages of a Participant (or from
other amounts that may be due and owing to a Participant from the
Corporation or a Subsidiary), or make other arrangements for the collection
of, all legally required amounts necessary to satisfy any and all federal,
state and local withholding and employment-related tax requirements
attributable to an Incentive Award, including, without limitation, the
grant, exercise or vesting of, or payment of dividends with respect to, an
Incentive Award or a disqualifying disposition of Common Stock received
upon exercise of an incentive stock option; or (b) require a Participant
promptly to remit the amount of such withholding to the Corporation before
taking any action with respect to an Incentive Award.  Unless the Committee
determines otherwise, withholding may be satisfied by withholding Common
Stock to be received upon exercise or by delivery to the Corporation of
previously owned Common Stock.  The Corporation may establish such rules
and procedures concerning timing of any withholding election as it deems
appropriate.

     9.3  COMPLIANCE WITH LAWS; LISTING AND REGISTRATION OF SHARES.  All
Incentive Awards granted under the Plan (and all issuances of Common Stock
or other securities under the Plan) shall be subject to all applicable
laws, rules and regulations, and to the requirement that if at any time the
Committee shall determine, in its discretion, that the listing,
registration or qualification of the shares covered thereby upon any
securities exchange or under any state or federal law, or the consent or
approval of any governmental regulatory body, is necessary or desirable as
a condition of, or in connection with, the grant of such Incentive Award or
the issue or purchase of shares thereunder, such Incentive Award may not be
exercised in whole or in part, or the restrictions on such Incentive Award
shall not lapse, unless and until such listing, registration,
qualification, consent or approval shall have been effected or obtained
free of any conditions not acceptable to the Committee.
                                     -14-
<PAGE>
     9.4  NO LIMIT ON OTHER COMPENSATION ARRANGEMENTS.  Nothing contained
in the Plan shall prevent the Corporation or any Subsidiary from adopting
or continuing in effect other or additional compensation arrangements,
including the grant of stock options and other stock-based awards, and such
arrangements may be either generally applicable or applicable only in
specific cases.

     9.5  NO RIGHT TO EMPLOYMENT.  The grant of an Incentive Award shall
not be construed as giving a Participant the right to be retained in the
employ of the Corporation or any Subsidiary.  The Corporation or any
Subsidiary may at any time dismiss a Participant from employment, free from
any liability or any claim under the Plan, unless otherwise expressly
provided in the Plan or in any written agreement with a Participant.

     9.6  SUSPENSION OF RIGHTS UNDER INCENTIVE AWARDS.  The Corporation, by
written notice to a Participant, may suspend a Participant's and any
transferee's rights under any Incentive Award for a period not to exceed 30
days while the termination for cause of that Participant's employment with
the Corporation and its Subsidiaries is under consideration.

     9.7  GOVERNING LAW.  The validity, construction and effect of the Plan
and any rules and regulations relating to the Plan shall be determined in
accordance with the laws of the State of Michigan and applicable federal
law.

     9.8  SEVERABILITY.  In the event any provision of the Plan shall be
held illegal or invalid for any reason, the illegality or invalidity shall
not affect the remaining provisions of the Plan and the Plan shall be
construed and enforced as if the illegal or invalid provision had not been
included.

                                SECTION 10

                         TERMINATION AND AMENDMENT

          The Board may terminate the Plan at any time, or may from time to
time amend the Plan as it considers proper and in the best interests of the
Corporation, provided that no such amendment may impair any outstanding
Incentive Award without the consent of the Participant, except according to
the terms of the Plan or the Incentive Award.  No termination, amendment or
modification of the Plan shall become effective with respect to any
Incentive Award previously granted under the Plan without the prior written
consent of the Participant holding such Incentive Award unless such
amendment or modification operates solely to the benefit of the
Participant.




                                     -15-
<PAGE>
                                SECTION 11

                  EFFECTIVE DATE AND DURATION OF THE PLAN

          This Plan shall take effect on May 19, 1998.  Unless earlier
terminated by the Board of Directors, the Plan shall terminate on the date
10 years after that date.  No Incentive Award shall be granted under the
Plan after such termination date.









































                                     -16-

<TABLE> <S> <C>

<ARTICLE>                                                                 9
<LEGEND>   THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS OF VALLEY
RIDGE FINANCIAL CORP. FOR THE PERIOD ENDED JUNE 30, 1998 AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER>                                                          1,000
       
<S>                                                            <C>
<PERIOD-TYPE>                                                         6-MOS
<FISCAL-YEAR-END>                                               DEC-31-1998
<PERIOD-START>                                                  JAN-01-1998
<PERIOD-END>                                                    JUN-30-1998
<CASH>                                                                5,973
<INT-BEARING-DEPOSITS>                                                    0
<FED-FUNDS-SOLD>                                                      1,300
<TRADING-ASSETS>                                                          0
<INVESTMENTS-HELD-FOR-SALE>                                          25,791
<INVESTMENTS-CARRYING>                                               25,791
<INVESTMENTS-MARKET>                                                 25,791
<LOANS>                                                              96,666
<ALLOWANCE>                                                           1,230
<TOTAL-ASSETS>                                                      136,723
<DEPOSITS>                                                          109,986
<SHORT-TERM>                                                              0
<LIABILITIES-OTHER>                                                   1,898
<LONG-TERM>                                                          11,000
<COMMON>                                                              6,200
                                                     0
                                                               0
<OTHER-SE>                                                            7,639
<TOTAL-LIABILITIES-AND-EQUITY>                                      136,723
<INTEREST-LOAN>                                                       4,412
<INTEREST-INVEST>                                                       716
<INTEREST-OTHER>                                                        109
<INTEREST-TOTAL>                                                      5,238
<INTEREST-DEPOSIT>                                                    1,822
<INTEREST-EXPENSE>                                                    2,152
<INTEREST-INCOME-NET>                                                 3,085
<LOAN-LOSSES>                                                            75
<SECURITIES-GAINS>                                                       80
<EXPENSE-OTHER>                                                       2,574
<INCOME-PRETAX>                                                       1,046
<INCOME-PRE-EXTRAORDINARY>                                            1,046
<EXTRAORDINARY>                                                           0
<CHANGES>                                                                 0
<NET-INCOME>                                                            818
<EPS-PRIMARY>                                                          1.32
<EPS-DILUTED>                                                          1.32
<YIELD-ACTUAL>                                                         4.98
<LOANS-NON>                                                             922
<LOANS-PAST>                                                            569
<LOANS-TROUBLED>                                                          0
<LOANS-PROBLEM>                                                           0
<ALLOWANCE-OPEN>                                                      1,187
<CHARGE-OFFS>                                                            53
<RECOVERIES>                                                             21
<ALLOWANCE-CLOSE>                                                     1,230
<ALLOWANCE-DOMESTIC>                                                  1,230
<ALLOWANCE-FOREIGN>                                                       0
<ALLOWANCE-UNALLOCATED>                                                 547
        


</TABLE>


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