OAK Income Up 82 Percent

October 28, 2005
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BYRON CENTER — OAK Financial Corp., the bank holding company for Byron Bank, reported third quarter net income of $1.67 million, an increase of 82 percent over net income posted for 2004’s third quarter.

Basic and diluted earnings per share increased in the just-passed quarter as well, up 83 percent to 75 cents per share vs. 41 cents per share in the year ago quarter.

Byron Bank currently has a dozen full-service banking offices in a dozen communities across Kent, Ottawa and Allegan counties. The bank is opening a 13th branch Nov. 7 in Wayland.

While it was an impressive third quarter, neither net income nor earnings per share reached record levels.

“Those are certainly great numbers to report, but in our history there has been a quarter or two that were a little bit higher, both of which you could probably argue had extraordinary items in them,” said CFO James Luyk.

In the fourth quarter of last year, for example, the company reversed $1.1 million from its loan loss reserve, and a few years ago it had enormous gains on the sale of mortgages due to the mortgage-refinancing boom, he said.

“I don’t think we can call the third quarter results ‘records,’ but certainly we’re very pleased and proud of the progress we’ve made,” Luyk added. “We have a great team of people and we certainly have high expectations.”

Year to date, net income was $4.32 million, or 61 percent higher than net income for the first nine months of 2004. The company attributed the rise in net income to an increase in net interest and to tight control over operating expenses, which is something the bank has been doing for three years, Luyk said.

“Our expense structure really hasn’t changed in the last three years,” he explained. “What we did was review every aspect of the company and identified opportunities to reduce expenses. We have 15 fewer full-time equivalent employees than we did a year or two ago. Employees are picking up a greater share of the health-care costs but, compared to our competitors, we still have a very attractive employee health-care plan.”

Basic and diluted earnings per share for the first nine months of 2005 was $1.93, an increase of 61 percent over the $1.20 reported for the same period in 2004.

Total assets increased $40 million over the first three quarters of this year. During the same period, total deposits grew by $50 million. Luyk pointed out that the $50 million figure includes approximately $28 million in funds from the bank’s “repurchase product,” which is not classified as a bank deposit.

“We now have a robust cash management product and we’ve moved those existing customers into a more traditional bank product. The bottom line is that we don’t want to be misleading in showing that kind of growth in deposits.”

Response to the mobile banking service introduced in late July has been “terrific,” he said.

“People love it, and it’s convenient and it’s safe. We’ve been able to add customers within our footprint because we have the service, and have also been able to add customers outside of our traditional footprint. It really has extended our ability to serve West Michigan.”    

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