OAK Financial Income Rises

July 24, 2007
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BYRON CENTER — OAK Financial Corp., the holding company for Byron Bank, reported a 4 percent increase in second quarter net income of $1.75 million, up 4 percent from the $1.69 million reported in the second quarter of 2006. Basic and diluted earnings per share in the just-passed quarter were 65 cents, compared with 63 cents a year ago. Year to date, net income and earnings per share both are up 7 percent from the same period in 2006.

President and CEO Patrick K. Gill said that thus far, 2007 has presented a number of significant — perhaps unprecedented — challenges for Michigan banks of all sizes. He said that’s particularly evident in net income and asset quality. Though pleased to report a 4 percent increase in net income, Gill said the company is not immune to the dynamics of the environment in which it operates.

“Our net interest margin continues to be under pressure as a result of intense competition, and the on-going economic challenges in the Michigan economy continue to present challenges to our industry and to our company,” Gill said.

Byron Bank’s net interest income continues to be essentially flat.

The provision for loan losses was $157,000 higher in the second quarter of 2007 compared with the year-ago quarter. According to OAK Financial, the increase is the result of an increase in the specific reserve associated with on particular loan, as well as overall continued weakness in the state’s economy.

A significant increase in service charges on deposit accounts, mortgage banking revenue and investment revenue contributed to the growth in non-interest income for the quarter, which was 25 percent of total revenue in the second quarter of 2007 versus 21.4 percent of total revenue in 2006’s second quarter.

According to the company, total operating expenses in the second quarter increased $569,000 over the second quarter of last year due to: continued investment in staff to support the bank’s recent growth; greater marketing expenditures designed to enhance the bank’s visibility;  increased loan collection expenses associated with the increase in non-performing loans; and equipment purchases and renovation costs for several branches, as well as the main office.

Compared with June 30, 2006, total assets increased $84 million, total loans increased $67 million, and total deposits increased $50 million. 

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