OAK Income, Earnings Slip

July 23, 2008
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BYRON CENTER — OAK Financial Corp., the holding company for Byron Bank, posted second quarter net income of $1.19 million, down 32 percent from the $1.75 million reported in the second quarter of 2007. Basic and diluted earnings per share in the quarter were 44 cents, a 32 percent decrease from the 65 cents reported in the year ago quarter. On a year-to-date basis, net income and earnings per share are each down 23 percent from the year-to-date period in 2007. The company indicated that the decline in net income is a result of higher loan collection costs and higher provision for loan losses.

The bank’s total assets and total loans reached new record levels, however. Total assets at June 30 equaled $787 million, an increase of $22 million during the second quarter. Total loans increased $25 million during the quarter to $629 million at June 30. Compared to one year ago, total loans increased $76 million and total deposits increased $20 million.

“As demonstrated by our growth in assets and loans, we continue to be uniquely positioned to take advantage of current conditions in the West Michigan banking industry,” said Patrick K. Gill, president and CEO of OAK Financial. “Committed to being prudent and conservative, we again made additional allocations to our loan loss reserve during the quarter to support loan growth and to provide further protection against the erosion of real estate collateral values. Despite the decrease in net income, our non-performing assets ratio is among the best in our peer group, our capital position remains strong and our dividend is intact.”

The provision for loan losses was $930,000 in the second quarter, compared with $337,000 during last year’s second quarter. The company said approximately 21 percent of the second quarter provision is attributed to net loans charged off during the quarter, approximately 34 percent is attributed to loan growth in the quarter and the remaining 45 percent is attributed to credit risk downgrades and specific reserves associated with non-performing loans. The amount associated with credit downgrades and specific reserves reflects the overall weakness in the Michigan economy and specific weakness in real estate values, according to OAK Financial.

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