OAK Financial income assets drop 58 percent

October 21, 2008
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OAK Financial Corp, holding company for Byron Bank, reported third quarter net income of $737,000, down 58 percent from the $1.76 million reported in the third quarter of 2007. Basic and diluted earnings per share for the quarter were 27 cents, reflecting a 58 percent decrease from the 65 cents reported for last year’s third quarter.

On a year-to-date basis, net income and earnings per share are each down 35 percent from the year ago period. The company attributed the decline in net income largely to an increase in the provision for loan losses, higher loan collection costs and impairment charges and losses on the sale of other real estate owned.

The provision for loan losses was $1.4 million in the just passed quarter, versus $930,000 in the second quarter of 2008 and $162,000 during the third quarter of 2007. Although net loans charged off totaled $207,000, the additional provision was deemed appropriate based on loan growth and increasing credit risk. An increase in non-performing assets, and the decline in real estate values contributed to the increase in credit risk, according to the company.

OAK’s total assets and total loans, however, reached new record levels. Total assets at Sept. 30, 2008 equaled $802 million, surpassing the $800 million mark for the first time. Total assets increased $15 million during the third quarter and $59 million during the first nine months of 2008, the company noted. Total loans increased $21 million during the third quarter to $650 million at Sept. 30. Compared to one year ago, total assets increased $71 million, or 10 percent, total loans increased $89 million, or 16 percent and total deposits increased $39 million, or 6 percent. The bank indicated that it continues to be well capitalized, with an equity-to-asset ratio of 8.9 percent at Sept. 30, compared to 9.5 percent Dec. 31, 2007.

“Despite continuing headwinds from a slowing economy and turmoil within the financial markets, our core operating performance remains strong,” said Patrick K. Gill, president and CEO of OAK Financial and Byron Bank. “Our earnings, however, have been impacted by our decision to increase our loan loss reserve, which we believe is prudent in light of current business conditions. As an indicator of credit quality, our level of non-performing assets continues to compare very favorably to both industry and peer group averages.”

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