OAK Financial Corporation, Parent Company of Byron Bank, Reports Second Quarter Results

BYRON CENTER, Mich.--(Business Wire)--
OAK Financial Corporation (OTCBB:OKFC), a West Michigan-based bank
holding company, reported second quarter net income of $1,199,000,
down 32% from the $1,752,000 reported in the second quarter of 2007.
Basic and diluted earnings per share in the second quarter of 2008
were $0.44, a decrease of 32% from the $0.65 reported for the second
quarter of 2007. On a year-to-date basis, net income and earnings per
share are each down 23% from the year-to-date period in 2007. 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.
Total assets at June 30, 2008 equaled $787 million, an increase of $22
million during the second quarter. Total loans increased $25 million
during the second quarter to $629 million at June 30, 2008. Compared
to one year ago, total assets increased $74 million, or 10%, total
loans increased $76 million, or 14%, and total deposits increased $20
million, or 3%. The bank continues to be well capitalized, with an
equity-to-asset ratio of 9.1% at June 30, 2008 compared to 9.5% at
December 31, 2007.

"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 Corporation and Byron Bank. "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. Our team
members are energized and our reputation continues to grow throughout
our markets."

Byron Bank's net interest margin in the second quarter of 2008 was
3.56% compared to 3.77% for the second quarter of 2007. Although the
net interest margin is down from a year ago, the net interest margin
has been in a narrow range over the past four quarters. Despite the
decline in the net interest margin, net interest income rose 3% in the
second quarter as result of the strong growth in earning assets.

The provision for loan losses was $930,000 in the second quarter
compared to $675,000 in the first quarter of 2008 and $337,000 during
the second quarter of 2007. Approximately 21% of the second quarter
provision is attributed to net loans charged off during the quarter,
approximately 34% is attributed to loan growth during the quarter and
the remaining 45% 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. As a result of the higher loan loss provision, the allowance
as a percent of total loans increased from 1.18% at the end of the
first quarter to 1.25% at June 30, 2008.

Total non-interest income increased $92,000, or 5%, in the second
quarter of 2008 compared to the second quarter of 2007. The results of
the second quarter include net security gains of $50,000 and a net
impairment charge of $85,000 on other real estate owned as a result of
a decline in real estate values. For the year-to-date period, total
non-interest income increased $346,000, or 9%, in 2008 compared to
2007. Increases in fee income were achieved in deposit service charges
and mortgage banking for both the second quarter and year-to-date
periods. Non-interest income represented 26.1% of total revenue during
the first six months of 2008 compared to 25.3% for the first six
months of 2007.

Operating expenses increased $540,000, or 10.1%, in the second
quarter of 2008 compared to the second quarter of 2007. For the
six-month period, total operating expenses increased 9.7%. The
increase for both the second quarter and the six-month period include
significant increase in loan collection costs and FDIC insurance. The
increase in the FDIC insurance reflects the full utilization of the
bank's FDIC credits during 2007.

Non-performing assets increased $1.5 million during the second
quarter of 2008 to $6.7 million. This represents .85% of total assets
and compares to .68% at March 31, 2008 and .93% at December 31, 2007.
At June 30, 2008, total non-performing assets consists of $2.1 million
of other real estate, $4.4 million of loans that are not accruing
interest, and approximately $.2 million of loans that are more than 90
days past due, but still accruing interest. Net loans charged-off as a
percent of total average loans was .13% in the second quarter of 2008
compared to .38% in the first quarter of 2008 and .05% in the second
quarter of 2007. Net loans charged-off in the second quarter totaled
$195,000 compared to $67,000 during the second quarter of 2007. Total
net loans charged-off for the first six months of 2008 was .25%
compared to .07% during the same period of 2007.

OAK Financial Corporation owns Byron Bank and provides traditional
banking services and products through 14 banking offices serving 14
communities in Kent, Ottawa and Allegan counties in West Michigan.
Byron Bank owns a subsidiary, Byron Investment Services, which offers
mutual fund products, securities brokerage services, retirement
planning services, investment management and advisory services. Our
Byron Insurance Agency subsidiary provides products, such as property
and casualty, life, disability and long-term care insurance. For
information regarding stock transactions, please contact Kent King
Securities at 1-888-804-8891, Howe Barnes at 1-800-800-4693, Royal
Securities at 616-538-2550 or Stifel, Nicolaus & Co., Inc. at
616-942-1717.

CAUTIONARY STATEMENT: This press release contains certain
forward-looking statements that involve risks and uncertainties.
Forward-looking statements include, but are not limited to, statements
concerning future growth in earning assets and net income, the
sustainability of past results, and other expectations and/or goals.
Such statements are subject to certain risks and uncertainties which
could cause actual results to differ materially from those expressed
or implied by such forward-looking statements, including, but not
limited to, economic, competitive, governmental and technological
factors affecting our operations, markets, products, services,
interest rates and fees for services. Readers are cautioned not to
place undue reliance on these forward-looking statements, which speak
only as of the date of this press release. Further information
concerning our business, including additional factors that could
materially affect our financial results, is included in our filings
with the Securities and Exchange Commission.

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OAK FINANCIAL CORPORATION CONSOLIDATED
AND SUBSIDIARY BALANCE SHEETS
----------------------------------------------------------------------

(Dollars in thousands, except per share
data) June 30, December 31,
2008 2007
ASSETS (Unaudited)
------------ ------------

Cash and cash equivalents $17,247 $15,342

Available-for-sale securities 111,753 117,627

Loans held for sale 2,316 3,496

Total loans 628,992 582,296
Allowance for loan losses (7,860) (7,008)
------------ ------------
Net Loans 621,132 575,288

Accrued interest receivable 3,589 3,580
Premises and equipment, net 16,888 16,372
Restricted investments 4,461 3,379
Other assets 9,669 8,362
------------ ------------

Total assets $787,055 $743,446
============ ============

LIABILITIES AND STOCKHOLDERS' EQUITY

Deposits
Non-interest bearing $74,553 $74,015
Interest bearing 515,467 491,433
------------ ------------
Total deposits 590,020 565,448

Federal funds purchased 35,500 37,600
Repurchase agreements 20,350 20,350
FHLB advances 64,697 43,258
Other borrowed funds 122 436
Other liabilities 5,077 5,541
------------ ------------
Total liabilities 715,766 672,633

Stockholders' equity
Common stock, $1 par value; 4,000,000
shares authorized;
2,703,009 shares issued and outstanding 2,703 2,703
Additional paid-in capital 32,778 32,778
Retained earnings 36,505 35,014
Accumulated other comprehensive income (697) 318
------------ ------------
Total stockholders' equity 71,289 70,813
------------ ------------

Total liabilities and stockholders' equity $787,055 $743,446
============ ============
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OAK FINANCIAL CORPORATION
AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME
----------------------------------------------------------------------

Three Months ended Six Months ended
(Dollars in thousands except per June 30, June 30,
share data) (Unaudited) (Unaudited)
-----------------------------------

2008 2007 2008 2007
---------- ------- -------- -------
Interest Income
Interest and fees on loans $9,533 $10,325 $19,347 $20,079
Available-for-sale securities 1,223 1,241 2,508 2,485
Restricted investments 50 37 95 79
Other interest income 1 1 3 3
---------- ------- -------- -------
Total interest income 10,807 11,604 21,953 22,646
---------- ------- -------- -------

Interest expense
Deposits 3,529 4,696 7,579 9,477
Federal funds purchased 151 299 414 414
Repurchase agreements 244 84 489 84
FHLB advances 644 485 1,212 894
Other borrowed funds 4 8 6 30
---------- ------- -------- -------
Total interest expense 4,572 5,572 9,700 10,899
---------- ------- -------- -------

Net interest income 6,235 6,032 12,253 11,747

Provision for loan losses 930 337 1,605 497
---------- ------- -------- -------

Net interest income after provision
for loan losses 5,305 5,695 10,648 11,250
---------- ------- -------- -------

Non-interest income
Service charges on deposit
accounts 1,387 1,309 2,639 2,487
Mortgage banking 303 281 707 531
Net gain on sales of available for
sale securities 50 5 52 10
Insurance premiums and brokerage
fees 286 288 625 632
Other 107 158 295 312
---------- ------- -------- -------
Total non-interest income 2,133 2,041 4,318 3,972
---------- ------- -------- -------

Non-interest expenses
Salaries 2,697 2,593 5,244 5,045
Employee benefits 575 536 1,197 1,064
Occupancy (net) 464 401 895 800
Furniture and fixtures 326 284 620 564
Other 1,849 1,557 3,547 3,011
---------- ------- -------- -------
Total non-interest expenses 5,911 5,371 11,503 10,484
---------- ------- -------- -------

Income before federal income taxes 1,527 2,365 3,463 4,738

Federal income taxes 328 613 782 1,246
---------- ------- -------- -------

Net income $1,199 $1,752 $2,681 $3,492
========== ======= ======== =======

Income per common share:
Basic $0.44 $0.65 $0.99 $1.29
Diluted $0.44 $0.65 $0.99 $1.29
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OAK FINANCIAL CORPORATION CONSOLIDATED
AND SUBSIDIARY FINANCIAL HIGHLIGHTS
----------------------------------------------------------------------

(Unaudited)
2nd Qtr 1st Qtr 4th Qtr3rd Qtr2nd Qtr
(Dollars in thousands except per
share data) 2008 2008 2007 2007 2007
-------------------------------------
Earnings
---------------------------------
Net interest income $6,235 $6,018 $5,828 $5,937 $6,032
Provision for loan losses $930 $675 $562 $162 $337
Non-interest income $2,133 $2,185 $2,259 $2,057 $2,041
Non-interest expense $5,911 $5,592 $5,615 $5,465 $5,371
Net income $1,199 $1,482 $1,476 $1,761 $1,752
Basic earnings per share $0.44 $0.55 $0.55 $0.65 $0.65
Diluted earnings per share $0.44 $0.55 $0.55 $0.65 $0.65
Average shares outstanding 2,703 2,703 2,703 2,703 2,703

Performance Ratios
---------------------------------
Return on average assets 0.62% 0.80% 0.80% 0.97% 1.01%
Return on average equity 6.64% 8.29% 8.32% 10.19% 10.39%
Net interest margin (tax-
equivalent) 3.56% 3.56% 3.49% 3.57% 3.77%
Efficiency ratio 69.0% 66.1% 67.5% 66.7% 65.0%
Full-time equivalent employees 202 200 200 197 196
Ending equity to ending assets 9.06% 9.46% 9.53% 9.49% 9.47%
Book value per share $26.37 $26.77 $26.20 $25.67 $24.97

Asset Quality
---------------------------------
Net loans charged-off $195 $558 $1,427 $116 $67
Net charge-offs to total average
loans (annualized) 0.13% 0.38% 1.00% 0.08% 0.05%
Nonperforming assets $6,714 $5,236 $6,932 $5,041 $4,542
Allowance for loan losses to
total loans 1.25% 1.18% 1.20% 1.40% 1.42%
Nonperforming assets to total
assets 0.85% 0.68% 0.93% 0.69% 0.64%

YTD YTD
(Dollars in thousands except per
share data) 6/30/08 6/30/07
----------------
Earnings
---------------------------------
Net interest income $12,253 $11,747
Provision for loan losses $1,605 $497
Non-interest income $4,318 $3,972
Non-interest expense $11,503 $10,484
Net income $2,681 $3,492
Basic earnings per share $0.99 $1.29
Diluted earnings per share $0.99 $1.29
Average shares outstanding 2,703 2,703

Performance Ratios
---------------------------------
Return on average assets 0.71% 1.02%
Return on average equity 7.46% 10.50%
Net interest margin (tax-
equivalent) 3.56% 3.74%
Efficiency ratio 67.6% 65.2%

Asset Quality
---------------------------------
Net loans charged-off $753 $180
Net charge-offs to total average
loans (annualized) 0.25% 0.07%
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OAK Financial Corporation
Patrick K. Gill, 616-588-7420
President & CEO
or
James A. Luyk, 616-588-7419
Executive Vice President COO & CFO

Copyright Business Wire 2008