OAK Financial Corporation, Parent Company of Byron Bank, Reports Third Quarter Results
http://www.businesswire.com/news/home/20091102006552/en
BYRON CENTER, Mich.--(Business Wire)--
OAK Financial Corporation (OTCBB: OKFC), a West Michigan-based bank holding
company, reported third quarter net loss of $1,308,000 compared to net income of
$737,000 for the third quarter of 2008. Basic and diluted earnings per share in
the third quarter of 2009 were ($0.49), down from $0.27 reported for the third
quarter of 2008. The decline in net income and earnings per share is largely due
to a $3,100,000 increase in the provision for loan losses in addition to
increases in loan collection expenses. Net income for the first nine months was
$952,000, down 72% from the first nine months of 2008.
Total assets at September 30, 2009 equaled $840 million, a decrease of $1
million from the end of the second quarter of 2009 and an increase of $38
million from September 30, 2008. Total loans declined $9 million during the
third quarter, which is a reflection of the difficult economic environment and
lower borrowing needs of some of our customers. An increase in the consumers`
savings rate contributed to the $14 million increase in total deposits during
the third quarter and past year. Compared to one year ago, total assets
increased 5% and total loans increased 6% and total deposits increased 10%. The
bank continues to be well capitalized and has an equity-to-asset ratio of 8.49%
at September 30, 2009 compared to 8.37% at December 31, 2008.
"It`s important to consider our third quarter performance against the backdrop
of events within our economy, our markets and our industry," said Patrick K.
Gill, President and CEO of OAK Financial Corporation and Byron Bank. "Our
increased provision for loan losses was primarily attributable to one
previously-performing real estate development-related borrower who notified us
late in the quarter of their intent to default on their obligation. Our loan
portfolio contains very few real estate development loans and, on an overall
basis, continues to perform well. In addition, our pre-provision performance
remains strong, despite elevated loan collections costs and dramatically higher
FDIC premiums."
The net interest margin improved to 3.44% in the third quarter 2009, which
compares favorably to a net interest margin of 3.27% in the second quarter of
2009 and 3.31% for the third quarter of 2008. The net interest margin
improvement reflects the decline in funding cost and stable loan yields. Net
interest income increased $279,000 on a linked-quarter basis and improved
$463,000 compared to the third quarter of 2008.
The provision for loan losses was $4,500,000 in the third quarter compared to
$1,375,000 in the second quarter of 2009 and $1,400,000 during the third quarter
of 2008. The higher provision for loan losses was necessary due to an increase
in net loan losses and increase in non-performing loans, which is described
below. The higher level of loan loss provision contributed to an increase in the
allowance as a percent of total loans from 1.33% at the end of 2008 to 2.03% at
September 30, 2009.
Total non-interest income was 18% higher in the third quarter of 2009, compared
to the third quarter of 2008. The increase is attributed to a $404,000 increase
in mortgage banking revenue, which is being influenced by mortgage refinance
activity due to historically low mortgage interest rates. For the first
nine-months, non-interest income increased $1,761,000, or 27%, almost entirely
from the increase in mortgage refinance activity.
Total non-interest expense was $828,000 higher in the third quarter of 2009
compared to the third quarter of 2008. The increase is largely due to higher
FDIC premiums, which are being assessed across the industry, and higher loan
collection and related expense. On a year-to-date basis, operating expenses
increased approximately 12%, or approximately 7% excluding the increase in the
FDIC insurance. Non-performing assets continue to add to our operating expense
through higher professional fees, loan collection costs, and losses and
impairment charges associated with the disposition of other real estate.
Non-performing assets totaled $18.3 million at September 30, 2009, up $10.5
million from the prior quarter and $9.5 million from September 30, 2008. The
increase in non-performing assets is primarily the result of placing two
residential construction and development projects and several commercial loans
secured by real estate on non-accrual. Total non-performing assets represent
2.18% of total assets compared to 0.63% at December 31, 2008 and 1.10% at
September 30, 2008. At September 30, 2009, total non-performing assets consist
of $4.9 million of other real estate, $12.7 million of loans that are not
accruing interest and $0.7 million of loans that are past due 90 days or more
and still accruing interest. Net loans charged-off as a percent of total average
loans was 0.55% in the third quarter of 2009, compared to .40% in the second
quarter of 2009 and 0.13% in the third quarter of 2008. Net loans charged-off in
the third quarter totaled $961,000 compared to $207,000 during the third quarter
of 2008. Year-to-date 2009, net loans charged-off totaled $1,901,000 compared to
$960,000 for the same period in 2008.
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 other subsidiary, Byron Insurance Agency, delivers a
broad range of personal and business insurance products. 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.
OAK FINANCIAL CORPORATION CONSOLIDATED
AND SUBSIDIARY BALANCE SHEETS
(Dollars in thousands, except per share data) September 30, December 31,
2009 2008
ASSETS (Unaudited)
Cash and cash equivalents $22,728 $15,411
Available-for-sale securities 94,704 107,251
Loans held for sale 5,592 2,762
Total loans 692,677 686,932
Allowance for loan losses (14,078 ) (9,130 )
Net Loans 678,599 677,802
Accrued interest receivable 3,771 3,967
Premises and equipment, net 15,300 16,782
Restricted investments 5,261 5,101
Other assets 14,140 11,235
Total assets $840,095 $840,311
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits
Non-interest bearing $78,652 $76,585
Interest bearing 622,533 600,684
Total deposits 701,185 677,269
Federal funds purchased - 2,300
Repurchase agreements 5,600 20,350
FHLB advances 55,485 63,655
Other borrowed funds 1,198 1,030
Other liabilities 5,310 5,352
Total liabilities 768,778 769,956
Stockholders' equity
Preferred stock, no par value; 500,000 shares authorized - -
Common stock, $1 par value; 4,000,000 shares authorized; 2,703 2,703
2,703,009 shares issued and outstanding
Additional paid-in capital 32,778 32,778
Retained earnings 33,339 34,171
Accumulated other comprehensive income 2,497 703
Total stockholders' equity 71,317 70,355
Total liabilities and stockholders' equity $840,095 $840,311
OAK FINANCIAL CORPORATION CONSOLIDATED STATEMENTS OF INCOME
AND SUBSIDIARIES
(Dollars in thousands except per share data) Three Months ended Nine Months ended
September 30, September 30,
(Unaudited) (Unaudited)
2009 2008 2009 2008
Interest Income
Interest and fees on loans $8,994 $9,528 $26,880 $28,875
Available-for-sale securities 938 1,245 2,984 3,753
Restricted investments 50 60 129 155
Other interest income 1 22 3 25
Total interest income 9,983 10,855 29,996 32,808
Interest expense
Deposits 2,648 3,695 8,594 11,274
Federal funds purchased 2 56 13 470
Repurchase agreements 110 247 559 736
FHLB advances 645 750 1,972 1,962
Other borrowed funds 9 1 14 7
Total interest expense 3,414 4,749 11,152 14,449
Net interest income 6,569 6,106 18,844 18,359
Provision for loan losses 4,500 1,400 6,850 3,005
Net interest income after provision for loan losses 2,069 4,706 11,994 15,354
Non-interest income
Service charges on deposit accounts 1,343 1,414 3,870 4,053
Mortgage banking 614 210 2,647 917
Net gain on sales of securities 54 - 396 52
Insurance premiums and brokerage fees 294 328 859 953
Other 152 137 480 516
Total non-interest income 2,457 2,089 8,252 6,491
Non-interest expenses
Salaries 2,682 2,568 8,072 7,812
Employee benefits 608 537 1,841 1,734
Occupancy (net) 471 471 1,436 1,366
Furniture and fixtures 309 341 972 961
Loss on other real estate 473 313 797 397
FDIC fees 305 114 1,246 329
Other 1,951 1,627 5,300 4,959
Total non-interest expenses 6,799 5,971 19,664 17,558
Income before federal income taxes (2,273 ) 824 582 4,287
Federal income taxes (benefit) (965 ) 87 (370 ) 869
Net income ($1,308 ) $737 $952 $3,418
Income per common share:
Basic ($0.49 ) $0.27 $0.35 $1.26
Diluted ($0.49 ) $0.27 $0.35 $1.26
OAK FINANCIAL CORPORATION CONSOLIDATED
AND SUBSIDIARY FINANCIAL HIGHLIGHTS
(Unaudited)
3rd Qtr 2nd Qtr 1st Qtr 4th Qtr 3rd Qtr
(Dollars in thousands except per share data) 2009 2009 2009 2008 2008
Earnings
Net interest income $6,569 $6,290 $5,985 $6,018 $6,106
Provision for loan losses $4,500 $1,375 $975 $1,950 $1,400
Non-interest income $2,457 $2,724 $3,071 ($1,183 ) $2,089
Non-interest expense $6,799 $6,396 $6,469 $6,031 $5,971
Net income ($1,308 ) $1,010 $1,250 ($1,882 ) $737
Basic earnings per share ($0.49 ) $0.38 $0.46 ($0.69 ) $0.27
Diluted earnings per share ($0.49 ) $0.38 $0.46 ($0.69 ) $0.27
Average shares outstanding 2,703 2,703 2,703 2,703 2,703
Performance Ratios
Return on average assets (0.62 %) 0.48 % 0.60 % (0.92 %) 0.37 %
Return on average equity (7.18 %) 5.68 % 7.14 % (10.45 %) 4.06 %
Net interest margin (tax-equivalent) 3.44 % 3.27 % 3.14 % 3.20 % 3.31 %
Efficiency ratio 76.5 % 71.7 % 71.2 % 71.0 % 70.0 %
Full-time equivalent employees 203 205 206 205 204
Ending equity to ending assets 8.49 % 8.45 % 8.32 % 8.37 % 8.92 %
Book value per share $26.38 $26.28 $25.75 $26.03 $26.49
Asset Quality
Net loans charged-off $961 $695 $245 $1,873 $207
Net charge-offs to total average loans (annualized) 0.55 % 0.40 % 0.14 % 1.12 % 0.13 %
Nonperforming assets $18,287 $7,828 $7,492 $5,332 $8,838
Allowance for loan losses to total loans 2.03 % 1.50 % 1.42 % 1.33 % 1.39 %
Nonperforming assets to total assets 2.18 % 0.93 % 0.90 % 0.63 % 1.10 %
YTD YTD
(Dollars in thousands except per share data) 9/30/09 9/30/08
Earnings
Net interest income $18,844 $18,359
Provision for loan losses $6,850 $3,005
Non-interest income $8,252 $6,491
Non-interest expense $19,664 $17,558
Net income $952 $3,418
Basic earnings per share $0.35 $1.26
Diluted earnings per share $0.35 $1.26
Average shares outstanding 2,703 2,703
Performance Ratios
Return on average assets 0.15 % 0.59 %
Return on average equity 1.78 % 6.32 %
Net interest margin (tax-equivalent) 3.28 % 3.47 %
Efficiency ratio 71.6 % 68.2 %
Asset Quality
Net loans charged-off $1,901 $960
Net charge-offs to total average loans (annualized) 0.37 % 0.21 %
OAK Financial Corporation, Byron Center, Mich.
Patrick K. Gill, President & CEO at (616) 588-7420, or
James A. Luyk, Executive Vice President COO & CFO at (616) 588-7419
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