FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______ to ________
Commission file number 0-22461
O.A.K. FINANCIAL CORPORATION
(Exact name of registrant as specified in its charter)
MICHIGAN 38-2817345
State of other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2445 84th Street, S.W., Byron Center, Michigan 49315
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (616) 878-1591
-----------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes No
The number of shares outstanding of each of the issuers classes of common stock,
as of the latest practicable date: 1,006,174 shares of the Company's Common
Stock ($1 par value) were outstanding as of July 31, 1997.
1
<PAGE>
INDEX
Page
Number
Part I. Financial Information (unaudited):
Item 1.
Consolidated Financial Statements 3
Notes to Consolidated Financial Statements 7
Item 2.
Management's Discussion and Analysis of
Financial Condition and Results of Operations 8
Part II. Other Information
Item 6.
Exhibits and Reports on Form 8-K 15
Signatures 16
2
<PAGE>
O.A.K. FINANCIAL CORPORATION CONSOLIDATED BALANCE SHEETS
AND SUBSIDIARY
- -------------------------------------------------------------------------------
<TABLE>
ASSETS
June 30, December 31,
1997 1996
(Unaudited)
<S> <C> <C>
Cash and due from banks ................................................... $ 6,313,114 $ 6,399,085
Federal funds sold......................................................... 0 400,000
------------ -------
Cash and cash equivalents.................................................. 6,313,114 6,799,085
Available-for-sale securities at fair value - amortized cost of
$58,226,104 - 1997 and $57,703,349 - 1996............................... 58,510,750 58,071,403
Loans receivable, net...................................................... 153,949,170 142,693,370
Loans held for sale........................................................ 196,366 1,933,000
Accrued interest receivable................................................ 1,504,986 1,453,398
Premises and equipment, net................................................ 4,573,454 4,653,473
Other assets............................................................... 2,895,073 1,922,801
--------- ---------
Total assets............................................................... $ 227,942,913 $ 217,526,530
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits
Interest bearing........................................................... $ 154,792,437 $ 146,442,392
Noninterest bearing........................................................ 22,410,808 23,778,515
---------- ----------
Total deposits............................................................. 177,203,245 170,220,907
Borrowed funds............................................................. 4,500,000 2,800,000
Securities sold under agreements to repurchase............................. 8,485,737 7,336,298
Other liabilities.......................................................... 2,603,757 1,625,709
--------- ---------
Total liabilities.......................................................... 192,792,739 181,982,914
----------- -----------
Stockholders' equity
Common stock, $1 par value; 2,000,000 shares authorized;
1,006,174 shares issued and outstanding................................. 1,006,174 1,006,174
Additional paid-in capital................................................. 6,036,338 6,036,338
Retained earnings.......................................................... 27,919,784 28,258,182
Net unrealized gain on available-for-sale securities....................... 187,878 242,922
------- -------
Total stockholders' equity................................................. 35,150,174 35,543,616
---------- ----------
Total liabilities and stockholders' equity................................. $ 227,942,913 $ 217,526,530
============= =============
</TABLE>
See accompanying notes.
3
<PAGE>
O.A.K. FINANCIAL CORPORATION CONSOLIDATED STATEMENTS OF INCOME
AND SUBSIDIARY (Unaudited)
Six months and three months ended June 30, 1997 and 1996
- -------------------------------------------------------------------------------
<TABLE>
Six Months Three Months
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Interest income
Loans ........................................ $6,985,319 $6,934,440 $3,600,771 $3,498,980
Available-for-sale securities ................ 1,833,016 1,703,486 909,782 852,057
Federal funds sold ........................... 28,550 30,600 8,683 6,778
---------- ---------- ---------- ----------
Total interest income ........................... 8,846,885 8,668,526 4,519,236 4,357,815
Interest expense
Deposits ..................................... 3,382,187 3,399,631 1,743,281 1,677,954
Borrowed funds ............................... 122,969 79,024 66,646 46,738
Securities sold under agreements to repurchase 144,992 123,351 72,544 61,139
---------- ---------- ---------- ----------
Total interest expense .......................... 3,650,148 3,602,006 1,882,471 1,785,831
Net interest income ............................. 5,196,737 5,066,520 2,636,765 2,571,984
Provision for possible loan losses .............. 0 0 0 0
---------- ---------- ---------- ---------
Net interest income after provision for
possible loan losses ......................... 5,196,737 5,066,520 2,636,765 2,571,984
Noninterest income
Service charges .............................. 253,174 261,735 130,855 138,492
Net realized gain on sale of available-
for-sale securities ........................ 51,587 11,571 7,011 0
Other ........................................ 439,948 232,529 287,876 105,959
---------- ---------- ---------- ----------
Total noninterest income ........................ 744,709 505,835 425,742 244,451
Noninterest expenses
Salaries and employee benefits ............... 1,512,587 1,251,328 827,164 693,625
Occupancy .................................... 202,395 203,082 95,588 105,682
Furniture and fixtures ....................... 243,003 208,386 115,880 112,473
Michigan single business tax ................. 99,200 97,300 49,100 47,500
Federal Deposit Insurance Corporation premium 13,355 1,000 6,653 0
Other ........................................ 687,087 687,150 389,507 348,313
---------- ---------- ---------- ----------
Total noninterest expense ....................... 2,757,627 2,448,246 1,483,892 1,307,593
---------- ---------- ---------- ----------
Income before federal income taxes .............. 3,183,819 3,124,109 1,578,615 1,508,842
Federal income taxes ............................ 976,597 997,000 510,076 466,000
---------- ---------- ---------- ----------
Net income ...................................... $ 2,207,222 $ 2,127,109 $1,068,539 $1,042,842
========== ========== ========== =========
Net income per share............................. $ 2.19 $ 2.11 $ 1.06 $ 1.04
======= ======= ======== =======
</TABLE>
See accompanying notes.
4
<PAGE>
O.A.K. FINANCIAL CORPORATION CONSOLIDATED STATEMENTS OF
AND SUBSIDIARY CHANGES IN STOCKHOLDERS' EQUITY
(Unaudited)
- -------------------------------------------------------------------------------
<TABLE>
Six Months Ended
June 30,
---------------------------------------
1997 1996
---- ----
<S> <C> <C>
Shares of common stock issued
and outstanding
Balance, beginning of period........................ 1,006,174 915,562
Common stock dividends.............................. - -
Repurchases and retirements......................... - (346)
------------- -----------
Balance, end of period.............................. 1,006,174 915,216
========= =======
Common stock
Balance, beginning of period........................ $ 1,006,174 $ 915,562
Common stock dividends.............................. - -
Repurchase and retirement of common shares.......... - (346)
------------- -----------
Balance, end of period.............................. 1,006,174 915,216
--------- ---------
Additional paid-in-capital
Balance, beginning of period........................ 6,036,338 6,084,056
Repurchase and retirement of common shares.......... - (19,030)
------------- ----------
Balance, end of period.............................. 6,036,338 6,065,026
--------- ---------
Retained earnings
Balance, beginning of period........................ 28,258,182 24,916,801
Net income.......................................... 2,207,222 2,127,109
Common stock dividends.............................. - -
Cash dividends...................................... (2,545,620) (439,303)
----------- -----------
Balance, end of period.............................. 27,919,784 26,604,607
---------- -----------
Net unrealized gain (loss) on available-for-
sale securities
Balance, beginning of period........................ 242,922 642,450
Change in net unrealized gain (loss) on available-
for-sale securities net of applicable
deferred income taxes ($63,879 in 1997,
$(48,396) in 1996................................ (55,044) (784,790)
--------- ----------
Balance, end of period.............................. 187,878 (142,340)
----------- ----------
Total stockholders' equity.............................. $ 35,150,174 $ 33,442,509
========== ==========
</TABLE>
See accompanying notes.
5
<PAGE>
O.A.K. FINANCIAL CORPORATION CONSOLIDATED STATEMENTS OF
AND SUBSIDIARY CASH FLOWS
(Unaudited)
- -------------------------------------------------------------------------------
<TABLE>
Six Months Ended
June 30,
-------------------------------------------
1997 1996
---- ----
<S> <C> <C>
Cash Flows from Operating Activities:
Net income........................................... $ 2,207,222 $ 2,127,109
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization................... 212,148 212,093
Proceeds from sales of loans held
for sale..................................... 8,377,644 13,527,621
Disbursements for loans held for sale........... (8,229,720) (13,466,991)
Net (gain) on sale of available-for-
sale securities ............................. (51,587) (11,571)
Net (gain) on loans held for sale............... (147,924) (60,630)
Net amortization of investment premiums......... 91,914 121,288
Changes in operating assets and liabilities
which provided (used) cash:
Accrued interest receivable.............. (51,588) 10,052
Other assets............................. (972,272) (360,228)
Other liabilities........................ 978,048 23,631
----------- ----------
Net cash provided by operating activities............... 2,413,885 2,122,374
------------ ----------
Cash Flows from Investing Activities:
Available-for-sale securities:
Proceeds from maturities.......................... 5,159,082 4,358,745
Proceeds from sales............................... 2,128,928 3,160,608
Purchases......................................... (7,822,728) (5,303,427)
Net increase in loans held for investment............ (9,519,166) (5,914,906)
Purchases of premises and equipment.................. (132,129) (298,050)
-------------- -------------
Net cash used in investing activities................... (10,186,013) (3,997,030)
-------------- --------------
Cash Flows from Financing Activities:
Net increase in demand deposits, NOW
accounts and savings deposits..................... (1,699,992) 136,879
Net (decrease) increase in time deposits............. 8,682,330 (2,298,528)
Net increase (decrease) in borrowed funds............ 1,700,000 2,550,000
Net increase in securities sold under agreements
to repurchase..................................... 1,149,439 2,566,226
Common stock dividends paid.......................... (2,545,620) (439,303)
Repurchase and retirement of common shares........... 0 (19,376)
--------------- -------------
Net cash provided by financing activities............... 7,286,157 2,495,898
------------ ------------
Net increase (decrease) in cash and
cash equivalents..................................... (485,971) 621,242
Cash and cash equivalents, beginning of period.......... 6,799,085 4,911,104
------------ ------------
Cash and cash equivalents, end of period................ $ 6,313,114 $ 5,532,346
============= =============
</TABLE>
See accompanying notes.
6
<PAGE>
O.A.K. FINANCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to form 10-Q and Article
10 of Regulation S-X. Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the six month period ended June 30, 1997
are not necessarily indicative of the results that may be expected for the year
ending December 31, 1997. For further information, refer to the consolidated
financial statements and footnotes thereto included in the Corporation's annual
report for the year ended December 31, 1996.
NOTE 2 COMPUTATION OF EARNINGS PER SHARE
The net income per share amounts are based on the weighted average number
of common shares outstanding. The weighted number of common shares outstanding
were 1,006,174 as of June 30, 1997 and 1,006,738 as of June 30, 1996.
In February 1997, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 128, Earnings Per Share.
SFAS No. 128 simplifies the standards for computing earnings per share (EPS) and
makes them comparable to international EPS standards. It also replaces the
presentation of primary EPS with a presentation of basic EPS. Since the
Corporation has a simple capital structure, implementation of SFAS No. 128 is
not expected to have an impact on the Corporation's reporting of EPS. SFAS No.
128 is required to be implemented for periods ending after December 15, 1997.
7
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
O.A.K. Financial Corporation (the "Corporation") is a single bank holding
company whose sole subsidiary is Byron Center State Bank (the "Bank"). The Bank
has seven banking offices serving seven communities in Kent, Ottawa and Allegan
Counties. Neither the Corporation nor the Bank has had any acquisition activity
in their respective histories.
The following is management's discussion and analysis of the factors that
influenced O.A.K. Financial Corporation's financial performance. The discussion
should be read in conjunction with the Corporation's 1996 annual report and with
the unaudited interim financial statements and notes.
SIX MONTHS AND THREE MONTHS ENDED JUNE 30, 1997 AND 1996
Results of Operations
Net income equaled $1,068,539 for the three months ending June 30, 1997,
compared to $1,042,842 for the same period in 1996. This is a 2.46% increase
over the same period in 1996. Net income for the six month period ended June 30,
1997 was $2,207,222, compared to $2,127,109 for the same period in 1996. This is
a 3.77% increase over the same period in 1996. Return on average equity was
12.72% for the six months ending June 30, 1997 and 12.94% for 1996. Return on
average assets was 2.02% for the six months ending June 30, 1997 and 2.01% for
1996.
Table 1 Summary of Earnings Performance (in thousands, except per share data)
<TABLE>
Six Months and Three Months Ending June 30
Six Months Three Months
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net Income....................................... $ 2,207 $ 2,127 $ 1,069 $ 1,043
Per Share..................................... $ 2.19 $ 2.11 $ 1.06 $ 1.04
Earnings ratios:
Return on average assets...................... 2.02% 2.01% 1.88% 1.95%
Return on average equity...................... 12.72% 12.94% 12.34% 12.51%
</TABLE>
Net Interest Income
The following schedule presents the average daily balances, interest income
(on a fully taxable equivalent basis) and interest expense and average rates
earned and paid for the Bank's major categories of assets, liabilities, and
stockholders' equity for the periods indicated:
Table 2 Interest Yields and Costs
8
<PAGE>
<TABLE>
Six months and three months ended June 30
Six Months
-----------------------------------------------------------------
1997 1996
Average Interest Yield/ Average Interest Yield/
Balance Cost Balance Cost
<S> <C> <C> <C> <C> <C> <C>
Assets:
Fed. funds sold $ 1,037 $ 29 5.55% $ 1,132 $ 31 5.44%
Securities:
Taxable 41,570 1,349 6.55% 39,964 1,236 6.22%
Tax-exempt 16,141 672 8.40% 15,053 649 8.67%
Loans(1)(2) 150,526 6,999 9.38% 146,453 6,950 9.54%
------- ----- ------- -----
Total earning assets/ 209,274 $9,049 8.72% 202,602 $8,866 8.80%
------- ------ ------- ------
total interest income
Cash and due from 4,729 4,232
banks
Unrealized Gain/Loss 63 741
All other assets 8,567 7,987
Allowance for loan loss (2,422) (2,426)
Total Assets: $220,211 $213,136
======== ========
Liabilities and
Stockholders' Equity:
Interest bearing deposits:
MMDA, Savings/ $ 63,272 $ 934 2.98% $ 59,933 $ 892 2.99%
NOW accounts
Time 87,474 2,448 5.64% 90,187 2,507 5.59%
Fed. Funds Purchased 8,220 161 3.96% 7,754 148 3.84%
Other Borrowed Money 3,621 107 5.94% 1,887 55 5.80%
----- --- ----- --
Total interest bearing 162,587 $ 3,650 4.53% 159,761 $3,602 4.53%
------- ------
Liabilities/total
interest expense
Noninterest bearing 21,421 18,524
deposits
All other liabilities 1,682 1,505
-----
Stockholders' Equity:
Unrealized Holding 41 490
Gain/Loss
Common Stock, Surplus, 34,480 32,856
------ ------
Retained Earnings
Total liabilities and $220,211 $213,136
======== ========
stockholders' equity:
Interest spread 5,197 4.19% 5,067 4.27%
===== =====
Net interest income-FTE $5,399 $5,264
====== ======
Net Interest Margin as a 5.20% 5.22%
Percentage of Average ===== =====
Earning Assets
</TABLE>
<PAGE>
Table 2 Interest Yields and Costs
<TABLE>
Six months and three months ended June 30
Three Months
-----------------------------------------------------------------
1997 1996
Average Interest Yield/ Average Interest Yield/
Balance Cost Balance Cost
<S> <C> <C> <C> <C> <C> <C>
Assets:
Fed. funds sold $590 $9 5.90% $497 $7 5.48%
Securities:
Taxable 41,157 668 6.51% 39,796 621 6.28%
Tax-exempt 16,245 335 8.28% 14,858 319 8.62%
Loans(1)(2) 153,920 3,609 9.40% 148,650 3,506 9.49%
------- ----- ------- -----
Total earning assets/ 211,912 $4,621 8.75% 203,801 $4,453 8.79%
------- ------ ------- ------
total interest income
Cash and due from 4,790 4,254
banks
Unrealized Gain/Loss (169) 439
All other assets 8,952 8,241
Allowance for loan loss (2,469) (2,456)
Total Assets: $ 223,016 $ 214,279
======== ========
Liabilities and
Stockholders' Equity:
Interest bearing deposits:
MMDA, Savings/ $ 62,714 $ 464 2.97% $ 60,339 $ 446 2.97%
NOW accounts
Time 90,372 1,279 5.68% 89,151 1,232 5.56%
Fed. Funds Purchased 7,803 80 4.09% 8,479 81 3.85%
Other Borrowed Money 4,063 60 5.89% 1,875 27 5.71%
----- ----- --
Total interest bearing 164,952 $1,883 4.58% 159,844 $1,786 4.49%
------- ------
Liabilities/total
interest expense
Noninterest bearing 21,718 19,266
deposits
All other liabilities 1,746 1,621
Stockholders' Equity:
Unrealized Holding (112) 290
Gain/Loss
Common Stock, Surplus, 34,712 33,258
Retained Earnings
Total liabilities and $223,016 $ 214,279
======== =========
stockholders' equity:
Interest spread 2,637 4.17% 2,572 4.30%
===== =====
Net interest income-FTE $2,738 $2,667
====== ======
Net Interest Margin as a 5.18% 5.26%
Percentage of Average ===== =====
Earning Assets
</TABLE>
<PAGE>
(1) Nonaccruing loans are not significant during the periods indicated, and
for purposes of the computations above, are included in the average daily
loan balances.
(2) Interest on loans includes net origination fees for the six months ending
June 30, totaling $129,645 in 1997 and $137,714 in 1996, for the three
months ending June 30, 1997 and 1996 the amounts were $63,188 and $67,840.
Net interest income is the principal source of income for the Corporation.
Tax equivalent net interest income increased $71,000 to $2,738,000 for the three
month period ended June 30, 1997, a 2.7% increase from the same period in 1996.
For the six month period ended June 30, 1997 tax equivalent net interest income
increased $135,000 to $5,399,000, a 2.56% increase from the same period in 1996.
The major factors for the increase in net interest income for the three months
ended June 30, 1997 was noninterest bearing deposits averaged $2,452,000 higher
in 1997 than in the same period in 1996 and the loan portfolio balance averaged
$5,270,000 higher in 1997 compared to 1996. The major factors for the increase
in net interest income for the six months ended June 30, 1997 was noninterest
bearing deposits averaged $2,897,000 higher in 1997 than in the same period in
1996 and the loan portfolio balance averaged $4,073,000 higher in 1997 compared
to 1996. Earning assets averaged $8,111,000, 3.98% higher for the three month
period ending June 30, 1997 compared to 1996; this volume change resulted in an
additional $177,000 in FTE interest income. The asset growth for the three
months ended June 30, 1997 was primarily funded by a 12.73%, $2,452,000 increase
in noninterest bearing deposits and a $2,375,000 increase in MMDA, Savings and
NOW accounts. For the three months ended June 30, 1997 the average FTE interest
rate earned on assets decreased .04%, decreasing FTE interest income by $9,000
and average rate paid on deposits, Federal funds purchased and other borrowed
money increased .09%, increasing interest expense by $37,000. The net difference
between interest rates earned and paid was a $46,000 decrease in FTE net
interest income. For the six months ended June 30, 1997 the average FTE interest
rate earned on assets decreased .08%, decreasing FTE interest income by $101,000
and average rate paid on deposits, fed funds purchased and other borrowed money
increased less than .01%, increasing interest expense by $14,000. The net
difference between interest rates earned and paid was a $115,000 decrease in FTE
net interest income.
For the three months ended June 30, 1997 the net interest yield decreased
.08% versus the same period in 1996. The net interest yield decreased .02% for
the six month period ending June 30, 1997 versus the same period in 1996.
Management expects the major deposit growth for the remainder of 1997 will be
from time deposits which are a higher cost of funds than savings and NOW
accounts; as a result the FTE net interest yield may decrease slightly.
Net interest income is the difference between interest earned on loans,
securities, and other earning assets and interest paid on deposits and borrowed
funds. In Table 2 and Table 3 the interest earned on investments and loans is
expressed on a fully taxable equivalent (FTE) basis. Tax exempt interest is
increased to an amount comparable to interest subject to federal income taxes in
order to properly evaluate the effective yields earned on earning assets. The
tax equivalent adjustment is based on a federal income tax rate of 34%. Table 3
analyzes the reasons for the increases and decreases in interest income and
expense. The change in interest due to changes in both balance and rate has been
allocated to change due to balance and change due to rate in proportion to the
relationship of the absolute dollar amounts of change in each.
10
<PAGE>
Table 3 Change in Tax Equivalent Net Interest Income (in thousands)
<TABLE>
Six Months and Three Months Ended June 30,
1997 Compared to 1996
Amount of
Increase/(Decrease)
Due to change in
Six Months Three Months
Total Total
Amount Amount
Of Of
Average Increase/ Average Increase/
Volume Rate (Decrease) Volume Rate (Decrease)
Interest Income
<S> <C> <C> <C> <C> <C> <C>
Federal funds sold........... $ (3) $ 1 $ (2) $ 1 $ 1 $ 2
Securities:
Taxable.................. 49 64 113 21 26 47
Tax Exempt............... 46 (23) 23 30 (14) 16
Loans........................ 192 (143) 49 125 (22) 103
--- ----- -- --- ---- ---
Total interest income..... 284 (101) 183 177 (9) 168
Interest Expense
Interest bearing deposits
Savings/NOW accounts...... 50 (8) 42 18 0 18
Time...................... (75) 16 (59) 17 30 47
Fed. Funds Purchased..... 9 4 13 (6) 5 (1)
Other Borrowed Money...... 50 2 52 31 2 33
--------- ---------- --------- -------- --------- ---------
Total interest expense.... 34 14 48 60 37 97
--------- ---------- --------- -------- -------- ---------
Net interest income (FTE).... $ 250 $(115) $ 135 $ 117 $ (46) $ 71
======== ======= ======= ====== ======= =======
</TABLE>
Table 4 Noninterest Income (in thousands)
<TABLE>
Six Months and Three Months Ended June 30,
1997 Compared to 1996
Six Months Three Months
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Service charges on deposit accounts $ 253 $ 262 $ 131 $ 138
Net gains (losses) on asset sales:
Loans............................ 148 61 132 40
Securities....................... 52 11 7 0
Other............................... 292 172 156 66
------ ----- ----- ------
Total noninterest income......... $ 745 $ 506 $ 426 $ 244
===== ===== ===== =====
</TABLE>
11
<PAGE>
Noninterest Income
Noninterest income consists of service charges on deposit accounts, service
fees, gains on investment securities available for sale and gains from sales of
Federal Home Loan Mortgage Corporation (Freddie Mac) loans. The Corporation
retains the servicing rights of these loans. Noninterest income increased
$182,000, 75% for the three month period ending June 30, 1997 versus 1996. The
increase was due to a $92,000 increase in real estate mortgage loan sales and a
$108,000 increase in brokerage and annuity commissions. For the six months ended
June 30, 1997 noninterest income increased 47%, to $239,000. The increase was
due to an $87,000 increase in real estate mortgage loan sales and a $133,000
increase in brokerage and annuity commissions.
Table 5 Noninterest Expense (in thousands)
<TABLE>
Six Months and Three Months Ended June 30,
1997 and 1996
Six Months Three Months
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Salaries and employee benefits...... $ 1,513 $ 1,251 $ 827 $ 694
Occupancy and equipment............. 445 411 211 218
FDIC assessment..................... 13 1 7 0
Postage............................. 34 32 31 26
Printing and supplies............... 53 79 28 39
Marketing........................... 73 128 35 61
Michigan Single Business Tax........ 99 97 49 48
Other...............................
Total noninterest expense....... $2,758 $2,448 $1,484 $1,308
====== ====== ====== ======
</TABLE>
Noninterest Expense
Noninterest expense increased $176,000 or 13.46% for the three month period
ending June 30, 1997 versus 1996. Salaries and employee benefits increased
$133,000 to $827,164 a 19.16% increase, this was the major factor of the
increase in noninterest expense. For the six month period ended June 30, 1997
noninterest expense increased $310,000 to $2,757,627 or a 12.64% increase,
principally due to salaries and employee benefits which increased $262,000 to
$1,512,587 a 20.94% increase. The increase in salary and employee benefit
expense was related to increased staffing, annual hourly and salary pay
adjustments and increased medical insurance expenses. The other noninterest
expenses were relatively constant for the three month period ended June 30, 1997
versus 1996.
Table 6 Nonperforming Assets (in thousands)
<TABLE>
Six months and three months
ended June 30, 1997 and 1996
1997 1996
------- ------
<S> <C> <C>
Nonaccrual loans..................................... $ 233 $ 813
90 days or more past due & still accruing............ 382 39
------ ------
Total Nonperforming loans....................... 615 852
Other real estate.................................... 796 0
------ -------
Total Nonperforming assets...................... $1,411 $ 852
====== ======
Nonperforming loans as a percent of total loans...... .39% .57%
Nonperforming assets as a percent of total loans..... .90% .57%
Nonperforming loans as a percent of the loan loss
reserve......................................... 25.00% 34.00%
</TABLE>
12
<PAGE>
Table 7 Loan Loss Experience (in thousands)
<TABLE>
Six months and three months
ended June 30, 1997 and 1996
Six Months Three Months
1997 1996 1997 1996
---- ---- ---- ----
Loans:
<S> <C> <C> <C> <C>
Average daily balance of loans for the period... $149,744 $145,583 $153,559 $147,247
Amount of loans outstanding at end of period.... $156,651 $149,100 $156,651 $149,100
Allowance for loan losses:
Balance at beginning of period.................. $ 2,376 $ 2,305 $ 2,381 $ 2,434
Loans charged off:
Real estate................................. 0 0 0 0
Commercial................................. 0 0 0 0
Consumer................................... 25 23 12 3
-------- ------- ------- -------
Total charge-offs..................... 25 23 12 3
Recoveries of loans previously charged off
Real estate................................. 0 56 0 55
Commercial.................................. 135 145 129 2
Consumer.................................... 19 15 7 10
Total recoveries....................... 154 216 136 67
-------- -------- -------- --------
Net loans charged off (recoveries).............. (129) (193) (124) (64)
Additions to allowance charged to operations.... 0 0 0 0
Balance at end of period.............. $ 2,505 $ 2,498 $ 2,505 $ 2,498
========= ========= ========= =========
Ratios:
Net loans charged off to avg loans outstanding.. -.09% -.13% -.08% -.04%
Allowance for loan losses to loans outstanding.. 1.60% 1.68% 1.60% 1.68%
</TABLE>
Table 8 Average Daily Deposits (in thousands)
The following table sets forth the average deposit balances and the weighted
average rates paid thereon:
<TABLE>
Six Months and Three Months Ended June 30,
1997 and 1996
Six Months Three Months
------------------------------------- -------------------------------------
1997 1996 1997 1996
------------------ ---------------- ---------------- ----------------
Average Average Average Average
Balance Rate Balance Rate Balance Rate Balance Rate
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Noninterest bearing demand.......... $21,421 $18,524 $21,718 $19,266
MMDA/Savings and NOW accounts 63,272 2.98% 59,933 2.99% 62,714 2.97% 60,339 2.97%
Time................................ 87,474 5.64% 90,187 5.59% 90,372 5.68% 89,151 5.56%
------ ----- ------ ----- ------ ----- ------ -----
Total Deposits................... $172,167 3.96% $168,644 3.91% $174,804 4.00% $168,756 4.00%
======== ======== ======== ========
</TABLE>
The following table summarizes time deposits in amounts of $100,000 or more
by time remaining until maturity as of June 30, 1997:
<TABLE>
Amount
<S> <C>
Three months or less.................... $ 2,285
Over 3 months through 6 months.......... 1,038
Over 6 months through 1 year............ 1,333
Over 1 year............................. 3,830
-----
$ 8,486
</TABLE>
13
<PAGE>
ANALYSIS OF CHANGES IN FINANCIAL CONDITION
Total assets increased $10,416,000, 4.79% to $227,943,000 from December 31,
1996 to June 30, 1997. The significant changes were an increase in loans of
$11,386,000, a 7.85% increase, other assets increased $972,272, 50.57% which was
a result of transferring a $811,000 non-accrual loan to other real estate.
Deposits increased $6,982,000, 4.10% to $177,203,245. Noninterest bearing
deposits decreased $1,368,000, 5.75% and interest bearing deposits increased
$8,350,000. Securities sold under agreements to repurchase increased $1,149,000,
15.67%.
LIQUIDITY
Management evaluates the Corporation's liquidity position on a regular
basis to assure that funds are available to meet borrower and depositor needs,
fund operations, pay cash dividends and to invest excess funds to maximize
income. The Corporation's sources of liquidity include cash and cash
equivalents, investment securities available for sale, principal payments
received on loans, Federal Funds Purchased, FHLB borrowings, deposits and the
issuance of common stock.
Cash and cash equivalents equaled 2.77% of total assets as of June 30, 1997
versus 3.13% as of December 31, 1996. For the six month period ending June 30,
1997, $2,414,000 in net cash was provided from operations, investing activities
used $10,186,000, and financing activities provided $7,286,000. The accumulated
effect of the Corporation's operating, investing and financing activities was
$486,000 decrease in cash and cash equivalents during the six month period
ending June 30, 1997.
The Corporation's liquidity is considered adequate by management.
CAPITAL
The capital of the Corporation consists of common stock, surplus, retained
earnings and unrealized net gain on investment securities available for sale.
For the six month period ending June 30, 1997 capital decreased $393,000, which
includes a $188,000 unrealized gain on investment securities available for sale.
A $2.00 per share cash dividend was paid during the quarter ended March 31, 1997
which resulted in the decrease.
There are minimum risk based capital regulatory guidelines placed on the
Corporation's capital by The Federal Reserve Board. The following table sets
forth the percentages required under the Risk Based Capital guidelines and the
Corporation's ratios as of June 30, 1997:
Table 9 Capital Resources (in thousands)
<TABLE>
As of June 30, 1997 and 1996
Regulatory Requirements
Adequately Well June 30,
Capitalized Capitalized 1997 1996
----------- ----------- ---- ----
<S> <C> <C> <C> <C>
Tier 1 capital...................... $34,245 $32,824
Tier 2 capital...................... 2,117 2,001
------- -------
Total qualifying capital........... $36,362 $34,825
======= =======
Ratio of equity to total assets
Tier 1 leverage ratio............... 4% 5% 15.40% 15.37%
Tier 1 risk-based capital........... 4% 6% 20.26% 20.57%
Total risk-based capital............ 8% 10% 21.52% 21.82%
</TABLE>
14
<PAGE>
PART II - OTHER INFORMATION
Item 6 Exhibits and Reports on Form 8-K
(a) Exhibits -
27 Financial Data Schedule
(b) Reports on Form 8K - None.
15
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Quarterly Report on For 10-Q for the quarter
ended June 30 1997 to be signed on its behalf by the undersigned hereunto duly
authorized.
O.A.K. FINANCIAL CORPORATION
/s/ John A. Van Singel
John A. Van Singel
(Chief Executive Officer)
/s/ Martin R. Braun
Martin R. Braun
(Principal Accounting Officer)
DATE: August 14, 1997
16
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
This schedule contains summary financial information from SEC Form 10-Q and
is qualified in its entirety by reference to such financial information.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 6,313,114
<INT-BEARING-DEPOSITS> 154,792,437
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 58,510,750
<INVESTMENTS-CARRYING> 58,226,104
<INVESTMENTS-MARKET> 58,510,750
<LOANS> 156,650,866
<ALLOWANCE> 2,505,330
<TOTAL-ASSETS> 227,942,913
<DEPOSITS> 177,203,245
<SHORT-TERM> 10,985,737
<LIABILITIES-OTHER> 2,603,757
<LONG-TERM> 2,000,000
0
0
<COMMON> 1,006,174
<OTHER-SE> 34,144,000
<TOTAL-LIABILITIES-AND-EQUITY> 227,942,913
<INTEREST-LOAN> 6,985,319
<INTEREST-INVEST> 1,833,016
<INTEREST-OTHER> 28,550
<INTEREST-TOTAL> 8,846,885
<INTEREST-DEPOSIT> 3,382,187
<INTEREST-EXPENSE> 3,650,148
<INTEREST-INCOME-NET> 5,196,737
<LOAN-LOSSES> 0
<SECURITIES-GAINS> 51,587
<EXPENSE-OTHER> 2,757,627
<INCOME-PRETAX> 3,183,819
<INCOME-PRE-EXTRAORDINARY> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,207,222
<EPS-PRIMARY> 2.19
<EPS-DILUTED> 2.19
<YIELD-ACTUAL> 4.19
<LOANS-NON> 233,000
<LOANS-PAST> 382,000
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 2,376,000
<CHARGE-OFFS> 25
<RECOVERIES> 154
<ALLOWANCE-CLOSE> 2,505,000
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
