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 March 31, 1998
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 X No ____
The number of shares outstanding of each of the issuers classes of common stock,
as of the latest practicable date: 1,000,000 shares of the Company's Common
Stock ($1 par value) were outstanding as of April 30, 1998.
1
<PAGE>
INDEX
Page
Number(s)
Part I. Financial Information (unaudited):
Item 1.
Consolidated Financial Statements 3-7
Notes to Consolidated Financial Statements 8
Item 2.
Management's Discussion and Analysis of
Financial Condition and Results of Operations 8-16
Part II. Other Information
Item 6.
Exhibits and Reports on Form 8-K 17
Signatures 18
2
<PAGE>
O.A.K. FINANCIAL CORPORATION CONSOLIDATED BALANCE SHEETS
AND SUBSIDIARY
- -------------------------------------------------------------------------------
<TABLE>
ASSETS
March 31, December 31,
1998 1997
(Unaudited)
<S> <C> <C>
Cash and due from banks ................................................... $ 6,715,808 $ 5,367,937
Federal funds sold......................................................... - -
-------------- --------------
Cash and cash equivalents.................................................. 6,715,808 5,367,937
Available-for-sale securities at fair value - amortized cost of
$59,649,830 - 1998 and $60,999,414 - 1997............................... 60,631,803 61,792,674
Loans receivable, net...................................................... 172,368,262 166,387,650
Loans held for sale........................................................ 3,090,000 1,345,615
Accrued interest receivable................................................ 1,832,315 1,513,146
Premises and equipment, net................................................ 4,554,981 4,534,281
Other assets............................................................... 2,333,707 2,146,617
-------------- --------------
Total assets............................................................... $ 251,526,876 $ 243,087,920
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits
Noninterest bearing........................................................ $ 24,424,849 $ 26,456,357
Interest bearing........................................................... 165,013,948 158,243,971
-------------- --------------
Total deposits............................................................. 189,438,797 184,700,328
Borrowed funds............................................................. 12,983,464 11,300,000
Securities sold under agreements to repurchase............................. 9,521,343 8,657,583
Other liabilities.......................................................... 2,166,300 1,515,231
------------ ------------
Total liabilities.......................................................... 214,109,904 206,173,142
----------- -----------
Stockholders' equity
Common stock, $1 par value; 2,000,000 shares authorized;
1,000,000 shares issued and outstanding ................................ 1,000,000 1,000,000
Additional paid-in capital................................................. 5,622,680 5,622,680
Retained earnings.......................................................... 30,146,179 29,768,536
Accumulated other comprehensive income..................................... 648,113 523,562
-------------- --------------
Total stockholders' equity................................................. 37,416,972 36,914,778
------------- -------------
Total liabilities and stockholders' equity................................. $ 251,526,876 $ 243,087,920
============= =============
</TABLE>
See accompanying notes.
3
<PAGE>
O.A.K. FINANCIAL CORPORATION CONSOLIDATED STATEMENTS OF INCOME
AND SUBSIDIARY (Unaudited)
- -------------------------------------------------------------------------------
<TABLE>
Three Months Ended March 31,
1998 1997
---- ----
Interest income
<S> <C> <C>
Loans............................................... $3,955,853 $3,366,856
Available-for-sale securities....................... 919,599 940,926
Federal funds sold.................................. 891 19,867
------------- ------------
Total interest income................................... 4,876,343 4,327,649
----------- -----------
Interest expense
Deposits ........................................ 1,835,400 1,638,906
Borrowed funds...................................... 182,059 56,324
Securities sold under agreement to repurchase....... 90,441 72,448
------------ ------------
Total interest expense.................................. 2,107,900 1,767,678
----------- ----------
Net interest income..................................... 2,768,443 2,559,971
Provision for possible loan losses...................... 50,000 -
------------ ---------------
Net interest income after provision for
possible loan losses................................. 2,718,443 2,559,971
----------- -----------
Noninterest income
Service charges..................................... 130,198 122,319
Net realized gain on sale of available-for-sale
loans ........................................ 330,412 15,432
Loan servicing fee.................................. 53,695 53,607
Net realized gain on sale of available-for-sale
securities....................................... 2,674 44,576
Other ........................................ 80,368 83,033
------------- ------------
Total noninterest income................................ 597,347 318,967
------------- -----------
Noninterest expense
Salaries and employee benefits...................... 689,808 685,423
Occupancy........................................... 115,864 93,789
Furniture and fixtures.............................. 123,898 116,088
Michigan single business tax........................ 57,000 50,724
Stationery, supplies, printing...................... 42,694 24,891
Other ........................................ 326,483 302,819
------------ ------------
Total noninterest expenses.............................. 1,355,747 1,273,734
------------ ---------
Income before federal income taxes...................... 1,960,043 1,605,204
Federal income taxes.................................... 582,400 466,521
------------- ------------
Net income ........................................ $ 1,377,643 $ 1,138,683
=========== ===========
Net income per share of common stock (basic)............ $ 1.38 $ 1.13
============= =============
</TABLE>
See accompanying notes.
4
<PAGE>
O.A.K. FINANCIAL CORPORATION CONSOLIDATED STATEMENTS OF
AND SUBSIDIARY COMPREHENSIVE INCOME
(Unaudited)
- -------------------------------------------------------------------------------
<TABLE>
Three Months Ended March 31,
1998 1997
---- ----
<S> <C> <C>
Other comprehensive income before income taxes:
Change in unrealized gain (loss) on
available-for-sale securities.................... $ 188,712 ($ 528,076)
Income tax (expense) benefit related to
other comprehensive income....................... (64,161) 179,546
------------ ------------
Other comprehensive income (loss), net of
income taxes..................................... 124,551 (348,530)
Net income ........................................ 1,377,643 1,138,683
----------- -----------
Comprehensive income.................................... $1,502,194 $ 790,153
========== ===========
</TABLE>
5
<PAGE>
O.A.K. FINANCIAL CORPORATION CONSOLIDATED STATEMENTS OF
AND SUBSIDIARY CHANGES IN STOCKHOLDERS' EQUITY
(Unaudited)
- -------------------------------------------------------------------------------
<TABLE>
Three Months Ended March 31,
1998 1997
---- ----
<S> <C> <C>
Shares of common stock issued
and outstanding
Balance, beginning of period........................ 1,000,000 1,006,174
Common stock dividends.............................. 0 0
Repurchases and retirements......................... 0 0
-------------- --------------
Balance, end of period.............................. 1,000,000 1,006,174
=========== ===========
Common stock
Balance, beginning of period........................ $ 1,000,000 $ 1,006,174
Common stock dividends.............................. 0 0
Repurchase and retirement of common shares.......... 0 0
---------------- ----------------
Balance, end of period.............................. 1,000,000 1,006,174
------------- -------------
Additional paid-in-capital
Balance, beginning of period........................ 5,622,680 6,036,338
Repurchase and retirement of common shares.......... 0 0
---------------- ----------------
Balance, end of period.............................. 5,622,680 6,036,338
------------- -------------
Retained earnings
Balance, beginning of period........................ 29,768,536 28,258,182
Net income.......................................... 1,377,643 1,138,683
Common stock dividends.............................. 0 0
Cash dividends...................................... (1,000,000) (2,012,349)
------------ -------------
Balance, end of period.............................. 30,146,179 27,384,516
----------- ------------
Accumulated other comprehensive income
Balance, beginning of period........................ 523,562 242,922
Net unrealized gain (loss) on available-
for-sale securities.............................. 124,551 (348,530)
------------- -------------
Balance, end of period.............................. 648,113 (105,608)
------------- -------------
Total stockholders' equity.............................. $37,416,972 $34,321,420
=========== ===========
</TABLE>
See accompanying notes.
6
<PAGE>
O.A.K. FINANCIAL CORPORATION CONSOLIDATED STATEMENTS OF
AND SUBSIDIARY CASH FLOWS
(Unaudited)
- -------------------------------------------------------------------------------
<TABLE>
Three Months Ended March 31,
1998 1997
---- ----
<S> <C> <C>
Cash Flows from Operating Activities:
Net income........................................... $ 1,377,643 $ 1,138,683
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization................... 104,175 104,205
Proceeds from sales of loans held
for sale..................................... 18,048,284 3,941,102
Disbursements for loans held for sale........... (19,462,258) (3,925,670)
Net (gain) on sale of available-for-
sale securities ............................. ( 2,674) (44,576)
Net (gain) on sale of loans held for sale...... (330,411) (15,432)
Net amortization of investment premiums......... 51,053 46,190
Changes in operating assets and liabilities
which provided (used) cash:
Accrued interest receivable.............. (319,169) (121,232)
Other assets............................. (187,090) (987,312)
Other liabilities........................ 1,834,533 531,185
----------- -----------
Net cash provided by operating activities............... 1,114,086 667,143
------------- ------------
Cash Flows from Investing Activities:
Available-for-sale securities:
Proceeds from maturities.......................... 2,026,934 1,881,889
Proceeds from sales............................... 533,705 2,128,928
Purchases......................................... (1,325,341) (3,841,700)
Net increase in loans held for investment............ (5,980,612) (3,551,393)
Purchases of premises and equipment.................. (123,130) ( 67,851)
-------------- -------------
Net cash used in investing activities................... (4,868,444) (3,450,127)
------------- ------------
Cash Flows from Financing Activities:
Net decrease in demand deposits, NOW
accounts and savings deposits..................... (456,985) (1,057,754)
Net increase in time deposits........................ 5,195,454 5,497,361
Net increase in borrowed funds....................... 500,000 700,000
Net increase in securities sold under agreements
to repurchase..................................... 863,760 912,936
Common stock dividends paid.......................... (1,000,000) (2,012,349)
----------- -----------
Net cash provided by financing activities............... 5,102,229 4,040,194
------------- ------------
Net increase in cash and cash equivalents............... 1,347,871 1,257,210
Cash and cash equivalents, beginning of period.......... 5,367,937 6,799,085
------------ ------------
Cash and cash equivalents, end of period................ $ 6,715,808 $ 8,056,295
============= ============
</TABLE>
See accompanying notes.
7
<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
only of normal recurring accruals) considered necessary for a fair presentation
have been included. Operating results for the three month period ended March 31,
1998 are not necessarily indicative of the results that may be expected for the
year ended December 31, 1998. 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, 1997.
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 1,000,000 for the three month periods ended March 31, 1998 and 1997. The
Corporation has no common stock equivalents and accordingly, presents only basic
earnings per share data.
NOTE 3 ADOPTION OF SFAS NO. 130
The Corporation adopted Statement of Financial Accounting Standards (SFAS)
No. 130, Reporting Comprehensive Income, on January 1, 1998. The Statement
establishes standards for reporting and displaying comprehensive income and its
components. SFAS No. 130 requires that all components of comprehensive income be
reported in a financial statement that is displayed with the same prominence as
other financial statements. For the Corporation, comprehensive income includes
net income and changes in unrealized gains and losses on available-for-sale
securities.
8
<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 eight offices serving eight 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 1997 annual report and with
the unaudited interim financial statements and notes.
THREE MONTHS ENDING MARCH 31, 1998 AND 1997
RESULTS OF OPERATIONS
Net income equaled $1,377,643 for the three months ending March 31, 1998,
compared to $1,138,683 for the same period in 1997. This is a 20.99% increase
over the same period in 1997. Return on average equity was 15.03% for the three
months ending March 31, 1998 and 13.48% for 1997. Return on average assets was
2.27% for the three months ending March 31, 1998 and 2.12% for 1997.
Table 1 Earnings Performance (in thousands, except per share data)
<TABLE>
Three Months Ended March 31,
1998 1997
---- ----
<S> <C> <C>
Net Income...................................... $ 1,378 $ 1,139
Per Share..................................... $ 1.38 $ 1.13
Earnings ratios:
Return on average assets...................... 2.27% 2.12%
Return on average equity...................... 15.03% 13.48%
</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:
9
<PAGE>
<TABLE>
Table 2 Interest Yields and Costs
Three months ended March 31,
1998 1997
Average Yield/ Average Yield/
Balance Interest Cost Balance Interest Cost
Assets:
<S> <C> <C> <C> <C> <C> <C>
Fed. funds sold $ 66 $ 1 5.49% $ 1,489 $ 20 5.45%
Securities:
Taxable 41,256 649 6.38% 41,989 681 6.58%
Tax-exempt 19,196 377 7.96% 16,036 339 8.57%
Loans(1)(2) 173,396 3,962 9.27% 147,095 3,390 9.35%
------- ------ ------- ------
Total earning assets/total interest
income 233,914 4,989 8.65% 206,609 4,430 8.70%
Cash and due from banks 5,504 4,665
Unrealized Gain 989 297
All other assets 8,275 8,178
Allowance for loan loss (2,552) (2,375)
Total assets: $246,130 $217,374
======== ========
Liabilities and
Stockholders' Equity:
Interest bearing deposits:
MMDA, Savings/ NOW accounts $ 65,385 $ 477 2.96% $ 63,835 $ 469 2.98%
Time 95,855 1,359 5.75% 84,545 1,169 5.61%
Fed. Funds Purchased 12,249 142 4.71% 8,641 82 3.85%
Other Borrowed Money 8,615 130 6.13% 3,174 47 6.00%
----- --- ----- --
Total interest bearing liabilities/
total interest expense 182,104 2,108 4.69% 160,195 1,767 4.47%
----- ------
Noninterest bearing deposits 25,196 21,120
All other liabilities 1,837 1,617
Stockholders' Equity:
Unrealized Holding Gain 653 196
Common Stock, Surplus, Retained 36,340 34,246
------ ------
Earnings
Total liabilities and
stockholders' equity: $246,130 $217,374
======== ========
Interest spread 2,768 3.95% 2,560 4.23%
===== =====
Net interest income-FTE $ 2,881 $ 2,663
======== ========
Net Interest Margin as a Percentage
of Average Earning Assets 4.99% 5.22%
===== =====
</TABLE>
(1) Non-accruing 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 three months ending
March 31, 1998 of $38,760 and $66,457 in 1997.
Net interest income is the principal source of income for the Corporation.
Tax equivalent net interest income increased $218,000 to $2,881,000 for the
three month period ended March 31, 1998, a 8.19% increase from the same period
in 1997. The major factors for the increase in net interest income for the three
months ended March 31, 1998 were non-interest bearing deposits averaged
$4,076,000 higher in 1998 than in the same period in 1997 and the loan portfolio
balance averaged $26,301,000 higher in 1998 compared to 1997. Earning assets
averaged $27,305,000, 13.22% higher for the three month period ending March 31,
1998 compared to 1997; this volume change resulted in an additional $633,000 in
FTE interest income. The asset growth for the three months ended March 31, 1998
was primarily funded by a 13.38%, $11,310,000 increase in time deposits and a
$5,441,000 increase in other borrowed money and a $4,076,000 increase in
non-interest bearing deposits. For the three months ended March 31, 1998 the
average FTE interest rate earned on assets decreased .05%, decreasing FTE
interest income by $74,000. The major factor of the decrease was lower yields on
the investment portfolio and the loan portfolio. The average interest rate paid
on deposits, fed funds purchased and other borrowed money increased .22%,
increasing interest expense by $46,000. The net difference between interest
rates earned and paid was a $218,000 increase in FTE net interest income.
For the three months ended March 31, 1998 the net interest yield decreased
.23% versus the same period in 1997. Management expects this trend to continue.
Deposit growth for the remainder of 1998 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 in the next nine months.
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.
11
<PAGE>
Table 3 Change in Tax Equivalent Net Interest Income (in thousands)
<TABLE>
Three Months Ended March 31,
1998 Compared to 1997
Amount of
Increase/(Decrease)
Due to Change in
Total
Amount
of
Average Increase/
Volume Rate (Decrease)
Interest Income
<S> <C> <C> <C>
Federal funds sold..................... $ (19) $ 0 $ (19)
Securities:
Taxable............................ (11) (21) (32)
Tax Exempt......................... 62 (24) 38
Loans................................ 601 (29) 572
------- -------- ------
Total interest income................ 633 (74) 559
Interest Expense
Interest bearing deposits
Savings/Now accounts................. 11 (3) 8
Time................................. 160 30 190
Fed. Funds Purchased................. 42 18 60
Other Borrowed Money................. 82 1 83
------- ------- -----
Total interest expense............... 295 46 341
------- ------- -----
Net Interest Income (FTE) $ 338 $ (120) $ 218
======= ======= =====
</TABLE>
12
<PAGE>
Table 4 Noninterest Income (in thousands)
<TABLE>
Three Months Ended March 31,
1998 Compared to 1997
1998 1997
------ -----
<S> <C> <C>
Service charges on deposit accounts................... $ 130 $ 122
Net gains on asset sales:
Loans............................................. 330 15
Securities........................................ 3 45
Other................................................. 134 137
------- --------
Total noninterest income......................... $ 597 $ 319
======= ========
</TABLE>
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
$278,000 or 87% for the three month period ending March 31, 1998 versus 1997.
The increase was due primarily to a $315,000 increase in gains on real estate
mortgage loan sales, offset by a $42,000 decrease on gains of securities
available-for sale.
Table 5 Noninterest Expense (in thousands)
<TABLE>
Three Months Ended March 31,
1998 1997
------ -----
<S> <C> <C>
Salaries and employee benefits........................ $ 690 $ 685
Occupancy and equipment............................... 240 210
FDIC assessment....................................... 7 7
Postage............................................... 4 3
Printing and supplies................................. 43 25
Marketing............................................. 50 38
Michigan Single Business Tax.......................... 57 51
Other................................................. 265 255
------------ ----------
Total noninterest expense........................ $ 1,356 $ 1,274
========== ===========
</TABLE>
Noninterest Expense
Noninterest expense increased $82,000 or 6.44% for the three month period
ending March 31, 1998 versus 1997. The major factors for the increase were a
$30,000 increase, 14.36% in occupancy and equipment expense and an $18,000
increase, 72% in stationery, supplies and printing expense. The increase in
occupancy and equipment expense was related to leasing space for a new branch in
Zeeland, Michigan. The increase in supplies and printing expense resulted from
additional forms and supplies needed for the Bank and for the new branch in
Zeeland, Michigan.
13
<PAGE>
Table 6 Nonperforming Assets (in thousands)
<TABLE>
Three Months Ended March 31,
1998 1997
------ -----
<S> <C> <C>
Nonaccrual loans................................................. $ 105 $ 269
90 days or more past due & still accruing........................ 84 513
--------- ---------
Total Nonperforming Loans................................... 189 782
Other real estate................................................ 0 811
------------ -----------
Total Nonperforming Assets................................... $ 189 $ 1,593
========= ========
Nonperforming loans as a percent of total loans.................. .11% .52%
Nonperforming assets as a percent of total loans................. .11% 1.07%
Nonperforming loans as a percent of the loan loss reserve........ 7.5% 32.8%
</TABLE>
Table 7 Loan Loss Experience (in thousands)
<TABLE>
Three Months Ended March 31,
1998 1997
------ -----
Loans:
<S> <C> <C>
Average daily balance of loans for the period..................... $173,396 $147,095
Amount of loans outstanding at end of period...................... $177,979 $149,489
Allowance for loan losses:
Balance at beginning of period.................................... $ 2,565 $ 2,376
Loans charged off:
Real estate.................................................... 0 0
Commercial..................................................... 70 0
Consumer....................................................... 45 13
---------- -----------
Total charge-offs............................................ 115 13
Recoveries of loans previously charged off:
Real estate.................................................... 0 0
Commercial..................................................... 6 6
Consumer....................................................... 15 12
----------- -----------
Total recoveries............................................ 21 18
----------- ----------
Net loans charged off (recoveries)................................ 94 (5)
Additions to allowance charged to operations...................... 50 0
----------- -----------
Balance at end of period.................................... $ 2,521 $ 2,381
========== ==========
Ratios:
Net loans charged off to avg loans outstanding.................... .05% .00%
Allowance for loan losses to loans outstanding.................... 1.42% 1.59%
</TABLE>
14
<PAGE>
Table 8 Average Daily Deposits (in thousands)
The following table sets forth the average deposit balances and the weighted
average rates paid thereon:
<TABLE>
Three Months Ended March 31,
1998 1997
------ -----
<S> <C> <C> <C> <C>
Noninterest bearing demand...................... $ 25,196 $ 21,120
MMDA/Savings and NOW accounts................... 65,385 2.96% 63,835 2.98%
Time............................................ 95,855 5.75% 84,545 5.61%
---------- ----- ---------- -----
Total Deposits.............................. $186,436 3.99% $169,500 3.92%
======== ===== ======== =====
</TABLE>
The following table summarizes time deposits in amounts of $100,000 or more
by time remaining until maturity as of March 31, 1998:
<TABLE>
Amount
<S> <C>
Three months or less....................................... $ 4,168
Over 3 months through 6 months............................. 2,249
Over 6 months through 1 year............................... 2,860
Over 1 year................................................ 3,231
---------
$ 12,508
=========
</TABLE>
ANALYSIS OF CHANGES IN FINANCIAL CONDITION
Total assets increased $8,439,000, 3.47% to $251,527,000 from December 31,
1997 to March 31, 1998. The significant changes were an increase in loans of
$5,981,000, a 3.59% increase. Deposits increased $4,738,000, 2.57% to
$189,439,000. Non-interest bearing deposits decreased $2,032,000 and interest
bearing deposits increased $6,770,000. The Corporation expects deposits to
increase throughout the remainder of the year. Borrowed funds increased
$1,683,000.
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 2.67% of total assets as of March 31,
1998 versus 2.21% as of December 31, 1997. For the three month period ending
March 31, 1998, $1,114,000 in net cash was provided from operations, investing
activities used $4,868,000, and financing activities provided $5,102,000. The
accumulated effect of the Corporation's operating, investing and financing
activities was a $1,348,000 increase in cash and cash equivalents during the
three month period ending March 31, 1998.
The Corporation's liquidity is considered adequate by management.
MARKET RISK
The Bank complements its stable core deposit base with alternate sources of
funds, which includes advances from the Federal Home Loan Bank and on a very
limited basis, jumbo certificates of deposit from outside its market area.
Management evaluates the funding needs and makes a decision based on current
interest rates and terms whether to fund internally or from alternate sources.
To date, the Bank has not employed the use of derivative financial instruments
in managing the risk of changes in interest rates.
15
<PAGE>
CAPITAL
The capital of the Corporation consists of common stock, additional paid in
capital, retained earnings and net unrealized gain on available-for-sale
securities. For the three period ending March 31, 1998 capital increased
$502,000, which includes a $125,000 unrealized gain on available-for-sale
investment securities.
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 March 31, 1998:
Table 9 Capital Resources (in thousands)
<TABLE>
As of March 31, 1998 and 1997
Regulatory Requirements
Adequately Well
Capitalized Capitalized 1998 1997
----------- ----------- ---- ----
<S> <C> <C> <C> <C>
Tier 1 capital........................ $36,060 $33,705
Tier 2 capital......................... 2,396 2,041
Total qualifying capital............ $38,456 $35,746
Ratio of equity to total assets
Tier 1 leverage ratio.................. 4% 5% 14.69% 15.56%
Tier 1 risk-based capital.............. 4% 6% 18.83% 20.68%
Total risk-based capital............... 8% 10% 20.08% 21.94%
</TABLE>
16
<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.
17
<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 March 31, 1998 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: May 14, 1998
18
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 6,715,808
<INT-BEARING-DEPOSITS> 165,013,948
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 60,631,803
<INVESTMENTS-CARRYING> 59,649,830
<INVESTMENTS-MARKET> 60,631,803
<LOANS> 177,979,538
<ALLOWANCE> 2,521,276
<TOTAL-ASSETS> 251,526,876
<DEPOSITS> 189,438,797
<SHORT-TERM> 14,504,807
<LIABILITIES-OTHER> 2,166,300
<LONG-TERM> 8,000,000
0
0
<COMMON> 1,000,000
<OTHER-SE> 36,416,972
<TOTAL-LIABILITIES-AND-EQUITY> 251,526,876
<INTEREST-LOAN> 3,955,853
<INTEREST-INVEST> 919,599
<INTEREST-OTHER> 891
<INTEREST-TOTAL> 4,876,343
<INTEREST-DEPOSIT> 1,836,400
<INTEREST-EXPENSE> 2,107,900
<INTEREST-INCOME-NET> 2,768,443
<LOAN-LOSSES> 50,000
<SECURITIES-GAINS> 2,674
<EXPENSE-OTHER> 1,355,747
<INCOME-PRETAX> 1,960,043
<INCOME-PRE-EXTRAORDINARY> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,377,643
<EPS-PRIMARY> 1.38
<EPS-DILUTED> 1.38
<YIELD-ACTUAL> 3.95
<LOANS-NON> 105,000
<LOANS-PAST> 84,000
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 2,565,000
<CHARGE-OFFS> 115,000
<RECOVERIES> 21,000
<ALLOWANCE-CLOSE> 2,521,000
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
