[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2002
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 (State of other jurisdiction of incorporation or organization) |
38-2817345 (I.R.S. Employer 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: 2,040,532 shares of the Corporation’s Common Stock ($1 par value) were outstanding as of August 14, 2002.
INDEX
| Page Number(s) |
||
| Part I. | Financial Information (unaudited): |
|
|
Item 1. Consolidated Financial Statements Notes to Consolidated Financial Statements Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Item 3. Quantitative and Qualitative Disclosures About Market Risk |
3-6 7-8 9-18 19 |
|
| Part II. | Other Information |
|
|
Item 1. Legal Proceedings Item 2. Changes in Securities and Use of Proceeds Item 3. Defaults Upon Senior Securities Item 4. Submission of Matters to a Vote of Security Holders Item 5. Other Information Item 6. Exhibits and Reports on Form 8-K |
20 20 20 20 20 20 |
|
| Signatures | 21 |
|
| Exhibits | 22 | |
-2-
|
O.A.K. FINANCIAL CORPORATION AND SUBSIDIARY |
CONSOLIDATED BALANCE SHEETS |
June 30, December 31,
2002 2001
ASSETS (Unaudited)
------------------- -----------------
Cash and due from banks..................................... $16,190,951 $12,051,503
Federal funds sold.......................................... 1,800,000 -
------------- ------------
Cash and cash equivalents................................... 17,990,951 12,051,503
Available-for-sale securities............................... 76,492,788 79,080,306
Total Loans ................................................ 395,885,349 379,345,186
Allowance for loan losses................................... (8,426,464) (6,982,779)
------------- -------------
Net Loans................................................... 387,458,885 372,362,407
Loans held for sale......................................... 3,511,911 11,456,287
Accrued interest receivable................................. 3,331,496 3,484,633
Premises and equipment, net................................. 15,294,424 12,586,367
Restricted investments...................................... 2,900,000 2,900,000
Other assets................................................ 8,073,523 6,860,483
------------ ------------
Total assets................................................ $515,053,978 $500,781,986
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits
Interest bearing............................................ $332,565,150 $310,631,041
Non-interest bearing........................................ 47,828,473 48,322,935
------------ ------------
Total deposits.............................................. 380,393,623 358,953,976
Securities sold under agreements to repurchase
and federal funds purchased............................... 41,982,507 51,162,712
Borrowed funds.............................................. 38,416,146 37,036,681
Other liabilities........................................... 4,111,493 4,345,794
------------ ------------
Total liabilities........................................... 464,903,769 451,499,163
Stockholders' equity
Common stock, $1 par value; 4,000,000 shares authorized;
2,040,532 shares issued and outstanding .................. 2,040,532 2,040,532
Additional paid-in capital.................................. 6,297,434 6,302,538
Retained earnings........................................... 40,857,729 40,396,147
Accumulated other comprehensive income ..................... 1,280,764 916,256
Unallocated common stock held by ESOP....................... (326,250) (372,650)
------------- -------------
Total stockholders' equity.................................. 50,150,209 49,282,823
------------ ------------
Total liabilities and stockholders' equity.................. $515,053,978 $500,781,986
============ ============
The accompanying notes are an integral part of these consolidated financial statements.
-3-
|
O.A.K. FINANCIAL CORPORATION AND SUBSIDIARY |
CONSOLIDATED STATEMENTS OF INCOME |
Six Months and Three Months ended June 30, 2002 and 2001
(Unaudited)
Three Months Six Months
------------- ----------
2002 2001 2002 2001
---- ---- ---- ----
Interest Income
Loans............................................... $7,105,299 $ 7,821,959 $14,542,519 $15,583,231
Available-for-sale securities....................... 832,002 1,120,028 1,676,256 2,286,878
Restricted investments.............................. 44,664 49,393 87,753 99,448
Federal funds sold.................................. 4,080 13,569 12,845 80,898
---------- ------------ ----------- -----------
Total interest income.................................. 7,986,045 9,004,949 16,319,373 18,050,455
---------- ------------ ----------- -----------
Interest expense
Deposits............................................ 2,572,323 3,420,367 5,129,734 7,179,231
Borrowed funds...................................... 503,113 626,862 1,074,844 1,242,379
Securities sold under agreements to repurchase...... 158,569 295,692 319,660 681,459
------- ------------ ----------- -----------
Total interest expense................................. 3,234,005 4,342,921 6,524,238 9,103,069
---------- ------------ ----------- -----------
Net interest income.................................... 4,752,040 4,662,028 9,795,135 8,947,386
Provision for loan losses.............................. 2,045,000 610,000 2,645,000 1,135,000
---------- ------------ ----------- -----------
Net interest income after provision for loan losses.... 2,707,040 4,052,028 7,150,135 7,812,386
---------- ------------ ----------- -----------
Non-interest income
Service charges..................................... 471,812 391,498 887,239 739,152
Net gain on sales of loans held for sale............ 335,976 531,487 1,040,164 716,055
Amortization of mortgage servicing rights........... (118,887) (87,929) (352,733) (181,441)
Loan servicing fees................................. 121,054 104,233 223,393 219,260
Net gain on sales of available-for-sale securities.. 33,231 49,993 81,042 155,929
Insurance premiums.................................. 258,124 250,798 591,057 499,251
Brokerage fees...................................... 74,126 86,666 131,459 157,976
Other............................................... 56,727 52,697 108,894 131,263
---------- ------------ ----------- -----------
Total non-interest income.............................. 1,232,163 1,379,443 2,710,515 2,437,445
---------- ------------ ----------- -----------
Non-interest expenses
Salaries............................................ 1,740,096 1,409,562 3,556,970 2,782,122
Employee benefits................................... 425,612 384,924 930,745 777,520
Occupancy........................................... 301,070 236,729 592,729 519,022
Furniture and fixtures.............................. 250,068 271,604 504,492 531,297
Other............................................... 1,257,934 1,159,148 2,394,176 2,016,461
---------- ------------ ----------- -----------
Total non-interest expenses............................ 3,974,780 3,461,967 7,979,112 6,626,422
---------- ------------ ----------- -----------
Income before federal income taxes..................... (35,577) 1,969,504 1,881,538 3,623,409
Federal income taxes................................... (102,100) 514,600 450,650 924,300
----------- ------------ ----------- -----------
Net income............................................. $66,523 $1,454,904 $1,430,888 $2,699,109
========== ============ =========== ===========
Income per common share:
Basic.............................................. $ .03 $ .72 $ .70 $ 1.33
========== ============ =========== ===========
Diluted............................................ $ .03 $ .72 $ .70 $ 1.33
========== ============ =========== ===========
The accompanying notes are an integral part of these consolidated financial statements.
-4-
|
O.A.K. FINANCIAL CORPORATION AND SUBSIDIARY |
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY |
Six Months Ended June 30,
(Unaudited)
2002 2001
---------------- ----------------
Shares of common stock issued and outstanding
Balance, beginning of year.............................. 2,040,532 2,041,775
Common stock issued..................................... - 757
----------- -----------
Balance, end of year.................................... 2,040,532 2,042,532
=========== ===========
Common stock
Balance, beginning of year.............................. $2,040,532 $2,041,775
Common stock issued..................................... - 757
----------- -----------
Balance, end of year.................................... 2,040,532 2,042,532
----------- -----------
Additional paid-in-capital
Balance, beginning of year.............................. 6,302,538 6,265,446
Issuance of common stock................................ - 37,092
Allocation of ESOP shares............................... (5,104) -
----------- -----------
Balance, end of year.................................... 6,297,434 6,302,538
Retained earnings
Balance, beginning of year.............................. 40,396,147 36,280,076
Unallocated ESOP shares................................. 7,018 -
Cash dividends.......................................... (976,324) (919,109)
Net income.............................................. 1,430,888 2,699,109
----------- -----------
Balance, end of year.................................... 40,857,729 38,060,046
----------- -----------
Accumulated other comprehensive (loss) income
Balance, beginning of year.............................. 916,256 483,869
Other comprehensive income (loss)....................... 364,508 527,674
----------- -----------
Balance, end of year.................................... 1,280,764 1,011,543
----------- -----------
Unallocated common stock held by ESOP
Balance, beginning of year.............................. (372,650) (442,350)
Allocation of ESOP shares............................... 46,400 69,700
----------- -----------
Balance, end of year.................................... (326,250) (372,650)
------------ ------------
Total stockholders' equity................................... $50,150,209 $47,044,009
----------- -----------
The accompanying notes are an integral part of these consolidated financial statements.
-5-
|
O.A.K. FINANCIAL CORPORATION AND SUBSIDIARY |
CONSOLIDATED STATEMENTS OF CASH FLOWS |
Six Months Ended June 30,
(Unaudited)
------------------------------------------
2002 2001
------------------ ------------------
Cash flows from operating activities
Net income............................................................. $1,430,888 $2,699,109
Adjustments to reconcile net income to net
cash provided by operating activities
Depreciation and amortization.................................... 482,299 536,033
Provision for loan losses........................................ 2,645,000 1,135,000
Proceeds from sales of loans held for sale....................... 76,496,749 43,567,349
Originations of loans held for sale.............................. (67,720,064) (44,386,781)
Net gain on sales of available-for-sale securities............... (81,042) (155,929)
Net gain on sales of loans held for sale......................... (832,309) (716,055)
Net amortization of investment premiums.......................... 203,157 47,164
(Gain) loss on sales of property and equipment................... 8,993 -
Deferred income taxes (benefit).................................. (482,582) -
Changes in operating assets and liabilities which (used) provided
cash
Accrued interest receivable................................. 153,137 (13,829)
Other assets................................................ (917,797) (1,827,215)
Net (decrease) increase in other liabilities................ (187,901) 299,101
----------- -----------
Net cash provided by operating activities.................................. 11,198,528 1,183,947
----------- -----------
Cash flows from investing activities
Available-for-sale securities
Proceeds from maturities............................................ 12,756,348 11,612,836
Proceeds from sales................................................. 3,503,195 3,672,833
Purchases........................................................... (13,240,379) (16,785,096)
Net increase in loans held for investment.............................. (17,741,478) (17,661,749)
Purchases of restricted investments - (10,000)
Purchases of premises and equipment.................................... (3,222,959) (627,074)
Proceeds from the sale of premises and equipment.......................
23,610 -
----------- -----------
Net cash used in investing activities...................................... (17,921,663) (19,798,250)
----------- -----------
Cash flows from financing activities
Net increase in deposits............................................... 21,439,647 6,591,721
Net increase in TT&L note.............................................. 1,399,627 441,273
Proceeds from FHLB borrowings.......................................... 4,000,000 7,200,000
Repayments of FHLB borrowings.......................................... (4,000,000) (4,000,000)
Common stock dividends paid............................................ (976,324) (919,139)
Net other borrowed funds (repayments).................................. (20,162) (20,857)
Net increase (decrease) in securities sold under
agreements to repurchase and fed funds purchased.................... (9,180,205) 5,643,050
Proceeds from stock options exercised.................................. - 37,850
----------- -----------
Net cash provided by financing activities ................................. 12,662,583 14,973,898
----------- -----------
Net increase (decrease) in cash and cash equivalents ...................... 5,939,448 3,640,405
Cash and cash equivalents, beginning of year............................... 12,051,503 16,759,837
----------- -----------
Cash and cash equivalents, end of period .................................. $17,990,951 $13,119,432
=========== ===========
Supplementary cash flows information
Interest paid.......................................................... $6,627,109 $9,364,777
Income taxes paid...................................................... $962,400 $933,500
The accompanying notes are an integral part of these consolidated financial statements.
-6-
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 six month period ended June 30, 2002 are not necessarily indicative of the results that may be expected for the year ending December 31, 2002. For further information, refer to the consolidated financial statements and footnotes thereto included in the Corporation's annual report on Form 10-K for the year ended December 31, 2001.
All earnings per share amounts have been presented to conform to the requirements of Statement of Financial Accounting Standard No. 128, Earnings Per Share (SFAS 128). Basic earnings per share exclude any dilutive effect of stock options. The basic earnings per share for the Corporation is computed by dividing net income by the weighted average number of common shares outstanding. Diluted earnings per share for the Corporation is computed by dividing net income by the sum of the weighted average number of common shares outstanding plus the dilutive effect of outstanding employee stock options. The following table summarizes the number of shares used in the denominator of the basic and diluted earnings per share computations:
Three Months ended June 30, Six Months ended June 30,
------------------------------- -------------------------------
2002 2001 2002 2001
---- ---- ---- ----
Average shares outstanding 2,040,532 2,042,532 2,040,532 2,042,532
Average ESOP shares not committed to be released (6,525) (7,517) (6,525) (7,582)
------------- ------------- ------------- -------------
Shares outstanding for basic earnings per share 2,034,007 2,035,015 2,034,007 2,034,950
Dilutive shares from stock option plans - - - -
------------- ------------- ------------- -------------
Shares outstanding for dilutive earnings per share 2,034,007 2,035,015 2,034,007 2,034,950
------------- ------------- ------------- -------------
Three Months ended June 30, Six Months ended June 30,
------------------------------- -------------------------------
2002 2001 2002 2001
---- ---- ---- ----
Net Income $67 $1,455 $1,431 $2,699
Net Change in unrealized gain on securities
available-for-sale, net of tax 428 (11) 364 528
------------- ------------- ------------- -------------
Comprehensive income $495 $1,444 $1,795 $3,227
============= ============= ============= =============
The allowance for loan losses is established as a reserve to absorb estimated credit losses associated with the loan portfolio. Loan losses are charged against the allowance when management believes the uncollectibility of the loan balance is confirmed. Subsequent recoveries, if any, are credited to the allowance.
-7-
The allowance for loan losses is evaluated on a regular basis by management and is based upon management's periodic review of the collectibility of the loans in light of historical experience, the nature and volume of the loan portfolio, adverse situations that may affect the borrower's ability to repay, estimated value of any underlying collateral and prevailing economic conditions. This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available.
A loan is considered impaired when, based on current information and events, it is probable that the Bank will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement. Factors considered by management in determining impairment include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired. Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower's prior payment record, and the amount of the shortfall in relation to the principal and interest owed. Impairment is measured on a loan by loan basis for commercial and construction loans by either the present value of expected future cash flows discounted at the loan's effective interest rate, the loan's obtainable market price, or the fair value of the collateral if the loan is collateral dependent.
Impaired loans as of June 30, 2002 and December 31, 2001 were $28.5 million and $8.8 million, respectively. The allowance for impaired loans was $3.0 million and $1.6 million as of June 30, 2002 and December 31, 2001, respectively. Non-performing loans totaled $6.9 million at June 30, 2002 compared to $5.2 million at December 31, 2001 and $3.0 million at June 30, 2001. Non-performing loans are defined as loans that are 90 days past due plus loans that the bank has stopped accruing interest.
In the ordinary course of business, the Bank enters into rate-lock residential real estate loan commitments with customers. These commitments expose the Bank to interest rate risk. It is the Bank's practice to sell most of the real estate mortgage loans to the Federal Home Loan Mortgage Corporation as soon as practical, to minimize the Bank's exposure to changes in interest rates.
This report contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. The Corporation intends such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Reform Act of 1995, and is including this statement for purposes of these safe harbor provisions. Forward-looking statements, which are based on certain assumptions and describe future plans, strategies and expectations of the Corporation, are generally identifiable by use of the words "believe," "expect," "intend," "anticipate," "estimate," "project" or similar expressions. The Corporation's ability to predict results or the actual effect of future plans or strategies is inherently uncertain. Factors which could have a material adverse affect on the operations and future prospects of the Corporation and the subsidiaries include, but are not limited to, changes in: interest rates, general economic conditions, legislative/regulatory changes, monetary and fiscal policies of the U.S. Government, including policies of the U.S. Treasury and the Federal Reserve Board, the quality or composition of the loan or investment portfolios, demand for loan products, deposit flows, competition, demand for financial services in the Corporation's market area and accounting principles, policies and guidelines. These risks and uncertainties should be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements. Further information concerning the Corporation and its business, including additional factors that could materially affect the Corporation's financial results, is included in the Corporation's other filings with the Securities and Exchange Commission.
-8-
| ITEM 2. | MANAGEMENTS 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 eleven banking offices serving eleven communities in Kent, Ottawa and Allegan Counties. The Bank owns a subsidiary, O.A.K. Financial Services, which offers mutual fund products, securities brokerage services, retirement planning services, investment management and advisory services. O.A.K. Financial Services in turn owns Dornbush Insurance Agency, which was acquired February 1, 1999. Dornbush Insurance Agency sells property and casualty, life, disability and long-term care insurance products.
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 2001 annual report on Form 10-K and the audited financial statements and notes contained therein.
During the course of the most recent examination of the Bank by representatives of the Federal Reserve Bank of Chicago, the Bank's principal federal regulator, and representatives of the Michigan Office of Financial and Insurance Services (the "Regulators"), the examiners raised concerns and identified supervisory issues with respect to the Bank's operations including, among others, its Board of Directors, management and asset quality and credit risk. The Regulators have recently issued their examination report, which reviews these issues and concerns in detail. The Regulators have also indicated that they intend to request the Bank to enter into an informal or a formal written agreement which would contain various reporting and other requirements for the Bank to respond to the issues and concerns raised during the course of the examination and in the examination report. As a result of issues and concerns of the Regulators, the Federal Reserve Bank of Chicago also issued a directive to the Bank which requires prior notice to the Federal Reserve Bank of Chicago before adding or replacing any member of the Banks' board of directors, or employing, changing the responsibilities of, or dismissing any officer of the Bank. In addition, as a result of the Regulators concerns, the Bank has withdrawn applications for opening a new branch office in Jenison, Michigan and a new planned branch in Wayland, Michigan. Another effect or result of the regulatory issues and concerns is that the Bank will be required to pay significantly increased premiums for FDIC insurance. These premiums are estimated to be approximately $80,000 per month and will have an adverse effect on the Bank's earnings while this requirement is in place.
The Bank's board of directors and management have been in discussions with the Regulators and are aggressively and thoroughly responding to the issues and concerns raised by the Regulators. Searches for a new Bank Chief Executive Officer and a new Bank Chief Lending Officer are in process and are expected to be completed within three to four months. Mr. John Van Singel, the president and chief executive officer of the Company and of the Bank is currently on a leave of absence. Mr. James Luyk, the Bank's Chief Financial Officer, has been designated as the Bank's Interim Chief Operating Officer for the Bank. Mr. Robert Deppe has been elected to serve as the new Chairman of the Board of the Bank. The Board is in the process of screening and selecting four new directors and expects to complete this process before the end of the year. The Bank also intends to retain a loan workout specialist on a contract basis. In addition, a special improvement team of key employees has been created which is identifying and implementing the action steps needed to resolve all of the regulatory issues and concerns.
In spite of the Regulators' asset quality concerns, which are being addressed, the Bank's capital exceeds the regulatory requirements for being `well capitalized" as set forth in applicable laws and regulations. In addition, the Bank is well positioned in markets, which are believed to be excellent. Given those factors, the strength of the Bank's overall staff and progress made to date in dealing with asset quality issues, Management believes that the restrictions on the Bank's operations and the increased FDIC insurance premiums imposed by the Regulators to date, or that may be imposed under any informal or formal agreement, will not continue for an extended period of time. Moreover, the Bank expects to be profitable for the balance of the year.
-9-
Total assets increased $14 million, 2.8% to $515 million from December 31, 2001 to June 30, 2002. The significant changes were an increase in net loans receivable of $15 million. Substantially all of the 4.1% increase was in the commercial loan portfolio. Deposits increased $21 million, or 6.0%, to $380 million; interest bearing deposits increased $22 million and non-interest bearing deposits decreased $.5 million, as a result of lower balances in business checking accounts. The significant change in the interest bearing deposits came from an increase in core deposits of $19 million. Savings, N.O.W. and M.M.D.A. increased $13 million, time deposits under $100,000 increased $6 million. Brokered time deposits increased $ 1 million from December 31, 2001 to June 30, 2002. The Corporation expects similar quarterly growth in deposits and slower growth in loans throughout the remainder of the year. Borrowed funds increased $1 million and securities sold under agreements to repurchase and fed funds purchased decreased $9 million from December 31, 2001 to June 30, 2002.
The Corporation maintains a diversified securities portfolio, which includes obligations of government sponsored agencies, securities issued by states and political subdivisions, corporate securities, and mortgage-backed securities. The primary objective of the Corporation's investing activities is to provide for safety of the principal invested, as a source of liquidity and management of exposure to changes in interest rates.
All of the Corporation's securities are classified as held-for-sale. The Corporation's total holdings decreased $3 million from December 31, 2001.
Amortized Fair Amount
Securities available-for-sale (in thousands) Cost Value Pledged
---- ----- -------
June 30, 2002.............................. $74,553 $76,493 $70,523
December 31, 2001.......................... 77,692 79,080 78,106
The Bank sold securities designated available-for-sale with an aggregate market value of $3.6 million during the first six months of 2002. The majority of the securities are pledged to secure borrowed funds from the Federal Home Loan Bank, and securities sold under agreements to repurchase and other purposes as required or permitted by law.
The Bank's largest concentration of loans is to businesses in the form of commercial loans and real estate mortgages. The Bank's consumer lending activity includes direct consumer loans, indirect consumer loans, home equity loans, unsecured lines of credit and residential real estate loans. In an effort to mitigate the exposure to changes in interest rates, most of the residential real estate loans are sold to the Federal Home Loan Mortgage Corporation("FHLMC"). However, the Bank retains servicing rights on substantially all such loans sold. At June 30, 2002 and December 31, 2001, the Bank was servicing loans for FHLMC totaling $241 million and $195 million respectively. The percentage of consumer loans as a percent of total loans is expected to decline. The Bank has taken steps to improve consumer credit quality that will result in a decline in indirect consumer lending. Indirect consumer loans declined from $46 million at December 31, 2001 to $40 million at June 30, 2002. It is likely that the indirect consumer loan portfolio will continue to shrink throughout the year.
June 30, 2002 December 31, 2001
------------- -----------------
Amount % Amount %
------ - ------ -
Commercial Real Estate.................... $215,408 54 $196,864 52
Residential Real Estate................... 57,382 14 49,961 13
Commercial................................ 57,450 15 60,667 16
Consumer.................................. 65,645 17 71,853 19
-------- -- -------- --
Total loans............................ $395,885 100% $379,345 100%
======== ==== ======== ====
-10-
The lending policy of the Bank was written to reduce credit risk, enhance earnings and guide the lending officers in making credit decisions. The Board of Directors of the Bank approves the loan authority for each lender and appoints the Chief Lending Officer, who is responsible for the supervision of the lending activities of the Bank. The Board has also appointed a loan review officer who monitors the credit quality of the loan portfolio independent of the loan approval process. The loan review officer submits periodic reviews to Executive management and these reviews are submitted to the Audit/Compliance Committee on a quarterly basis. The Bank has no foreign loans and there were no concentrations greater than 10% of total loans that are not disclosed as a separate category.
The low interest rate environment resulted in a significant amount of re-financing during the first six months of 2002. Consumers refinanced mortgage loans to lock in the lower interest rates. This activity increased gains on sales of loans held for sale by 45% from the previous year. Management does not expect this abnormally high volume to continue. Loans held for sale declined from $11.5 million at December 31, 2001 to $3.5 million at June 30, 2002. During the three months of 2001 and the first three months of 2002, the Bank experienced a significant amount of fixed rate commercial loan re-financing. A significant number of these customers re-financed from higher fixed interest rates to lower variable interest rates. For discussion regarding interest rate risk exposure and management of this risk see the "Interest Rate Risk" and "Asset/Liability Gap Position" sections.
June 30, 2002 December 31, 2001
-------------- -----------------
Non-accrual loans............................................ $6,637 $2,285
90 days or more past due & still accruing.................... 233 2,961
------ ------
Total Non-performing Loans.............................. 6,870 5,246
Other real estate............................................ 120 120
------ ------
Total Non-performing Assets.............................. $6,990 $5,366
====== ======
As a percentage of portfolio loans
Non-performing loans.................................... 1.74% 1.38%
Non-performing assets................................... 1.77% 1.41%
Allowance for loan losses............................... 2.13% 1.84%
Allowance for loan losses as a % of non-performing loans..... 123% 133%
Non-performing assets are comprised of loans for which the accrual of interest has been discontinued, accruing loans 90 days or more past due in payments, and other real estate, which is real estate that has been acquired primarily through foreclosure and is awaiting disposition. Loans, including loans considered impaired under SFAS 118, are generally placed on a nonaccrual basis when principal or interest is past due 90 days or more and when, in the opinion of management, full collection of principal and interest is unlikely.
Three Months ended Six Months ended
June 30, June 30,
---------------------------- ---------------------------
2002 2001 2002 2001
---- ---- ---- ----
Balance at beginning of period...................... $7,292 $5,115 $6,983 $4,874
Loans charged off................................... (993) (188) (1,340) (598)
Recoveries of loans previously charged off.......... 82 39 138 165
Additions to allowance charged to operations........ 2,045 610 2,645 1,135
------- -------- ------- -------
Balance at end of period....................... $8,426 $5,576 $8,426 $5,576
======= ======= ======= =======
Net loans charged off to average loans outstanding.. .92% .17% .62% .24%
Net loans charged off increased $762,000 or 511% for the second quarter of 2002, compared to 2001. This is a result of higher charge-offs in the commercial loan and indirect consumer loan portfolios. The additions to allowance charged to operations increased $1,435,000 for the second quarter of 2002, versus 2001. The addition to the allowance charged to operations was 235% higher compared to the same period in 2001. This increase was the result of increased charge-offs, a change in the Bank's loan rating system and a continued weak economy.
-11-
For the six month period ended June 30, 2002 versus the same period in 2001, net loans charged off increased 178%. The increased provision for loan losses charged to operations, reflects the growth in the loan portfolio and the probable losses inherent in the portfolio. The majority of loan charge offs, during the first six months of 2002, are from the indirect consumer auto loan and commercial loan portfolio. The indirect consumer loan portfolio has been intentionally reduced by over 15% since October 2001 to lower risk in this area.
Allocation of the Allowance for Loan Losses (dollars in thousands)
The allowance for loan losses is analyzed quarterly by management. In so doing, management assigns a portion of the allowance to specific credits that have been identified as impaired loans, reviews past loss experience, the local economy and a number of other factors.
June 30, 2002 December 31, 2001
------------- -----------------
Allowance % of total Allowance % of total
Amount allowance Amount allowance
------ --------- ------ ---------
Commercial............................. $5,424 64% $4,908 70%
Real estate mortgages.................. 115 1 100 2
Consumer............................... 1,414 17 1,273 18
Allocated based on subjective factors.. 1,473 18 702 10
------ ----- ------ -----
Total................................ $8,426 100% $6,983 100%
====== ===== ====== =====
In addition to specific reserves assigned to individual loans, management uses an eight point rating system to assign risk ratings to all commercial loans. A pre-determined loss allocation is assigned to loans in each risk-rating category. Residential real-estate and consumer loans are assigned a loss allocation on a "pooled" basis, which represents historical losses and management's judgment. The allowance also includes an allocation based on subjective factors, including but not limited to general economic conditions, local business conditions, trends, and mix and terms of the loan portfolio.
The above allocations are not intended to imply limitations on usage of the allowance. The entire allowance is available for any future loans without regard to loan type. Management has provided additions to the allowance for loan losses to support the 2002 loan growth, to replenish the allowance for charge-offs during the year and for the increase of non-performing loans.
The following table sets forth the average deposit balances and the portfolio mix thereon:
June 30, 2002 December 31, 2001
------------- -----------------
Average Average
Balance % Balance %
------- - ------- -
Non-interest bearing demand ................ $49,521 13% $ 44,685 13%
NOW accounts ............................... 35,551 10% 29,164 8%
MMDA/Savings ............................... 76,340 20% 68,837 20%
Time - negotiable brokered ................. 58,350 16% 51,699 15%
Time ....................................... 154,064 41% 152,000 44%
-------- ------ -------- ------
Total Deposits ......................... $373,826 100% $346,385 100%
======== ====== ======== ======
Total deposits increased $21 million from $359 million at December 31, 2001 to $380 million at June 30, 2002. Non-interest bearing deposits declined $.5 million, savings and time deposits increased $18.5 million and time deposits over $100,000 increased $3.0 million. The increase in time deposits over $100,000 includes brokered CD's, which increased $1 million from $56 million at December 31, 2001 to $57 million at June 30, 2002.
Borrowed funds from the Federal Home Loan Bank remained at $36 million from December 31, 2001 to June 30, 2002. Fed funds purchased declined $10 million from $10 million at December 31, 2001 to zero at June 30, 2002.
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The use of alternative funding sources such as fed funds, brokered certificates and FHLB advances supplement the Bank's core deposits and also is an integral component of the Bank's asset/liability management effort.
Net income decreased significantly from the same period in 2001. The decrease is mainly due to an increase in the loan loss provision and an increase in non-interest expense. Net income equaled $67,000 for the second quarter in 2002, compared to $1,455,000 for the second quarter in 2001. This is a 95% decrease from the second quarter in 2001. The loan loss provision for the second quarter in 2002 was $2,045,000 compared to $610,000 for the second quarter in 2001. Non-interest expense increased $513,000 for the second quarter in 2002, compared to 2001.
Net income equaled $1,431,000 for the six months ended June 30, 2002, compared to $2,699,000 for the same period in 2001. This is a 47% decrease from the same period in 2001. The loan loss provision for the first six months of 2002 was $2,645,000, compared to $1,135,000 for the same period in 2001. Non-interest expense increased $1,353,000 for the six month period ended June 30, 2002 versus 2001.
Earnings Performance (in thousands, except per share data)
Three Months Ended June 30, Six Months Ended June 30,
------------------- ------------------- ------------------- -----------------
2002 2001 2002 2001
---- ---- ---- ----
Net Income.......................... $67 $1,455 $1,431 $2,699
Per Share......................... $0.03 $0.72 $0.70 $1.33
Earnings ratios:
Return on average assets.......... 05% 1.24% .56% 1.17%
Return on average equity.......... 52% 12.49% 5.71% 11.81%
The following schedule presents the average daily balances, interest income on a fully taxable equivalent basis ("FTE") 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:
Three Months Ended June 30, Six Months Ended June 30,
(dollars in thousands) (dollars in thousands)
---------------------- ----------------------
2002 2001 2002 2001
---- ---- ---- ----
Average earning assets...................... $473,260 $442,215 $476,746 $438,584
Tax equivalent net interest income.......... 4,865 4,786 10,041 9,189
As a percentage of average earning assets:
Tax equivalent interest income............ 6.77% 8.28% 6.92% 8.40%
Interest expense.......................... 3.18% 4.64% 3.21% 4.91%
-------- -------- -------- --------
Interest spread........................... 3.59% 3.64% 3.71% 3.49%
Tax equivalent net interest income........ 4.12% 4.34% 4.25% 4.23%
Average earning assets as a percentage of
average assets.............................. 92.1% 94.2% 92.8% 94.3%
Net interest income is the principal source of income for the Corporation. For the second quarter in 2002, tax equivalent net interest income increased $79,000, or 2%, over the same period in 2001. Average earning assets increased 7% to $473,260,000 during the second quarter in 2002, compared to $442,215,000 in 2001. This volume change resulted in an increase in an additional $363,000 in fully taxable equivalent interest income. The average rate of interest collected on loans decreased 137 basis points for the second quarter of 2002, compared to 2001, resulting in a $1,310,000 decrease in fully taxable equivalent interest income. The average rate paid on time deposits decreased 150 basis points for the second quarter in 2002, compared to 2001, resulting in a $796,000 increase in fully taxable equivalent net interest income.
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Tax equivalent net interest income increased $852,000 to $10,041,000 for the first six months of 2002, a 9% increase from the same period in 2001. The increase was a result of the growth of the Corporation's average earning assets, which grew 9% from a year earlier. The loan portfolio average balance increased 10% and the investment portfolio average balance increased 4% for the first six months of 2002 compared to the same period in 2001. Earning assets averaged $38 million higher for the first six months of 2002 compared to the same period in 2001; this volume change resulted in an additional $970,000 in fully taxable equivalent ("FTE") interest income. The asset growth for the six months ended June 30, 2002 was primarily funded by a 4.3% increase, $8,715,000 in time deposits. For the six months ended June 30, 2002 the average FTE interest rate earned on assets decreased 148 basis points, decreasing FTE interest income by $1,728,000. The average interest rate paid on deposits, fed funds purchased and other borrowed money decreased 170 basis points, decreasing interest expense by $2,580,000. The net difference between interest rates earned and paid was a $852,000 increase in FTE net interest income.
In the long-term, management expects the declining trend in the net interest margin to continue because of fierce competition for deposits in the Bank's local markets and shift of deposit funding sources from low cost funds to higher cost funds. This is a result of high funding needs, increased local competition, and increased sophistication of funds management by the Bank's customers. The unprecedented decline in rates and steep yield curve have resulted in significant customer refinance activity from fixed rate commercial loans to floating rate. This refinancing activity will likely result in a decline in the Bank's net interest margin from the current level.
The provision for loan losses charged to earnings was $2,045,000 in the second quarter of 2002, compared to $610,000 for the same period in 2001. The provision for loan losses charged to earnings was $2,645,000 in the first six months of 2002, which is significantly higher than the $1,135,000 for the same period in 2001. The recent increase in the provision is attributed to loan growth, an increase in classified loans and a general weakness in the economy.
The increase in the allowance reflects management's assessment of the allowance for loan losses. Although management expects the loan loss provision to be approximately $500,000 to $600,000 in the remaining quarters of 2002, unanticipated changes in credit quality could result in significant adjustments to the provision charged to operations.
Non-interest income consists of service charges on deposit accounts, insurance fees, brokerage fees, service fees, gains on investment securities available for sale, gains from loan sales to the Federal Home Loan Mortgage Corporation (Freddie Mac) loans. The Bank retains the servicing rights on the loans sold to Freddie Mac. Non-interest income decreased $147,000, or 11% for the second quarter of 2002, compared to 2001. The decrease was mainly the result of a slow down in mortgage refinancing during the second quarter of 2002. This resulted in a $196,000 decrease in net gain on sales of loans held for sale for the three month period ended June 30, 2002, versus 2001.
Non-interest income increased $273,000 or 11% for the six month period ended June 30, 2002 versus 2001. The increase was due to a $324,000, 45%, increase in net gains on loan sales. This increase is a direct result of a favorable interest rate environment which caused a significant increase in the mortgage refinance business. The Bank anticipates lower volume in mortgage activity for the remainder of the year. The 94% increase in amortization of mortgage servicing rights was due to the refinance boom. Service charges on deposit accounts increased $148,000, a 20% increase for the six month period ended June, 2002 versus 2001. This increase was a result of continued account growth and fee increases. Insurance revenue increased 18%, or $92,000. This increase was a result of continued growth in the number of new insurance customers.
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Non-interest Expense
Non-interest expense is expected to increase in future quarters as a result of matters described under "Bank Regulatory Developments." Increases in staff expense, legal and professional expense and FDIC insurance are expected.
Three Months Ended June 30, Six Months Ended June 30,
(in thousands) (in thousands)
-------------- --------------
2002 2001 2002 2001
---- ---- ---- ----
Salaries ............................ $1,740 $1,409 $3,557 $2,782
Employee benefits ................... 426 385 931 778
Occupancy ........................... 301 237 593 519
Equipment ........................... 250 271 504 531
Data processing & software .......... 224 180 442 374
Legal & professional ................ 156 91 277 160
Printing and supplies ............... 163 103 276 210
Marketing ........................... 87 71 187 140
Other ............................... 628 715 1,212 1,132
-------- -------- -------- --------
Total non-interest expense ..... $3,975 $3,462 $7,979 $6,626
======== ======== ======== ========
Non-interest expense increased $513,000 or 15% for the second quarter in 2002, compared to 2001. The corporation's salary expense increased $331,000 or 23% for the second quarter of 2002, versus 2001. Employee benefits expense increased $41,000 or 11% for the second quarter of 2002, versus 2001. Legal and professional fees increased $65,000 for the second quarter of 2002, versus 2001.
Non-interest expense increased $1,353,000 or 20% for the six month period ended June 30, 2002 versus 2001. The Corporation's salary expense increased $775,000, or 28% for the six month period ended June 30, 2002 versus 2001. The increase includes the addition of several key management positions, new employees and salary increases. Employee benefit's increased $153,000, or 20% during the first six months of 2002 versus 2001. The Corporation's medical plan is self-insured, there were higher medical claims and more employees enrolled in the plan. Legal & professional fees increased 73%, or $117,000. The increase is a result of outside audit and other consulting expense. Other expenses increased 7%, or $80,000 for the six month period ended June 30, 2002 versus 2001. The increase in non-interest expense includes temporary staff and lending expenses associated with the significant increase in mortgage business. As the mortgage activity slows, these expenses will decline.
The provision for income taxes was $451,000, which equates to an effective tax rate of 24% for the six month period ended June 30, 2002 compared to $924,000, effective tax rate of 26% in 2001. The decrease in the effective tax rate for the six month period ended June 30, 2002 is a result of a higher percentage of tax-exempt income to income before federal income taxes. The percentage was 33% for the six month period ended June 30, 3002 versus 19% for the same period in 2001. The corporation utilized a valuation allowance credit of $120,000 for the six month period ended June 30, 2001, which resulted in lowering the effective tax rate from 29% to 26%. The difference between the Corporation's effective tax rate and statutory tax rate is largely due to investment interest income that is exempt from federal taxation. Tax-exempt income, net of nondeductible interest expense totaled $527,000 and $555,000 for six month periods ended June 30, 2002 and 2001, respectively.
The provision for federal income taxes for the second quarter was a credit of $102,000, as a result of a net operating loss before federal income taxes and impact of tax exempt income in the second quarter, off-setting a portion of the tax provision recorded in the first quarter.
The majority of assets and liabilities of financial institutions are monetary in nature. Generally, changes in interest rates have a more significant impact on earnings of the Corporation than inflation. Although influenced by inflation, changes in rates do not necessarily move in either the same magnitude or direction as changes in the price of goods and services. Inflation does impact the growth of total assets, creating a need to increase equity capital at a higher rate to maintain an adequate equity to assets ratio, which in turn reduces the amount of earnings available for cash dividends.
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The capital of the Corporation consists of common stock, additional paid-in capital, retained earnings and accumulated other comprehensive income. For the six month period ended June 30, 2002 total shareholders' equity increased $867,000, which includes a $365,000 increase of accumulated other comprehensive income.
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 at June 30, 2002:
Capital Resources (in thousands)
Regulatory Requirements
Adequately Well
Capitalized Capitalized June 30, 2002 December 31, 2001
----------- ----------- ------------- -----------------
Tier 1 capital...................... $48,236 $47,761
Tier 2 capital...................... 5,321 5,099
------- -------
Total qualifying capital............ $53,557 $52,860
======= =======
Ratio of capital to total assets
Tier 1 leverage ratio............... 4% 5% 9.43% 9.64%
Tier 1 risk-based capital........... 4% 6% 11.52% 11.90%
Total risk-based capital............ 8% 10% 12.79% 13.17%
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As of June 30, 2002
------------------------------------------------------------------------
0-3 4-12 1-5 5+
Months Months Years Years Total
------ ------ ----- ----- -----
Interest earning assets:
Fed Funds Sold....................... $ 1,800 $ - $ - $ - $ 1,800
Loans................................ 159,137 32,510 162,223 42,015 395,885
Securities (including restricted
investments)...................... 45,818 4,624 15,572 13,379 79,393
Loans held for sale.................. 3,512 - - - 3,512
-------- ------- -------- ------- --------
Total interest earning assets........ $210,267 $37,134 $177,795 $55,394 $480,590
======== ======= ======== ======= ========
Interest bearing liabilities:
Savings & NOW........................ $55,199 $ 3,963 $21,136 $40,070 120,368
Time................................. 44,102 72,689 91,569 3,837 212,197
-------- ------- -------- ------- --------
Total interest bearing deposits...... 99,301 76,652 112,705 43,907 332,565
Other borrowings..................... 44,399 3,000 15,200 17,800 80,399
-------- ------- -------- ------- --------
Total interest bearing liabilities.. $143,700 $79,652 $127,905 $61,707 $412,964
======== ======= ======== ======= ========
Rate sensitivity gap and ratios:
Gap for period....................... 66,567 (42,518) 49,890 (6,313)
Cumulative gap....................... 66,567 24,049 73,939 67,626
Period gap ratio..................... 1.46 .47 1.39 .90
Cumulative gap ratio................. 1.46 1.11 1.21 1.16
Gap /Total Earning assets
Period............................... 13.9% (8.8)% 10.4% (1.3)%
Cumulative........................... 13.9% 5.0% 15.4% 14.1%
The asset/liability gap reflects the scheduled repayment and maturities of the Corporation's loans, investments and liabilities. Management has made a number of assumptions to improve the usefulness of the gap analysis and to manage interest rate risk. The assumptions include, but are not limited to, prepayments on loans, repayment speeds on certain investment securities, and the likelihood of certain call and put features on financial instruments being exercised. Also, savings and NOW accounts, which have a variable interest rate, are treated as not immediately sensitive to changes in interest rates, based on the Corporation's historical experience and future intentions.
As of June 30, 2002 the cumulative one-year gap position was asset sensitive, approximately 5.0% of total earning assets. The table above reflects that the Corporation has an asset repricing gap of $67 million at 3 months and an asset repricing gap of $24 million at one year. The Corporation's gap position indicates that within one year, the net interest margin should decrease if interest rates decline and increase if interest rates rise. Management recognizes that GAP analysis alone is not a reliable measure of interest rate risk. Management regularly reviews the asset liability gap position and other available information to manage the overall interest rate risk of the Corporation.
Changes in Market Value of Portfolio Equity and Net Interest Income (dollars in thousands)
Market Value of
Change in Interest Rates Portfolio Percent Net Interest Percent
Equity(1) Change Income(2) Change
------------------- ---------------- ----------------- --------------
300 basis point rise $36,387 (22.6)% $20,069 9.4%
200 basis point rise 40,048 (14.8) 19,522 6.4
100 basis point rise 43,659 (7.1) 18,957 3.4
Base rate 47,011 - 18,341 -
100 basis point decline 50,151 6.7 17,711 (3.4)
200 basis point decline 53,491 13.8 16,532 (9.9)
300 basis point decline 57,356 22.0 14,643 (20.2)
(1) Simulation analyses calculate the change in the net present value of the Corporation's assets and
liabilities, under parallel shifts in interest rates, by discounting the estimated future cash flows.
(2) Simulation analyses calculate the change in net interest income, under parallel shifts in interest rates
over the next 12 months, based on a static balance sheet.
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Simulations models are useful tools, but require numerous assumptions that have a significant impact on the measured interest rate risk. The use of a simulation model is relatively new at the Bank and changes in the assumptions could impact the results. Simulation models require the ability to accurately predict customer reaction to interest rate changes, changes in the competitive environment, and other economic factors.
The Bank does not currently, nor does it have plans to, use derivatives to assist in the management of interest risk.
Liquidity management is a significant responsibility of the Asset and Liability Management Committee (ALCO). 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, brokered certificates of deposit and the issuance of common stock.
Cash and cash equivalents equaled 3.5% of total assets as of June 30, 2002 versus 2.4% as of December 31, 2001. For the six month period ended June 30, 2002, $11.2 million in net cash was provided from operations, investing activities used $17.9 million, and financing activities provided $12.6 million. The accumulated effect of the Corporation's operating, investing and financing activities was a $5.9 million increase in cash and cash equivalents during the six month period ended June 30, 2002. The Corporation's liquidity is considered adequate by management.
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| ITEM 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. |
A derivative financial instrument includes futures, forwards, interest rate swaps, option contracts, and other financial instruments with similar characteristics. The Corporation currently does not enter into futures, forwards, swaps, or options. However, the Corporation is party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit and standby letters of credit. These instruments involve to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the consolidated balance sheets. Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates and may require collateral from the borrower if deemed necessary by the Corporation. Standby letters of credit are conditional commitments issued by the Corporation to guarantee the performance of a customer to a third party up to a stipulated amount and with specified terms and conditions.
Commitments to extend credit and standby letters of credit are not recorded as an asset or liability by the Corporation until the instrument is exercised.
The Corporation's exposure to market risk is reviewed on a regular basis by the Asset/Liability Committee. Interest rate risk is the potential of economic losses due to future interest rate changes. These economic losses can be reflected as a loss of future net interest income and/or a loss of current fair market values. The objective is to measure the effect on net interest income and to adjust the balance sheet to manage the inherent risk while at the same time maximize income. Management realizes certain risks are inherent and that the goal is to identify and minimize the risks. Tools used by management include the standard GAP report and a simulation model. The Corporation has no market risk sensitive instruments held for trading purposes.
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PART II - OTHER INFORMATION
| Item 1. | Legal Proceedings. - None |
| Item 2. | Changes in Securities and Use of Proceeds. - None |
| Item 3. | Defaults Upon Senior Securities. - None |
| Item 4. | Submission of Matters to a Vote of Securities Holders. |
| The annual meeting of shareholders of the Corporation was held on April 18, 2002. The shareholders of
the Corporation voted on the following matters at the meeting.: |
|||||
|
Director Nominee: John A. Van Singel |
For: 1,622,245 |
Withhold 39,013 |
| Item 5. | Other Information. - None |
| Item 6. | Exhibits and Reports on 8-K. |
| (a) | Exhibits |
||
| 99.1 | Certificate of the Interim Chief Executive Officer and the Chief Financial
Officer of O.A.K. Financial Corporation pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
||
| (b) | Reports on 8-K |
||
| The
Corporation filed a Current Report on Form 8-K dated June 27, 2002, disclosing
in Item 9 an increase in the loan loss provision, the search for a new CEO for
the Corporation’s bank subsidiary and the appointment of a chief operating
officer. |
|||
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Quarterly Report on Form 10-Q for the quarter ended June 30, 2002 to be signed on its behalf by the undersigned thereunto duly authorized.
|
O.A.K. FINANCIAL CORPORATION /s/ James A. Luyk James A. Luyk (Acting Chief Executive Officer) /s/ James A. Luyk James A. Luyk (Chief Financial Officer) |
DATE: 8/14/02
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EXHIBIT INDEX
| Exhibit | Description |
| 99.1 | Certificate of the Acting Chief Executive Officer and the Chief Financial Officer of O.A.K. Financial Corporation pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
-22-
I, James A. Luyk, Acting Chief Executive Officer and the Chief Financial Officer of O.A.K. Financial Corporation certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) the Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2002 which this statement accompanies fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, and
(2) the information contained in the Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2002 fairly presents, in all material respects, the financial condition and results of operations of O.A.K. Financial Corporation.
Dated: August 14, 2002
|
/s/ James A. Luyk James A. Luyk Acting Chief Executive Officer and Chief Financial Officer |
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