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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

_________________

FORM 10-Q

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2005

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 000-22461

O.A.K. FINANCIAL CORPORATION
(Exact name of registrant as specified in its charter)

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 ____.

Indicate  by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2). Yes __X__ No ____.

The number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 2,034,691 shares of the Corporation’s Common Stock ($1 par value) were outstanding as of May 9, 2005.

INDEX

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OAK FINANCIAL CORPORATION AND SUBSIDIARY

CONSOLIDATED BALANCE SHEETS

     (Dollars in thousands, except per share data)

        The accompanying notes are an integral part of these consolidated financial statements.

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OAK FINANCIAL CORPORATION AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF INCOME

     (Dollars in thousands, except per share data)

        The accompanying notes are an integral part of these consolidated financial statements.

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OAK FINANCIAL CORPORATION AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

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OAK FINANCIAL CORPORATION AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS

The accompanying notes are an integral part of these consolidated financial statements.

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OAK FINANCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

Note 1 – Financial Statements

        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 of Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation have been included. Operating results for the year-to-date and three-month periods ended March 31, 2005 are not necessarily indicative of the results that may be expected for the year ending December 31, 2005. 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, 2004.

Note 2 – Calculation of Earnings per Share (in thousands)

        All earnings per share amounts have been presented to conform to the requirements of Statement of Financial Accounting Standard (SFAS) No. 128, Earnings Per Share. 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 stock options. The following table summarizes the number of shares used in the denominator of the basic and diluted earnings per share computations:

Note 3 – Segment Reporting

        The Corporation provides a broad range of financial products and services through its branch network in West Michigan. While the Corporation’s chief decision makers monitor the revenue streams of various products and services, operations are managed and financial performance is evaluated on a corporate wide basis. Accordingly, all of the Corporation’s operations are aggregated in one reportable operating segment.

Note 4 – Special Purpose Entities

        OAK ELC is an employee leasing company that leases employees to Byron Bank, Byron Investment Services and Byron Insurance Agency. The purpose of OAK ELC is to reduce the administrative burden of multiple payrolls, minimize the payroll tax reporting burden, and allocate shared employment costs between business units. The financial results of OAK ELC and elimination of inter-company transactions are included in the consolidated results of the Corporation.

Note 5 – Allowance for Loan Losses

        The allowance for loan losses is established as losses are estimated to have occurred through a provision for loan losses charged to earnings.  Loan losses are charged against the allowance when management believes the loan balance is uncollectible. Subsequent recoveries, if any, are credited to the allowance.

        The allowance for loan losses is evaluated quarterly by management and is based upon a 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 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.

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        A loan is considered impaired when, based on current information and events, it is probable that the Corporation 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 an individual 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.

Note 6 – Interest Rate Risk

        The primary components of the balance sheet are interest-earning assets, which are funded by interest-bearing liabilities. The differences in cash flows of these rate sensitive assets and liabilities, combined with shifts, or changes in the overall market yield curve result in interest rate risk. Interest rate risk is the change in net interest income due to interest rate changes. Interest rate risk is inherent to banking and cannot be eliminated.

        The Asset and Liability Management Committee (ALCO) is responsible for overseeing the financial management of net interest income, liquidity, investment transactions, and other related activities. To address interest rate risk, management utilizes simulation analysis to assess risk in dynamic interest rate environments.

Note 7 – Stock Compensation and Stock Option Plans (dollars in thousands, except per share data)

        The Corporation maintains stock option plans for non-employee directors (the Directors’ Plan) and employees and officers of the Corporation and its subsidiary (the Employees’ Plan). The stock compensation plans were established in 1999, and authorize the issue of up to 165,000 options under the Employees’ Plan and up to 35,000 options under the Directors’ Plan.

        Options under both plans become exercisable after the first anniversary of the award date. The option exercise price is at least 100% of the market value of the common stock at the grant date. No options were awarded during the first quarter of 2005. During the first quarter of 2004, 1,000 options were awarded at an exercise price of $45.00. The following tables summarize information about stock option transactions:

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        All options expire 10 years after the date of the grant; 145,992 shares are reserved for future issuance under the Employees’ Plan and 25,000 shares are reserved for future issuance under the Directors’ Plan.

        SFAS No. 123, as amended by SFAS No. 148, Accounting for Stock-Based Compensation, encourages all entities to adopt a fair value based method of accounting for stock compensation plans, whereby compensation cost is measured at the grant date based on the value of the award and is recognized over the service period, which is usually the vesting period.

        Had compensation costs for the Corporation’s stock option plans been determined based on fair value at the grant dates for awards under the plans consistent with the method prescribed by FASB 123, the Corporation’s net income and earnings per share would have been adjusted to the pro forma amounts indicated below:

FORWARD LOOKING STATEMENTS

        This report includes "forward-looking statements" as that term is used in the securities laws. All statements regarding our expected financial position, business and strategies are forward-looking statements. In addition, the words "anticipates," "believes," "estimates," "seeks," "expects," "plans," "intends," and similar expressions, as they relate to us or our management, are intended to identify forward-looking statements. The presentation and discussion of the provision and allowance for loan losses, valuation of mortgage service rights and statements concerning future profitability or future growth or increases, are examples of inherently forward looking statements in that they involve judgments and statements of belief as to the outcome of future events. Our 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 our operations and our future prospects 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 our 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 us and our business, including additional factors that could materially affect our financial results, has been included within our filings with the Securities and Exchange Commission.

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ITEM 2.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

        OAK Financial Corporation (the "Corporation") is a single bank holding company, which owns OAK ELC (which is discussed above under Special Purpose Entities), and Byron Bank (the "Bank"). The Bank has twelve banking offices serving communities in Kent, Ottawa and Allegan Counties. The Bank owns a subsidiary, Byron Investment Services. Byron Investment Services offers mutual fund products, securities brokerage services, retirement planning services, investment management and advisory services. Byron Investment Services owns Byron Insurance Agency, which sells property, casualty, life, disability and long-term health care insurance products. Byron Insurance Agency owns OAK Title Agency, which provides title insurance for residential and commercial mortgages.

        On February 17, 2005 the Bank changed its name from Byron Center State Bank to Byron Bank. Along with the new name, a new logo and new colors were introduced. The name change reflects the Bank's heritage of over 80 years in the banking business and offers a dynamic new look for the future. The name of the Bank's subsidiaries, OAK Financial Services and Dornbush Insurance Agency were also changed to Byron Investment Services and Byron Insurance Agency, respectively.

        The following is management's discussion and analysis of the factors that influenced OAK Financial Corporation's financial performance. The discussion should be read in conjunction with the Corporation's 2004 annual report on Form 10-K and the audited financial statements and notes contained therein.

Critical Accounting Policies

        The Corporation's consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States and follow general practices within the banking and other industries in which it operates. Certain of the Corporation's accounting policies are important to the portrayal of the Corporation's financial condition, since they require management to make difficult, complex or subjective judgments, some of which may relate to matters that are inherently uncertain. Estimates associated with these policies are susceptible to material changes as a result of changes in facts and circumstances. Facts and circumstances, which could affect these judgments, include, but without limitation, changes in: interest rates, local and national economic conditions, or the financial condition of borrowers. The Corporation's accounting policies are discussed in detail in Note 1 of the Notes to Consolidated Financial Statements on pages 37 through 40 in the Corporation's Report on Form 10-K for the year ended December 31, 2004 ("10-K Report"). Management believes that its most significant accounting policies include determining the allowance for loan losses, assessing the risk of individual loans and the risk of the overall commercial loan portfolio and the valuation of mortgage servicing rights. These are discussed on page 10 of the 10-K Report.

FINANCIAL CONDITION

Summary

        Total assets increased to $558 million as of March 31, 2005. This was an increase of $18 million, or an annualized rate of 13 percent, from December 31, 2004 to March 31, 2005. This total marks a new record high for total assets for OAK Financial Corporation. The majority of the change was the result of an increase in total loans of $16 million.

        Correspondingly, total liabilities increased $18 million, or 4 percent during the three months ended March 31, 2005. The significant changes were an increase in total deposits of $40 million and a decrease in securities sold under agreements to repurchase of $23 million. A significant portion of both the increase in deposits and the decrease in securities sold under agreements to repurchase was the result of the Bank working with many of their customers to transfer funds from the repurchase product to more traditional banking deposits.

Securities (dollars in thousands)

        The Corporation maintains a diversified securities portfolio, which includes obligations of government sponsored entities, securities issued by states and political subdivisions, corporate securities, and mortgage-backed securities. The Corporation's investment securities portfolio serves as a source of earnings and contributes to the management of interest rate risk and liquidity risk.

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        All of the Corporation's securities are classified as available-for-sale. The Corporation's total holdings remained flat from December 31, 2004 to March 31, 2005. During the first quarter of 2005 the Corporation purchased $6 million in securities, which was offset by $5 million in maturities and a $1 million decline in the unrealized gain. Fluctuations in the investment portfolio are considered normal and intended to manage the Bank's interest rate risk and short-term liquidity needs. The majority of the securities purchased in the first quarter are obligations of government sponsored entities and securities issued by state and political subdivisions with maturities or call features of less than 10 years. The modified duration of the portfolio in years at March 31, 2005 was 2.67, compared to 2.66 at December 31, 2004. Also, see Asset/Liability Gap Position. The following table summarizes the securities available-for-sale held by the Corporation:

        A large percentage of the securities are pledged to secure funds borrowed from the Federal Home Loan Bank of Indianapolis, securities sold under agreements to repurchase and other purposes as required or permitted by law. The Bank generally pledges more securities than required to assure that adequate collateral is available to meet the Bank’s pledging requirements, which change on a daily basis as a result of customer activity in the repurchase product. The recent decline in the securities sold under agreements to repurchase has allowed the Corporation to reduce the amount of securities that are pledged.

Loans

        The Bank’s lending policy is intended 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 has appointed a Chief Lending Officer who is responsible for the supervision of the lending activities of the Bank. The Bank uses the services of an independent third party to periodically review the credit quality of the loan portfolio, separate from the loan approval process. These reviews are then submitted to the Risk Management Officer and to the Audit Committee. Requests to the Bank for credit are considered on the basis of creditworthiness of each applicant, without consideration of race, color, religion, national origin, sex, marital status, physical handicap, age, or the receipt of income from public assistance programs. Consideration is given to the applicant’s capacity for repayment based on cash flow, collateral, capital and alternative sources of repayment. Loan applications are accepted at all the Bank’s offices and are approved within the limits of each lending officer’s authority. Loan requests in excess of specific lending officers’ authority, are required to be presented to the Board of Directors or the Director Loan Committee for review and approval.

        Principal lending markets include nearby communities and metropolitan areas of the Bank’s twelve branches. Subject to established underwriting criteria, the Bank participates with other financial institutions to fund certain large commercial loans, which would exceed the Bank’s legal lending limit if made solely by the Bank.

Loan Portfolio Composition (dollars in thousands)

        The Bank has no international loans and there were no concentrations greater than 10% of total loans that are not disclosed as a separate category. The Bank’s largest concentration of loans is to businesses in the form of commercial loans and real estate mortgages. Management reviews the concentration, and changes in concentrations of loans, using the Standard Industrial Classification (S.I.C.) code.

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        During the first three months of 2005, commercial real estate loans increased $11 million, or 5.1 percent, residential real estate loans increased $547,000, or less than 1 percent, and commercial loans increased $6 million, or 8.0 percent. The significant increase in commercial and commercial real estate loans is reflective of the Bank’s strategic plan to focus on the growth of its business loan portfolio. Total consumer loans continue to decline as a result of the Bank’s intentional exit from the consumer indirect business. Consumer loans declined $2 million, or 7.9 percent, during the three month period ended March 31, 2005. Expansion of the overall loan portfolio during the first three months of 2005 has been at a 15.6 percent annualized rate.

        The Bank’s current practice is to sell residential real estate loans with maturities over 15 years to secondary market buyers. During the first three months of 2005, the Bank sold loans totaling $500,000 with servicing rights retained and $9.2 million with the servicing rights released. At March 31, 2005 and December 31, 2004, the Bank was servicing loans for secondary market entities totaling approximately $231 million and $240 million, respectively. Mortgage servicing rights, net of reserve of impairment, were valued at approximately $2.4 million at March 31, 2005 and $2.5 million at December 31, 2004.

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Non-performing Assets (dollars in thousands)

        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, collateral for loans and other real estate, which has been acquired primarily through foreclosure and is awaiting disposition. Loans, including loans considered to be impaired under SFAS No. 118, Accounting by Creditors for Impairment of Loan-Income Recognition and Disclosures, are generally placed on a non-accrual 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.

        Total non-performing loans increased $931,000 from December 31, 2004 to March 31, 2005. This increase was due primarily to the addition of one large commercial loan. The Bank’s management has an aggressive approach to credit management and expects that a significant portion of the customers with loans in non-accrual status will secure alternative financing and repay their loans to the Bank. In some instances, non-performing assets are sold to a new borrower of the Bank. There were no properties categorized as other real estate at March 31, 2005.

Allowance for Loan Losses (dollars in thousands)

        The allowance for loan losses represents the Corporation’s estimate of probable credit losses related to specifically identified loans as well as probable credit losses inherent in the remainder of the loan portfolio as of the balance sheet date. The allowance for loan losses is maintained at a level believed to be adequate through additions to the provision for loan losses.

        Inherent risks and uncertainties related to the operation of a financial institution require management to rely on estimates, appraisals and evaluations of loans to prepare the Corporation’s financial statements. Changes in economic conditions and the financial prospects of borrowers may result in abrupt changes to the estimates, appraisals or evaluations used. In addition, if actual circumstances and losses differ substantially from management’s assumptions and estimates, the allowance for loan losses may not be sufficient to absorb all future losses, and net income could be significantly impacted.

        Impaired loans were $12 million at both March 31, 2005 and December 31, 2004. The allowance for loan losses attributable to impaired loans was $1.5 million and $1.8 million as of March 31, 2005 and December 31, 2004, respectively.

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Allocation of the Allowance for Loan Losses (dollars in thousands)

        The allowance for loan losses is analyzed quarterly by management. In determining the adequacy of the allowance for loan losses, management determines (i) a specific allocation for loans when a loss is probable, (ii) an allocation based on credit risk rating for other adversely rated loans, (iii) an allocation based on historical losses for various categories of loans, and (iv) subjective factors including local and general economic factors and trends.

        Actual losses experienced in the future, could vary significantly from the estimated allocation of the loan loss reserve. Changes in local and national economic factors could significantly affect the adequacy of the allowance for loan losses. While amounts are allocated to various portfolios as directed by Statement of Financial Accounting Standards No. 118, the entire allowance for loan losses is available to absorb losses from any portfolio segment.

Deposits and borrowed funds (dollars in thousands)

The following table sets forth the deposit balances and the portfolio mix:

        Total deposits increased $40 million, or 10 percent, from December 31, 2004 to March 31, 2005. A large reason for the increase was due to the Bank working with many of their customers to transfer funds from the Bank’s repurchase product to more traditional deposit products. This was part of the Bank’s liquidity management, which will allow the Bank to reduce the number of securities that are pledged against repurchase agreements. The largest increase occurred in time deposits greater than $100,000, which increased $34 million or 41%. This is partially due to the recent increases in the interest rates paid on time deposits. The increase in time deposits over $100,000 is also attributed to an increase in brokered time deposits that were purchased to fund the increase in loans.

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        Alternative funding sources such as federal funds, brokered time certificates and FHLB advances supplement the Bank’s core deposits and are an integral component of the Bank’s asset/liability management effort. Brokered deposits increased $16 million or 32 percent from December 31, 2004 to March 31, 2005. FHLB advances remained flat at $23 million from December 31, 2004 to March 31, 2005. The Bank’s ability to borrow additional funds is contingent upon, but not limited to, the availability of funds in the market and the Bank’s financial condition at the time of each request, as well as its compliance with all applicable collateral requirements, regulations, laws, and Bank policies.

Contractual Obligations, Commitments, Contingent Liabilities, and Off-Balance Sheet Arrangements

        The Corporation has various financial obligations, including contractual obligations and commitments that may require future cash payments. Management believes that there have been no material changes in the Corporation’s overall level of these financial obligations since December 31, 2004 and that any changes in the Corporation’s obligations, which have occurred, are routine for the industry. Further discussion of the nature of each type of obligation is included in Managements Discussion and Analysis on page 27 of the Corporation’s Form 10K Annual Report, and is incorporated herein by reference.

RESULTS OF OPERATIONS

Summary

        Net income was $1,238,000 for the three months ended March 31, 2005, compared to $812,000 for the same period in 2004. This is a 52 percent increase. The increase is primarily attributable to an increase in net interest income. Net interest income increased $928,000, or 24 percent, for the first quarter of 2005, compared to the same period in 2004. The increase in net interest income is the result of a $40 million increase in average earning assets, from the first quarter of 2004 to the first quarter of 2005, combined with 175 basis point increase in the prime lending rate from March 31, 2004 to March 31, 2005. The provision for loan losses charged to earnings increased from zero to $120,000, when comparing the first quarter of 2004 to the first quarter of 2005. This was mainly attributable to the recent loan growth that the Bank has experienced. Non-interest income declined $87,000 or 6 percent for the three-month period ended March 31, 2005, compared to the same period in 2004. The decline in non-interest income was primarily the result of a $122,000, or 38 percent, compared to last year, decline in mortgage banking revenue due to decreased mortgage refinance activity. Non-interest expenses increased $88,000, or 2 percent, for the first quarter of 2005, compared to 2004. The increase was the result of a credit of over $300,000 to expense that occurred in the first quarter of 2004, due to the amendment of the directors deferred compensation plan. This was partially offset by a 13 percent reduction in salaries and employee benefits expense.

Earnings Performance (dollars in thousands, except per share data)

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Net Interest Income (dollars in thousands)

        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 by the Corporation for the periods indicated:

        Net interest income is the principal source of income for the Corporation. Net interest income is the difference between the interest earned on loans and investments and the interest paid on deposits and borrowed funds. The tax equivalent net interest income increased $1.1 million for the three-month period ended March 31, 2005, compared to the same period in 2004. Tax equivalent net interest income, as a percentage of average earning assets, was 3.84% for the first quarter of 2005 compared to 3.62% for the fourth quarter of 2004 and 3.32% for the first quarter of 2004. The increase is mainly due to the increase in tax equivalent interest income, which has been aided by the increase in the Bank's average earning assets as well as the recent increases in short-term interest rates.

Provision for loan losses

        The provision for loan losses charged to earnings was $120,000 for the three-month period ended March 31, 2005, compared to no charge to earnings for the same period in 2004. The increase in the provision was the result of the recent growth in the Bank’s loan portfolios. Based upon Management’s assessment, the allowance for loan losses is adequate.

Non-interest Income

        Non-interest income consists of service charges on deposit accounts, insurance fees, brokerage fees, gains or losses on the sales of investments, gains from the sales of mortgage loans and servicing fees on the loans sold with the servicing rights retained. The majority of the mortgage loans the Bank originates are sold to secondary market buyers.

        Service charge income on deposit accounts increased by $35,000, or 7 percent for the three months ended March 31, 2005, when compared to the same time period of 2004. The rise in service fee income is mostly attributable to increases in ATM and other electronic service fees due to increases in volume. Mortgage banking income declined $122,000, or 38% for the first quarter of 2005, compared to 2004. The decline in mortgage banking revenue is due to a decline in mortgage refinancing activity. Net gain on sales of available for sale securities declined $5,000 as no securities were sold during the first quarter of 2005. The Corporation will buy and sell investment securities as part of its asset and liability management when necessary to match the investment goals and strategies of the Corporation. Income from insurance premiums and brokerage fees increased $4,000, or 1 percent for the three months ended March 31, 2005, compared to the same period in 2004. This increase includes a $90,000 increase in the annual profit-sharing income from the insurance underwriters, which is based on the loss rate of the Byron Insurance Agency policyholders. Other non-interest income remained flat for the first quarter of 2005 when compared to the first quarter of 2004.

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Non-interest Expense

        Non-interest expense increased $88,000, or 2 percent, for the three months ended March 31, 2005, compared to the same period in 2004. During 2004, the organization performed a comprehensive review of operating expenses and it was determined that the Corporation’s staff levels required adjustment. As a result of the changes that came out of this review, as well as a decline in mortgage commission expense, due to lower mortgage production, total salaries and benefits expense declined $356,000, or 13 percent, for the first quarter of 2005, compared to 2004. Occupancy and equipment cost increased by $17,000, or 3 percent, for the three months ended March 31, 2005, compared to the same period in 2004. Other non-interest expense increased $427,000 for the first quarter of 2005, compared to the first quarter of 2004. This is mainly the result of a one-time reduction of $336,000 to directors deferred compensation expense that occurred in 2004, due to an amendment to the existing plan. Advertising and marketing expenses increased $36,000 for the three months ended March 31, 2005, compared to the prior year. This is primarily due to the promotion of the Bank’s new name. Also included in the increase of other non-interest expense was an increase in professional and legal fees of $63,000. This increase resulted in part from additional expenses due to the name change of the Bank as well as increased expenses associated with compliance with the Sarbanes Oxley Act of 2002.

Provision for Federal Income Tax

        The provision for income taxes was $489,000, which equates to an effective tax rate of 28% for the three-month period ended March 31, 2005, compared to $282,000, which equates to an effective tax rate of 26%, for the same period in 2004.

        The difference between the Corporation’s effective tax rate and statutory tax rate is largely due to the percentage of total income that is derived from investment interest income that is exempt from federal taxation. The Corporation does not expect significant fluctuations in the effective tax rate throughout the year.

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Impact of Inflation

        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.

LIQUIDITY AND CAPITAL RESOURCES

Capital

        The capital of the Corporation consists of common stock, additional paid-in capital, retained earnings and accumulated other comprehensive income. Total stockholders’ equity increased $144,000, from December 31, 2004, to March 31, 2005; this represents a change of less than 1 percent. The change in securities valuation caused a $728,000 decrease in accumulated other comprehensive income, from December 31, 2004 to March 31, 2005.

        A quarterly dividend of $0.15 per share was paid to the shareholders during the first quarter of 2005. On March 21, 2005 the Corporation announced an increase in the quarterly dividend from $0.15 per share to $0.18 per share. The dividend is payable April 29, 2005, to shareholders of record on April 8, 2005. On April 21, 2005 the Corporation also announced a 10 percent stock dividend to be paid May 31, 2005, to shareholders of record on May 16, 2005.

        Management regularly reviews the capital level of the Bank and the Corporation. Management believes that the current level of capital is adequate for current and projected needs at both the Bank and Corporation.

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Capital Resources (dollars in thousands)

        Under the regulatory “risk-based” capital guidelines in effect for both banks and bank holding companies, minimum capital levels are based upon perceived risk in the Corporation’s various asset categories. These guidelines assign risk weights to on-balance sheet and off-balance sheet categories in arriving at total risk-adjusted assets. Regulatory capital is divided by the computed total of risk adjusted assets to arrive at the minimum levels prescribed by the Federal Reserve Board at March 31, 2005 as shown in the table below:

Liquidity

        Liquidity is measured by the Corporation’s ability to raise funds through deposits, borrowed funds, infusion of capital, or cash flow from the repayment of loans and investment securities. These funds are used to meet deposit withdrawals, maintain reserve requirements, fund loans and operate our Corporation. Liquidity is primarily achieved through the growth of deposits and liquid assets such as securities available for sale, matured securities, and federal funds sold. Asset and liability management, which is a significant responsibility of the Asset and Liability Management Committee (ALCO), is the process of managing the balance sheet to achieve a mix of earning assets and liabilities that maximizes profitability, while providing adequate liquidity.

        The Corporation’s liquidity strategy is to fund loan growth with deposits, and borrowed funds as needed. During the three month period ended March 31, 2005, total portfolio loans increased $16 million, with the increase funded primarily through the use of brokered deposits. Brokered deposits increased $16 million from December 31, 2004 to March 31, 2005. Management expects to be in a federal funds purchased position throughout 2005 and has established a target level for federal funds purchased of $10 million. At March 31, 2005, the Bank had federal funds purchased totaling $9 million and had available and unused federal funds lines of credit totaling $41 million from various correspondent banks.

        Management anticipates that loan growth, during 2005, will exceed the Bank's ability to grow deposits and will likely utilize brokered certificates of deposit and FHLB advances to provide funding for loan growth.

        Cash and cash equivalents remained relatively flat from December 31, 2004 to March 31, 2005. The current level of cash and cash equivalents is deemed to be near optimal, and as a result, is not expected to change significantly from the this level.

        Operating activities provided net cash of $1,093,000 during the first quarter of 2005, compared to $167,000 in the first quarter of 2004. A large reason for the increase was the 52% increase in net income. Investing activities used net cash of $17,458,000 for the first three months of 2005, compared to $7,515,000 for the same period in 2004. This increase was mainly the result of an $11,630,000 increase in the net cash used for loans held for investment, when compared to last year. Financing activities during the first quarters of 2005 and 2004, provided net cash of $16,774,000 and $2,882,000, respectively. This increase was the result of a $39,551,000 increase in deposits in the first quarter of 2005, compared to a $2,647,000 decrease in deposits in the first quarter of 2004. This was partially offset by a $22,578,000 decrease in securities sold under agreements to repurchase in the first quarter of 2005 compared to a $5,789,000 increase in the first quarter of 2004.

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

        Market risk is the potential for losses in the fair value of the Corporation’s assets and liabilities due to changes in interest rates, exchange rates and securities pricing. The Corporation’s exposure to market risk is reviewed on a regular basis by the ALCO. Interest rate risk represents the Corporations primary component of market risk. 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. Tools used by management to manage these risks include an interest modeling and simulation model. 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 maximizing income. Management realizes certain risks are inherent and that the goal is to identify and minimize these risks.

Simulation Model

        Simulations models require numerous assumptions that have a significant impact on the measured interest rate risk. Simulation models attempt to predict customer reaction to interest rate changes, changes in the competitive environment, and other economic factors. In running our Interest Rate Scenario Analysis (“IRSA”) simulation model, we first forecast the next twelve months of net interest income under an assumed environment of constant market interest rates. Next, immediate and parallel interest rate shocks are constructed in the model. These rate shocks reflect changes of equal magnitude to all market interest rates. The next twelve months of net interest income are then forecast under each of the rate shock scenarios. The resulting change in net interest income is an indication of the sensitivity of our earnings to directional changes in market interest rates. The IRSA model is based solely on parallel changes in market rates and does not reflect the levels of interest rate risk that may arise from other factors such as changes in the spreads between key market rates or in the shape of the Treasury yield curve. The net interest income sensitivity is monitored by the ALCO, which evaluates the results in conjunction with acceptable interest rate risk parameters. The simulation also measures the change in the Economic Value of Equity. This represents the change in the net present value of the Corporation’s assets and liabilities under the same parallel shifts in interest rates, as calculated by discounting the estimated future cash flows using a market-based discount rate. Cash flow estimates incorporate anticipated changes in prepayment speeds of loans and securities. The following table shows the suggested impact on net interest income over the next twelve months, and the Economic Value of Equity based on the Corporation’s balance sheet as of March 31, 2005.

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         Changes in Market Value of Portfolio Equity and Net Interest Income (dollars in thousands)

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ITEM 4. CONTROLS AND PROCEDURES

PART II — OTHER INFORMATION

(a) Exhibits

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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 March 31, 2005, to be signed on its behalf by the undersigned thereunto duly authorized.

Date: May 9, 2005

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EXHIBIT INDEX

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Exhibit 31.1

I, Patrick K. Gill, certify that:

Dated: May 9, 2005

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Exhibit 31.2

I, James A. Luyk, certify that:

Dated: May 9, 2005

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Exhibit 32.1

I, Patrick K. Gill, Chief Executive Officer of OAK 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 March 31, 2005 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 March 31, 2005 fairly presents, in all material respects, the financial condition and results of operations of OAK Financial Corporation.

Dated: May 9, 2005

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Exhibit 32.2

I, James A. Luyk, Chief Financial Officer of OAK 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 March 31, 2005 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 March 31, 2005 fairly presents, in all material respects, the financial condition and results of operations of OAK Financial Corporation.

Dated: May 9, 2005

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