December 2008

Dear Friends,

As we near the end of 2008 and reflect on the dramatic events of this past year, we are thankful for all that we have accomplished.  Despite the challenges facing our economy and our industry, Oak Bank continues to grow and prosper.  In these uncertain times, we feel that it is important to keep you apprised of what is happening at Oak Bank because we believe that one of our greatest assets is your continued trust and confidence in our organization.

With less than one month to go, we remain on track to have a record year.  We have achieved solid loan and deposit growth and record earnings.  Most importantly, we have maintained excellent credit quality.  This continues to be our single most important objective.  

As you are probably aware, the Federal Reserve, the FDIC and the U.S. Treasury Department have introduced a number of new programs in recent months in an effort to stabilize the financial services industry and restore confidence to financial markets.  We will briefly describe a few of these key programs and summarize our position regarding each one.

As part of the Emergency Economic Stabilization Act of 2008, the FDIC temporarily increased the basic limit on federal deposit insurance to $250,000 from $100,000.  This temporary increase in FDIC insurance coverage, which is effective through December 31, 2009, is automatically available at all FDIC insured financial institutions including Oak Bank. 

The FDIC also implemented the Transaction Account Guaranty Program (TAGP). This program provides unlimited FDIC insurance coverage on balances maintained in non-interest bearing transaction accounts as well as certain NOW accounts that pay an interest rate no higher than .50%.  This unlimited federal insurance coverage is only available to clients of FDIC insured financial institutions that elect to participate in this voluntary program.  The FDIC insurance coverage on accounts covered by TAGP is in addition to and separate from the coverage provided under the FDIC's general deposit insurance guidelines.  TAGP is a temporary program which expires on December 31, 2009.  Oak Bank has elected to participate in this program as a benefit to our deposit clients.

The Treasury Department's Capital Purchase Program (CPP) enables eligible financial institutions, on a voluntary basis, to raise additional capital by selling preferred stock to the U.S. Treasury Department.  After carefully analyzing the CPP, Oak Bank has elected not to participate in this program.  Our primary reasons for opting out of this program are summarized below. 

First and foremost, we do not need additional capital at this time.  We presently have a strong capital position and we believe that our earnings will support our future growth.  Raising additional capital at this time would dilute per share earnings for our existing shareholders.

Second, we found many of the conditions and restrictions imposed upon participants in the CPP to be undesirable for privately held community banks.  For example, banks accepting money under the CPP are generally prohibited from buying back their own stock.  Since shares of Oak Financial, Inc., the parent company of Oak Bank, are not listed securities, we believe that it is imperative for us to continue to make a market for our stock by purchasing shares offered for sale by existing shareholders.

Third, we ultimately came to the conclusion that, in the long-term, having the U.S. Treasury Department as a partner may not be in the best interest of our organization or our shareholders. 

In summary, Oak Bank is a strong, profitable and growing community bank. Our solid performance reinforces our belief that if we treat people fairly, provide exemplary service at a fair price and give back to our community, success will surely follow.   

If you have any questions or concerns that you would like to share with us, please give us a call.  We wish you and your loved ones a very safe and joyous holiday season.  Thank you for your continued support of and relationship with Oak Bank.

Sincerely,

Robert Gorsuch 
Chairman of the Board and CEO

Terry Taylor
President and COO                                                     

                                                OAK BANK IS SAFE AND SOUND

October 6, 2008

We are extremely frustrated by the national media's continued misrepresentation of the troubles engulfing Wall Street as a "national banking crisis."  In stark contrast to the problems that exist on Wall Street, our nation's community banks remain healthy and strong with capital levels near all time highs.  According to the American Bankers Association, 98% of all banks in this country meet the regulatory definition of well capitalized and Oak Bank is no exception. 

The disruption taking place in our nation's' financial system is largely confined to Wall Street investment banks and large thrifts that made huge investments in subprime mortgage related assets and real estate development loans.  These firms are struggling to raise fresh capital to support credit losses and write-downs in the value of these assets. 

As a deposit client, we believe that it is important for you to know that Oak Bank, which is FDIC insured, is on very solid footings.  We are proud of our performance and we'd like to share a few of our highlights with you so that you can rest assured knowing that your deposits are safe and sound. 

Oak Bank has never originated a subprime mortgage loan.  We only originate conventional, prime real estate loans to honest, hardworking people like you and we diligently underwrite each loan request.  As a result, our credit quality remains exceptionally strong.  We service approximately 1,030 mortgage loans and we have no delinquencies in our mortgage loan portfolio.  In eight years of doing business, we have never incurred a loss on a mortgage loan. 

Our commercial loan portfolio is also performing extremely well.  Our participation in real estate development lending has been minimal.  We recognize that this type of lending is inherently risky and we extend this type of credit only to very strong, local developers who are experienced and maintain meaningful deposit relationships with us.  We have only a few nonperforming loans (loans that are 90 days past due and no longer accruing interest.)  In aggregate, the amount of these nonperforming loans (approximately $250,000) is insignificant in relation to the size of our total loan portfolio (approximately $164 million) and to the size of our reserve for loan losses (approximately $2.0 million.)

At just over $17 million, our capital position remains very strong and provides an additional "cushion" if needed to support unforeseen future loan losses.  We continue to meet the regulatory definition of a well capitalized and financially sound bank. 

Through the first eight months of 2008, our net operating revenue and after-tax earnings are up roughly 16% and 31%, respectively, over the same period last year.  Our year-to-date return on equity of nearly 12% places us near the top quartile for banks of similar size throughout the country. 

In summary, our credit quality, our capital position and our earnings are all very strong and we remain on track to have a record year.  Our solid performance reinforces our belief that if we treat people fairly, provide exemplary service at a fair price and give back to our community, success will follow. 

If you have any questions or concerns that you'd like to share with us, please give us a call.  Thank you for your continued support of, and relationship with, Oak Bank.

A letter from Robert Gorsuch, Chairman of the Board and CEO, and Terry Taylor, President and COO.

July 21, 2008

HEADLINES CAN BE VERY MISLEADING!

Pick up a paper or listen to the quick bursts of news on the television or radio these days, and what you get are reports of a "banking crisis."  Well, we'd like an opportunity to set the record straight. 

The community banking industry is safe and sound.  The credit problems that are receiving so much media attention today are largely confined to unregulated mortgage brokers and a few large Wall Street institutions that invested hundreds of billions of dollars in subprime and other exotic mortgage loans.  These non-traditional mortgage loans were made to individuals with poor credit histories and the inability to pay the obligations that they had incurred.

Oak Bank (like thousands of other regulated, FDIC insured community banks across the country) does not originate or invest in subprime mortgage loans.  We originate and service conventional mortgage loans to honest, hard working individuals like you.  What's more, we fully underwrite our loans to ensure that our clients have the income needed to pay all obligations.  This is a basic element of loan underwriting that has been practiced by community bankers since the banking industry's inception.  Mortgage brokers, in concert with Wall Street investment banks, have not followed these basic lending principles and are now paying the price. 

As depositors of Oak Bank, we believe that it is important for you to know that Oak Bank is a regulated, FDIC insured bank that is on very solid footings.  We are proud of our performance and we'd like to share a few of our highlights with you so that you can rest assured that your deposits at Oak Bank are safe and sound. 

First and foremost, Oak Bank's loan quality is very strong.  Presently, we service over 1,000 mortgage loans and over 500 home equity loans.  We are pleased to report that we do not have any delinquent loans in our mortgage portfolio.  Not one single delinquent loan.  Furthermore, Oak Bank has never lost money on a mortgage loan in the eight years that the bank has been in existence.  This is a testament to our strong, consistent loan underwriting practices.  Maintaining superior loan quality remains our number one priority.

Our asset and earnings growth are strong as well.  Oak Bank now approximates $190 million in total assets.  Our assets grew roughly 14% over the past twelve months.  What's more, through the first six months of 2008, our earnings are 35% higher than in the same period last year.  This is shaping up to be a record year for Oak Bank.

As of June 30, 2008, Oak Bank had nearly $17 million of capital, significantly more than what is required by federal and state regulators.  We continue to meet the regulatory definition of a well capitalized and financially sound bank. 

Our performance reinforces our belief that if we treat people fairly, provide exemplary service at a fair price and give back to our community, success will surely follow. 

In closing, while you can be sure that the media will continue to invoke strong feelings with headlines such as "banking crisis" and "subprime mortgage meltdown," know that our banking system is strong, our economy will strengthen, the housing market will recover and we will be left with a financial system that has fewer unregulated players and a renewed emphasis on the fundamental principles of prudent loan underwriting that community banks, like Oak Bank, consistently practice in good times and bad.

Thank you for your continued support of, and relationship with, Oak Bank.  We sincerely appreciate and value your business.  If we can address any questions or concerns that you may have, please give us a call. 

Sincerely,

Robert Gorsuch  
Chairman of the Board and CEO 

Terry Taylor
President and COO