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Oak Ridge Financial Services, Inc. Announces Second Quarter

OAK RIDGE, N.C., July 22, 2022 (GLOBE NEWSWIRE) — Oak Ridge Financial Services, Inc. (“Oak Ridge”; or the “Company”) (OTCPink: BKOR), the parent company of Bank of Oak Ridge (the “Bank”), announced unaudited financial results for the three and six months ended June 30, 2022.

June 30, 2022 Highlights

  • Basic and diluted earnings per share of $0.63 for the three months ended June 30, 2022, down two cents, or 3.1%, from the comparable 2021 period;
  • Annualized return on average common stockholders’ equity of 13.52% for the three months ended June 30, 2022, compared to 14.71% for the same period in 2021;
  • Tangible book value per common share of $18.77 as of June 30, 2022, up 4.7%, or $0.84, from $17.93 as of June 30, 2021;
  • Through June 30, 2022, have forgiven and recognized 94% of the unamortized fees and associated costs on the $80.0 million of first and second round of Small Business Administration (“SBA”) Paycheck Protection Program (“PPP”) loans;
  • Period end total loans of $432.4 million, up 0.64% (1.27% annualized), or $2.7 million, from $429.7 million as of December 31, 2021;
  • Period end allowance for loan losses of $4.8 million, up 27.1%, from $3.8 million on December 31, 2021;
  • Nonperforming assets of $884,000, down 69.5% from $2.9 million on December 31, 2021;
  • Period end deposits of $535.5 million, up 5.1%, or $26.2 million from $509.3 million as of December 31, 2021; and
  • Named to American Banker magazine’s Top 200 Publicly Traded Community Banks and Thrifts. The ranking is based on a company’s three-year average return on average equity (ROAE) through December 31, 2021. This is the sixth consecutive year the Company has been on the prestigious list.

Tom Wayne, Chief Executive Officer and Chief Financial Officer, reported, “I am extremely pleased with our continued strong financial performance in the second quarter of 2022 given the reduction in the bank’s PPP income. Our team has shown great resilience and performance as we navigate the changing economic and social environment, with the Company producing greater than double digit return on equity for the last six consecutive quarters. Additionally, our nonperforming assets to total assets declined from 0.51% on December 31, 2021, to 0.14% on June 30, 2022.”

A quarterly cash dividend of $0.08 per share of common stock is payable on September 2, 2022, to stockholders of record as of the close of business on August 19, 2022. “We are pleased to pay another quarterly cash dividend to our stockholders,” said Mr. Wayne. “Paying stockholders a portion of our earnings reflects our continuing commitment to enhance stockholder value.”

As of June 30, 2022, the Bank’s Community Bank Leverage Ratio was 10.2%, unchanged from December 31, 2021. Stockholders’ equity on June 30, 2022, was $50.7 million, down 1.2% from $51.3 million on December 31, 2021, due to an increase in accumulated other comprehensive loss in 2022.

For the three months ended June 30, 2022 and 2021, net interest income was $5.2 million and $5.1 million, respectively. For the three months ended June 30, 2022, the annualized net interest margin was 3.66% compared to 3.79% for the same period in 2021, a decrease of 13 basis points. For the six months ended June 30, 2022, net interest income was $10.6 million, compared to $10.7 million during the same period in 2021. The annualized net interest margin was 3.87% for the six months ended June 30, 2022, compared to 4.02% for the same period in 2021, a decrease of 15 basis points.

The Company recorded a recovery of provision for loan losses of $107,000 for the three months ended June 30, 2022, with no provision for loan losses for the same period in 2021. For the six months ended June 30, 2022 and 2021, the Company recorded a recovery of provision for loan losses of $19,000 and $112,000, respectively. The allowance for loan losses as a percentage of total loans was 1.10% on June 30, 2022, compared to 0.87% on December 31, 2021. The increase in the allowance for loan losses in 2022 was largely the result of the Company increasing the qualitative factors in its allowance for loan loss model due to the declining overall economic outlook. Nonperforming assets represented 0.14% of total assets on June 30, 2022, compared to 0.64% on December 31, 2021.

Noninterest income totaled $1.3 million for the three months ended June 30, 2022, compared with $659,000 for the same period in 2021, an increase of $641,000 or 97.3%. The biggest contributor to the increase was gains on sales of SBA loans (not PPP loans) of $485,000 in the second quarter of 2022 and no gains in the comparable period in 2021. Additionally, Income from Small Business Investment Company totaled $100,000 for the three months ended June 30, 2022, with no income in the comparable period in 2021. Noninterest income totaled $2.1 million for the six months ended June 30, 2022, compared with $1.3 million for the same period in 2021, an increase of $750,000 or 56.4%. The biggest contributor to the increase was gains on sales of SBA loans (not PPP loans) of $514,000 for the six months ended June 30, 2022, with no gains in the comparable period in 2021. Additionally, Income from Small Business Investment Company totaled $100,000 for the six months ended June 30, 2022, with no income in the comparable period in 2021.

Noninterest expense totaled $4.5 million in the three months ended June 30, 2022, an increase of $827,000, or 22.7%, from the same period in 2021. The increase was driven by higher employee salaries which increased by $875,000 compared to the prior year period, partly due to annual merit increases effective November 1, 2021, higher 2022 commissions, and the absence of the Cares Act Employer Retention Credit in 2022. Additionally, other expenses increased $113,000 compared to the prior year period partly due to increased expenses related to SBA lending, deposit losses, insurance expenses, annual license fees, and appraisal fees. Noninterest expense totaled $8.5 million in the six months ended June 30, 2022, an increase of $1.1 million, or 15.2%, from 2021. The increase was driven by higher employee salaries which increased by $866,000 compared to the prior period, partly due to annual merit increases effective November 1, 2021, higher 2022 commissions, and the absence Cares Act Employer Retention Credit in 2022. Professional and advertising expenses increased $156,000 compared to the prior year period due to higher legal expenses related to the disposition of nonaccrual loans, and higher outsourced information technology security and cybersecurity expenses. Additionally, other expenses increased $197,000 compared to the prior year period, partly due to increased expenses related to SBA lending, insurance expenses, annual license fees, and appraisal fees.

About Oak Ridge Financial Services, Inc. and Bank of Oak Ridge
At Bank of Oak Ridge, we pride ourselves on knowing your name when you walk through our door. Whether in-person or through our digital offerings, managing your financial well-being is easy, safe, and convenient. We are the longest-running employee-owned community bank in the Triad and have served community members, local businesses, and non-profit organizations since 2000. Learn more about what makes Bank of Oak Ridge the Triad’s community bank by visiting one of our convenient locations in Greensboro, High Point, Summerfield & Oak Ridge.

Oak Ridge Financial Services, Inc. (OTC Pink: BKOR) is the holding company for Bank of Oak Ridge. Bank of Oak Ridge is a member of the FDIC and an Equal Housing Lender.

Awards & Recognitions | Best Bank in the Triad | Triad’s Top Workplace Finalist | 2016 Better Business Bureau Torch Award for Business Ethics | Triad’s Healthiest Employer Winner

Banking for Business & Personal | Mobile & Online Banking | Worldwide ATM | Debit, Credit + Rewards | Checking, Savings & Money Market | Loans + SBA | Mortgage | Insurance | Wealth Management

Let’s Talk | 336.644.9944 | www.BankofOakRidge.com | Extended Hours at all Triad Locations

Forward-looking Information This earnings release contains certain forward-looking statements with respect to the financial condition, results of operations and business of the Company. These forward-looking statements involve risks and uncertainties and are based on the beliefs and assumptions of management of the Company and on the information available to management at the time that these disclosures were prepared. These statements can be identified by the use of words like “expect,” “anticipate,” “estimate” and “believe,” variations of these words and other similar expressions. Readers should not place undue reliance on forward-looking statements as a number of important factors could cause actual results to differ materially from those in the forward-looking statements. Factors that could cause actual results to differ materially include, but are not limited to, (1) competition in the Company’s markets, (2) changes in the interest rate environment, (3) general national, regional or local economic conditions may be less favorable than expected, resulting in, among other things, a deterioration in credit quality and the possible impairment of collectability of loans, (4) legislative or regulatory changes, including changes in accounting standards, (5) significant changes in the federal and state legal and regulatory environment and tax laws, and (6) the impact of changes in monetary and fiscal policies, laws, rules and regulations. The Company undertakes no obligation to update any forward-looking statements.

Oak Ridge Financial Services, Inc.
Consolidated Balance Sheets
As of June 30, 2022 (Unaudited) and December 31, 2021 (Audited)
(Dollars in thousands)

    2022   2021  
Assets          
           
Cash and due from banks   $ 11,917   $ 8,998  
Interest-bearing deposits with banks   62,276   79,086  
Total cash and cash equivalents   74,193   88,084  
Securities available-for-sale   84,058   46,948  
Securities held-to-maturity   354   387  
Restricted stock, at cost   1,347   1,324  
Loans, net of allowance for loan losses of $4,774 and          
$3,756 at June 30, 2022 and December 31, 2021, respectively   427,621   425,900  
Property and equipment, net   9,407   9,907  
Accrued interest receivable   1,902   1,842  
Bank owned life insurance   6,054   6,014  
Right-of-use assets – operating leases   1,391   1,594  
Other assets   6,249   4,921  
Total assets   $ 612,576   $ 586,921  
               
Liabilities and Stockholders’ Equity              
               
Liabilities              
Deposits              
Noninterest-bearing   $ 118,227   $ 116,525  
Interest-bearing     417,277     392,754  
Total deposits     535,504     509,279  
Long-term borrowings     551     683  
Junior subordinated notes – trust preferred securities     8,248     8,248  
Subordinated debentures     9,883     9,863  
Lease liabilities – operating leases     1,391     1,594  
Accrued interest payable     110     110  
Other liabilities     6,170     5,816  
Total liabilities     561,857     535,593  
               
Stockholders’ equity              
Common stock, no par value; 50,000,000 shares authorized;              
2,702,370 and 2,672,620 issued and outstanding              
at June 30, 2022 and December 31, 2021, respectively     25,945     25,532  
Retained earnings     25,778     22,815  
Accumulated other comprehensive income (loss)     (1,004 )   2,981  
Total stockholders’ equity     50,719     51,328  
Total liabilities and stockholders’ equity   $ 612,576   $ 586,921  

Oak Ridge Financial Services, Inc.
Consolidated Statements of Income (Unaudited)
For the three and six months ended June 30, 2022 and 2021
(Dollars in thousands)

  Three months ended June 30,   Six months ended June 30,  
  2022   2021   2022   2021  
Interest and dividend income  
Loans and fees on loans $ 5,051   $ 5,440 $ 10,539   $ 11,316  
Interest on deposits in banks   171     7   199     10  
Restricted stock dividends   18     20   36     40  
Interest on investment securities   408     328   764     684  
Total interest and dividend income   5,648     5,795   11,538     12,050  
Interest expense              
Deposits   237     342   494     723  
Short-term and long-term debt   217     330   428     646  
Total interest expense   454     672   922     1,369  
Net interest income   5,194     5,123   10,616     10,681  
Provision for (recovery of) loan losses   (107)       (19)     (112)  
Net interest income after provision for loan losses   5,301     5,123   10,635     10,793  
Noninterest income              
Service charges on deposit accounts   150     120   287     254  
Brokerage commissions on mortgage loans   61     55   133     132  
Insurance commissions   112     88   226     208  
Gain on sale of Small Business Administration loans   485       514      
Debit and credit card interchange income   308     293   585     547  
Income from Small Business Investment Company   100       170      
Income earned on bank owned life insurance   20     21   40     42  
Other service charges and fees   64     82   124     146  
Total noninterest income   1,300     659   2,079     1,329  
Noninterest expense              
Salaries   2,340     1,637   4,356     3,490  
Employee benefits   304     271   551     565  
Occupancy   251     243   547     530  
Equipment   243     268   496     545  
Data and item processing   408     429   854     875  
Professional and advertising   294     271   584     428  
Stationary and supplies   34     58   60     97  
Impairment loss on securities       18       28  
Telecommunications   104     96   211     190  
FDIC assessment   53     36   107     94  
Other expense   445     322   747     550  
Total noninterest expense   4,476     3,649   8,513     7,392  
Income before income taxes   2,125     2,133   4,201     4,730  
Income tax expense   422     413   836     955  
Net income and income available to common stockholders $ 1,703   $ 1,720 $ 3,365   $ 3,775  
Basic income per common share $ 0.63   $ 0.65 $ 1.25   $ 1.43  
Diluted income per common share $ 0.63   $ 0.65 $ 1.25   $ 1.43  
Basic weighted average shares outstanding   2,702,370     2,643,503   2,692,794     2,648,089  
Diluted weighted average shares outstanding   2,702,370     2,643,503   2,692,794     2,648,089  
Selected Financial Data June 30,
2022
  March 31,
2022
December 31,
2021
September 30,
2021
June 30,
2021
March 31,
2021
Return on average common stockholders’ equity1   13.52  %   13.07  %   15.70  %   16.40  %   14.71  %   18.45  %
Tangible book value per share $ 18.77   $ 18.63   $ 19.20   $ 18.53   $ 17.93   $ 17.24  
Return on average assets1   1.11  %   1.14  %   1.36  %   1.41  %   1.20  %   1.49  %
Net interest margin1   3.66  %   4.07  %   3.65  %   3.94  %   3.79  %   4.26  %
Efficiency ratio   68.93  %   65.10  %   69.73  %   63.08  %   62.80  %   59.94  %
Nonperforming assets to total assets   0.14  %   0.16  %   0.51  %   0.50  %   0.55  %   0.62  %

1Annualized

Contact: Tom Wayne, CEO and CFO
Phone: 336.644.9944