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

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

Oak Ridge Financial Services, Inc. Announces Second Quarter 2022 Results