Oak Ridge Financial Services, Inc. Announces Second Quarter

OAK RIDGE, N.C., July 31, 2023 (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 second quarter of 2023 and a quarterly cash dividend of $0.10 per common share.

Second Quarter 2023 Performance and Accomplishments

Earnings per share of $0.54, compared to $0.47 in the linked quarter and $0.63 for the second quarter of 2022.
Return on equity of 10.84%, compared to 9.62% in the linked quarter and 13.52% for the second quarter of 2022.
Dividends declared per common share of $0.10, unchanged from the linked quarter and up from $0.08 for the second quarter of 2022.
Tangible book value per common share of $20.14 as of period end, compared to $19.94 at the end of the linked quarter and $18.77 at the end of the second quarter of 2022.
Net interest margin of 3.89%, compared to 3.91% in the linked quarter and 3.66% for the second quarter of 2022.
Efficiency ratio of 70.39%, compared to 71.60% in the linked quarter and 68.93% for the second quarter of 2022.
American Banker’s Top 200 Publicly Traded Banks Under $2 Billion in Assets for 2022 for the eighth consecutive year.
#4 out of 106 Small Business Administration (“SBA”) 7a lenders in SBA’s North Carolina District office of total year-to-date loan approvals through July 21, 2023.

Tom Wayne, Chief Executive Officer and Chief Financial Officer, reported, “Oak Ridge’s operating performance in the second quarter was solid considering the current economic conditions and the liquidity concerns in the banking industry. Despite the continued increase in market interest rates and concern over bank failures, asset quality was strong at the end of the quarter, our net interest margin was strong during the quarter, and our loans increased and deposits decreased just slightly from year end. Capital and liquidity levels remain strong. Oak Ridge remains focused on its full client relationships including long-term core deposit and lending solutions and other products and services that meet our customers’ financial objectives. We are incredibly proud of our team and appreciate their efforts in serving our clients and managing the Bank in a safe and sound manner.”

A quarterly cash dividend of $0.10 per share of common stock is payable on September 1, 2023, to stockholders of record as of the close of business on August 18, 2023, which represents the 19^th consecutive quarterly dividend paid by the Company. “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.”

Review of Balance Sheet at June 30, 2023, as compared to December 31, 2022

Total assets increased $24.2 million, or 4.1%, to $613.5 million, from $589.3 million.
Cash and cash equivalents decreased $16.0 million, or 31.9%, to $34.3 million, from $50.4 million.
Securities available-for-sale increased $14.3 million, or 17.6%, to $95.2 million, from $80.9 million. Purchases of securities available-for-sale in 2023 of $40.1 million partially offset by sales, maturities, and repayments of $25.8 million accounted for the increase.
Securities held-to-maturity increased $7.4 million, or 66.3%, to $18.6 million due to reclassifications of subordinated debenture investments in other banks and bank holding companies from loans receivable to held-to-maturity securities. The reclassifications were $10.9 million and $7.4 million in December of 2022 and June of 2023, respectively. The lowest, largest, and average balance of each subordinated debenture investment in one bank or bank holding company as of June 30, 2023, was $331,000, $1.5 million, and $909,000, respectively. The book average life of the subordinated debenture portfolio was 3.28 years as of June 30, 2023.
Total net loans increased $20.4 million, or 3.8%, to $437.3 million, from $421.4 million.
- The allowance for loan losses as a percentage of total loans was 1.06% and 1.14% on June 30, 2023, and December 31, 2022, respectively.
- Nonperforming assets represented 0.10% of total assets on June 30, 2023, compared to 0.13% on December 31, 2022.
- On January 1, 2023, the Company adopted Current Expected Credit Loss ("CECL") methodology for establishing it allowance for loan loss. As a result of adopting this standard the Company’s retained earnings increased $24,000, the allowance for loan losses decreased $247,000, and the reserves for unfunded commitments increased $223,000.
Total deposits decreased $4.0 million, or 0.8%, to $486.2 million, from $481.0 million. The ratio of estimated uninsured deposits to total deposits for the Bank was 18.5% at June 30, 2023, compared to 22.1% at December 31, 2022.
Total borrowings from Federal Home Loan Bank of Atlanta advances and under the Federal Reserve Term Funding Program increased $24 million, or 80.0%, to $54 million, from $30 million.
Stockholders’ equity increased $2.4 million, or 4.6%, to $55.0 million, from $52.6 million. Accumulated other comprehensive loss was $2.4 million, or 4.2% of total stockholders’ equity as of June 30, 2023. The Bank’s Community Bank Leverage Ratio (“CBLR”) was 11.50% at June 30, 2023, compared to 11.27% at December 31, 2022. Financial institutions that follow the CBLR guidelines and have a CBLR of greater than 9% meet the well-capitalized regulatory requirement.

Review of Income Statement for the three months ended June 30, 2023, as compared same period ending June 30, 2022

Net interest income increased $192,000 to $5.4 million in the second quarter of 2023 compared to the year-ago quarter. The net interest margin increased 23 basis points to 3.89% for the second quarter of 2023 compared to the year-ago quarter.
- On June 12 and 22, 2023, the Bank entered into two interest rate swap agreements totaling approximately $25.0 million to hedge balance sheet interest rate sensitivity and protect selected securities in its available-for-sale portfolio against changes in fair value related to changes in the benchmark interest rate.
The Company had a recovery of credit losses of $63,000 in the second quarter of 2023 compared to a provision for credit losses of $175,000 in the year-ago quarter. The primary risks inherent in the Bank’s loan portfolio, including the adequacy of the allowance or reserve for loan losses, are based on management’s assumptions regarding, among other factors, general and local economic conditions, which are difficult to predict and are beyond the Bank’s control. In estimating these risks, and the related loss reserve levels, management also considers the financial conditions of specific borrowers and credit concentrations with specific borrowers, groups of borrowers, and industries.
Noninterest income decreased $409,000 to $891,000 in the second quarter 2023 compared with the year-ago quarter. Significant contributors to the overall net decrease were:
- Decrease of $389,000 in gain on sale of SBA loans. On most 2023 originations the Company is retaining the guaranteed portion of the loan whereas in 2022 the Company sold substantially all guaranteed portions of the loans.
- Decreases of $49,000 in brokerage commissions on mortgage loans and income from Small Business Investment Corporation.
- Increase of $91,000 in other service charges and fees due to increase in fee income from managing deposits sold through the Intrafi deposit network.
Noninterest expense decreased $58,000, or 1.3%, to $4.4 million in the second quarter of 2023 compared with the year-ago quarter.

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 Interactive Teller Machine 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 the 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, 2023 (Unaudited) and December 31, 2022 (Audited)
(Dollars in thousands)

	2023			2022
Assets
Cash and due from banks	$	9,085		$	12,467
Interest-bearing deposits with banks		25,218			37,889
Total cash and cash equivalents		34,303			50,356
Securities available-for-sale		95,213			80,939
Securities held-to-maturity, fair values of $16,364 and $10,350 at June
30, 2023 and December 31, 2022, respectively		18,566			11,161
Restricted stock, at cost		2,737			2,626
Loans, net of allowance for credit losses of $4,779 and
$4,851 at June 30, 2023, and December 31, 2022, respectively		437,259			421,444
Property and equipment, net		8,756			9,192
Accrued interest receivable		2,125			1,996
Bank owned life insurance		6,134			6,095
Right-of-use assets – operating leases		2,610			1,183
Other assets		5,798			4,289
Total assets	$	613,501		$	589,281

Liabilities and Stockholders’ Equity
*Liabilities*
Deposits
Noninterest-bearing	$	110,637		$	120,263
Interest-bearing		366,301			360,722
Total deposits		476,938			480,985
Short-term FHLB Advances		32,000			30,000
Federal Reserve bank term funding program		22,000			-
Other short-term borrowings		286			418
Junior subordinated notes – trust preferred securities		8,248			8,248
Subordinated debentures		9,923			9,903
Lease liabilities – operating leases		2,610			1,183
Accrued interest payable		548			226
Other liabilities		5,902			5,675
Total liabilities		558,455			536,638

*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, 2023, and December 31, 2022, respectively		26,471			26,207
Retained earnings		30,939			28,642
Accumulated other comprehensive loss		(2,364	)		(2,206	)
Total stockholders’ equity		55,046			52,643
Total liabilities and stockholders’ equity	$	613,501		$	589,281

Oak Ridge Financial Services, Inc.
Consolidated Statements of Income (Unaudited)
For the three months ended June 30, 2023, and 2022
(Dollars in thousands)

	Three months ended								Six months ended June 30,
	June 30, 2023			March 31, 2023		June 30, 2022			2023		2022
*Interest and dividend income*
Loans and fees on loans	$	5,780		$	5,916	$	5,051		$	11,696	$	10,539
Interest on deposits in banks		216			241		171			457		199
Restricted stock dividends		41			57		18			98		36
Interest on investment securities		1,368			839		408			2,206		764
Total interest and dividend income		7,405			7,053		5,648			14,457		11,538
*Interest expense*
Deposits		1,374			1,023		237			2,396		494
Short-term and long-term debt		645			670		217			1,315		428
Total interest expense		2,019			1,693		454			3,711		922
Net interest income		5,386			5,360		5,194			10,746		10,616
*Provision for (recovery of) credit losses*		(63	)		175		(107	)		111		(19	)
Net interest income after provision for loan losses		5,449			5,185		5,301			10,635		10,635
*Noninterest income*
Service charges on deposit accounts		149			147		150			297		287
Brokerage commissions on mortgage loans		12			22		61			34		133
Insurance commissions		109			97		112			206		226
Gain on sale of investment securities		-			77		-			77		-
Gain on sale of Small Business Administration loans		96			232		485			328		514
Debit and credit card interchange income		299			292		308			591		585
Income from Small Business Investment Company		51			-		100			51		170
Income earned on bank owned life insurance		20			19		20			39		40
Other service charges and fees		155			166		64			320		124
Total noninterest income		891			1,052		1,300			1,943		2,079
*Noninterest expense*
Salaries		2,180			2,312		2,340			4,492		4,356
Employee benefits		264			309		304			573		551
Occupancy		261			308		251			569		547
Equipment		239			211		243			450		496
Data and item processing		468			470		408			938		854
Professional and advertising		345			357		294			702		584
Stationery and supplies		34			34		34			68		60
Telecommunications		129			126		104			255		211
FDIC assessment		132			74		53			206		107
Other expense		366			390		445			757		747
Total noninterest expense		4,418			4,591		4,476			9,010		8,513
Income before income taxes		1,922			1,646		2,125			3,568		4,201
*Income tax expense*		434			365		422			799		836
*Net income and income available to common stockholders*	$	1,488		$	1,281	$	1,703		$	2,769	$	3,365
*Basic and diluted income per common share*	$	0.54		$	0.47	$	0.63		$	1.02	$	1.25
*Basic and diluted weighted average shares outstanding*		2,732,720			2,713,959		2,702,370			2,723,391		2,692,794

Selected Financial Data	June 30, 2023			March 31, 2023				December 31, 2022			September 30, 2022			June 30, 2022			March 31, 2022
Return on average common stockholders' equity¹		10.84	%			9.62	%		12.98	%		12.35	%		13.52	%		13.07	%
Tangible book value per share	$	20.14			$	19.94		$	19.48		$	18.67		$	18.77		$	18.63
Return on average assets¹		1.02	%			0.88	%		1.18	%		1.08	%		1.11	%		1.14	%
Net interest margin¹		3.89	%			3.91	%		4.02	%		4.10	%		3.66	%		4.07	%
Efficiency ratio		70.39	%			71.60	%		69.64	%		66.76	%		68.93	%		65.10	%
Nonperforming assets to total assets		0.10	%			0.11	%		0.13	%		0.15	%		0.14	%		0.16	%

¹Annualized

Contact: Skylar Mearing, Marketing Director
Phone: 336.662.4840

Oak Ridge Financial Services, Inc. Announces Second Quarter 2023 Results and Quarterly Cash Dividend of $0.10 Per Share