November 13, 2009 at 21:24 PM EST
Oak Ridge Financial Services Announces Third Quarter 2009 Results

Oak Ridge Financial Services, Inc. (Nasdaq:BKOR), parent company of Bank of Oak Ridge, headquartered in Oak Ridge, North Carolina, announced unaudited net income of $159,000 before adjusting for the effective dividend on preferred stock for the three months ended September 30, 2009, compared to net income of $375,000 for the prior year period. Net income available for common shareholders for the three months ended September 30, 2008 was $375,000 or $0.21 per diluted share. On the positive side, an increased net interest margin contributed to a significant increase in the Company’s net interest income in the quarter ended September 30, 2009 compared to the same prior year period. Earnings in the current period were negatively impacted by higher loan loss provisions, charge offs, and other real estate owned write downs in response to current economic conditions. Increased noninterest operating expense and a slight decrease in noninterest income also contributed to the overall decline in earnings.

Oak Ridge Financial Services President, Ron Black, in commenting on the results, noted, “Given the difficult economic environment, we are pleased with our performance in the third quarter. As a true community bank our primary purpose continues to be helping our clients succeed in these difficult times. Pre-tax, pre-loan loss provision, and post-CPP dividend payment, earnings were $1.2 million for the third quarter of 2009, compared to $673,000 for the third quarter of 2008, an increase of approximately $511,000. Pre-tax, pre-loan loss provision, and post-CPP dividend payments, earnings were $2.5 million for the first nine months of 2009, compared to $1.6 million for the first nine months of 2008, an increase of approximately $912,000. Additionally, our core earnings have been strong enough to absorb significant charge offs and loan loss provisions. Our primary areas of focus for the foreseeable future are managing credit quality, building liquidity sources, managing capital, and improving operational earnings. We are pleased that despite significant charge-offs we were able to increase our allowance for loan loss from $2.5 million or 1.00% of total loans at December 31, 2008 to $3.3 million or 1.33% of loans at September 30, 2009.”

Mr. Black further commented, “We plan to continue to support our local economy by taking deposits, making loans, and providing financial advice for our clients in these challenging times. The community was incredibly supportive of our Bank in the first nine months of 2009 and we had increases in loans and deposits. Lastly, at September 30, 2009 we were well-capitalized with ample capital for future growth.”

About Bank of Oak Ridge

Bank of Oak Ridge, headquartered in Oak Ridge, NC, is a community Bank with five banking offices in Oak Ridge, Summerfield and Greensboro. The Bank’s independent financial advisory division, Oak Ridge Wealth Management, operates out of an office in downtown Greensboro. The Bank offers a complete line of banking and investment services, including savings and checking accounts, mortgage and business loans, extended weekday and Saturday branch banking hours, same-day deposits, cash management services, business and personal internet banking with balance alerts and reminders, internet bill payment, mobile banking and accounts designed specifically for seniors, small businesses and civic organizations. For more information, contact Bank of Oak Ridge at 336-644-9944, or visit www.bankofoakridge.com.

Forward-looking Information

This form 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 collectibility 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, (6) the impact of changes in monetary and fiscal policies, laws, rules and regulations and (7) other risks and factors identified in the Company’s other filings with the Federal Deposit Insurance Corporation. The Company undertakes no obligation to update any forward-looking statements.

Oak Ridge Financial Services, Inc.
Financial Highlights (dollars in thousands, except share and per share data)

Three months ended

September 30,

Nine months ended

September 30,

20092008Change20092008Change
Income Statement Data:
Total interest income $ 4,974 $ 4,457 11.6 % $ 14,714 $ 13,358 10.2 %
Total interest expense 1,7592,181 (19.3 ) 6,0206,947 (13.3 )
Net interest income 3,215 2,276 41.3 8,694 6,411 35.6
Provision for loan losses 877 74 1,085.1 1,546 337 358.8
Non-interest income 850 898 (5.3 ) 2,544 2,549 (0.2 )
Non-interest expense 2,9792,501 19.1 8,9577,332 22.2
Net income before provision for income taxes 209 599 (65.1 ) 735 1,291 (43.1 )
Provision for income taxes 50224 (77.7 ) 234471 (50.3 )
Net income $159$375 (57.6 ) $501$820 (38.9 )
Preferred stock dividends 98 - n/a 259 - n/a
Accretion of discount 68- n/a 178- n/a
Income available to common shareholders $(7)$375 (101.9 ) $64$820 (92.2 )
Per share data and shares outstanding: (1)
Basic net income per common share $ - $ 0.21 (100.0 )% $ 0.04 $ 0.46 (91.3 )%
Diluted net income per common share - 0.21 (100.0 ) 0.04 0.45 (91.2 )
Book value per common share at period end 11.57 9.26 24.9 11.57 9.26 24.9
Weighted average number of common shares outstanding (000's):
Basic 1,791.5 1,791.5 (0.0 )% 1,791.5 1,791.5 - %
Diluted 1,791.5 1,791.2 0.0 1,791.5 1,809.4 (1.0 )
Shares outstanding at period end 1,791.5 1,791.5 - 1,791.5 1,791.5 (0.0 )
September 30,December 31,
Balance sheet data20092008Change
Total assets $ 339,682 $ 320,672 5.9 %
Loans receivable 249,699 245,481 1.7
Allowance for loan losses 3,315 2,450 35.3
Other interest-earning assets 70,855 55,807 27.0
Noninterest-bearing deposits 20,469 18,181 12.6
Interest-bearing deposits 264,644 252,423 4.8
Borrowings 25,248 30,248 (16.5 )
Stockholders' equity 27,658 18,195 52.0

Three months ended

September 30,

Nine months ended

September 30,

Selected performance ratios:2009200820092008
Return on average assets (2) 0.22 % 0.51 % 0.19 % 0.38 %
Return on average stockholders' equity (2) 1.20 8.48 1.89 6.21
Net interest margin (2)(3) 3.95 3.27 3.59 3.10
Net interest spread (2)(4) 3.68 2.99 3.43 2.85
Noninterest income as a % of total revenue 20.9 28.3 22.6 28.4
Noninterest income as a % of average assets (2) 1.0 1.2 1.5 1.2
Efficiency ratio (5) 73.28 78.80 79.70 81.83
Noninterest expense as a % of average assets (2) 3.4 3.5 3.5 3.4
September 30,December 31,
Asset quality ratios (at period end):20092008
Nonperforming assets to period-end loans (6) 1.50 % 1.09 %
Nonperforming assets to period-end assets (6) 1.10 0.61
Allowance for loan losses to period-end loans 1.33 1.00
Allowance for loan losses to total assets 0.98 0.76
Net loan charge-offs to average loans outstanding (2) 1.48 0.12
Oak Ridge Financial Services, Inc.
Financial Highlights (dollars in thousands, except share and per share data)
September 30,December 31,
Capital and liquidity ratios:20092008
Equity to assets ratio 8.1 % 5.7 %
Loans to deposits 87.6 90.7

Three months ended

September 30,

Nine months ended

September 30,

Total Revenue20092008Change20092008Change
Net interest income $3,215$2,276 41.3 % $8,694$6,411 35.6 %
Fees and other revenue:
Service charges on deposit accounts 237 222 6.8 645 575 12.2
Mortgage loan origination fees 102 98 4.1 403 330 22.1
Investment and insurance commissions 159 237 (32.9 ) 495 687 (27.9 )
Fee income from purchase of accounts receivable 186 209 (11.0 ) 541 561 (3.6 )
Income earned on bank owned life insurance 51 41 24.4 148 121 22.3
Other 11591 26.4 312275 13.5
Total noninterest income 850898 (5.3 ) 2,5442,549 (0.2 )
Total revenue $4,065$3,174 28.1 $11,238$8,960 25.4

Three months ended

September 30,

Nine months ended

September 30,

Noninterest Expense20092008Change20092008Change
Salaries and employee benefits $ 1,474 $ 1,339 10.1 % $ 4,258 $ 3,885 9.6 %
Occupancy 209 171 22.2 574 434 32.3
Equipment 216 158 36.7 560 438 27.9
Data and items processing 162 122 32.8 462 334 38.3
Professional and advertising 350 259 35.1 964 850 13.4
Stationary and supplies 52 48 8.3 188 192 (2.1 )
Telecommunications expense 77 55 40.0 218 194 12.4
Other real estate expenses and writedowns 12 - n/a 314 - n/a
FDIC assessment 110 67 64.2 402 179 124.6
Accounts receivable financing expense 56 66 (15.2 ) 165 210 (21.4 )
Other-than-temporary impairment loss 21 - n/a 126 - n/a
Other 240216 11.1 726616 17.9
Total noninterest expense $2,979$2,501 19.1 $8,957$7,332 22.2

Three months ended

September 30,

Nine months ended

September 30,

Average Balances20092008Change20092008Change
Total assets $ 349,289 $ 293,729 18.9 % $ 344,071 $ 285,346 20.6 %
Loans receivable 248,326 232,678 6.7 248,539 225,398 10.3
Allowance for loan losses 3,168 2,347 35.0 2,846 2,270 25.4
Other interest-earning assets 68,856 40,232 71.1 64,264 38,946 65.0
Total deposits 293,439 246,177 19.2 294,621 237,146 24.2
Total noninterest bearing deposits 20,723 17,213 20.4 19,525 16,029 21.8
Borrowings 23,400 30,408 (23.0 ) 24,254 27,599 (12.1 )
Stockholders' equity 27,405 17,699 54.8 22,877 17,602 30.0
(1) Computed based on the weighted average number of shares outstanding during each period.
(2) Ratios for the three- and nine-month periods ended September 30, 2009 and 2008 are presented on an annualized basis.
(3) Net interest margin is net interest income divided by average interest earning assets.
(4) Net interest spread is the difference between the average yield on interest earning assets and the average cost of interest bearing liabilities.
(5) Efficiency ratio is noninterest expense divided by the sum of net interest income and noninterest income.
(6) Nonperforming assets consist of non-accruing loans, restructured loans and foreclosed assets, where applicable.

Contacts:

Oak Ridge Financial Services, Inc.
Ron Black, 336-644-9944
President & CEO
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