November 11, 2010 at 14:47 PM EST
Oak Ridge Financial Services Announces Third Quarter 2010 Results

Oak Ridge Financial Services, Inc. (Nasdaq:BKOR), parent company of Bank of Oak Ridge, headquartered in Oak Ridge, North Carolina, reports results for the third quarter of 2010.

Financial Highlights:

  • Quarterly net income of $41,000, compared to $159,000 in the same period in 2009. The biggest contributor to the difference in net income between the two periods was a $350,000 Employee Stock Ownership Plan (“ESOP”) accrual in the quarter ended September 30, 2010
  • Quarterly net loss available to common shareholders of $118,000, compared to a $7,000 quarterly net loss available to shareholders in the same period in 2009.
  • Allowance for loan loss of 1.56% of total loans as of September 30, 2010, compared to 1.51% and 1.33% as of December 31, 2009 and September 30, 2009, respectively.
  • Noninterest income of $1 million, up 17.9% from noninterest income of $850 thousand for the same period in 2009.
  • Noninterest expense of $3.6 million, up 19.5% from noninterest expense of $3.0 million for the same period in 2009. Excluding the $350,000 ESOP contribution, noninterest expense increased 7.7% on a year over year basis.
  • Total loans increased 1.4% to $254.9 million from December 31, 2009 to September 30, 2010.
  • Noninterest bearing deposits increased 22.8% to $25.2 million from December 31, 2009 to September 30, 2010.

Oak Ridge Financial Services, Inc. announced net income for the three months ended September 30, 2010 of $41,000, compared to net income of $159,000 for the prior year period. After subtracting dividends and accretion on preferred stock, net loss available for common shareholders for the current period was $118,000 or $0.07 per diluted share, compared with a net loss available for common shareholders of $7,000 and diluted earnings per share of $0.00 for the quarter ended September 30, 2009. Earnings in the current period were positively impacted by an increased net interest margin, a slightly lower loan loss provision, and an increase in noninterest income. Negatively impacting net income was an increase in noninterest expense driven in part by a $350,000 ESOP accrual.

Oak Ridge Financial Services President, Ron Black, in commenting on the results, noted, “Given the difficult economic environment, we are pleased that we were profitable in the third quarter of 2010 and, compared to the same period in 2009, were able to increase our net interest margin and noninterest income. Nonperforming assets were up from December 2009 and March 2010 and we continue to devote substantial efforts in servicing and reducing them. Additionally, net income for the quarter and the nine months includes pretax ESOP accruals of $350,000 and $650,000, respectively. The Company plans to utilize the ESOP accruals to increase our common equity at some point in the future, as we concluded that the ESOP is an effective way to raise capital, relative to other options available to us, in this challenging economic environment.”

Mr. Black further commented, “Our primary areas of focus for the rest of 2010 will be continuing to service our loan and other real estate owned portfolios and growing net interest income and noninterest income by providing extraordinary service to existing and prospective clients. We plan to continue to support our local economy by taking deposits, making loans, and providing financial advice for our clients to help them navigate in these difficult times. The community was incredibly supportive of our Bank in the first nine months of 2010 and we had increases in both loans and deposits. Lastly, at September 30, 2010 we were well-capitalized with capital available for future profitable 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, remote check capture for businesses, 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.
Unaudited Financial Highlights (dollars in thousands, except share and per share data)
(Unaudited)

Three months ended
September 30,

Nine months ended
September 30,

20102009Change20102009Change
Income Statement Data:
Total interest income $ 4,512 $ 4,974 (9.3 ) % $ 13,593 $ 14,714 (7.6 ) %
Total interest expense 1,1491,759 (34.7 ) 3,6676,020 (39.1 )
Net interest income 3,363 3,215 4.6 9,926 8,694 14.2
Provision for loan losses 761 877 (13.2 ) 1,898 1,546 22.8
Noninterest income 1,002 850 17.9 3,213 2,544 26.3
Noninterest expense 3,559 2,979 19.5 10,201 8,957 13.9
Provision for income taxes 450 (92.0 ) 346234 47.9
Net income $41$159 (74.2 ) $694$501 38.5
Preferred stock dividends 97 98 (1.0 ) 289 259 11.6
Accretion of discount 6268 (8.8 ) 179178 0.6
Income available to common shareholders $(118)$(7) n/a $226$64 253.1
Per share data and shares outstanding:
Basic net income per share (1) $ (0.07 ) $ 0.04 (275.0 ) % $ 0.13 $ 0.04 225.0 %
Diluted net income per share (1) (0.07 ) 0.04 (275.0 ) 0.13 0.04 225.0
Book value at period end 15.72

15.40

2.1

15.72

15.40

2.1

Weighted average number of common shares outstanding (000's):
Basic 1,791.5 1,791.5 - % 1,791.5 1,791.5 - %
Diluted 1,791.5 1,791.5 - 1,791.5 1,791.5 -
Shares outstanding at period end 1,791.5 1,791.5 - 1,791.5 1,791.5 -
September 30,December 31,
Balance sheet data20102009Change
Total assets $ 342,818 $ 338,048 1.4 %
Loans receivable 254,942 251,300 1.4
Allowance for loan losses 3,986 3,667 8.7
Other interest-earning assets 67,506 65,812 2.6
Noninterest-bearing deposits 25,193 20,520 22.8
Interest-bearing deposits 269,331 271,164 (0.7 )
Borrowings 17,248 17,248 -
Shareholders' equity 28,166 27,592 2.1

Three months ended
September 30,

Nine months ended
September 30,

Selected performance ratios:2010200920102009
Return on average assets (2) 0.05 % 0.22 % 0.27 % 0.19 %
Return on average stockholders' equity (2) (2.21 ) (0.14 ) 4.22 1.35
Net interest margin (2)(3) 4.15 3.95 4.06 3.59
Net interest spread (2)(4) 3.91 3.68 3.89 3.43
Noninterest income as a % of total revenue 23.0 20.9 24.5 22.6
Noninterest income as a % of average assets (2) 1.2 1.0 1.3 1.0
Efficiency ratio (5) 81.53 73.28 77.64 79.70
Noninterest expense as a % of average assets (2) 4.1 3.4 4.0 3.5
September 30,December 31,September 30,
Asset quality ratios (at period end):201020092009
Nonperforming assets to period-end loans (6) 3.62 % 1.61 % 1.50 %
Nonperforming assets to period-end assets (6) 2.69 1.20 1.10
Allowance for loan losses to period-end loans 1.56 1.44 1.33
Allowance for loan losses to total assets 1.16 1.46 0.98
Net loan charge-offs to average loans outstanding (2) 0.83 0.54 1.48

Oak Ridge Financial Services, Inc.
Unaudited Financial Highlights (dollars in thousands, except share and per share data)
(Unaudited)
September 30,December 31,September 30,
Capital ratios (Bank of Oak Ridge):201020092009
Total capital ratio 11.6 % 11.5 % 10.9 %
Tier 1 capital ratio 10.3 10.2 9.8
Leverage capital ratio 8.2 8.1 8.0

Three months ended
September 30,

Nine months ended
September 30,

Total Revenue20102009Change20102009Change
Net interest income $3,363$3,215 4.6 % $9,926$8,694 14.2 %
Fees and other revenue:
Service charges on deposit accounts 163 237 (31.2 ) 557 645 (13.6 )
Gain on sale of securities - - n/a 386 - n/a
Mortgage loan origination fees 188 102 84.3 372 403 (7.7 )
Investment and insurance commissions 248 159 56.0 718 495 45.1
Fee income from accounts receivable financing 212 186 14.0 638 541 17.9
Debit card interchange income 129 92 40.2 355 246 44.3
Income earned on bank owned life insurance 42 51 (17.6 ) 126 148 (14.9 )
Other service charges and fees 2023 (13.0 ) 6166 (7.6 )
Total noninterest income 1,002850 17.9 3,2132,544 26.3
Total revenue $4,365$4,065 7.4 $13,139$11,238 16.9

Three months ended
September 30,

Nine months ended
September 30,

Noninterest Expense20102009Change20102009Change
Salaries $ 1,493 $ 1,317 13.4 % $ 4,211 $ 3,801 10.8 %
Employee benefits 502 157 219.7 1,118 457 144.6
Occupancy expense 218 209 4.3 678 574 18.1
Equipment expense 215 216 (0.5 ) 634 560 13.2
Data and item processing 146 162 (9.9 ) 487 462 5.4
Professional and advertising 295 350 (15.7 ) 1,032 964 7.1
Stationary and supplies 79 52 51.9 208 188 10.6
Net loss on sale of foreclosed and repossessed assets 16 12 33.3 45 314 (85.7 )
Telecommunications expense 56 77 (27.3 ) 173 218 (20.6 )
FDIC assessment 115 110 4.5 384 402 (4.5 )
Accounts receivable financing expense 68 56 21.4 211 165 27.9
Other-than-temporary impairment loss - 21 (100.0 ) 21 126 (83.3 )
Other 356240 48.3 999726 37.6
Total noninterest expense $3,559$2,979 19.5 $10,201$8,957 13.9

Three months ended
September 30,

Nine months ended
September 30,

Average Balances20102009Change20102009Change
Total assets $ 342,260 $ 349,289 (2.0 ) % $ 343,522 $ 344,071 (0.2 ) %
Loans receivable 253,870 248,326 2.2 252,347 248,539 1.5
Allowance for loan losses 4,059 3,168 28.1 3,941 2,846 38.5
Other interest-earning assets 67,442 68,856 (2.1 ) 68,854 67,643 1.8
Total deposits 270,360 293,439 (7.9 ) 273,383 272,716 0.2
Total noninterest bearing deposits 24,376 20,723 17.6 22,534 19,525 15.4
Borrowings 17,248 23,400 (26.3 ) 17,259 23,966 (28.0 )
Shareholders' equity 28,101 27,405 2.5 28,067 25,248 11.2

(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, 2010 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, President & CEO, 336-644-9944
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