March 11, 2011 at 11:50 AM EST
Oak Ridge Financial Services Announces 2010 Results

Oak Ridge Financial Services, Inc. (Nasdaq:BKOR), parent company of Bank of Oak Ridge, headquartered in Oak Ridge, North Carolina, reported financial results for 2010.

Financial Highlights:

  • Annual net income of $732,000, compared to $674,000 in the same period in 2009. Contributing to this increase were increases in net interest margin and noninterest income, offset by increases in noninterest expense and income tax expense. Of the $2.0 million increase in noninterest expense, $900,000 of it was attributable to an Employee Stock Ownership Plan accrual.
  • Annual net income available to common shareholders of $105,000, compared to $132,000 in the same period in 2009.
  • Allowance for loan loss of 1.71% of total loans as of December 31, 2010, compared to 1.44% and 1.00% as of December 31, 2009 and 2008, respectively.
  • Noninterest income of $4.2 million, up 26.8% from noninterest income of $3.3 million for the same period in 2009.
  • Noninterest expense of $14.0 million, up 17.0% from noninterest expense of $12.0 million for the same period in 2009. Excluding the $900,000 ESOP contribution, noninterest expense increased 9.5% on a year over year basis.
  • Total loans increased 2.1% to $256.5 million from December 31, 2009 to December 31, 2010.
  • Noninterest bearing deposits increased 30.7% to $26.8 million from December 31, 2009 to December 31, 2010.

Oak Ridge Financial Services, Inc. announced net income for the year ended December 31, 2010 of $732,000, compared to net income of $674,000 for the prior year period. After subtracting dividends and accretion on preferred stock, net income available for common shareholders was $105,000 and $132,000 for the years ended December 31, 2010 and 2009. Net income per diluted share was $0.06 and $0.07 for the years ended December 31, 2010 and 2009, respectively. Earnings in the current period were positively impacted by an increased net interest margin and an increase in noninterest income. Negatively impacting net income was an increase in noninterest expense driven in part by a $900,000 ESOP accrual.

Oak Ridge Financial Services President, Ron Black, in commenting on the results, noted, “Given the difficult economic environment, we are pleased that in 2010 we were able to increase our net interest margin and noninterest income over 2009 levels. Nonperforming assets were up from December 2009 to December 2010 as they were at many of the community banks in the state and our market. We continue to devote substantial efforts in servicing and reducing them. Additionally, net income for 2010 includes pretax ESOP accruals of $900,000 that were not present in 2009. 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 2011 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 to help our clients to help them navigate these difficult times. The community was incredibly supportive of our Bank in 2010 and we had increases in both loans and deposits. Lastly, at December 31, 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

December 31,

Year ended

December 31,

20102009Change20102009Change
Income Statement Data:
Total interest income $ 4,512 $ 4,920 (8.3 ) % $ 18,105 $ 19,634 (7.8 ) %
Total interest expense 1,0861,408 (22.9 ) 4,7537,428 (36.0 )
Net interest income 3,426 3,512 (2.4 ) 13,352 12,206 9.4
Provision for loan losses 508 998 (49.1 ) 2,406 2,544 (5.4 )
Noninterest income 979 872 12.3 4,171 3,290 26.8
Noninterest expense 3,829 3,140 21.9 14,009 11,971 17.0
Provision for income taxes 3073 (58.9 ) 376307 22.5
Net income $38$173 (78.0 ) $732$674 8.6
Preferred stock dividends 96 46 108.7 385 305 26.2
Accretion of discount 6359 6.8 242237 2.1
Income available to common shareholders $(121)$68 (277.9 ) $105$132 (20.5 )
Per share data and shares outstanding:
Basic net income per share (1) $ (0.07 ) $ 0.04 (277.8 ) % $ 0.06 $ 0.07 (14.3 ) %
Diluted net income per share (1) (0.07 ) 0.04 (277.8 ) 0.06 0.07 (14.3 )
Book value at period end 11.75 11.74 0.1 11.75 11.74 0.1
Weighted average number of common shares outstanding (000's):
Basic 1,792.9 1,791.5 0.1 % 1,792.5 1,791.5 0.1 %
Diluted 1,792.9 1,791.5 0.1 1,792.5 1,791.5 0.1
Shares outstanding at period end 1,792.9 1,791.5 0.1 1,792.9 1,791.5 0.1
December 31,December 31,
Balance sheet data20102009Change
Total assets $ 349,008 $ 338,048 3.2 %
Loans receivable 256,486 251,300 2.1
Allowance for loan losses 4,375 3,667 19.3
Other interest-earning assets 71,853 65,812 9.2
Noninterest-bearing deposits 26,767 20,520 30.4
Interest-bearing deposits 273,508 271,164 0.9
Borrowings 17,248 17,248 -
Shareholders' equity 27,873 27,592 1.0

Three months ended

December 31,

Year ended

December 31,

Selected performance ratios:2010200920102009
Return on average assets (2) 0.04 % 0.22 % 0.21 % 0.19 %
Return on average stockholders' equity (2) (2.26 ) 1.31 1.95 2.42
Net interest margin (2)(3) 4.15 4.35 4.13 3.85
Net interest spread (2)(4) 3.99 4.19 3.97 3.68
Noninterest income as a % of total revenue 22.2 19.9 23.8 22.6
Noninterest income as a % of average assets (2) 1.1 1.0 1.2 1.0
Efficiency ratio (5) 86.92 71.62 79.95 77.25
Noninterest expense as a % of average assets (2) 4.3 3.6 4.1 3.5
December 31,December 31,December 31,
Asset quality ratios (at period end):201020092008
Nonperforming assets to period-end loans (6) 2.92 % 1.61 % 1.09 %
Nonperforming assets to period-end assets (6) 2.14 1.20 0.61
Allowance for loan losses to period-end loans 1.71 1.46 1.00
Allowance for loan losses to total assets 1.25 1.08 0.76
Net loan charge-offs to average loans outstanding (2) 0.67 0.54 0.12

Oak Ridge Financial Services, Inc.
Unaudited Financial Highlights (dollars in thousands, except share and per share data)
(Unaudited)
December 31,December 31,December 31,
Capital ratios (Bank of Oak Ridge):201020092008
Total capital ratio 11.8 % 11.5 % 10.9 %
Tier 1 capital ratio 10.5 10.2 9.8
Leverage capital ratio 8.0 8.1 8.0

Three months ended

December 31,

Year ended

December 31,

Total Revenue20102009Change20102009Change
Net interest income $3,426$3,512 (2.4 ) % $13,352$12,206 9.4 %
Fees and other revenue:
Service charges on deposit accounts 166 252 (34.1 ) 723 897 (19.4 )
Gain on sale of securities - 38 (100.0 ) 386 38 915.8
Mortgage loan origination fees 233 86 170.9 605 489 23.7
Investment and insurance commissions 179 154 16.2 897 649 38.2
Fee income from accounts receivable financing 209 187 11.8 847 728 16.3
Debit card interchange income 135 91 48.4 490 337 45.4
Impairment loss on securities - (3 ) n/a (21 ) (129 ) n/a
Income earned on bank owned life insurance 39 47 (17.0 ) 165 195 (15.4 )
Other service charges and fees 1820 (10.0 ) 7986 (8.1 )
Total noninterest income 979872 12.3 4,1713,290 26.8
Total revenue $4,405$4,384 0.5 $17,523$15,496 13.1

Three months ended

December 31,

Year ended

December 31,

Noninterest Expense20102009Change20102009Change
Salaries $ 1,498 $ 1,212 23.6 % $ 5,709 $ 5,013 13.9 %
Employee benefits 245 117 109.4 713 574 24.2
ESOP accrual 250 - n/a 900 - n/a
Occupancy expense 244 229 6.6 922 803 14.8
Equipment expense 242 217 11.5 876 777 12.7
Data and item processing 141 161 (12.4 ) 628 623 0.8
Professional and advertising 326 404 (19.3 ) 1,358 1,368 (0.7 )
Stationary and supplies 49 53 (7.5 ) 257 241 6.6
Net loss on sale of foreclosed and repossessed assets 170 44 286.4 307 358 (14.2 )
Telecommunications expense 50 4 1,150.0 223 222 0.5
FDIC assessment 135 337 (59.9 ) 519 739 (29.8 )
Accounts receivable financing expense 71 57 24.6 282 222 27.0
Other 408305 33.8 1,3151,031 27.5
Total noninterest expense $3,829$3,140 21.9 $14,009$11,971 17.0

Three months ended

December 31,

Year ended

December 31,

Average Balances20102009Change20102009Change
Total assets $ 351,144 $ 342,318 2.6 % $ 345,443 $ 343,629 0.5 %
Loans receivable 254,145 251,417 1.1 252,800 249,264 1.4
Allowance for loan losses 4,211 3,501 20.3 4,009 3,011 33.1
Other interest-earning assets 73,496 68,654 7.1 70,335 68,028 3.4
Total deposits 302,715 289,916 4.4 297,558 292,656 1.7
Total noninterest bearing deposits 26,275 20,382 28.9 23,457 19,836 18.3
Borrowings 17,248 22,824 (24.4 ) 17,256 23,679 (27.1 )
Shareholders' equity 28,203 27,551 2.4 28,237 27,984 0.9

(1) Computed based on the weighted average number of shares outstanding during each period.

(2) Ratios for the three- and twelve-month periods ended December 31, 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:

Bank of Oak Ridge
Ron Black, President & CEO
336-644-9944
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