November 03, 2008 at 19:27 PM EST
Oak Ridge Financial Services Announces a 25% Increase in Net Income and a 24% Increase in EPS; Solid Asset Quality and Strong Capital Position

Oak Ridge Financial Services, Inc. (NASDAQ CM: BKOR), the holding company for Bank of Oak Ridge, today reported quarterly net income increased 25% to $375,000 for the third quarter of 2008, compared with quarterly net income of $299,000 for the same period in 2007. Basic and diluted earnings per share also increased 24% to 21 cents per share for the third quarter of 2008, compared with basic and diluted earnings per share of 17 cents for the same period in 2007.

Bank of Oak Ridge President, Ron Black, in commenting on the results, noted, We are pleased with our results in the third quarter of 2008, especially given the volatile economic conditions that have persisted for all of 2008. Our efforts this year have been primarily focused on maintaining our record of sound asset quality and attracting low-cost business and checking account deposits, and our hard work and sound financial condition continues to reward us with new business and consumer relationships. I am appreciative of all the great efforts of my teammates and the support of our clients and our Board of Directors in helping us to achieve these results.

Ron Black further noted, We are proud of our strong emphasis on safety and soundness in conducting the operations of the Bank, which we believe is supported by the following factors:

  • The Bank has never engaged in sub prime lending;
  • The Bank currently has a Bauer Financial four-star (excellent) rating;
  • At September 30, 2008, the Companys, nonperforming assets to total assets ratio was 0.28%, which is very low by industry standards; and
  • The Bank was well capitalized at September 30, 2008.

As it relates to recent developments in the banking industry, the Bank would like its investors and clients to take note of the Banks capabilities:

  • The Banks experienced employees are able to work with existing and new clients to make sure they maximize their FDIC insurance coverage;
  • Through the Banks participation in the CDARS program, the Bank can offer full FDIC insurance to clients and businesses up to $50 million;
  • The Bank currently offers unlimited FDIC insurance on noninterest-bearing accounts to consumers and businesses, and plans to participate in the FDIC program to offer this insurance through the end of December 2009; and
  • The Bank is going to apply for the Treasurys Capital Purchase Program and expects its application to be approved.

About Oak Ridge Financial Services, Inc.

Oak Ridge Financial Services, Inc., is the holding company for the Bank of Oak Ridge, a community bank headquartered in Oak Ridge, NC, with five locations in Oak Ridge, Summerfield and 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, 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 Bank. These forward-looking statements involve risks and uncertainties and are based on the beliefs and assumptions of management of the Bank 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 Banks 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 Banks other filings with the Federal Deposit Insurance Corporation. The Bank 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,

20082007Change20082007Change
Income Statement Data:
Total interest income $ 4,457 $ 4,268 4.4 % $ 13,358 $ 11,890 12.3 %
Total interest expense 2,1812,348 (7.1 ) 6,9476,336 9.6
Net interest income 2,276 1,920 18.5 6,411 5,554 15.4
Provision for loan losses 74 110 (32.7 ) 337 273 23.4
Noninterest income 898 735 22.2 2,549 1,747 45.9
Noninterest expense 2,501 2,082 20.1 7,332 6,116 19.9
Provision for income taxes 224164 36.6 471305 54.4
Net income $375$299 25.4 $820$607 35.1
Per share data and shares outstanding:
Basic net income per share (1) $ 0.21 $ 0.17 23.5 % $ 0.46 $ 0.34 35.3 %
Diluted net income per share (1) 0.21 0.17 23.5 0.45 0.33 36.4
Book value at period end 10.16 9.56 6.3 10.16 9.56 6.3
Weighted average number of common shares outstanding (000's):
Basic 1,791.5 1,790.2 0.1 % 1,791.5 1,790.2 0.1 %
Diluted 1,791.5 1,809.1 (1.0 ) 1,809.4 1,837.4 (1.5 )
Shares outstanding at period end 1,791.5 1,790.2 0.1 1,791.5 1,790.2 0.1
September 30,December 31,
Balance sheet data20082007Change
Total assets $ 309,730 $ 262,208 18.1 %
Loans receivable 238,616 212,821 12.1
Allowance for loan losses 2,379 2,120 12.2
Other interest-earning assets 55,064 31,724 73.6
Noninterest-bearing deposits 19,155 14,771 29.7
Interest-bearing deposits 240,486 203,745 18.0
Borrowings 30,248 24,248 24.7
Shareholders' equity 18,194 17,684 2.9

Three months ended

September 30,

Nine months ended

September 30,

Selected performance ratios:2008200720082007
Return on average assets (2) 0.51 % 0.51 % 0.38 % 0.37 %
Return on average stockholders' equity (2) 8.48 7.07 6.21 4.85
Net interest margin (2)(3) 3.27 3.51 3.10 3.54
Net interest spread (2)(4) 2.99 3.01 2.85 3.12
Noninterest income as a % of total revenue 28.3 27.7 28.4 23.9
Noninterest income as a % of average assets (2) 1.2 1.2 1.2 1.1
Efficiency ratio (5) 78.80 78.42 81.83 83.77
Noninterest expense as a % of average assets (2) 3.4 3.5 3.4 3.7
September 30,December 31,September 30,
Asset quality ratios (at period end):200820072007
Nonperforming assets to period-end loans (6) 0.28 % 0.18 % 0.21 %
Allowance for loan losses to period-end loans 1.00 1.00 1.03
Allowance for loan losses to total assets 0.77 0.81 0.80
Net loan charge-offs to average loans outstanding (2) 0.04 0.02 0.04
September 30,December 31,September 30,
Capital ratios (Bank of Oak Ridge):200820072007
Total capital ratio 10.4 % 10.4 % 11.2 %
Tier 1 capital ratio 9.5 9.4 10.3
Leverage capital ratio 8.3 8.5 9.0
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,

Total Revenue20082007Change20082007Change
Net interest income $2,276$1,920 18.5 % $6,411$5,554 15.4 %
Fees and other revenue:
Customer service and other fees 222 160 38.8 575 405 42.0
Mortgage loan origination fees 98 94 4.3 330 316 4.4
Investment and insurance commissions 237 246 (3.7 ) 687 626 9.7
Trading loss (2 ) 11 (118.2 ) 1 (135 ) (100.7 )
Income from bank owned life insurance 41 40 2.5 121 118 2.5
Fee income from accounts receivable financing 209 113 85.0 561 236 137.7
Other 9371 31.0 274181 51.4
Total noninterest income 898735 22.2 2,5491,747 45.9
Total revenue $3,174$2,655 19.5 $8,960$7,301 22.7

Three months ended

September 30,

Nine months ended

September 30,

Noninterest Expense20082007Change20082007Change
Salaries and employee benefits $ 1,339 $ 1,103 21.4 % $ 3,885 $ 3,356 15.8 %
Occupancy expense 171 121 41.3 434 367 18.3
Equipment expense 158 145 9.0 438 407 7.6
Data and items processing 122 89 37.1 334 223 49.8
Professional and advertising expenses 259 269 (3.7 ) 850 717 18.5
Stationary and supplies 81 50 62.0 192 158 21.5
Telecommunications expense 56 55 1.8 194 164 18.3
Other 315250 26.0 1,005724 38.8
Total noninterest expense $2,501$2,082 20.1 $7,332$6,116 19.9

Three months ended

September 30,

Nine months ended

September 30,

Average Balances20082007Change20082007Change
Total assets $ 293,729 $ 233,418 25.8 % $ 285,346 $ 218,780 30.4

%

Loans receivable 232,678 185,004 25.8 225,398 174,484 29.2
Allowance for loan losses 2,347 1,903 23.3 2,270 1,814 25.1
Other interest-earning assets 40,232 32,197 25.0 38,946 29,620 31.5
Total deposits 246,177 190,615 29.1 237,146 180,691 31.2
Total noninterest bearing deposits 17,213 15,916 8.1 16,029 14,952 7.2
Borrowings 30,408 24,248 25.4 27,599 20,140 37.0
Shareholders' equity 17,699 16,921 4.6 17,602 16,700 5.4

(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, 2008 and 2007 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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