May 15, 2009 at 18:15 PM EDT
Oak Ridge Financial Services Announces Increased First Quarter 2009 Earnings

Oak Ridge Financial Services, Inc. (NASDAQ CM: BKOR), the holding company for Bank of Oak Ridge, today reported first quarter 2009 net income of $100,000, compared with net income of $61,000 for the same period in 2008. First quarter 2009 loss available to common stockholders was $8,000, compared to income available to common stockholders of $61,000 for the same period in 2008. First quarter 2009 diluted earnings per share were $0.00, compared to diluted earnings per share of $0.03 for the same period in 2008.

Oak Ridge Financial Services President, Ron Black, in commenting on the results, noted, “Given the difficult economic environment, we are pleased with our profitability in the first quarter of 2009. During the first quarter our primary focus was servicing our loan portfolio, and although our level of nonperforming assets increased from December 2008, we believe that our efforts will pay off in subsequent quarters. Our primary areas of focus for the rest of 2009 will be continuing to service our loan portfolio 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 in these difficult times. The community was incredibly supportive of our Bank in the first quarter and we had significant increases in loans, deposits and noninterest income. Lastly, at March 31, 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 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, 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 March 31,
20092008Change
Income Statement Data:
Total interest income $ 4,696 $ 4,453 5.5 %
Total interest expense 2,2292,538 (12.2 )
Net interest income 2,467 1,915 28.8
Provision for loan losses 366 164 123.2
Non-interest income 828 754 9.8
Non-interest expense 2,7752,408 15.2
Net income before provision for income taxes 154 97 58.8
Provision for income taxes 5436 50.0
Net income $100$61 63.9
Preferred stock dividends 64 - n/a
Accretion of discount 44- n/a
Income available to common stockholders $(8)$61 (113.1 )
Per share data and shares outstanding: (1)
Basic net income per share $ - $ 0.03 (100.0 ) %
Diluted net income per share - 0.03 (100.0 )
Book value at period end 10.65 9.26 15.0
Weighted average number of common shares outstanding (000's):
Basic 1,791.5 1,791.5 - %
Diluted 1,791.5 1,799.1 (0.4 )
Shares outstanding at period end 1,791.5 1,791.5 -
March 31,December 31,
Balance sheet data20092008Change
Total assets $ 345,277 $ 320,672 7.7 %
Loans receivable 250,151 245,481 1.9
Allowance for loan losses 2,777 2,450 13.3
Other interest-earning assets 64,820 55,807 16.2
Noninterest-bearing deposits 18,652 18,181 2.6
Interest-bearing deposits 275,712 252,423 9.2
Borrowings 23,248 30,248 (23.1 )
Stockholders' equity 26,009 18,195 42.9
Three months ended March 31,
Selected performance ratios:20092008
Return on average assets (2) 0.12 % 0.09

%

Return on average stockholders' equity (2) 1.82 1.39
Net interest margin (2)(3) 3.24 3.00
Net interest spread (2)(4) 2.98 2.70
Noninterest income as a % of total revenue 25.1 28.3
Noninterest income as a % of average assets (2) 1.0 1.1
Efficiency ratio (5) 84.22 90.22
Noninterest expense as a % of average assets (2) 3.3 3.5
March 31,December 31,
Asset quality ratios (at period end):20092008
Nonperforming assets to period-end loans (6) 1.67 % 1.09

%

Nonperforming assets to period-end assets (6) 1.21 0.61
Allowance for loan losses to period-end loans 1.11 1.00
Allowance for loan losses to total assets 0.80 0.76
Net loan charge-offs to average loans outstanding (2) 0.06 0.12
Oak Ridge Financial Services, Inc.
Financial Highlights (dollars in thousands, except share and per share data)
March 31,December 31,
Capital and liquidity ratios:20092008
Equity to assets ratio 7.5 % 5.7

%

Loans to deposits 90.7 97.2
Three months ended March 31,
Total Revenue20092008Change
Net interest income $2,467$1,915 28.8 %
Fees and other revenue:
Service charges on deposit accounts 203 176 15.3
Mortgage loan origination fees 156 95 64.2
Investment and insurance commissions 174 206 (15.5 )
Fee income from purchase of accounts receivable 174 167 4.2
Income earned on bank owned life insurance 31 40 (22.5 )
Other 9070 28.6
Total noninterest income 828754 9.8
Total revenue $3,295$2,669 23.5
Three months ended March 31,
Noninterest Expense20092008Change
Salaries and employee benefits $ 1,386 $ 1,284 7.9 %
Occupancy 186 134 38.8
Equipment 170 140 21.4
Data and items processing 145 84 72.6
Professional and advertising 290 287 1.0
Stationary and supplies 55 62 (11.3 )
Telecommunications expense 67 64 4.7
Other real estate expenses and writedowns 119 - n/a
FDIC assessment 73 50 46.0
Accounts receivable financing expense 53 87 (39.1 )
Other 231216 6.9
Total noninterest expense $2,775$2,408 15.2
Three months ended March 31,
Average Balances20092008Change
Total assets $ 333,740 $ 273,907 21.8 %
Loans receivable 248,858 219,860 13.2
Allowance for loan losses 2,566 2,172 18.1
Other interest-earning assets 59,652 35,754 66.8
Total deposits 274,444 257,968 6.4
Borrowings 25,270 24,993 1.1
Stockholders' equity 22,024 17,608 25.1
(1) Computed based on the weighted average number of shares outstanding during each period.
(2) Ratios for the three-month periods ended March 31, 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:

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