GlobeNewswire Inc | Aug 3, 2020 10:24PM EDT

August 04, 2020

OAK RIDGE, N.C., Aug. 03, 2020 (GLOBE NEWSWIRE) -- Oak Ridge Financial Services, Inc. (Oak Ridge; or the Company) (OTCPink: BKOR), the parent company of Bank of Oak Ridge (the Bank), announced unaudited financial results for the second quarter of 2020 and a quarterly cash common dividend of $0.06 per share.

Second Quarter 2020 Highlights

-- Basic and diluted earnings per share of $0.45 for the three months ended June 30, 2020, up $0.07, or 18.4%, from $0.38 for the same period in 2019 -- Return on average common stockholders equity of 11.61% (annualized) for the three months ended June 30, 2020, compared to 10.75% (annualized) for the same period in 2019 -- Period end loans net of outstanding Small Business Administration (SBA) Payroll Protection Program (PPP) loans of $405.3 million, up 4.2% (8.4% annualized) from December 31, 2019 -- Period end loans of $452.3 million, up 16.3% (32.7% annualized) from December 31, 2019 -- Through July 31, 2020, the Bank has funded 587 PPP loans totaling $49.6 million, and had collected fees from the SBA of $1.96 million; these fees will be recognized as interest income over the life of the PPP loans -- Proactively deferred $133.0 million in loans as of June 30, 2020 in response to COVID-19 -- Loan loss provisions through the six months ended June 30, 2020 were $1.6 million, up from $185,000 for the same period in 2019, most of the 2020 loan loss provisions are related to the potential adverse economic impact of the COVID-19 pandemic -- Period end deposits of $463.0 million, up 16.3% (32.8% annualized) from December 31, 2019 -- Period end noninterest-bearing deposits of $101.9 million, up 58.3% (117.3% annualized) from December 31, 2019 -- On June 4, 2020, the Company completed a private placement of $10 million of subordinated notes to certain qualified institutional and other accredited investors. The Company intends to use the net proceeds for general corporate purposes, including possible repayment of the currently outstanding subordinated debt which is callable in 2021 -- Nonperforming assets of $3.6 million, down 7.7% from December 31, 2019 -- On April 27, 2020, the Bank became a member bank of the Federal Reserve System through the Federal Reserve Bank of Richmond -- Named to American Banker magazines Top 200 Publicly Traded Community Banks and Thrifts. The ranking is based on a companys three-year average return on average equity (ROAE) through December 31, 2019. The Company came in at #90, up 20 spots from last year. This is the fourth consecutive year the Company has been named to the prestigious list.

Tom Wayne, Chief Executive Officer and Chief Financial Officer, reported, In the midst of the unprecedented challenges presented by the ongoing COVID-19 pandemic, I am extremely pleased with our financial performance thus far in 2020, and very proud of our banks support of the local community through our participation in the PPP program and our loan deferral program which is structured to assist borrowers that have been impacted by COVID-19. Since the pandemic began, we have followed local, state, and national guidelines, and have adapted our sales and service processes to seamlessly service our clients and new clients while keeping our teams safe. While it is difficult to accurately predict the next few quarters and the impact of COVID-19 on our local and national economy, I am thankful to have our experienced team of bankers and a supportive board of directors as we address future challenges and opportunities.

The Company announced that its board of directors has declared a quarterly cash dividend of $0.06 per share of common stock. The dividend is payable on September 4, 2020 to stockholders of record as of the close of business on August 21, 2020. We are pleased to announce our quarterly cash dividend to our stockholders, said Tom Wayne. Paying stockholders a portion of our earnings reflects our continuing commitment to enhance stockholder value.

The Banks capital ratios remain strong and exceeded all regulatory requirements at June 30, 2020. As of June 30, 2020, the Companys stockholders equity was 7.7% of total assets, down from 8.5% as of December 31, 2019.

With respect to the consolidated statement of operations for the three months ended June 30, 2020, net interest income was $4.4 million, which was an increase from $4.1 million during the same period in 2019. For the three months ended June 30, 2020, the net interest margin was 3.60% compared to 3.72% for the same period in 2019, a decrease of 12 basis points. For the six months ended June 30, 2020, net interest income was $8.4 million, compared to $8.1 million during the same period in 2019. The net interest margin was 3.58% for the six months ended June 30, 2020, compared to 3.72% for the same period in 2019, a decrease of 14 basis points.

The Company recorded a provision for loan losses of $489,000 for the three months ended June 30, 2020, compared with a provision of $225,000 for the same period in 2019. For the six months ended June 30, 2020 the Company recorded a provision of $1.6 million compared with a provision of $185,000 for the same period in 2019. The allowance for loan losses as a percentage of total loans was 1.00% at June 30, 2020 compared to 0.90% at December 31, 2019. The allowance for loan losses as a percentage of total loans not including PPP loans was 1.11% at June 30, 2020. The increase in the allowance for loan losses in 2020 was largely the result of the Company increasing the qualitative factors in its allowance for loan loss model due to the deteriorating economic outlook related to COVID-19. Nonperforming assets represented 0.65% of total assets at June 30, 2020, compared to 0.82% at December 31, 2019.

Noninterest income totaled $946,000 for the three months ended June 30, 2020, compared with $847,000 for the same period in 2019, an increase of $99,000 or 11.7%. The biggest contributor to the increase was a gain on sale of SBA loans (not PPP loans) of $261,000 in the second quarter of 2020 and no such gains in the comparable period in 2019. A $164,000 gain on sale of securities for the three months ended June 30, 2019, and no such gain in 2020 partially offset the increase in gain on sale of SBA loans. Noninterest income totaled $1.6 million for the six months ended June 30, 2020, compared with $1.4 million for the same period in 2019, an increase of $170,000 or 11.7%. The biggest contributor to the increase was a gain on sale of SBA loans (not PPP loans) of $261,000 in the second quarter of 2020 and no such gains in the comparable period in 2019. A $164,000 gain on sale of securities for the three months ended June 30, 2019, and no such gain in 2020 partially offset the increase in gain on sale of SBA loans.

Noninterest expense totaled $3.4 million in the three months ended June 30, 2020, a decrease of $144,000, or 4.1%, from the same period in 2019. A decrease in salaries, primarily due to credits in payroll taxes as a result of provisions in the CARES Act, was responsible for most of this decrease. Noninterest expense totaled $6.7 million in the six months ended June 30, 2020, a decrease of $174,000, or 2.5%, from 2019. A decrease in salaries, primarily due to credits in payroll taxes as a result of provisions in the CARES Act as well as lower incentive payments in 2020 compared to 2019, was responsible for most of this decrease.

About Oak Ridge Financial Services, Inc.Oak Ridge Financial Services, Inc. (OTCPink: BKOR) is the holding company for Bank of Oak Ridge. Bank of Oak Ridge delivers personal attention and convenience for every client. Substantially all of the Banks employees are stockholders in Oak Ridge Financial Services, Inc. through their participation in the Banks Employee Stock Ownership Plan. We are proud of our many accolades and awards, including seven Best Bank in the Triad wins, Triads Top Workplace finalist, Triads Healthiest Employer winner and a 2016 Better Business Bureau Torch Award winner. We offer a complete range of banking services for individuals and businesses. Bank of Oak Ridge is a member of the FDIC and an Equal Housing Lender.

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Visit Us | To learn more, visit us during our extended weekday and Saturday hours at one of our convenient locations in Greensboro, Summerfield and Oak Ridge, North Carolina, or call 336.644.9944, or online at www.BankofOakRidge.com.

Forward-looking InformationThis earnings release 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 Companys 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 collectability 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, and (6) the impact of changes in monetary and fiscal policies, laws, rules and regulations. The Company undertakes no obligation to update any forward-looking statements.

Oak Ridge Financial Services, Inc. Consolidated Balance Sheets June 30, 2020 (Unaudited) and December 31, 2019 (Audited) (Dollars in thousands)

2020 2019Assets Cash and due from banks $ 11,455 $ 4,030Interest-bearing deposits with banks 17,712 19,539Total cash and cash equivalents 29,167 23,569Securities available-for-sale 44,125 41,183Securities held-to-maturity (fair values of $777 in 2020 651 730and $898 in 2019)Federal Home Loan Bank Stock, at cost 1,880 1,042Loans, net of allowance for loan losses of $4,505 in 2020 447,755 386,056and $2,886 in 2019Property and equipment, net 10,230 10,491Accrued interest receivable 2,986 1,478Bank owned life insurance 5,883 5,837Right-of-use assets ? operating leases 1,174 1,336Other assets 3,903 3,984Total assets $ 547,754 $ 475,706 Liabilities and Stockholders? Equity Liabilities Deposits: Noninterest-bearing $ 101,930 $ 64,374Interest-bearing 361,041 333,752Total deposits 462,971 398,126Short-term borrowings 10,000 15,000Long-term borrowings 1,085 1,184Junior subordinated notes related to trust preferred 8,248 8,248securitiesSubordinated debentures 15,431 5,608Lease liabilities ? operating leases 1,174 1,336Accrued interest payable 176 281Other liabilities 6,424 5,608Total liabilities 505,509 435,391 Stockholders? equity Common stock, no par value; 50,000,000 shares authorized;2,643,945 and 2,621,315 issued and outstanding in 2020 24,720 24,850and 2019, respectivelyRetained earnings 14,227 13,146Accumulated other comprehensive income 3,298 2,319Total stockholders? equity 42,245 40,315Total liabilities and stockholders? equity $ 547,754 $ 475,706

Oak Ridge Financial Services, Inc.Consolidated Statements of OperationsFor the three months and six months ended June 30, 2020 and 2019 (Unaudited)(Dollars in thousands except per share data)





Three months ended June Six months ended June 30, 30, 2020 2019 2020 2019Interest and dividend incomeLoans and fees on loans $ 5,221 $ 5,048 $ 10,145 $ 9,927Interest on deposits in 3 90 68 172banksFederal Home Loan Bank 25 17 41 33stock dividendsInvestment securities 317 368 615 734Total interest and dividend 5,566 5,523 10,869 10,866incomeInterest expense Deposits 854 1,129 1,914 2,201Short-term and long-term 265 277 538 590debtTotal interest expense 1,119 1,406 2,452 2,791Net interest income 4,447 4,117 8,417 8,075Provision for loan losses 489 225 1,629 185Net interest income after 3,958 3,892 6,788 7,890provision for loan losses Noninterest income Service charges on deposit 128 195 309 340accountsGain on sale of securities - 164 - 164Brokerage commissions on 116 68 198 136mortgage loansInsurance commissions 88 81 172 168Gain on sale of SBA loans 261 - 261 -Fee income from accounts 1 1 1 12receivable financingDebit and credit card 278 252 521 458interchange incomeIncome earned on bank owned 23 24 47 48life insuranceOther service charges and 51 62 110 123feesTotal noninterest income 946 847 1,619 1,449Noninterest expense Salaries 1,341 1,598 2,888 3,272Employee benefits 229 275 501 560Occupancy expense 217 208 452 427Equipment expense 248 271 493 461Data and item processing 581 526 1,093 976Professional and 148 183 314 287advertisingStationary and supplies 19 39 52 90Impairment loss on 22 4 22 10securitiesTelecommunications expense 104 95 182 189FDIC assessment 74 48 87 99Accounts receivable - - - 3financing expenseOther expense 403 283 636 520Total noninterest expense 3,386 3,530 6,720 6,894Income before income taxes 1,518 1,209 1,687 2,445Income tax expense 317 214 314 442Net income and net incomeavailable to common $ 1,201 $ 995 $ 1,373 $ 2,003stockholdersBasic net income per common $ 0.45 $ 0.38 $ 0.52 $ 0.77shareDiluted income per common $ 0.45 $ 0.38 $ 0.52 $ 0.76shareBasic weighted average 2,644,388 2,625,695 2,639,787 2,616,459common shares outstandingDiluted weighted average 2,652,469 2,633,641 2,648,468 2,624,405common shares outstanding

Oak Ridge Financial Services, Inc.Selected Quarterly Financial Ratios (unaudited)

Selected June 30, March 31, December September June 30, March 31,Financial 2020 2020 31, 2019 30, 2019 2019 2019DataReturn onaveragecommon 11.66 % 1.68 % 10.23 % 11.08 % 10.75 % 11.61 %stockholders'equity^1Tangible bookvalue per $ 15.98 $ 15.22 $ 15.36 $ 14.99 $ 14.37 $ 13.80 shareReturn onaverage 0.92 % 0.14 % 0.86 % 0.92 % 0.85 % 0.89 %assets^1Net interest 3.60 % 3.55 % 3.57 % 3.80 % 3.72 % 3.72 %margin^1Net interestincome to 3.41 % 3.23 % 3.37 % 3.51 % 3.51 % 3.52 %averageassets^1Efficiency 62.79 % 71.82 % 74.53 % 69.9 % 71.1 % 73.1 %ratioNonperformingassets to 0.65 % 0.78 % 0.81 % 0.91 % 0.50 % 0.56 %total assets

1Annualized

Contact: Tom Wayne, President and CFOPhone: 336-644-9944