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Oak Ridge Financial Services, Inc. Announces Third Quarter 2021 Results

OAK RIDGE, N.C., Oct. 26, 2021 (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 three and nine months ended September 30, 2021.

Third Quarter 2021 Highlights

  • Basic and diluted earnings per share of $0.75 for the three months ended September 30, 2021, up 42 cents, or 127.3%, from the comparable 2020 period;
  • Annualized return on average common stockholders’ equity of 16.40% for the three months ended September 30, 2021, compared to 8.50% for the same period in 2020;
  • Tangible book value per common share of $18.72 as of September 30, 2021, up 14.4%, or $2.36, from $16.36 as of September 30, 2020;
  • Through September 30, 2021, forgave and recognized remaining unamortized fees and associated costs of approximately 90% on the $50.1 million of first round of Small Business Administration (“SBA”) Paycheck Protection Program (“PPP”) loans;
  • Through the nine months ending September 30, 2021, the Bank funded 418 Round 2 PPP loans totaling $30.8 million, the associated fees and origination costs will be recognized as interest income and expense, respectively, over the life of the PPP loans;
  • Through September 30, 2021, forgave and recognized remaining unamortized fees and associated costs of approximately 27% on the $30.8 million of second round of Small Business Administration (“SBA”) Paycheck Protection Program (“PPP”) loans;
  • Period end loans of $441.5 million, down 2.02% (2.71% annualized), or $9.1 million from $450.6 million as of December 31, 2020;
  • Period end allowance for loan losses of $4.2 million, down 22.6%, from $5.5 million on December 31, 2020;
  • Nonperforming assets of $2.8 million, down 20% from $3.5 million on December 31, 2020;
  • Period end deposits of $487.2 million, up 6.9%, or $31.5 million from $455.7 million as of December 31, 2020.
  • Through the nine months ending September 30, 2021, the Bank has retired $8 million in short term borrowings and $5.6 million in subordinated debentures.

Tom Wayne, Chief Executive Officer and Chief Financial Officer, reported, “I am extremely pleased with our continued strong performance in the third quarter of 2021. I am thankful to have our experienced team of bankers and a supportive board of directors as we address future opportunities and challenges.”

A quarterly cash dividend of $0.07 per share of common stock is payable on December 1, 2021 to stockholders of record as of the close of business on November 16, 2021. “We are pleased to pay another quarterly cash dividend to our stockholders,” said Mr. Wayne. “Paying stockholders a portion of our earnings reflects our continuing commitment to enhance stockholder value.”

The Bank adopted the 9% community bank leverage ratio (“CBLR”) requirement as of September 30, 2020. As of September 30, 2021, the Bank’s CBLR was 10.09%, up from 9.37% on December 31, 2020. As of September 30, 2021, the Company’s stockholders’ equity was $49.5 million, up 11.3%, from $44.5 million on December 31, 2020.

With respect to the consolidated statement of operations for the three months ended September 30, 2021, net interest income was $5.3 million, compared to $4.5 million during the same period in 2020. For the three months ended September 30, 2021, the net interest margin was 3.94% compared to 3.42% for the same period in 2020, an increase of 52 basis points. For the nine months ended September 30, 2021, net interest income was $16.0 million, compared to $12.9 million during the same period in 2020. The net interest margin was 4.00% for the nine months ended September 30, 2021, compared to 3.55% for the same period in 2020, an increase of 45 basis points.

The Company recorded a negative provision for loan losses of $135,000 for the three months ended September 30, 2021, compared to a provision of $617,000 for the same period in 2020. For the nine months ended September 30, 2021, the Company recorded a negative provision of $247,000 compared with a provision of $2.2 million for the same period in 2020. The allowance for loan losses as a percentage of total loans was 0.96% on September 30, 2021, compared to 1.21% on December 31, 2020. The allowance for loan losses as a percentage of total loans not including PPP loans was 1.02% on September 30, 2021, compared to 1.35% as of December 31, 2020. The decrease in the allowance for loan losses in 2021 was largely the result of the Company decreasing the qualitative factors in its allowance for loan loss model due to the improving overall economic outlook and specifically related to the economic effects COVID-19. Nonperforming assets represented 0.50% of total assets on September 30, 2021, compared to 0.64% on December 31, 2020.

Noninterest income totaled $919,000 for the three months ended September 30, 2021, compared with $900,000 for the same period in 2020, an increase of $19,000 or 2.1%. The biggest contributors to the decrease was a gain on sale of SBA loans (not PPP loans) of $202,000 in the third quarter of 2020 and $56,000 such gains in the comparable period in 2021; as well as a gain on the sale of investment securities of $182,000 in the third quarter of 2021 and no such gains in the comparable period in 2020. Noninterest income totaled $2.2 million for the nine months ended September 30, 2021, compared with $2.5 million for the same period in 2020, a decrease of $266,000 or 10.6%. The biggest contributor to the decrease was the above-mentioned gain on sale of SBA loans in the comparable period in 2020 as well as the above-mentioned gain on sale of investment securities in the nine months ended September 30, 2021, and no such gains on sale of investment securities in the comparable period in 2020.

Noninterest expense totaled $3.8 million in the three months ended September 30, 2021, an increase of $112,000, or 3.0%, from the same period in 2020. The increase was driven by higher employee salaries which increased by $188,000 compared to the prior period. Annual merit increases effective January 1, 2021, higher 2021 incentive payments, and higher 2020 deferred loan origination expense contributed to the increase in salaries. Noninterest expense totaled $11.2 million in the nine months ended September 30, 2021, an increase of $782,000, or 7.5%, from 2020. The increase was driven by higher employee salaries which increased by $791,000 compared to the prior period. Annual merit increases effective January 1, 2021, higher 2021 incentive payments, and higher 2020 deferred loan origination expense contributed to the salary increase.

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 the Bank’s employees are stockholders in Oak Ridge Financial Services, Inc. through their participation in the Bank’s Employee Stock Ownership Plan. We are proud of our many accolades and awards, including seven “Best Bank in the Triad” wins, “Triad’s Top Workplace” finalist, “Triad’s 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.

Banking Services | ATM Usage Worldwide | Mobile Banking | Online Billpay | Remote and Mobile Deposit | Checking | Savings | Mortgage | Insurance | Lending | Wealth Management

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

Forward-looking Information
This 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 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 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
As of September 30, 2021 (Unaudited) and December 31, 2020 (Audited)

 2021
 2020
Assets     
Cash and due from banks$8,949 $9,354
Interest-bearing deposits with banks 44,617  11,994
Total cash and cash equivalents 53,566  21,348
Securities available-for-sale 45,266  46,357
Securities held-to-maturity 455  564
Restricted stock, at cost 1,320  1,806
Loans, net of allowance for loan losses of $4,227 at period end 2021 and $5,458 at year end 2020 437,237  445,127
Property and equipment, net 10,131  10,632
Accrued interest receivable 1,783  2,412
Bank owned life insurance 5,993  5,930
Right-of-use assets – operating leases 1,695  1,990
Other assets 5,447  4,464
Total assets$562,893 $540,630
      
Liabilities and Stockholders’ Equity     
Liabilities     
Deposits:     
Noninterest-bearing$119,101 $94,227
Interest-bearing 368,119  361,510
Total deposits 487,220  455,737
Short-term borrowings -  8,000
Long-term borrowings 750  952
Junior subordinated notes related to trust preferred securities 8,248  8,248
Subordinated debentures 9,853  15,484
Lease liabilities – operating leases 1,695  1,990
Accrued interest payable 271  140
Other liabilities 5,340  5,604
Total liabilities 513,377  496,155
      
Stockholders’ equity     
Common stock, no par value; 50,000,000 shares authorized; 2,672,620 issued and outstanding at period end 2021 and 2,639,345 at year end 2020 25,379  25,013
Retained earnings 21,028  15,771
Accumulated other comprehensive income 3,109  3,691
Total stockholders’ equity 49,516  44,475
Total liabilities and stockholders’ equity$562,893 $540,630
      


Oak Ridge Financial Services, Inc.
Consolidated Statements of Income
Nine and three months ended September 30, 2021 and 2020 (Unaudited)
(Dollars in thousands except per share data)
 Three months ended
September 30,
Nine months ended
September 30,
 20212020
20212020
Interest and Dividend Income            
Loans and fees on loans$5,471 $5,302 $16,787 $15,453 
Interest on deposits in banks 11  11  21  79 
Restricted stock dividends 19  10  59  51 
Taxable and tax-exempt investment securities 330  322  1,014  937 
Total interest and dividend income 5,831  5,645  17,881  16,520 
Interest expense            
Deposits 304  729  1,027  2,644 
Short-term and long-term debt 209  416  855  954 
Total interest expense 513  1,145  1,882  3,598 
Net interest income 5,318  4,500  15,999  12,922 
Provision for (recovery of) loan losses (135)  617  (247)  2,246 
Net interest income after provision for loan losses 5,453  3,883  16,246  10,676 
Noninterest income            
Service charges on deposit accounts 135  136  390  445 
Brokerage commissions on mortgage loans 67  97  199  295 
Insurance commissions 112  103  321  275 
Gain on sale of SBA loans 56  202  56  464 
Debit and credit card interchange income 283  275  829  796 
Income earned on bank owned life insurance 21  24  63  70 
Gain on sale of investment securities 182  -  182  - 
Other service charges and fees 63  63  208  169 
Total noninterest income 919  900  2,248  2,514 
Noninterest expense            
Salaries 1,708  1,520  5,198  4,407 
Employee benefits 265  330  830  831 
Occupancy 271  261  800  713 
Equipment 284  259  829  752 
Data and item processing 500  540  1,375  1,633 
Professional and advertising 296  148  724  462 
Stationary and supplies 42  51  139  103 
Net cost of foreclosed assets -  -  -  - 
Impairment loss on securities -  31  28  53 
Telecommunications 91  83  281  265 
FDIC assessment 48  107  141  194 
Other expense 315  378  865  1,015 
Total noninterest expense 3,820  3,708  11,210  10,428 
Income before income taxes 2,552  1,075  7,284  2,762 
Income tax expense 539  199  1,495  513 
Net income and income available to common stockholders$2,013 $876 $5,789 $2,249 
Basic income per common share$0.75 $0.33 $2.17 $0.85 
Diluted income per common share$0.75 $0.33 $2.17 $0.85 
Basic weighted average shares outstanding 2,672,620  2,644,165  2,667,405  2,641,251 
Diluted weighted average shares outstanding 2,672,620  2,644,165  2,667,405  2,648,882 
             


Selected Financial DataSeptember
30, 2021  
June 30,
2021  
March 31,
2021  
December
31, 2020   
September
30, 2020  
June 30,
2020  
Return on average common stockholders' equity1 16.40% 14.71% 18.45% 9.17% 8.50% 11.61%
Tangible book value per share$18.72 $17.93 $17.24 $16.86 $16.36 $15.98 
Return on average assets1 1.41% 1.20% 1.49% 0.73% 0.64% 0.92%
Net interest margin1 3.94% 3.79% 4.26% 3.57% 3.42% 3.60%
Net interest income to average assets1 3.73% 3.67% 4.03% 3.32% 3.27% 3.41%
Efficiency ratio 63.08% 62.80% 59.94% 67.64% 68.67% 62.79%
Nonperforming assets to total assets 0.50% 0.55% 0.62% 0.64% 0.64% 0.65%

1Annualized

Contact: Tom Wayne, CEO and CFO
Phone: 336-644-9944