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Oak Ridge Financial Services, Inc. Announces First Quarter 2015 Net Income

OAK RIDGE, N.C., April 21, 2015 (GLOBE NEWSWIRE) -- Oak Ridge Financial Services, Inc. ("Oak Ridge"; the "Company") (OTCQB:BKOR), the parent company of Bank of Oak Ridge (the "Bank"), announced unaudited financial results for the first quarter of 2015 today.

The Company's net income for the first quarter of 2015 was $714,000 compared to net income of $408,000 for the first quarter of 2014, an increase of $306,000. Net income available to common stockholders for the first quarter of 2015 was $597,000 compared to net income of $312,000 for the first quarter of 2014, an increase of $285,000. Basic and diluted income per common share increased $0.11 to $0.27 for the first quarter of 2015 compared to diluted income per common share of $0.16 in the first quarter of 2014.

Ron Black, President and CEO of the Company and the Bank, commented, "During the first quarter, the Company continued to focus on enhancing our basic core banking business. Both loans and deposits increased from December 31, 2014 to March 31, 2015. I am thankful for the support of our clients, shareholders, employees and Board of Directors while we improve the earnings of the Bank."

Profitability as measured by the Company's annualized return on average assets was 0.80% and 0.47% for the three months ended March 31, 2015 and 2014, respectively.

The Company produced net interest income of $3.4 million during the first three months of 2015, which was slightly higher than the $3.3 million generated for the same time period of 2014. The increase was primarily caused by higher interest income, which increased $97,000 or approximately 2.6% to $3.9 million for the first three months of 2015 as compared to the same time period of the prior year. Interest expense increased to $523,000 for the three months ended March 31, 2015 compared to $447,000 for the same period in 2014.

The allowance for loan losses was $4.3 million as of March 31, 2015, which represented 1.53% of total loans outstanding. The allowance for loan losses was $4.2 million, or 1.52% of total loans outstanding, as of December 31, 2014. Material improvements in asset quality over the last year lowered the Company's nonperforming assets to total assets to 1.47% as of March 31, 2015 compared to 2.04% as of March 31, 2014. Nonperforming assets decreased to $5.3 million as of March 31, 2015 from $7.3 million as of March 31, 2014. This 40.9% decrease has been driven by significant efforts by the Bank to dispose of nonperforming assets. Nonperforming assets to total assets increased from 1.31% as of December 31, 2014 to 1.47% as of March 31, 2015.

Noninterest income increased $563,000 or approximately 74.3% to $1.3 million during the first three months of 2015 as compared to the same time period of 2014. The majority of the net increase was associated with a $678,000 gain on sale of securities during the three months ended March 31, 2015, offset by a decline of $74,000 in fee income from accounts receivable financing from the three months ended 2014 to the same period in 2015.

Noninterest expense increased $528,000 or approximately 17.0% to $3.6 million for the first three months of 2015 compared to $3.1 million for the same time period of 2014. The overall increase is largely due to increases in employee benefits, stationary and supplies, net cost of foreclosed assets, telecommunications and other expenses. Employee benefits increased $124,000 from 2014 to 2015 which was mostly due to a $160,000 increase in the Employee Stock Ownership Plan accrual from 2014 to 2015, offset by decreases in other employee benefit expenses. Stationary and supplies increased $55,000 to $80,000 for the three months ended March 31, 2015 due to greater supply purchases in 2015 compared to 2014. Net cost of foreclosed assets increased $274,000 to $238,000 (there was a negative expense of $36,000 in 2014), due to writedowns of several foreclosed assets during the three months ended March 31, 2015. Telecommunications expense increased $90,000 to $191,000 for the three months ended March 31, 2015 due to contingency fees paid to a fixed cost reduction company based on one-time and ongoing cost savings identified during the end of 2014 and during the three months ended March 31, 2015. Lastly, other expense increased $105,000 to $361,000 for the three months ended March 31, 2015 mostly due to a $121,000 increase in appraisals on problem loans and assets. Smaller decreases and increases in other expense items contributed to the overall net increase in the expense category.

Total assets as of March 31, 2015 were $362.7 million, up approximately 1.4% or $5.0 million from $357.7 million as of December 31, 2014. The principal components of the Company's assets as of the end of the time period were $274.9 million in net loans, $17.8 million in cash and cash equivalents and $52.4 million in available-for-sale and held-to-maturity securities. During the first three months of 2015, net loans were $274.9 million, up approximately 1.3% or $3.7 million from $271.2 million as of December 31, 2014. Cash and cash equivalents increased approximately 23.4% or $3.4 million from $14.4 million as of December 31, 2014, and available-for-sale and held-to-maturity investment securities decreased approximately 0.80% or $421,000 from $52.9 million as of December 31, 2014.

Total liabilities as of March 31, 2015 were $335.6 million, up approximately 1.4% or $4.7 million from $330.9 million as of December 31, 2014. Higher levels of deposits drove the increase as noninterest-bearing and interest-bearing deposits increased $1.2 million (3.1%) and $3.3 million (1.2%), respectively, from December 31, 2014 to March 31, 2015.

Total stockholders' equity as of March 31, 2015 was $27.1 million as compared to total stockholders' equity as of December 31, 2014 of $26.8 million. Increases from December 31, 2014 to March 31, 2015 in common stock of $189,000 and net income of $714,000, were offset by preferred dividends of $117,000 and a $432,000 decrease in accumulated other comprehensive income.

About Oak Ridge Financial Services, Inc.

Oak Ridge Financial Services, Inc. (OTCQB:BKOR) is the holding company for Bank of Oak Ridge. Bank of Oak Ridge (http://www.BankofOakRidge.com) is a community bank with locations in Greensboro, Summerfield and Oak Ridge, North Carolina. The bank was established in 2000 with the goal of delivering Banking As It Should Be®. With a focus on providing personal attention and convenience for every client, we offer a complete range of banking services for individuals and businesses including Saturday and extended weekday hours at all locations, ATM usage world-wide, mobile banking, remote deposits for consumers and businesses, and a full line of checking accounts; savings accounts; mortgage services; insurance services; lending options; and wealth management services. Bank of Oak Ridge is a Member FDIC and Equal Housing Lender. For more information, call 336-644-9944 or visit the office location closest to you.

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.
Consolidated Balance Sheets
March 31, 2015 (unaudited) and December 31, 2014 (audited)
(Dollars in thousands)
2015 2014
Assets
Cash and due from banks $ 6,075 $ 7,279
Interest-bearing deposits with banks 11,704 7,132
Total cash and cash equivalents 17,779 14,411
Securities available-for-sale 50,126 50,389
Securities held-to-maturity (fair values of $2,550 in 2015 and $2,683 in 2014) 2,315 2,472
Federal Home Loan Bank Stock, at cost 432 426
Loans held for sale 191 864
Loans, net of allowance for loan losses of $4,276 in 2015 and $4,191 in 2014 274,865 271,205
Property and equipment, net 7,806 7,889
Foreclosed assets 235 450
Accrued interest receivable 1,169 1,343
Bank owned life insurance 5,357 5,329
Other assets 2,488 2,908
Total assets $ 362,673 $ 357,686
Liabilities and Stockholders' Equity
Liabilities
Deposits:
Noninterest-bearing $ 40,784 $ 39,556
Interest-bearing 277,186 273,936
Total deposits 317,970 313,492
Federal Home Loan Bank advances 2,500 2,500
Notes payable 2,375 2,500
Junior subordinated notes related to trust preferred securities 8,248 8,248
Accrued interest payable 120 97
Other liabilities 4,404 4,055
Total liabilities 335,617 330,892
Stockholders' equity
Preferred stock, Series A, no par value, $1,000 per share liquidation preference; 7,700 shares authorized; 5,200 issued and outstanding in 2015 and 2014, respectively 5,191 5,191
Common stock, no par value; 50,000,000 shares authorized; 2,181,705 and 2,164,840 issued and outstanding in 2015 and 2014, respectively 18,638 18,449
Retained earnings 2,426 1,830
Accumulated other comprehensive income 891 1,324
Total stockholders' equity 27,146 26,794
Total liabilities and stockholders' equity $ 362,763 $ 357,686
Ridge Financial Services, Inc.
Consolidated Statements of Income
For the three months ended March 31, 2015 and 2014 (unaudited)
(Dollars in thousands except per share data)
2015 2014
Interest and dividend income
Loans and fees on loans $ 3,435 $ 3,242
Interest on deposits in banks 6 7
Federal Home Loan Bank stock dividends 4 4
Taxable investment securities 439 534
Total interest and dividend income 3,884 3,787
Interest expense
Deposits 468 407
Borrowings 55 40
Total interest expense 523 447
Net interest income 3,361 3,340
Provision for loan losses 25 460
Net interest income after provision for loan losses 3,336 2,880
Noninterest income
Service charges on deposit accounts 187 189
Gain on sale of securities 678 27
Gain on sale of property and equipment -- 14
Gain on sale of mortgage loans 42 47
Investment commissions 13 7
Insurance commissions 36 40
Fee income from accounts receivable financing 68 142
Debit card interchange income 203 196
Income earned on bank owned life insurance 29 30
Other service charges and fees 65 66
Total noninterest income 1,321 758
Noninterest expense
Salaries 1,457 1,410
Employee benefits 373 249
Occupancy 205 229
Equipment 183 230
Data and item processing 297 302
Professional and advertising 162 204
Stationary and supplies 80 45
Net cost of foreclosed assets 238 (36)
Telecommunications 191 101
FDIC assessment 71 78
Accounts receivable financing 21 43
Other expense 361 256
Total noninterest expense 3,639 3,111
Income before income taxes 1,018 527
Income tax expense 304 119
Net income $ 714 $ 408
Preferred stock dividends (117) (96)
Income available to common stockholders $ 597 $ 312
Basic income per common share $ 0.27 $ 0.16
Diluted income per common share $ 0.27 $ 0.16
Basic weighted average shares outstanding 2,176,646 1,913,996
Diluted weighted average shares outstanding 2,184,974 1,920,034
Oak Ridge Financial Services, Inc.
Selected Quarterly Financial Ratios (unaudited)
Selected Financial Ratios March
31, 2015
December
31, 2014
September
30, 2014
June 30,
2014
March 31,
2014
Return on average assets1 0.80% 0.61% 0.60% 0.65% 0.47%
Return on average common stockholders' equity1 10.96% 6.43% 6.97% 8.70% 6.57%
Net interest margin1 3.97% 3.98% 4.02% 4.06% 4.06%
Net interest income to average assets1 3.78% 3.77% 3.83% 3.84% 3.85%
Efficiency ratio 77.7% 76.0% 73.3% 73.3% 75.9%
Nonperforming assets to total assets 1.47% 1.31% 1.45% 1.60% 2.04%
1Annualized

CONTACT: Thomas W. Wayne, CFO Phone: 336-644-9944Source:Oak Ridge Financial Services