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

OAK RIDGE, N.C., July 14, 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 second quarter of 2015 today.

The Company's net income for the second quarter of 2015 was $855,000 compared to net income of $575,000 for the second quarter of 2014, an increase of $280,000. Net income available to common stockholders for the second quarter of 2015 was $738,000 compared to net income of $402,000 for the second quarter of 2014, an increase of $336,000. Basic and diluted income per common share increased $0.13 to $0.34 for the second quarter of 2015 compared to diluted income per common share of $0.21 in the second quarter of 2014.

The Company's net income for the first six months of 2015 was $1.6 million compared to net income of $983,000 for the same period in 2014, an increase of $586,000. Net income available to common stockholders for the first six months of 2015 was $1.3 million compared to net income of $714,000 for the same period in 2014, an increase of $621,000. Basic and diluted income per common share increased $0.24 to $0.61 for the first six months of 2015 compared to diluted income per common share of $0.37 for the same period in 2014.

Ron Black, President and CEO of the Company and the Bank, commented, "During the second quarter, the Company continued to focus on enhancing our basic core banking business. Both loans and deposits increased from December 31, 2014 to June 30, 2015, and we made significant progress in reducing nonperforming assets during the same period of time. 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 0.95% and 0.65% for the three months ended June 30, 2015 and 2014, respectively.

The Company produced net interest income of $3.3 million during the first three months of 2015, which was slightly lower than the $3.4 million generated for the same time period of 2014. The decrease was primarily caused by higher interest expense, which increased $45,000 or approximately 9.9% to $498,000 for the three months ended June 30, 2015 as compared to the same time period of the prior year. Interest income was relatively unchanged in the three months ended June 30, 2015 compared to the same period in 2014.

Noninterest income decreased $136,000 or approximately 17.5% to $640,000 during the three months ended June 30, 2015 as compared to the same time period of 2014. The majority of the net decrease was associated with decreases in gain on sale of securities and fee income from accounts receivable financing, as well as an increase in impairment loss on securities.

Noninterest expense was slightly lower in the three months ended June 30, 2015 compared to the same period in 2014. However, there were increases and decreases in expense categories from 2014 to 2015. Salaries were $1.5 million for the three months ended June 30, 2015 compared to $1.3 million during the same period in 2014. Most of the increase during the period was caused by higher incentive payments, higher contract labor, and higher commissions, as well as an increase in wages. Employee benefits were $136,000 for the three months ended June 30, 2015 compared to $263,000 during the same period in 2014. Lower Employee Stock Ownership Plan accruals, employee health insurance, and post-retirement benefit expenses contributed to most of the overall net decrease in employee benefits from 2014 to 2015. Other smaller increases and decreases in expense categories contributed to the remainder of the small net decrease in noninterest expense from 2014 to 2015.

The Company produced net interest income of $6.7 million during the first six months of 2015, which was slightly lower than the amount recorded for the same time period in 2014. The decrease was primarily caused by higher interest expense, which increased $122,000 or approximately 13.6% to $1.0 million for the six months ended June 30, 2015 as compared to the same time period of the prior year. Interest income increased $92,000 in the six months ended June 30, 2015 to $7.7 million, compared to the same period in 2014.

Noninterest income increased $427,000 or approximately 27.8% to $1.96 million during the six months ended June 30, 2015 as compared to the same time period of 2014. The majority of the net increase was associated with gains on sale of securities of $674.000 in the first six months of 2015 compared to $78,000 in the same time period in 2014. Offsetting this increase was a decrease in fee income from accounts receivable financing of $129,000 to $140,000 for the six months ended June 30, 2015. Smaller increases and decreases made up the remainder of the net increase in noninterest income in 2015 compared to 2014.

Noninterest expense was $6.7 million for the six months ended June 30, 2015 compared to $6.2 million for the same period in 2014. Increases in net cost of foreclosed assets and other expenses contributed to most of the net increase. Losses on disposals of other real estate owned caused the increase in net cost of foreclosed assets, and expenses associated with nonperforming assets contributed to the majority of the increase in other expenses.

Total assets as of June 30, 2015 were $359.8 million, up approximately 0.6% or $2.1 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 $272.1 million in net loans, $20.1 million in cash and cash equivalents and $49.2 million in available-for-sale and held-to-maturity securities. During the first six months of 2015, net loans were $272.1 million, up approximately 0.33% or $905,000 from $271.2 million as of December 31, 2014. Cash and cash equivalents increased approximately 39.1% or $5.6 million from $14.4 million as of December 31, 2014, and available-for-sale and held-to-maturity investment securities decreased approximately 7.5% or $3.7 million from $52.9 million as of December 31, 2014.

The allowance for loan losses was $3.8 million as of June 30, 2015, which represented 1.39% 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 1.14% as of June 30, 2015 compared to 1.60% as of June 30, 2014. Nonperforming assets decreased to $4.1 million as of June 30, 2015 from $5.7 million as of June 30, 2014. This 28.5% decrease has been driven by significant efforts by the Bank to dispose of nonperforming assets. Nonperforming assets to total assets decreased from 1.31% as of December 31, 2014 to 1.14% as of June 30, 2015.

Total liabilities as of June 30, 2015 were $332.3 million, up approximately 0.4% or $1.4 million from $330.9 million as of December 31, 2014. Higher levels of deposits drove the increase as noninterest-bearing deposits increased $2.5 million or 6.2%. The increase in noninterest-bearing deposits was offset by a $959,000 decrease in interest-bearing deposits from December 31, 2014 to June 30, 2015.

Total stockholders' equity as of June 30, 2015 was $27.5 million as compared to total stockholders' equity as of December 31, 2014 of $26.8 million. Increases from December 31, 2014 to June 30, 2015 in common stock of $379,000 and net income of $1.6 million, were offset by preferred dividends of $234,000 and a $1.0 million 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
June 30, 2015 (unaudited) and December 31, 2014 (audited)
(Dollars in thousands)
2015 2014
Assets
Cash and due from banks $ 5,812 $ 7,279
Interest-bearing deposits with banks 14,238 7,132
Total cash and cash equivalents 20,050 14,411
Securities available-for-sale 47,047 50,389
Securities held-to-maturity (fair values of $2,337 in 2015 and $2,683 in 2014) 2,123 2,472
Federal Home Loan Bank Stock, at cost 432 426
Loans held for sale -- 864
Loans, net of allowance for loan losses of $3,842 in 2015 and $4,191 in 2014 272,110 271,205
Property and equipment, net 7,693 7,889
Foreclosed assets 84 450
Accrued interest receivable 1,228 1,343
Bank owned life insurance 5,385 5,329
Other assets 3,627 2,908
Total assets $ 359,779 $ 357,686
Liabilities and Stockholders' Equity
Liabilities
Deposits:
Noninterest-bearing $ 42,006 $ 39,556
Interest-bearing 272,977 273,936
Total deposits 314,983 313,492
Federal Home Loan Bank advances 2,500 2,500
Notes payable 2,250 2,500
Junior subordinated notes related to trust preferred securities 8,248 8,248
Accrued interest payable 121 97
Other liabilities 4,197 4,055
Total liabilities 332,299 330,892
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 18,828 18,449
Retained earnings 3,164 1,830
Accumulated other comprehensive income 297 1,324
Total stockholders' equity 27,480 26,794
Total liabilities and stockholders' equity $ 359,779 $ 357,686
Oak Ridge Financial Services, Inc.
Consolidated Statements of Operations
For the three and six months ended June 30, 2015 and 2014
(Dollars in thousands except per share data)
Three months ended June 30, Six months ended June 30,
2015 2014 2015 2014
Interest and dividend income
Loans and fees on loans $ 3,413 $ 3,338 $ 6,848 $ 6,580
Interest on deposits in banks 7 6 13 13
Federal Home Loan Bank stock dividends 5 4 9 7
Investment securities 424 508 864 1,042
Total interest and dividend income 3,849 3,856 7,734 7,642
Interest expense
Deposits 445 413 913 820
Short-term and long-term debt 53 40 109 80
Total interest expense 498 453 1,022 900
Net interest income 3,351 3,403 6,712 6,742
Provision for loan losses (300) 350 (275) 810
Net interest income after provision for loan losses 3,651 3,053 6,987 5,932
Noninterest income
Service charges on deposit accounts 188 187 374 376
Gain on sale of securities (4) 51 674 78
Gain (loss) on sale of property and equipment -- 1 -- 15
Gain on sale of mortgage loans 31 24 74 72
Investment commissions 7 17 20 24
Insurance commissions 55 42 91 81
Fee income from accounts receivable financing 72 127 140 269
Debit card interchange income 231 225 434 422
Income earned on bank owned life insurance 28 30 57 59
Impairment loss on securities (36) -- (36) --
Other service charges and fees 68 72 133 138
Total noninterest income 640 776 1,961 1,534
Noninterest expense
Salaries 1,457 1,281 2,914 2,691
Employee benefits 136 263 509 513
Occupancy expense 186 194 390 423
Equipment expense 186 233 370 463
Data and item processing 323 295 619 596
Professional and advertising 214 245 377 450
Stationary and supplies 61 39 142 84
Net cost of foreclosed assets 41 51 279 15
Telecommunications expense 71 111 262 212
FDIC assessment 66 77 137 154
Accounts receivable financing expense 22 37 42 80
Other expense 284 237 645 493
Total noninterest expense 3,047 3,063 6,686 6,174
Income before income taxes 1,244 766 2,262 1,292
Income tax expense 389 191 693 309
Net income $ 855 $ 575 $ 1,569 $ 983
Preferred stock dividends (117) (173) (234) (269)
Accretion of discount
Net income available to common stockholders $ 738 $ 402 $ 1,335 $ 714
Basic net income per common share $ 0.34 $ 0.21 $ 0.61 $ 0.37
Diluted income per common share $ 0.34 $ 0.21 $ 0.61 $ 0.37
Basic weighted average common shares outstanding 2,181,705 1,920,232 2,181,705 1,920,232
Diluted weighted average common shares outstanding 2,186,451 1,926,341 2,189,307 1,926,306
Oak Ridge Financial Services, Inc.
Selected Quarterly Financial Ratios (unaudited)
Selected Financial Ratios June 30,
2015
March
31, 2015
December
31, 2014
September
30, 2014
June 30,
2014
Return on average assets1 0.95% 0.80% 0.61% 0.60% 0.65%
Return on average common stockholders' equity1 13.39% 10.96% 6.43% 6.97% 8.70%
Net interest margin1 3.92% 3.97% 3.98% 4.02% 4.06%
Net interest income to average assets1 3.73% 3.78% 3.77% 3.83% 3.84%
Efficiency ratio 76.3% 77.7% 76.0% 73.3% 73.3%
Nonperforming assets to total assets 1.14% 1.47% 1.31% 1.45% 1.60%

1Annualized

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