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Oak Ridge Financial Services, Inc. Announces Annual Earnings for 2016

OAK RIDGE, N.C., Jan. 30, 2017 (GLOBE NEWSWIRE) -- Oak Ridge Financial Services, Inc. (“Oak Ridge”; the “Company”) (OTCPink:BKOR), the parent company of Bank of Oak Ridge (the “Bank”), announced unaudited financial results for all of 2016 and the fourth quarter of 2016 today.

2016 Highlights

  • Earnings per share of $1.02 for all of 2016, down 12 cents from 2015. The decline in earnings per share is mostly attributable to gains on sales of securities that were $424,000 higher in 2015 than in 2016.
  • Earnings per share of $0.26 for the three months ended December 31, 2016, up 5 cents from 2015
  • Return on average common stockholders’ equity 9.01% for all of 2016, compared to 10.30% for 2015; return on average common stockholders’ equity 8.89% for the three months ended December 31, 2016, compared to 7.52% for 2015
  • Period end loans of $306.5 million, up 9.5% from December 31, 2015
  • Period end deposits of $329.6 million, up 6.8% from December 31, 2015
  • Period end noninterest-bearing deposits of $47.4 million, up 8.8% from December 31, 2015
  • Nonperforming assets of $3.5 million, up from $3.1 million at December 31, 2015
  • Issuance of 7% tax deductible Subordinated Debentures to completely redeem $5.2 million of the Company’s 9% Series A Preferred Stock
  • Establishment of plan to repurchase up to 100,000 of the Company’s outstanding common shares
  • Successful execution of management succession plan at the Executive and Board level
  • Winner of the Best Bank in the Triad for the fifth consecutive year
  • Winner of the Better Business Bureau’s Torch Award for business ethics
  • Installation and implementation of Interactive Teller Machines at all four branches and expansion of the channel’s hours of operations to 7 am – 7 pm Monday – Friday, and 8 am – 1 pm Saturdays

Tom Wayne, President and Chief Financial Officer, reported, “We were very pleased with loan and deposit growth in the fourth quarter and all of 2016. In 2016, loans increased $26.6 million or 9.5%. The growth was due to a combination of increased production from our lending team and improving economic conditions in the Triad. The retail banking team supported the lending side, as total deposits have increased $20.1 million or 6.8% for all of 2016. In particular, we have been very pleased with the growth in non-interest bearing deposits from 2015 to 2016. Additionally, the retail banking team continues to drive adoption of existing and new clients of the Bank’s new interactive teller machines (“ITMs”), which were deployed in the second quarter of 2016. Client acceptance of the new delivery channel and the extended hours (7 am to 7 pm Monday-Friday and 9 am – 1 pm Saturday) has been very positive, and we saw increased utilization of ITMs in December of 2016 compared to prior months. I am very pleased with our overall performance in 2016 and thank our dedicated employees, the Board of Directors, and our clients for their support.”

Bank of Oak Ridge’s capital ratios remain strong and exceed all regulatory requirements at December 31, 2016. As of December 31, 2016, the Company’s stockholders’ equity was 7.0% of total assets, compared to 8.2% as of December 31, 2015. Book value per common share was $11.37 as of December 31, 2016, compared to $10.86 as of December 31, 2015.

As far as the consolidated statement of operations for 2016 and 2015 is concerned, net interest income was $13.4 million for all of 2016, which was a small increase from $13.3 million during the same period in 2015. The $5.5 million in subordinated debentures issued on June 29, 2016 and the resulting interest expense contributed to the small increase in the Company’s net interest income, however, the issuance of the subordinated debentures eliminated preferred dividends after they were redeemed on June 30, 2016. The debentures, which carry an interest rate of 7%, were used to redeem Series A preferred stock on June 30, 2016 that carried a dividend rate of 9%. Interest expense on the debentures is deductible while the dividend payments on the Series A preferred stock were non-deductible. For 2016, the net interest margin was 3.84% compared to 4.02% for the same period in 2015, a decrease of 18 basis points.

The Company recorded a negative provision expense of $170,000 for 2016, compared with a negative provision of $435,000 for 2015. The allowance for loan losses as a percentage of total loans was 1.20% at December 31, 2016 compared to 1.39% at December 31, 2015. The need for additions to the allowance for loan losses in 2016 were reduced by improvement in various qualitative factors used in the determination of the allowance, notably asset quality and economic conditions, which offset the loan growth the Bank experienced in 2016. Charge-offs, and other real estate owned are all improved over the past year, and nonperforming assets are relatively unchanged. Nonperforming assets ($3.5 million of non-performing loans and $4,000 of other real estate owned) represented 0.89% of total assets at December 31, 2016, compared to 0.88% at December 31, 2015. Other real estate owned was $4,000 compared to $44,000 at December 31, 2015, a decrease of $40,000 or 91.0%.

Noninterest income totaled $2,938,000 in 2016, compared with $3,271,000 in 2015, a decrease of $333,000 or 10.2%. The biggest noninterest income category contributing to the decline were decreases in gain on sale of securities, which declined $424,000 from 2015 to 2016.

Noninterest expense totaled $12.7 million in 2016 and was relatively unchanged from 2015.

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 is an employee owned community bank with a mission to provide Banking as It Should Be® by delivering personal attention and convenience for every client. Bank of Oak Ridge has been named Best Bank in the Triad five years in a row, one of the Triad’s Healthiest Employers and Top Workplaces, and winner of the Better Business Bureau’s Torch award for ethics in 2016. 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 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, Summerfield and Oak Ridge, North Carolina, or call 336.644.9944, or online at 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 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, (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
December 31, 2016 (unaudited) and December 31, 2015 (audited)
(Dollars in thousands)
2016 2015
Assets
Cash and due from banks$7,718 $6,357
Interest-bearing deposits with banks 10,626 9,611
Federal Funds sold 1,203 2,061
Total cash and cash equivalents 19,547 18,029
Securities available-for-sale 44,563 46,526
Securities held-to-maturity (fair values of $1,520 in 2016 and $1,936 in 2015) 1,397 1,771
Federal Home Loan Bank Stock, at cost 811 680
Loans held for sale - 582
Loans, net of allowance for loan losses of $3,678 in 2016 and $3,898 in 2015 302,798 275,972
Property and equipment, net 8,795 8,056
Foreclosed assets 4 44
Accrued interest receivable 1,272 1,260
Bank owned life insurance 5,536 5,441
Other assets 3,086 2,870
Total assets$387,809 $361,231
Liabilities and Stockholders’ Equity
Liabilities
Deposits:
Noninterest-bearing$47,426 $43,582
Interest-bearing 282,148 264,996
Total deposits 329,574 308,578
Short-term borrowings 11,500 8,500
Long-term borrowings 1,500 2,000
Junior subordinated notes related to trust preferred securities 8,248 8,248
Subordinated debentures 5,526 -
Accrued interest payable 98 122
Other liabilities 4,227 4,081
Total liabilities$360,673 $331,529
Stockholders’ equity
Preferred stock, Series A, no par value, $1,000 per share liquidation preference; 7,700 shares authorized;
0 and 5,200 issued and outstanding in 2016 and 2015, respectively - 5,191
Common stock, no par value; 50,000,000 shares authorized; 2,386,514 and 2,257,891 issued and
outstanding in 2016 and 2015, respectively 20,064 19,241
Retained earnings 6,664 4,329
Accumulated other comprehensive income 408 941
Total stockholders’ equity 27,136 29,702
Total liabilities and stockholders’ equity$387,809 $361,231


Oak Ridge Financial Services, Inc.
Consolidated Statements of Operations
For the three months and years ended December 31, 2016 and 2015
(Dollars in thousands except per share data)
Three months ended December 31, Years ended December 31,
2016 2015 2016 2015
Interest and dividend income
Loans and fees on loans$3,654 $3,411 $14,253 $13,663
Interest on deposits in banks 18 6 56 27
Federal Home Loan Bank stock dividends 5 5 20 19
Investment securities 355 387 1,465 1,640
Total interest and dividend income 4,032 3,809 15,794 15,349
Interest expense
Deposits 482 446 1,938 1,806
Short-term and long-term debt 173 65 474 221
Total interest expense 655 511 2,412 2,027
Net interest income 3,377 3,298 13,382 13,322
Provision for loan losses (20) 90 (170) (435)
Net interest income after provision for loan losses 3,397 3,208 13,552 13,757
Noninterest income
Service charges on deposit accounts 153 177 681 736
Gain on sale of securities - - 275 699
Gain (loss) on sale of property and equipment - - (1) -
Gain on sale of mortgage loans 29 38 131 139
Investment commissions 6 9 44 41
Insurance commissions 62 56 240 202
Fee income from accounts receivable financing 44 57 195 256
Debit card interchange income 220 216 904 881
Income earned on bank owned life insurance 23 27 95 112
Impairment loss on securities - - (18) (65)
Other service charges and fees 96 69 392 270
Total noninterest income 633 649 2,938 3,271
Noninterest expense
Salaries 1,478 1,527 6,227 5,917
Employee benefits 247 160 949 849
Occupancy expense 220 190 786 758
Equipment expense 168 188 673 749
Data and item processing 463 369 1,587 1,352
Professional and advertising 156 200 773 777
Stationary and supplies 55 52 239 246
Net cost of foreclosed assets - (2) 13 259
Telecommunications expense 106 76 417 416
FDIC assessment 41 50 215 244
Accounts receivable financing expense 13 17 58 78
Other expense 223 203 805 1,081
Total noninterest expense 3,170 3,030 12,742 12,726
Income before income taxes 860 827 3,748 4,302
Income tax expense 247 255 1,119 1,335
Net income$613 $572 $2,629 $2,967
Preferred stock dividends - (117) (234) (468)
Net income available to common stockholders$613 455 $2,395 $2,499
Basic net income per common share$0.26 $0.21 $1.02 $1.14
Diluted income per common share$0.26 $0.21 $1.01 $1.14
Basic weighted average common shares outstanding 2,386,514 2,186,980 2,348,571 2,186,735
Diluted weighted average common shares outstanding 2,399,065 2,197,763 2,359,667 2,196,312


Oak Ridge Financial Services, Inc.
Selected Quarterly Financial Ratios (unaudited)
Selected Financial RatiosDecember
31, 2016
September
30, 2016
June 30,
2016
March 31,
2016
December
31, 2015
Return on average assets10.64%0.76%0.81%0.62%0.64%
Return on average common stockholders' equity18.89%10.30%9.61%6.99%7.52%
Net interest margin13.83%3.77%3.81%3.88%3.96%
Net interest income to average assets13.51%3.54%3.65%3.67%3.69%
Efficiency ratio79.1%77.6%77.3%78.4%76.8%
Nonperforming assets to total assets0.89%0.90%0.82%0.83%0.85%
1Annualized

Contact: Thomas W. Wayne, President and CFO Phone: 336-644-9944

Source:Oak Ridge Financial Services