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Oak Ridge Financial Services, Inc. Announces Second Quarter 2018 Earnings

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OAK RIDGE, N.C., July 24, 2018 (GLOBE NEWSWIRE) -- Oak Ridge Financial Services, Inc. ("Oak Ridge"; the "Company") (OTC:BKOR), the parent company of Bank of Oak Ridge (the "Bank"), announced unaudited financial results for the second quarter of 2018.

Second Quarter 2018 Highlights

  • Net income available to common stockholders of $908,000 for the three months ended June 30, 2018, up $143,000, or 18.7%, from $765,000 for the same period in 2017 
  • Basic and diluted earnings per share of $0.38 for the three months ended June 30, 2018, up $0.06 cents, or 18.8%, from $0.32 for the same period in 2017
  • Annualized return on average common stockholders' equity of 11.42% for the three months ended June 30, 2018, compared to 10.82% for the same period in 2017
  • Period end loans of $352.7 million, up 4.6% (9.3% annualized) from December 31, 2017
  • Period end deposits of $368.4 million, up 1.8% (3.7% annualized) from December 31, 2017
  • Period end noninterest-bearing deposits of $57.7 million, up 10.3% (20.7% annualized) from December 31, 2017
  • Nonperforming assets of $2.8 million, unchanged from December 31, 2017

Tom Wayne, President and Chief Financial Officer, reported, "We are very pleased with our return on average stockholders' equity during the second quarter of 2018, and the year over year growth in our pretax net income, after tax net income and earnings per share. The Company experienced strong loan and noninterest-bearing deposit growth in the second quarter of 2018 and our net interest margin increased seven basis points from the first quarter of 2018. I am very pleased with our overall performance in the first half of 2018 and thank our stockholders, our dedicated employees, our Board of Directors, and our clients for their continued support."

The Bank's capital ratios remain strong and exceed all minimum regulatory requirements at June 30, 2018. As of June 30, 2018, stockholders' equity was 7.4% of total assets, compared to 7.2% as of December 31, 2017. Book value per common share was $13.54 as of June 30, 2018, compared to $12.28 as of June 30, 2017.

With respect to the consolidated statement of operations for the three months ended June 30, 2018, net interest income was $3.9 million, which was an increase from $3.6 million during the same period in 2017. For the three months ended June 30, 2018, the net interest margin was 3.90% compared to 3.91% for the same period in 2017, a decrease of one basis point. For the six months ended June 30, 2018, net interest income was $7.7 million, an increase of $0.8 million from $6.9 million during the same period in 2017. The net interest margin was 3.86% for the six months ended June 30, 2018, compared to 3.76% for the same period in 2017, an increase of 10 basis points.

The Company recorded a provision for loan loss of $66,000 for the three months ended June 30, 2018, compared with a negative provision of $85,000 for the same period in 2017. For the six months ended June 30, 2018 the Company recorded a provision for loan loss of $66,000 compared with a negative provision of $20,000 for the same period in 2017.  The allowance for loan losses as a percentage of total loans was 1.01% at June 30, 2018 compared to 1.04% at December 31, 2017. The need to supplement the allowance for loan losses in 2018 was reduced by improvement in various quantitative and qualitative factors used in the determination of the allowance. Nonperforming assets represented 0.63% of total assets at June 30, 2018, unchanged from December 31, 2017.

Noninterest income totaled $694,000 for the three months ended June 30, 2018, compared with $698,000 for the same period in 2017, a decrease of $4,000 or 0.6%. The biggest contributor to the decrease was the absence of any gains on sale of SBA loans during the three months ended June 30, 2018, compared to $61,000 during the same period in 2017. Noninterest income totaled $1.6 million for the six months ended June 30, 2018, compared with $1.3 million for the same period in 2017, an increase of $365,000 or 28.4%. The biggest contributor to the increase was a gain on sale of SBA loans of $305,000 during the six months ended June 30, 2018, compared to $61,000 during the same period in 2017.

Noninterest expense totaled $3.5 million in the three months ended June 30, 2018, an increase of $197,000, or 6.0%, from the same period in 2017. Two expense categories primarily contributed to the overall increase in noninterest expense. Salaries increased due to higher incentive payments in 2018 compared to 2017 and salary merit increases that took effect on January 1, 2018. Also, employee benefits increased due to lower post-retirement benefit costs in 2017 compared to 2018. Noninterest expense totaled $7.1 million in the six months ended June 30, 2018, an increase of $751,000, or 11.9%, from 2017. Several expense categories contributed to the overall increase in noninterest expense. Salaries increased due to higher incentive payments in 2018 compared to 2017, salary merit increases that took effect on January 1, 2018, and commissions related to the gain on sale of SBA loans in 2018. Employee benefits increased due to lower post-retirement benefit costs in 2017 compared to 2018. Also, other expenses increased due to higher check and debit card losses in 2018 compared to 2017, as well as higher expenses in 2018 related to the gain on sale of SBA loans.

The enactment of the new federal tax law, signed in late December 2017, positively affected net income for the Company for the current quarter. The law reduces the corporate tax rate to 35% to 21%.

About Oak Ridge Financial Services, Inc.
Oak Ridge Financial Services, Inc. (OTC:BKOR) is the holding company for Bank of Oak Ridge. Bank of Oak Ridge is an employee-owned community bank that delivers personal attention and convenience for every client. Bank of Oak Ridge has been named Best Bank in the Triad six years in a row, a 2017 Top Workplace, one of the Triad's Healthiest Employers, and was the 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 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
June 30, 2018 (unaudited) and December 31, 2017 (audited)
(Dollars in thousands)
 
 
  2018     2017
Assets    
     
Cash and due from banks $     8,812     $     8,673
Interest-bearing deposits with banks       12,549           18,497
Federal Funds sold       -           2,298
Total cash and cash equivalents       21,361           29,468
Securities available-for-sale       42,255           43,375
Securities held-to-maturity (fair values of $1,145 in 2018 and $1,257 in 2017)       991           1,108
Federal Home Loan Bank Stock, at cost       917           1,133
Loans, net of allowance for loan losses of $3,614 in 2018 and $3,538 in 2017     352,653         337,105
Property and equipment, net       9,062           8,631
Foreclosed assets       -           4
Accrued interest receivable       1,513           1,388
Bank owned life insurance       5,685           5,635
Other assets       4,808           2,865
Total assets $   439,245     $   430,712
     
     
Liabilities and Stockholders' Equity    
     
Liabilities    
Deposits:    
Noninterest-bearing $     57,735     $     52,361
Interest-bearing     310,639         309,360
Total deposits     368,374         361,721
Federal Funds Purchased       4,675           -
Short-term borrowings       12,500           18,500
Long-term borrowings       750           1,000
Junior subordinated notes related to trust preferred securities       8,248           8,248
Subordinated debentures       5,567           5,553
Accrued interest payable       178           145
Other liabilities       6,548           4,460
Total liabilities     406,840         399,627
     
     
Stockholders' equity    
Common stock, no par value; 50,000,000 shares authorized; 2,393,257 and 2,360,680 issued and outstanding in 2018 and 2017, respectively       20,704           20,413
Retained earnings       11,192           9,784
Accumulated other comprehensive income       509           888
Total stockholders' equity       32,405           31,085
Total liabilities and stockholders' equity $   439,245     $   430,712


 
Oak Ridge Financial Services, Inc.
Consolidated Statements of Operations
For the three months and six months ended June 30, 2018 and 2017 (Unaudited)
(Dollars in thousands except per share data)
 
  Three months ended June 30,     Six months ended June 30,  
   2018  
   2017  
     2018  
   2017  
 
Interest and dividend income        
Loans and fees on loans $   4,414   $   3,856     $   8,616   $   7,518  
Interest on deposits in banks     57       35         120       57  
Federal Home Loan Bank stock dividends     15       12         30       21  
Investment securities     367       350         734       642  
Total interest and dividend income     4,853       4,253         9,500       8,238  
Interest expense        
Deposits     658       439         1,268       865  
Short-term and long-term debt     262       231         487       433  
Total interest expense     920       670         1,755       1,298  
Net interest income     3,933       3,583         7,745       6,940  
Provision for loan losses     66       (85 )       66       (20 )
Net interest income after provision for loan losses     3,867       3,668         7,679       6,960  
         
Noninterest income        
Service charges on deposit accounts     169       157         333       299  
Gain on sale of securities     -        (4 )       -       (4 )
Gain on sale of mortgage loans     53       22         94       36  
Investment commissions     4       5         18       26  
Insurance commissions     68       69         142       135  
Gain on sale of SBA loans     -        61         305       61  
Fee income from accounts receivable financing     55       46         112       89  
Debit card interchange income     235       223         437       426  
Income earned on bank owned life insurance     26       24         51       48  
Other service charges and fees     84       95         157       168  
Total noninterest income     694       698         1,649       1,284  
Noninterest expense        
Salaries     1,670       1,542         3,409       3,044  
Employee benefits     300       182         569       355  
Occupancy expense     194       194         430       406  
Equipment expense     164       149         329       277  
Loss (gain) on sale of property and equipment     -        -          -       1  
Data and item processing     412       459         811       862  
Professional and advertising     204       248         418       438  
Stationary and supplies     59       60         104       108  
Net cost of foreclosed assets     2       5         2       6  
Impairment loss on securities     -        8           4         13  
Telecommunications expense     118       130         246       237  
FDIC assessment     54       58         110       113  
Accounts receivable financing expense     18       14         36       30  
Other expense     276       225         588       415  
Total noninterest expense     3,471       3,274         7,056       6,305  
Income before income taxes     1,090       1,092         2,272       1,939  
Income tax expense     182       327         410       542  
Net income and net income available to common stockholders $   908   $   765     $     1,862   $     1,397  
Basic net income per common share $   0.38   $   0.32     $   0.78   $   0.59  
Diluted income per common share $   0.38   $   0.32     $   0.77   $   0.59  
Basic weighted average common shares outstanding     2,387,092       2,366,981         2,398,207       2,373,580  
Diluted weighted average common shares outstanding     2,395,382       2,377,340           2,406,471         2,383,862  


 
Oak Ridge Financial Services, Inc.
Selected Quarterly Financial Ratios (unaudited)
 
Selected Financial Data June 30,
2018
March 31,
2018
December
31, 2017
September
30, 2017
June 30,
2017
March 31,
2017
Return on average common stockholders' equity1   11.42%   12.44%   8.88%   10.82%   10.82%   9.21%
Tangible book value per share   $13.54   $13.06   $13.17   $12.66   $12.28   $11.77
Return on average assets1   0.85%   0.90%   0.65%   0.77%   0.76%   0.65%
Net interest margin1   3.90%   3.83%   3.75%   3.96%   3.91%   3.73%
Net interest income to average assets1   3.68%   3.57%   3.59%   3.62%   3.58%   3.47%
Efficiency ratio   75.0%   75.1%   73.2%   75.9%   76.4%   76.1%
Nonperforming assets to total assets   0.63%   0.65%   0.65%   0.71%   0.70%   0.85%
 
1Annualized
 

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

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