Oak Ridge Financial Services, Inc. Announces 2021 Results and Quarterly Cash Dividend of $0.07 Per Share - Oak Ridge Finl Servs (OTC:BKOR)

OAK RIDGE, N.C., Jan. 31, 2022 (GLOBE NEWSWIRE) -- Oak Ridge Financial Services, Inc. ("Oak Ridge"; or the "Company") BKOR, the parent company of Bank of Oak Ridge (the "Bank"), announced unaudited financial results for the fourth quarter and full year of 2021, and a quarterly cash dividend of $0.07 per share.

Fourth Quarter and Full Year 2021 Highlights

Earnings per share of $2.91 for 2021, up $1.68, or 137%, from 2020; earnings per share of $0.74 for the three months ended December 31, 2021, up 36 cents, or 95%, from the same period in 2020;
Return on average common stockholders' equity of 15.70% for 2021, compared to 7.68% for 2020; return on average common stockholders' equity of 14.78% for the three months ended December 31, 2021, compared to 9.17% for the same period in 2020;
Negative loan loss provision for the year ended December 31, 2021 of $682,000, compared to a loan loss provision of $2.7 million for 2020; 2020 loan loss provision of $2.7 million predominantly related to the potential adverse economic impact of the COVID-19 pandemic;
Tangible book value per common share of $19.20, up 13.9%, or $2.34, from $16.86 as of December 31, 2020.
Through December 31, 2021, forgave and recognized remaining unamortized fees and associated costs of approximately 92% on the $50.1 million of first round of Small Business Administration ("SBA") Paycheck Protection Program ("PPP") loans;
In 2021, the Bank funded 418 second round 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 December 31, 2021, forgave and recognized remaining unamortized fees and associated costs of approximately 50% on the $30.8 million of second round of PPP loans;
Period end loans of $429.7 million, down 4.6% from December 31, 2020. Period end loans, net of PPP loans, of $410.6 million, up 2.4% from December 31, 2020;
Period end allowance for loan losses of $3.8 million, down 31.2%, from $5.5 million at December 31, 2020.
Nonperforming assets of $3.0 million, down 14.3% from $3.5 million at December 31, 2020.
Period end deposits of $509.3 million, up 11.7% from December 31, 2020. Period end noninterest-bearing deposits of $116.5 million, up 23.7% from December 31, 2020.

Tom Wayne, Chief Executive Officer and Chief Financial Officer of the Company and the Bank, reported, "I am extremely pleased with our continued strong performance in the fourth quarter and for the full year of 2021. Despite the continued challenges presented by the ongoing pandemic, we experienced excellent financial performance. I am thankful for our experienced team of bankers and board of directors, and our supportive clients as we address future opportunities and challenges."

A quarterly cash dividend of $0.07 per share of common stock is payable on March 2, 2022 to stockholders of record as of the close of business on February 16, 2022. "We are pleased to announce our 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 December 31, 2021, the Bank's CBLR was 10.17%, up from 9.37% on December 31, 2020. As of December 31, 2021, the Company's stockholders' equity was $51.3 million, up 15.4%, from $44.5 million on December 31, 2020.

With respect to the consolidated statement of operations for 2021 and 2020, net interest income was $21.0 million for 2021, up $3.4 million, or 19.4%, from $17.6 million during the year ending December 31, 2020. For 2021, the net interest margin was 3.96% compared to 3.50% for year ending December 31, 2020, an increase of 39 basis points. The primary reason for the increase in the net interest margin was an increase in interest income on loans and fees on loans of $1.3 million from 2020 to 2021, as well as a $1.9 million decrease in interest expense on deposits from 2020 to 2021.

The Company recorded a negative provision for loan losses of $682,000 in 2021, compared with a loan loss provision of $2.7 million in 2020. The allowance for loan losses as a percentage of total loans not including PPP loans was 0.92% as of December 31, 2021 compared to 1.36% 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 economic outlook. Nonperforming assets represented 0.51% of total assets as of December 31, 2021, compared to 0.64% at December 31, 2020.

Noninterest income totaled $4.1 million in 2021, a 30% increase from 2020. The biggest contributor to the increase in noninterest income was a $641,000 increase in gain on sale of SBA loans from 2020 to 2021. Noninterest expense totaled $16.0 million in 2021, a 13.9% increase from 2020. The biggest contributor to the increase in noninterest expense was a 27% increase in salaries from 2020 to 2021. There were a variety of factors leading to the increase in salaries: PPP cost deferral in 2020 and recognition in 2021, higher incentive payments to employees due to better performance against goals in 2021 compared to 2020, scheduled merit increases on January 1, 2021, and accelerated merit increases on November 1, 2021.

About Oak Ridge Financial Services, Inc.
Oak Ridge Financial Services, Inc. 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.

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 December 31, 2021 (Unaudited) and 2020 (Audited)*
(Dollars in thousands)

		2021		2020
Assets
Cash and due from banks	$	8,998	$	9,354
Interest-bearing deposits with banks		79,086		11,994
Total cash and cash equivalents		88,084		21,348
Securities available-for-sale		46,948		46,357
Securities held-to-maturity		387		564
Restricted stock, at cost		1,324		1,806
Loans, net of allowance for loan losses of $3,756 and
$5,458 at December 31, 2021 and 2020, respectively		425,900		445,127
Property and equipment, net		9,907		10,632
Accrued interest receivable		1,842		2,412
Bank owned life insurance		6,014		5,930
Right-of-use assets – operating leases		1,594		1,990
Other assets		4,921		4,464
Total assets	$	586,921	$	540,630

Liabilities and Stockholders' Equity
*Liabilities*
Deposits
Noninterest-bearing	$	116,525	$	94,227
Interest-bearing		392,754		361,510
Total deposits		509,279		455,737
Short-term borrowings		-		8,000
Long-term borrowings		683		952
Junior subordinated notes related to trust preferred securities		8,248		8,248
Subordinated debentures		9,863		15,484
Lease liabilities – operating leases		1,594		1,990
Accrued interest payable		110		140
Other liabilities		5,816		5,604
Total liabilities		535,593		496,155

*Stockholders' equity*
Common stock, no par value; 50,000,000 shares authorized;
2,672,620 and 2,639,345 issued and outstanding
at December 31, 2021 and 2020, respectively		25,532		25,013
Retained earnings		22,815		15,771
Accumulated other comprehensive income		2,981		3,691
Total stockholders' equity		51,328		44,475
Total liabilities and stockholders' equity	$	586,921	$	540,630

Oak Ridge Financial Services, Inc.
*Consolidated Statements of Income* *For the three months and years ended December 31, 2021 and 2020 (Unaudited)*
(Dollars in thousands)

	Three months ended December 31, 2021			Three months ended December 31, 2020		Year ended December 31, 2021			Year ended December 31, 2020
Interest and dividend income
Loans and fees on loans	$	5,135		$	5,196	$	21,922		$	20,649
Interest on deposits in banks		23			4		44			58
Restricted stock dividends		18			48		78			98
Interest on investment securities		317			367		1,331			1,329
Total interest and dividend income		5,493			5,615		23,375			22,134

Interest expense
Deposits		279			570		1,306			3,213
Short-term and long-term debt		204			365		1,059			1,319
Total interest expense		483			935		2,365			4,532
Net interest income		5,010			4,680		21,010			17,602

Provision for loan losses		(435	)		500		(682	)		2,746
Net interest income after provision for loan losses		5,445			4,180		21,692			14,856

Noninterest income
Service charges on deposit accounts		144			143		534			588
Gain on sale of securities		-			-		182			-
Loss on sale of property and equipment		-			-		-			(6	)
Brokerage commissions on mortgage loans		91			86		290			381
Insurance commissions		92			87		413			362
Gain on sale of SBA loans		1,049			-		1,105			464
Debit and credit card interchange income		300			252		1,129			1,047
Income from SBIC		102			-		102			-
Income earned on bank owned life insurance		21			23		84			93
Other service charges and fees		42			57		251			227
Total noninterest income		1,841			648		4,090			3,156

Noninterest expense
Salaries		2,603			1,731		7,801			6,138
Employee benefits		289			286		1,119			1,117
Occupancy		285			285		1,086			998
Equipment		280			258		1,109			1,003
Data and item processing		550			514		1,925			2,147
Professional and advertising		107			118		831			579
Stationary and supplies		39			29		179			132
Net cost of foreclosed assets		-			-		-			5
Impairment loss on securities		46			5		74			58
Telecommunications		88			86		369			351
FDIC assessment		30			72		171			266
Other expense		460			234		1,326			1,245
Total noninterest expense		4,777			3,618		15,990			14,039
Income before income taxes		2,509			1,210		9,792			3,973

Income tax expense		534			200		2,029			714
Net income and income available
to common stockholders	$	1,975		$	1,010	$	7,763		$	3,259

Basic income per common share	$	0.74		$	0.38	$	2.91		$	1.23
Diluted income per common share	$	0.74		$	0.38	$	2.91		$	1.23
Basic weighted average shares outstanding		2,672,620			2,639,345		2,668,720			2,640,504
Diluted weighted average shares outstanding		2,672,620			2,639,345		2,668,720			2,640,504

Selected Financial Data	December 31, 2021			September 30, 2021			June 30, 2021			March 31, 2021			December 31, 2020			September 30, 2020
Return on average common stockholders' equity¹		15.70	%		16.40	%		14.71	%		18.45	%		9.17	%		8.50	%
Tangible book value per share	$	19.20		$	18.53		$	17.93		$	17.24		$	16.85		$	16.36
Return on average assets¹		1.36	%		1.41	%		1.20	%		1.49	%		0.73	%		0.64	%
Net interest margin¹		3.65	%		3.94	%		3.79	%		4.26	%		3.57	%		3.42	%
Efficiency ratio		69.73	%		63.08	%		62.80	%		59.94	%		67.64	%		68.67	%
Nonperforming assets to total assets		0.51	%		0.50	%		0.55	%		0.62	%		0.64	%		0.64	%

¹Annualized

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

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