BKOR Oak Ridge Financial Services Inc (PK)

Oak Ridge Financial Services, Inc. (Nasdaq:BKOR), parent company of Bank of Oak Ridge, headquartered in Oak Ridge, North Carolina, reported financial results for the second quarter of 2011.

Quarterly Financial Highlights:

• Quarterly net income of $77,000, compared to $15,000 in the same period in 2010. Contributing to the increase were increases in net interest income and reductions in noninterest expense and income tax expense. Offsetting the overall increase in net income was an increase in provision for loan losses and a decrease in noninterest income.
• Quarterly net loss available to common shareholders of $86,000, compared to $167,000 in the same period in 2010.
• Allowance for loan losses of 1.78% of total loans as of June 30, 2011, compared to 1.71% as of December 31, 2010.
• Net interest income of $3.5 million, up 8.5% from $3.2 million for the same period in 2010. The Company’s net interest margin increased to 4.28%, up from 4.04% in the same period in 2010.
• Noninterest income of $1.1 million, up 11.9% from $1.0 million for the same period in 2010. A primary factor contributing to the increase in noninterest income was a gain on sale of securities in the three months ended June 30, 2011 of $257,000. There were no gains on securities during the same period in 2010. Excluding the gain on sale of securities in 2011, noninterest income decreased 13.4% from 2010 to 2011.
• Noninterest expense of $3.3 million, down 4.2% from noninterest expense of $3.5 million for the same period in 2010.
• Total loans decreased 1.4% to $252.8 million from December 31, 2010 to June 30, 2011.
• Noninterest bearing deposits increased 15.6% to $31.0 million from December 31, 2010 to June 30, 2011.

Narrative:

Oak Ridge Financial Services, Inc. announced net income for the three months ended June 30, 2011 of $77,000, compared to net income of $15,000 for the prior year period. After subtracting dividends and accretion on preferred stock, net loss available for common shareholders was $86,000 and $167,000 for the three months ended June 30, 2011 and 2010, respectively. Net loss per diluted share was $0.05 and $0.09 for the three months ended June 30, 2011 and 2010, respectively.

Oak Ridge Financial Services President, Ron Black, in commenting on the results, noted, “Given the difficult economic environment, we are pleased that we were able to increase net interest income, increase noninterest bearing deposits, and reduce noninterest expense from 2010 to 2011. Nonperforming assets were up from December 2010 to June 2011 as our region continues to experience the negative effects of the weak economy. We continue to devote substantial efforts in servicing and reducing these assets.”

Mr. Black further commented, “Our primary areas of focus for the rest of 2011 will be continuing to service our loan and other real estate owned portfolios while growing net interest income and noninterest income, and providing the best service possible to existing and potential clients. We plan to continue to support our local economy by taking deposits, making loans, and providing financial advice to help our clients navigate these difficult times. The community was supportive of our Bank in the first six months of 2011 and we are very encouraged by the continuing growth we are seeing in both noninterest deposits and interest bearing checking deposits. Lastly, at June 30, 2011 we were well-capitalized with capital available for future profitable growth.”

About Bank of Oak Ridge

Bank of Oak Ridge, headquartered in Oak Ridge, NC, is a community Bank with five banking offices in Oak Ridge, Summerfield and Greensboro. The Bank’s independent financial advisory division, Oak Ridge Wealth Management, operates out of an office in downtown Greensboro. The Bank offers a complete line of banking, investment and insurance services, including savings and checking accounts, mortgage and business loans, extended weekday and Saturday branch banking hours, same-day deposits, cash management services, business and personal internet banking with balance alerts and reminders, internet bill payment, remote check capture for businesses, mobile banking and accounts designed specifically for seniors, small businesses and civic organizations. For more information, contact Bank of Oak Ridge at 336-644-9944, or visit 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 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. Unaudited Financial Highlights (dollars in thousands, except share and per share data) (Unaudited)          

Three months ended June 30,

Six months ended June 30,

2011 2010 Change 2011 2010 Change Income Statement Data: Total interest income $ 4,394 $ 4,448 (1.2 ) % $ 8,834 $ 9,081 (2.7 ) % Total interest expense   881     1,209   (27.1 )   1,822     2,518 (27.6 ) Net interest income 3,513 3,239 8.5 7,012 6,563 6.8 Provision for loan losses 1,261 784 60.8 1,866 1,137 64.1 Noninterest income 1,137 1,016 11.9 1,957 2,211 (11.5 ) Noninterest expense 3,335 3,482 (4.2 ) 6,785 6,641 2.2 Provision for income taxes   (23 )   (26 ) (11.5 )   48     342 (86.0 ) Net income $ 77   $ 15   413.3 $ 270   $ 654 (58.7 )   Preferred stock dividends 97 96 1.0 193 192 0.5 Accretion of discount   66     86   (23.3 )   133     172 (22.7 ) Income (loss) available to common shareholders $ (86 ) $ (167 ) n/a $ (56 ) $ 290 (119.3 )   Per share data and shares outstanding:

Basic net income per share (1)

$ (0.05 ) $ (0.09 ) (44.4 ) % $ (0.03 ) $ 0.16 (118.8 ) %

Diluted net income per share (1)

(0.05 ) (0.09 ) (44.4 ) (0.03 ) 0.16 (118.8 ) Book value at period end 11.59 11.90 (2.6 ) 11.59 11.90 (2.6 )   Weighted average number of common shares outstanding (000's): Basic 1,795.8 1,791.5 0.2 % 1,795.9 1,791.5 0.2 % Diluted 1,795.8 1,791.5 0.2 1,795.9 1,791.5 0.2 Shares outstanding at period end 1,808.4 1,791.5 0.9 1,808.4 1,791.5 0.9   June 30, December 31, Balance sheet data 2011 2010 Change Total assets $ 346,443 $ 349,008 (0.7 ) % Loans receivable 252,846 256,486 (1.4 ) Allowance for loan losses 4,500 4,375 2.9 Other interest-earning assets 72,891 71,853 1.4 Noninterest-bearing deposits 30,945 26,767 15.6 Interest-bearing deposits 268,430 273,508 (1.9 ) Borrowings 17,248 17,248 - Shareholders' equity 27,894 27,873 0.1  

Three months ended June 30,

Six months ended June 30,

Selected performance ratios: 2011 2010 2011 2010 Return on average assets (2) 0.09 % 0.02 % 0.16 % 0.38 % Return on average stockholders' equity (2) (1.64 ) (3.11 ) (0.54 ) 2.73 Net interest margin (2)(3) 4.28 4.04 4.29 4.12 Net interest spread (2)(4) 4.06 3.81 4.07 3.88 Noninterest income as a % of total revenue 24.5 23.9 21.8 25.2 Noninterest income as a % of average assets (2) 1.3 1.2 1.1 1.3 Efficiency ratio (5) 71.72 81.83 75.65 75.69 Noninterest expense as a % of average assets (2) 3.8 4.0 3.9 3.9   June 30, December 31, June 30, Asset quality ratios (at period end): 2011 2010 2010 Nonperforming assets to period-end loans (6) 4.83 % 2.92 % 2.64 % Nonperforming assets to period-end assets (6) 3.53 2.14 1.95 Allowance for loan losses to period-end loans 1.78 1.71 1.51 Allowance for loan losses to total assets 1.30 1.25 1.11 Net loan charge-offs to average loans outstanding (2) 1.38 0.67 0.79   June 30, December 31, June 30, Capital ratios (Bank of Oak Ridge): 2010 2010 2010 Total capital ratio 13.2 % 11.5 % 11.5 % Tier 1 capital ratio 11.9 10.2 10.3 Leverage capital ratio 9.1 8.1 8.2     Oak Ridge Financial Services, Inc. Unaudited Financial Highlights (dollars in thousands, except share and per share data) (Unaudited)    

Three months ended June 30,

   

Six months ended June 30,

  Total Revenue 2011   2010 Change 2011   2010 Change Net interest income $ 3,513 $ 3,239 8.5 % $ 7,012 $ 6,563 6.8 % Fees and other revenue: Service charges on deposit accounts 138 194 (28.9 ) 295 394 (25.1 ) Gain on sale of securities 257 - n/a 257 386 (33.4 ) Mortgage loan origination fees 42 123 (65.9 ) 108 184 (41.3 ) Investment and insurance commissions 273 278 (1.8 ) 475 470 1.1 Fee income from accounts receivable financing 207 236 (12.3 ) 415 426 (2.6 ) Debit card interchange income 163 122 33.6 295 226 30.5 Income earned on bank owned life insurance 35 41 (14.6 ) 72 84 (14.3 ) Other service charges and fees   22   22 -   40   41 (2.4 )

Total noninterest income

  1,137   1,016 11.9   1,957   2,211 (11.5 )

Total revenue

$ 4,650 $ 4,255 9.3 $ 8,969 $ 8,774 2.2  

Three months ended June 30,

Six months ended June 30,

Noninterest Expense 2011 2010 Change 2011 2010 Change Salaries $ 1,427 $ 1,316 8.4 % $ 2,892 $ 2,718 6.4 % Employee benefits 176 161 9.3 365 314 16.2 Employee Stock Ownership Plan 25 300 (91.7 ) 25 300 (91.7 ) Occupancy expense 206 224 (8.0 ) 417 460 (9.3 ) Equipment expense 217 225 (3.6 ) 427 419 1.9 Data and item processing 232 265 (12.5 ) 444 494 (10.1 ) Professional and advertising 328 223 47.1 553 583 (5.1 ) Stationary and supplies 104 68 52.9 226 129 75.2 Net loss on sale of foreclosed and repossessed assets 9 52 (82.7 ) 252 45 460.0 Expenses of foreclosed and repossessed assets 13 45 (71.1 ) 44 77 (42.9 ) Telecommunications expense 57 60 (5.0 ) 110 117 (6.0 ) FDIC assessment 146 138 5.8 278 269 3.3 Accounts receivable financing expense 65 84 (22.6 ) 131 143 (8.4 ) Other-than-temporary impairment loss - 21 (100.0 ) - 21 (100.0 ) Other   330   300 10.0   621   552 12.5 Total noninterest expense $ 3,335 $ 3,482 (4.2 ) $ 6,785 $ 6,641 2.2  

Three months ended June 30,

Six months ended June 30,

Average Balances 2011 2010 Change 2011 2010 Change Total assets $ 349,953 $ 345,375 1.3 % $ 351,076 $ 344,159 2.0 Loans receivable 254,722 251,166 1.4 255,234 251,572 1.5 Allowance for loan losses 4,573 3,933 16.3 4,525 3,880 16.6 Other interest-earning assets 74,199 70,489 5.3 74,061 51,957 42.5 Total deposits 288,564 274,282 5.2 288,303 292,159 (1.3 ) Total noninterest bearing deposits 30,193 22,907 31.8 28,646 21,568 32.8 Borrowings 17,248 17,248 - 17,248 17,265 (0.1 ) Shareholders' equity 27,947 28,190 (0.9 ) 27,883 28,037 (0.5 )        

(1) Computed based on the weighted average number of shares outstanding during each period.

(2) Ratios for the three- and six-month periods ended June 30, 2011 and 2010 are presented on an annualized basis.

(3) Net interest margin is net interest income divided by average interest earning assets.

(4) Net interest spread is the difference between the average yield on interest earning assets and the average cost of interest bearing liabilities.

(5) Efficiency ratio is noninterest expense divided by the sum of net interest income and noninterest income.

(6) Nonperforming assets consist of non-accruing loans, restructured loans and foreclosed assets, where applicable.