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 third quarter of 2011.

Quarterly Financial Highlights:

• Quarterly net income of $75,000, compared to $41,000 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 $88,000, compared to $118,000 in the same period in 2010.
• Allowance for loan losses of 1.81% of total loans as of September 30, 2011, compared to 1.71% as of December 31, 2010.
• Net interest income of $3.5 million, up 3.6% from $3.4 million for the same period in 2010. The Company’s net interest margin increased to 4.28%, up from 4.15% in the same period in 2010.
• Noninterest income of $836,000, down 16.6% from $1.0 million for the same period in 2010.
• Noninterest expense of $3.3 million, down 7.2% from noninterest expense of $3.6 million for the same period in 2010.
• Total loans decreased 2.4% to $250.4 million from December 31, 2010 to September 30, 2011.
• Noninterest bearing deposits increased 21.1% to $32.4 million from December 31, 2010 to September 30, 2011.

Narrative:

Oak Ridge Financial Services, Inc. announced net income for the three months ended September 30, 2011 of $75,000, compared to net income of $41,000 for the prior year period. After subtracting dividends and accretion on preferred stock, net loss available for common shareholders was $88,000 and $118,000 for the three months ended September 30, 2011 and 2010, respectively. Net loss per diluted share was $0.05 and $0.07 for the three months ended September 30, 2011 and 2010, respectively.

Oak Ridge Financial Services President, Ron Black, in commenting on the results, noted, “Our operating performance continues to be negatively affected by the weak local economy as reflected by the increase in our provision for loan losses from 2010 to 2011. On a positive note, our nonperforming assets declined significantly from June 30, 2011 to September 30, 2011 as a result of resolving two significant loan relationships with total outstanding balances in excess of $4 million. As a result of these efforts, nonperforming assets were up only slightly from December 2010 to September 2011. We continue to devote substantial efforts in servicing and reducing these assets. Additionally, we have been very pleased with our growth in non-interest and interest-bearing consumer and business checking accounts in 2011.”

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, minimizing the negative impact on noninterest income as a result of recently enacted government regulations, 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 nine 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 September 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)            

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  2011 2010 Change 2011 2010 Change Income Statement Data: Total interest income $ 4,281 $ 4,512 (5.1 ) % $ 13,116 $ 13,593 (3.5 ) % Total interest expense   798     1,149   (30.5 )   2,620     3,667 (28.6 ) Net interest income 3,483 3,363 3.6 10,496 9,926 5.7 Provision for loan losses 960 761 26.1 2,827 1,898 48.9 Noninterest income 836 1,002 (16.6 ) 2,794 3,213 (13.0 ) Noninterest expense 3,302 3,559 (7.2 ) 10,087 10,201 (1.1 ) Provision for income taxes   (18 )   4   (550.0 )   30     346 (91.3 ) Net income $ 75   $ 41   82.9 $ 346   $ 694 (50.1 )   Preferred stock dividends 96 97 (1.0 ) 290 289 0.3 Accretion of discount   67     62   8.1   200     179 11.7 Income available to common shareholders $ (88 ) $ (118 ) n/a $ (144 ) $ 226 (163.7 ) Per share data and shares outstanding:   Basic net income per share (1) $ (0.05 ) $ (0.07 ) (28.6 ) % $ (0.08 ) $ 0.13 (161.5 ) % Diluted net income per share (1) (0.05 ) (0.07 ) (28.6 ) (0.08 ) 0.13 (161.5 ) Book value at period end 11.61 11.96 (2.9 ) 11.61 11.96 (2.9 ) Weighted average number of common shares outstanding (000's): Basic 1,808.4 1,791.5 0.9 % 1,797.7 1,791.5 0.3 % Diluted 1,808.4 1,791.5 0.9 1,797.7 1,791.5 0.3 Shares outstanding at period end 1,808.4 1,791.5 0.9 1,808.4 1,791.5 0.9   September 30, December 31, Balance sheet data 2011 2010 Change Total assets $ 350,642 $ 349,008 0.5 % Loans receivable 250,350 256,486 (2.4 ) Allowance for loan losses 4,534 4,375 3.6 Other interest-earning assets 80,136 71,853 11.5 Noninterest-bearing deposits 32,421 26,767 21.1 Interest-bearing deposits 279,992 273,508 2.4 Borrowings 8,248 17,248 (52.2 ) Shareholders' equity 28,005 27,873 0.5  

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Selected performance ratios:   2011 2010 2011   2010 Return on average assets (2) 0.09 % 0.05

 

%

 

0.13 % 0.27

 

% Return on average stockholders' equity (2) (1.66 ) (2.19 ) (0.92 ) 1.41 Net interest margin (2)(3) 4.28 4.15 4.22 4.06 Net interest spread (2)(4) 4.08 3.91 4.08 3.89 Noninterest income as a % of total revenue 19.4 23.0 21.0 22.6 Noninterest income as a % of average assets (2) 1.0 1.2 1.1 1.3 Efficiency ratio (5) 76.45 81.53 75.90 77.64 Noninterest expense as a % of average assets (2) 3.8 4.1 3.9 4.0   September 30, December 31, Asset quality ratios (at period end): 2011 2010

 

Nonperforming assets to period-end loans (6) 3.43 % 2.92

%

 

Nonperforming assets to period-end assets (6) 2.45 2.14 Allowance for loan losses to period-end loans 1.81 1.71 Allowance for loan losses to total assets 1.29 1.25 Net loan charge-offs to average loans outstanding (2) 1.40 0.67 Oak Ridge Financial Services, Inc. Unaudited Financial Highlights (dollars in thousands, except share and per share data) (Unaudited)       September 30, December 31, Capital ratios (Bank of Oak Ridge):   2011   2010 Total capital ratio 13.5 % 11.8 % Tier 1 capital ratio 12.2 10.5 Leverage capital ratio 9.2 8.0  

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Total Revenue 2011 2010 Change 2011 2010 Change Net interest income $ 3,483   $ 3,363 3.6 % $ 10,496 $ 9,926 5.7 % Fees and other revenue: Service charges on deposit accounts 87 163 (46.6 ) 382 557 (31.4 ) Gain on sale of securities - - n/a 258 386 (33.2 ) Mortgage loan origination fees 60 188 (68.1 ) 168 372 (54.8 ) Investment and insurance commissions 284 248 14.5 759 718 5.7 Fee income from accounts receivable financing 185 212 (12.7 ) 600 638

 

(6.0 ) Debit card interchange income 165 129 27.9 459 355 29.3 Income earned on bank owned life insurance 37 42 (11.9 ) 109 125 (12.8 ) Other service charges and fees   18     20 (10.0 )   59   62 (4.8 ) Total noninterest income   836     1,002 (16.6 )   2,794   3,213 (13.0 ) Total revenue $ 4,319   $ 4,365 (1.1 ) $ 13,290 $ 13,139 1.1  

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  Noninterest Expense 2011 2010 Change 2011 2010 Change Salaries $ 1,551 $ 1,493 3.9 % $ 4,442 $ 4,211 5.5 % Employee benefits 211 131 61.1 577 445 29.7 Occupancy expense (25 ) 350 (107.1 ) - 650 (100.0 ) Employee Stock Ownership Plan 231 218 6.0 649 678 (4.3 ) Equipment expense 225 215 4.7 652 634 2.8 Data and item processing 247 230 7.4 691 724 (4.6 ) Professional and advertising 277 211 31.3 830 795 4.4 Stationary and supplies 89 79 12.7 315 208 51.4 Net loss on sale of foreclosed and repossessed assets 3 - n/a 257 45 471.1 Expenses of foreclosed and repossessed assets 95 16 493.8 137 92 48.9 Telecommunications expense 54 56 (3.6 ) 164 173 (5.2 ) FDIC assessment 7 115 (93.9 ) 285 384 (25.8 ) Accounts receivable financing expense 57 68 (16.2 ) 188 211 (10.9 ) Other-than-temporary impairment loss - - n/a - 21 (100.0 ) Other   280     377 (25.7 )   900   930 (3.2 ) Total noninterest expense $ 3,302   $ 3,559 (7.2 ) $ 10,087 $ 10,201 (1.1 )  

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Average Balances 2011 2010 Change 2011 2010 Change Total assets $ 344,858 $ 342,260 0.8 % $ 348,981 $ 343,522 1.6 % Loans receivable 255,772 257,929 (0.8 ) 258,416 256,633 0.7 Allowance for loan losses 4,732 4,059 16.6 4,595 4,286 7.2 Other interest-earning assets 71,460 67,442 6.0 72,994 68,854 6.0 Total deposits 303,928 294,736 3.1 303,758 298,373 1.8 Total noninterest bearing deposits 30,589 24,376 25.5 29,301 24,990 17.3 Borrowings 11,183 17,248 (35.2 ) 15,204 17,259 (11.9 ) Shareholders' equity 28,049 28,101 (0.2 ) 27,938 28,067 (0.5 )

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

(2) Ratios for the three- and nine-month periods ended September 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.