Oak Ridge Financial Services, Inc. Announces 2023 Results and Quarterly Cash Dividend of $0.07 Per Share

OAK RIDGE, N.C., Jan. 31, 2023 (GLOBE NEWSWIRE) — Oak Ridge Financial Services, Inc. (“Oak Ridge”; or the “Company”) (OTCPink: BKOR), the parent company of Bank of Oak Ridge (the “Bank”), announced unaudited financial results for the fourth quarter and full year of 2023, and a quarterly cash dividend of $0.07 per share.

Fourth Quarter and Full Year 2023 Highlights

  • Earnings per share of $2.91 for 2023, up $1.68, or 137%, from 2020; earnings per share of $0.74 for the three months ended December 31, 2023, up 36 cents, or 95%, from the same period in 2020;
  • Return on average common stockholders’ equity of 15.70% for 2023, compared to 7.68% for 2020; return on average common stockholders’ equity of 14.78% for the three months ended December 31, 2023, compared to 9.17% for the same period in 2020;
  • Negative loan loss provision for the year ended December 31, 2023 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, 2023, 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 2023, 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, 2023, 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 2023. 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, 2023 to stockholders of record as of the close of business on February 16, 2023. “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, 2023, the Bank’s CBLR was 10.17%, up from 9.37% on December 31, 2020. As of December 31, 2023, 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 2023 and 2020, net interest income was $21.0 million for 2023, up $3.4 million, or 19.4%, from $17.6 million during the year ending December 31, 2020. For 2023, 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 2023, as well as a $1.9 million decrease in interest expense on deposits from 2020 to 2023.

The Company recorded a negative provision for loan losses of $682,000 in 2023, 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, 2023 compared to 1.36% as of December 31, 2020. The decrease in the allowance for loan losses in 2023 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, 2023, compared to 0.64% at December 31, 2020.

Noninterest income totaled $4.1 million in 2023, 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 2023. Noninterest expense totaled $16.0 million in 2023, a 13.9% increase from 2020. The biggest contributor to the increase in noninterest expense was a 27% increase in salaries from 2020 to 2023. There were a variety of factors leading to the increase in salaries: PPP cost deferral in 2020 and recognition in 2023, higher incentive payments to employees due to better performance against goals in 2023 compared to 2020, scheduled merit increases on January 1, 2023, and accelerated merit increases on November 1, 2023.

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 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.

Banking Services | ATM Usage Worldwide | Mobile Banking | Online Billpay | Remote and Mobile 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, 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, 2023 (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, 2023 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, 2023 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, 2023 and 2020 (Unaudited)
(Dollars in thousands)                
                 
    Three months
ended December
31, 2023
  Three months
ended December
31, 2020

  Year ended
December
31, 2023
  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, 2023
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

Oak Ridge Financial Services