Oak Ridge Financial Services, Inc. Announces Fourth Quarter and Full Year 2022 Results and Quarterly Cash Dividend of $0.08 per share

Oak Ridge Financial Services

OAK RIDGE, N.C., Feb. 02, 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 fourth quarter and full year of 2022, and a quarterly cash dividend of $0.08 per share.

Fourth Quarter and Full Year 2022 Highlights

• Earnings per share of $2.47 for 2022, down $0.44, or 15.1%, from 2021; earnings per share of $0.63 for the three months ended December 31, 2022, down eleven cents, or 14.9%, from the same period in 2021.

• Return on average common stockholders’ equity of 12.95% for 2022, compared to 15.70% for 2021; return on average common stockholders’ equity of 12.98% for the three months ended December 31, 2022, compared to 15.70% for the same period in 2021.

• Recovery of loan losses for the years ended December 31, 2022 and 2021 of $41,000 and $682,000, respectively; recovery of loan losses for the three months ended December 31, 2022 and 2021 of $182,000 and $435,000, respectively.

• Tangible book value per common share of $19.48, up 1.50%, or 28 cents, from $19.20 as of December 31, 2021 despite a $5.2 million decrease in accumulated other comprehensive income (“AOCI”) from December 31, 2021 to December 31, 2022, which would have otherwise caused a decrease in book value per share during the same period of time. AOCI is part of total book value.

• Through December 31, 2022, the Bank has recognized almost 100% of the unamortized fees and associated costs on $80.0 million of first and second round Small Business Administration (“SBA”) Paycheck Protection Program (“PPP”) loans.

• Period end total loans of $436.0 million as of December 31, 2022, up 1.5% from total loans of $429.7 million as of December 31, 2021. Period end total loans (excluding PPP loans) of $436.0 million as of December 31, 2022, up 9.9% from total loans (excluding PPP loans) of $396.5 million as of December 31, 2021.

• Period end deposits of $481.0 million, down 5.6% from December 31, 2021. Period end noninterest-bearing deposits of $120.3 million, up 3.2% from December 31, 2021.

• Period end allowance for loan losses of $4.8 million, up 29.1%, from $3.8 million as of December 31, 2021.

• Nonperforming assets of $739,000, down 74.5% from $2.9 million as of December 31, 2021.
  

Tom Wayne, Chief Executive Officer and Chief Financial Officer, reported, “I am extremely pleased with our continued strong financial performance in 2022 despite the reduction in the Bank’s PPP income from 2021 to 2022. Our team has shown great resilience and performance as we navigate the changing economic and social environment, with the Company producing greater than double digit return on equity for the last seven consecutive quarters. Additionally, our ratio of nonperforming assets to total assets declined from 0.51% on December 31, 2021, to 0.13% on December 31, 2022.”

A quarterly cash dividend of $0.08 per share of common stock is payable on March 3, 2023 to stockholders of record as of the close of business on February 15, 2023. “We are pleased to pay another quarterly cash dividend to our stockholders,” said Mr. Wayne. “Paying stockholders a portion of our earnings reflects our continuing commitment to enhance stockholder value.”

As of December 31, 2022, the Bank’s Community Bank Leverage Ratio was 11.4%, up from 10.2% as of December 31, 2021. Stockholders’ equity on December 31, 2022, was $52.6 million, up 2.6% from $51.3 million on December 31, 2021. Net income of $6.7 million offset by a decrease in accumulated other comprehensive income of $5.2 million for the year ended December 31, 2022, was the principal factor for the net increase in stockholders’ equity from 2021 to 2022.

For the year ended December 31, 2022, net interest income was $21.7 million, compared to $21.0 million in 2021. The annualized net interest margin was 3.96% for the year ended December 31, 2022, unchanged from 2021. For the three months ended December 31, 2022 and 2021, net interest income was $5.4 million and $5.0 million, respectively. For the three months ended December 31, 2022, the annualized net interest margin was 4.02% compared to 3.65% for the same period in 2021, an increase of 37 basis points.

For the year ended December 31, 2022, the Company recorded a recovery of provision for loan losses of $41,000, compared to a recovery of provision for loan losses of $682,000 for the same period in 2021. For the three months ended December 31, 2022, the Company recorded a recovery of provision for loan losses of $182,000, compared to a recovery of provision for loan losses of $435,000 for the same period in 2021. The allowance for loan losses as a percentage of total loans was 1.11% on December 31, 2022, compared to 0.87% on December 31, 2021. The increase in the allowance for loan losses in 2022 was partly the result of the Company increasing the qualitative factors in its allowance for loan loss model due to slowing economic growth and a decline in the overall economic outlook, and an increase in reserves on specific loans. Nonperforming assets represented 0.13% of total assets on December 31, 2022, compared to 0.51% on December 31, 2021.

Noninterest income totaled $4.1 million for the year ended December 31, 2022, unchanged compared to the same period in 2021. There were increases and decreases in components of noninterest income from 2021 to 2022. Losses on sale(s) of investment securities were $131,000 in 2022 compared to gains on sale(s) of investment securities of $182,000 in 2021. Additionally, other service charges, fees, and income increased $250,000 from 2021 to 2022 due mostly to an increase of $181,000 in fee income earned from selling deposits to other banks and smaller increases in fees from other services. Noninterest income totaled $1.0 million for the three months ended December 31, 2022, compared to $1.8 million for the same period in 2021. Gain on sale(s) of Small Business Administration loans were $356,000 for the three months ended December 31, 2022, compared to $1.0 million for the same period in 2021. Losses on sale(s) of investment securities were $131,000 in 2022 compared to no gains or losses on sale(s) of investment securities 2021. Additionally, other service charges, fees, and income increased $149,000 from 2021 to 2022 due mostly to an increase of $110,000 in fee income earned from selling deposits to other banks and smaller increases in fees from other services.

Noninterest expense totaled $17.4 million for the year ended December 31, 2022, compared to $16.0 million for the same period in 2021. Salaries increased $1.1 million from 2021 to 2022 which accounted for most of the $1.4 million increase in noninterest expense during the same period. Most of the increase in salaries was a result of increased employee salaries of $531,000, increased expense related to restricted stock vesting of $160,000, increased incentive and commission expense of $336,000, increased payroll tax expense of $291,000 because of a loss contingency related to the Cares Act Employer Retention Credit, and a decrease in deferred loan costs of $289,000. Professional and advertising expenses increased $273,000 from 2021 to 2022 due to increases in contracted IT services and audit fees of $356,000 and $48,000, respectively, offset by a decrease in legal fees of $126,000. Other noninterest expense increased $321,000 from 2021 to 2022 due to increases in annual license fees, insurance expense, appraisal fees, and director fees of $125,000, $89,000, $32,000, and $27,000, respectively. Noninterest expense totaled $4.5 million for the three months ended December 31, 2022, compared to $4.7 million for the same period in 2021. Salaries decreased $307,000 from the three months ended December 31, 2021 to the same period in 2022 which accounted for most of the $200,000 decrease in noninterest expense during the same period. Most of the increase in salaries was a result of increased employee salaries of $211,000, increased incentive and commission expense of $77,000, which were partially offset by a decrease in payroll tax expense of $555,000 because of a loss contingency related to the Cares Act Employer Retention Credit and a decrease in deferred loan costs of $36,000.

About Oak Ridge Financial Services, Inc., and Bank of Oak Ridge
At Bank of Oak Ridge, we pride ourselves on knowing your name when you walk through our door. Whether in-person or through our digital offerings, managing your financial well-being is easy, safe, and convenient. We are the longest-running employee-owned community bank in the Triad and have served community members, local businesses, and non-profit organizations since 2000. Learn more about what makes Bank of Oak Ridge the Triad’s community bank by visiting one of our convenient locations in Greensboro, High Point, Summerfield & Oak Ridge.

Oak Ridge Financial Services, Inc. (OTC Pink: BKOR) is the holding company for Bank of Oak Ridge. Bank of Oak Ridge is a member of the FDIC and an Equal Housing Lender.

Awards & Recognitions | Best Bank in the Triad | Triad’s Top Workplace Finalist | 2016 Better Business Bureau Torch Award for Business Ethics | Triad’s Healthiest Employer Winner

Banking for Business & Personal | Mobile & Online Banking | Worldwide ATM | Debit, Credit + Rewards | Checking, Savings & Money Market | Loans + SBA | Mortgage | Insurance | Wealth Management

Let’s Talk | 336.644.9944 | www.BankofOakRidge.com | Extended Hours at all Triad Locations

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, 2022 (Unaudited) and December 31, 2021 (Audited)
(Dollars in thousands)
		2022				2021
Assets
Cash and due from banks	$	12,467			$	8,998
Interest-bearing deposits with banks		37,889				79,086
Total cash and cash equivalents		50,356				88,084
Securities available-for-sale		80,939				46,948
Securities held-to-maturity		311				387
Restricted stock, at cost		2,626				1,324
Loans, net of allowance for loan losses of $4,851 and
$3,756 at December 31, 2022, and December 31, 2021, respectively		431,127				425,900
Property and equipment, net		9,192				9,907
Accrued interest receivable		1,996				1,842
Bank owned life insurance		6,095				6,014
Right-of-use assets – operating leases		1,183				1,594
Other assets		5,456				4,921
Total assets	$	589,281			$	586,921
Liabilities and Stockholders’ Equity
Liabilities
Deposits
Noninterest-bearing	$	120,263			$	116,525
Interest-bearing		360,722				392,754
Total deposits		480,985				509,279
Short-term borrowings		30,000				-
Long-term borrowings		418				683
Junior subordinated notes – trust preferred securities		8,248				8,248
Subordinated debentures		9,903				9,863
Lease liabilities – operating leases		1,183				1,594
Accrued interest payable		226				110
Other liabilities		5,675				5,816
Total liabilities		536,638				535,593
Stockholders’ equity
Common stock, no par value; 50,000,000 shares authorized;
2,702,020 and 2,672,620 issued and outstanding
at December 31, 2022, and December 31, 2021, respectively		26,207				25,532
Retained earnings		28,642				22,815
Accumulated other comprehensive income (loss)		(2,206	)			2,981
Total stockholders’ equity		52,643				51,328
Total liabilities and stockholders’ equity	$	589,281			$	586,921

Oak Ridge Financial Services, Inc.
Consolidated Statements of Income (Unaudited)
For the three and year ended December 31, 2022 and 2021
(Dollars in thousands)
	Three months ended December 31,									Year ended December 31,
	2022				2021				2022				2021
Interest and dividend income
Loans and fees on loans	$	5,488			$	5,135		$			21,223		$	21,922
Interest on deposits in banks		144				23					514			35
Restricted stock dividends		9				18					66			78
Interest on investment securities		780				317					2,234			1,340
Total interest and dividend income		6,421				5,493					24,037			23,375
Interest expense
Deposits		554				279					1,269			1,306
Short-term and long-term debt		418				204					1,114			1,059
Total interest expense		972				483					2,383			2,365
Net interest income		5,449				5,010					21,654			21,010
Provision for (recovery of) loan losses		(182		)		(435	)				(41	)		(682		)
Net interest income after provision for loan losses		5,631				5,010					21,695			21,692
Noninterest income
Service charges on deposit accounts		153				144					591			534
Brokerage commissions on mortgage loans		18				91					200			290
Insurance commissions		113				92					463			413
Gain on sale of Small Business Administration loans		356				1,049					1,074			1,105
Debit and credit card interchange income		272				300					1,163			1,129
Income from Small Business Investment Company		10				102					179			102
Gain (loss) on sale of investment securities		(131		)		-					(131	)		182
Income earned on bank owned life insurance		21				21					81			84
Other service charges, fees, and income		191				42					450			251
Total noninterest income		1,003				1,841					4,070			4,090
Noninterest expense
Salaries		2,296				2,603					8,870			7,801
Employee benefits		301				289					1,118			1,119
Occupancy		283				285					1,111			1,086
Equipment		229				280					962			1,109
Data and item processing		463				550					1,728			1,925
Professional and advertising		267				107					1,104			831
Stationery and supplies		26				39					106			179
Impairment loss on securities		9				46					22			74
Telecommunications		114				88					438			369
FDIC assessment		74				30					291			171
Other expense		431				460					1,647			1,326
Total noninterest expense		4,493				4,777					17,397			15,990
Income before income taxes		2,141				2,509					8,368			9,792
Income tax expense		449				534					1,706			2,029
Net income and income available to common stockholders	$	1,692			$	1,975		$			6,662		$	7,763
Basic and diluted income per common share	$	0.63			$	0.74		$			2.47		$	2.91
Basic and diluted weighted average shares outstanding		2,702,058				2,672,620					2,697,538			2,668,720

Selected Financial Data	December 31, 2022						September 30, 2022					June 30, 2022				March 31, 2022				December 31, 2021				September 30, 2021
Return on average common stockholders' equity1		12.98	%					12.35	%				13.52	%			13.07	%			15.70	%			16.40	%
Tangible book value per share	$	19.48					$	18.67				$	18.77			$	18.63			$	19.20			$	18.72
Return on average assets1		1.18	%					1.08	%				1.11	%			1.14	%			1.36	%			1.41	%
Net interest margin1		4.02	%					4.10	%				3.66	%			4.07	%			3.65	%			3.94	%
Efficiency ratio		69.64	%					66.76	%				68.93	%			65.10	%			69.73	%			63.08	%
Nonperforming assets to total assets		0.13	%					0.15	%				0.14	%			0.16	%			0.51	%			0.50	%

¹Annualized

Contact: Skylar Mearing, Director of Marketing
Phone: 336.644.4840