Oak Ridge Financial Services, Inc. Announces Second Quarter 2022 Results

Rhea-AI Summary

Oak Ridge Financial Services (OTCPink: BKOR) reported Q2 2022 earnings of $0.63 per share, down 3.1% from the previous year. The company's annualized return on average equity was 13.52%, while tangible book value increased by 4.7% to $18.77 per share. Total loans rose to $432.4 million, a 0.64% increase. Nonperforming assets declined by 69.5% to $884,000. Despite an increase in noninterest expense by 22.7% due to higher salaries, noninterest income surged by 97.3%. A quarterly dividend of $0.08 per share will be paid on September 2, 2022.

Positive

• Tangible book value per share increased by 4.7% to $18.77.
• Nonperforming assets decreased by 69.5% to $884,000.
• Noninterest income rose by 97.3%, driven by gains on sales of SBA loans.

Negative

• Earnings per share decreased by 3.1% compared to Q2 2021.
• Annualized net interest margin fell from 3.79% to 3.66% year-over-year.
• Noninterest expenses increased by 22.7%, primarily due to higher salaries.

OAK RIDGE, N.C., July 22, 2022 (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 three and six months ended June 30, 2022.

June 30, 2022 Highlights

• Basic and diluted earnings per share of $0.63 for the three months ended June 30, 2022, down two cents, or 3.1%, from the comparable 2021 period;
• Annualized return on average common stockholders’ equity of 13.52% for the three months ended June 30, 2022, compared to 14.71% for the same period in 2021;
• Tangible book value per common share of $18.77 as of June 30, 2022, up 4.7%, or $0.84, from $17.93 as of June 30, 2021;
• Through June 30, 2022, have forgiven and recognized 94% of the unamortized fees and associated costs on the $80.0 million of first and second round of Small Business Administration (“SBA”) Paycheck Protection Program (“PPP”) loans;
• Period end total loans of $432.4 million, up 0.64% (1.27% annualized), or $2.7 million, from $429.7 million as of December 31, 2021;
• Period end allowance for loan losses of $4.8 million, up 27.1%, from $3.8 million on December 31, 2021;
• Nonperforming assets of $884,000, down 69.5% from $2.9 million on December 31, 2021;
• Period end deposits of $535.5 million, up 5.1%, or $26.2 million from $509.3 million as of December 31, 2021; and
• Named to American Banker magazine’s Top 200 Publicly Traded Community Banks and Thrifts. The ranking is based on a company’s three-year average return on average equity (ROAE) through December 31, 2021. This is the sixth consecutive year the Company has been on the prestigious list.
  

Tom Wayne, Chief Executive Officer and Chief Financial Officer, reported, “I am extremely pleased with our continued strong financial performance in the second quarter of 2022 given the reduction in the bank’s PPP income. 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 six consecutive quarters. Additionally, our nonperforming assets to total assets declined from 0.51% on December 31, 2021, to 0.14% on June 30, 2022.”

A quarterly cash dividend of $0.08 per share of common stock is payable on September 2, 2022, to stockholders of record as of the close of business on August 19, 2022. “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 June 30, 2022, the Bank’s Community Bank Leverage Ratio was 10.2%, unchanged from December 31, 2021. Stockholders’ equity on June 30, 2022, was $50.7 million, down 1.2% from $51.3 million on December 31, 2021, due to an increase in accumulated other comprehensive loss in 2022.

For the three months ended June 30, 2022 and 2021, net interest income was $5.2 million and $5.1 million, respectively. For the three months ended June 30, 2022, the annualized net interest margin was 3.66% compared to 3.79% for the same period in 2021, a decrease of 13 basis points. For the six months ended June 30, 2022, net interest income was $10.6 million, compared to $10.7 million during the same period in 2021. The annualized net interest margin was 3.87% for the six months ended June 30, 2022, compared to 4.02% for the same period in 2021, a decrease of 15 basis points.

The Company recorded a recovery of provision for loan losses of $107,000 for the three months ended June 30, 2022, with no provision for loan losses for the same period in 2021. For the six months ended June 30, 2022 and 2021, the Company recorded a recovery of provision for loan losses of $19,000 and $112,000, respectively. The allowance for loan losses as a percentage of total loans was 1.10% on June 30, 2022, compared to 0.87% on December 31, 2021. The increase in the allowance for loan losses in 2022 was largely the result of the Company increasing the qualitative factors in its allowance for loan loss model due to the declining overall economic outlook. Nonperforming assets represented 0.14% of total assets on June 30, 2022, compared to 0.64% on December 31, 2021.

Noninterest income totaled $1.3 million for the three months ended June 30, 2022, compared with $659,000 for the same period in 2021, an increase of $641,000 or 97.3%. The biggest contributor to the increase was gains on sales of SBA loans (not PPP loans) of $485,000 in the second quarter of 2022 and no gains in the comparable period in 2021. Additionally, Income from Small Business Investment Company totaled $100,000 for the three months ended June 30, 2022, with no income in the comparable period in 2021. Noninterest income totaled $2.1 million for the six months ended June 30, 2022, compared with $1.3 million for the same period in 2021, an increase of $750,000 or 56.4%. The biggest contributor to the increase was gains on sales of SBA loans (not PPP loans) of $514,000 for the six months ended June 30, 2022, with no gains in the comparable period in 2021. Additionally, Income from Small Business Investment Company totaled $100,000 for the six months ended June 30, 2022, with no income in the comparable period in 2021.

Noninterest expense totaled $4.5 million in the three months ended June 30, 2022, an increase of $827,000, or 22.7%, from the same period in 2021. The increase was driven by higher employee salaries which increased by $875,000 compared to the prior year period, partly due to annual merit increases effective November 1, 2021, higher 2022 commissions, and the absence of the Cares Act Employer Retention Credit in 2022. Additionally, other expenses increased $113,000 compared to the prior year period partly due to increased expenses related to SBA lending, deposit losses, insurance expenses, annual license fees, and appraisal fees. Noninterest expense totaled $8.5 million in the six months ended June 30, 2022, an increase of $1.1 million, or 15.2%, from 2021. The increase was driven by higher employee salaries which increased by $866,000 compared to the prior period, partly due to annual merit increases effective November 1, 2021, higher 2022 commissions, and the absence Cares Act Employer Retention Credit in 2022. Professional and advertising expenses increased $156,000 compared to the prior year period due to higher legal expenses related to the disposition of nonaccrual loans, and higher outsourced information technology security and cybersecurity expenses. Additionally, other expenses increased $197,000 compared to the prior year period, partly due to increased expenses related to SBA lending, insurance expenses, annual license fees, and appraisal fees.

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 June 30, 2022 (Unaudited) and December 31, 2021 (Audited)
(Dollars in thousands)

		2022			2021
Assets
Cash and due from banks		$	11,917		$	8,998
Interest-bearing deposits with banks		62,276			79,086
Total cash and cash equivalents		74,193			88,084
Securities available-for-sale		84,058			46,948
Securities held-to-maturity		354			387
Restricted stock, at cost		1,347			1,324
Loans, net of allowance for loan losses of $4,774 and
$3,756 at June 30, 2022 and December 31, 2021, respectively		427,621			425,900
Property and equipment, net		9,407			9,907
Accrued interest receivable		1,902			1,842
Bank owned life insurance		6,054			6,014
Right-of-use assets – operating leases		1,391			1,594
Other assets		6,249			4,921
Total assets		$	612,576		$	586,921
Liabilities and Stockholders’ Equity
Liabilities
Deposits
Noninterest-bearing		$	118,227		$	116,525
Interest-bearing			417,277			392,754
Total deposits			535,504			509,279
Long-term borrowings			551			683
Junior subordinated notes – trust preferred securities			8,248			8,248
Subordinated debentures			9,883			9,863
Lease liabilities – operating leases			1,391			1,594
Accrued interest payable			110			110
Other liabilities			6,170			5,816
Total liabilities			561,857			535,593
Stockholders’ equity
Common stock, no par value; 50,000,000 shares authorized;
2,702,370 and 2,672,620 issued and outstanding
at June 30, 2022 and December 31, 2021, respectively			25,945			25,532
Retained earnings			25,778			22,815
Accumulated other comprehensive income (loss)			(1,004	)		2,981
Total stockholders’ equity			50,719			51,328
Total liabilities and stockholders’ equity		$	612,576		$	586,921

Oak Ridge Financial Services, Inc.
Consolidated Statements of Income (Unaudited)
For the three and six months ended June 30, 2022 and 2021
(Dollars in thousands)

	Three months ended June 30,								Six months ended June 30,
	2022				2021				2022		2021
Interest and dividend income
Loans and fees on loans	$	5,051			$	5,440	$		10,539		$	11,316
Interest on deposits in banks		171				7			199			10
Restricted stock dividends		18				20			36			40
Interest on investment securities		408				328			764			684
Total interest and dividend income		5,648				5,795			11,538			12,050
Interest expense
Deposits		237				342			494			723
Short-term and long-term debt		217				330			428			646
Total interest expense		454				672			922			1,369
Net interest income		5,194				5,123			10,616			10,681
Provision for (recovery of) loan losses		(107)				-			(19)			(112)
Net interest income after provision for loan losses		5,301				5,123			10,635			10,793
Noninterest income
Service charges on deposit accounts		150				120			287			254
Brokerage commissions on mortgage loans		61				55			133			132
Insurance commissions		112				88			226			208
Gain on sale of Small Business Administration loans		485				-			514			-
Debit and credit card interchange income		308				293			585			547
Income from Small Business Investment Company		100				-			170			-
Income earned on bank owned life insurance		20				21			40			42
Other service charges and fees		64				82			124			146
Total noninterest income		1,300				659			2,079			1,329
Noninterest expense
Salaries		2,340				1,637			4,356			3,490
Employee benefits		304				271			551			565
Occupancy		251				243			547			530
Equipment		243				268			496			545
Data and item processing		408				429			854			875
Professional and advertising		294				271			584			428
Stationary and supplies		34				58			60			97
Impairment loss on securities		-				18			-			28
Telecommunications		104				96			211			190
FDIC assessment		53				36			107			94
Other expense		445				322			747			550
Total noninterest expense		4,476				3,649			8,513			7,392
Income before income taxes		2,125				2,133			4,201			4,730
Income tax expense		422				413			836			955
Net income and income available to common stockholders	$	1,703			$	1,720	$		3,365		$	3,775
Basic income per common share	$	0.63			$	0.65	$		1.25		$	1.43
Diluted income per common share	$	0.63			$	0.65	$		1.25		$	1.43
Basic weighted average shares outstanding		2,702,370				2,643,503			2,692,794			2,648,089
Diluted weighted average shares outstanding		2,702,370				2,643,503			2,692,794			2,648,089

Selected Financial Data	June 30, 2022					March 31, 2022			December 31, 2021			September 30, 2021			June 30, 2021				March 31, 2021
Return on average common stockholders' equity1		13.52	%			13.07	%			15.70	%		16.40	%		14.71	%			18.45	%
Tangible book value per share	$	18.77			$	18.63			$	19.20		$	18.53		$	17.93			$	17.24
Return on average assets1		1.11	%			1.14	%			1.36	%		1.41	%		1.20	%			1.49	%
Net interest margin1		3.66	%			4.07	%			3.65	%		3.94	%		3.79	%			4.26	%
Efficiency ratio		68.93	%			65.10	%			69.73	%		63.08	%		62.80	%			59.94	%
Nonperforming assets to total assets		0.14	%			0.16	%			0.51	%		0.50	%		0.55	%			0.62	%

¹Annualized

Contact: Tom Wayne, CEO and CFO
Phone: 336.644.9944

FAQ

What are the recent earnings per share for BKOR?

The recent earnings per share for BKOR is $0.63 for the three months ended June 30, 2022.

How much did BKOR's tangible book value increase?

BKOR's tangible book value increased by 4.7% to $18.77 per share as of June 30, 2022.

What is BKOR's annualized return on equity for Q2 2022?

BKOR's annualized return on average equity for Q2 2022 is 13.52%.

When is the next dividend payment for BKOR?

The next dividend payment for BKOR is $0.08 per share, payable on September 2, 2022.

What were BKOR's nonperforming assets as of June 30, 2022?

BKOR's nonperforming assets totaled $884,000, down 69.5% from the previous year.