OAK RIDGE, N.C., Oct. 21, 2016 (GLOBE NEWSWIRE) -- Oak Ridge Financial Services, Inc. (“Oak Ridge”; the “Company”) (OTCPink:BKOR), the parent company of Bank of Oak Ridge (the “Bank”), announced unaudited financial results for the third quarter of 2016 today.
Net income available to common shareholders was $712,000 compared to $709,000 for the third quarter of 2015. Basic and diluted net income per common share was $0.30 for the 2016 quarter compared to $0.32 for the 2015 quarter. Net income available to common stockholders’ for the third quarter of 2016 produced annualized returns on average assets of 0.76% and on average equity of 10.30%.
Financial Performance and Overview
Tom Wayne, President and Chief Financial Officer, reported, “We were very pleased with loan and deposit growth in the third quarter. In the first nine months of 2016, loans have increased $19.9 million or 7.1%. The growth was due to a combination of increased production from our lending team and improving economic conditions in the Triad.
The retail banking team has supported the lending side, as total deposits have increased $16.5 million or 5.3% in the first nine months of 2016. In particular, we have been very pleased with the growth in non-interest bearing deposits, which have grown $3.7 million or 8.5% during the first nine months of 2016. Additionally, the retail banking team continues to drive adoption to existing and new clients of the Bank’s new interactive teller machines (“ITMs”) which were deployed in the second quarter of 2016. Client acceptance of the new delivery channel and the extended hours (7 am to 7 pm Monday-Friday and 9 am – 1 pm Saturday) has been very positive.
Although net income to available shareholders during the three month period ending September 30, 2016 was up only slightly from the same period in 2015, return on average common stockholders’ equity was 10.30%, which are a reflection of solid earnings as well as the prudent use of forms of regulatory capital other than common equity to fund the Company’s growth.
During the first nine months of 2016, the Company has had stable profitability and solid growth. I’m very pleased with our performance and thank our amazing employees, the Board of Directors, and our clients for their support.”
Capital
Bank of Oak Ridge’s capital ratios remain strong and exceed all regulatory requirements.
As of September 30, 2016, the Company’s stockholders’ equity was 7.2% of total assets, compared to 8.2% as of December 31, 2015. Book value per common share was $11.56 as of September 30, 2016, compared to $10.86 as of December 31, 2015.
Net Interest Income
Net interest income was $3.3 million in the three months ended September 30, 2016, which was essentially unchanged from net interest during the same period in 2015. The allowance for loan losses as a percentage of total loans was 1.24% at September 30, 2016 compared to 1.39% at December 31, 2015.
For the 2016 quarter, the net interest margin was 3.77% compared to 3.92% for the same quarter in 2015, a decrease of 15 basis points. Most of the decrease in the margin was driven by subordinated debentures of $5.5 million that were outstanding during the three months ended September 30, 2016 but not outstanding during the prior year period. The debentures, which carry an interest rate of 7%, were used to redeem Series A preferred stock on June 30, 2016 that carried an interest rate of 9%. Interest expense on the debentures is deductible while the dividend payments on the Series A preferred stock were non-deductible.
Provision for Losses and Allowance for Loan Losses
The Company recorded a negative provision expense of $100,000 for the third quarter of 2016 compared with a negative provision of $250,000 for the same quarter in 2015.
There has been growth in loans outstanding over the first three quarters of 2016. The need for additions to the allowance for loan losses was reduced by improvement in various qualitative factors used in the determination of the allowance, notably asset quality and economic conditions. Charge-offs, and other real estate owned are all improved over the past year, and non-performing assets are relatively unchanged.
Credit Quality Measurements
Non-performing assets ($3.4 million of non-performing loans and $4,000 of other real estate owned) represented 0.90% of total assets at September 30, 2016, compared to 0.88% at December 31, 2015.
Other real estate owned was $4,000 compared to $44,000 at December 31, 2015, a decrease of $40,000 or 91.0%.
Noninterest Income
Noninterest income totaled $978,000 in the third quarter of 2016, compared with $661,000 in the third quarter of 2015, an increase of $317,000 or 48.0%. Gain on sale of securities was the most notable change, as it was $275,000 compared to no gains in the prior year quarter.
Noninterest Expense
Noninterest expense totaled $3.3 million in the third quarter of 2016, compared to $3.0 million in the third quarter of 2015, an increase of $332,000 or 11.0%. Most of the increase was related to higher salaries, which increased $208,000 from the third quarter of 2015 to the same period in 2016. The increase is mostly attributable to normal merit increases which generally occur on January 1 of each year as well as higher incentive payments during the three months ended September 30, 2016 compared to the same period in 2015.
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 is an employee owned community bank with a mission to provide Banking as It Should Be® by delivering personal attention and convenience for every client. Bank of Oak Ridge has been named Best Bank in the Triad five years in a row, as well as one of the Triad’s Healthiest Employers and Top Workplaces. 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 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, Summerfield and Oak Ridge, North Carolina, or call 336.644.9944, or online at 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 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, (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. Consolidated Balance Sheets September 30, 2016 (unaudited) and December 31, 2015 (audited) (Dollars in thousands) | ||||||
| 2016 | 2015 | |||||
| Assets | ||||||
| Cash and due from banks | $ | 7,055 | $ | 6,357 | ||
| Interest-bearing deposits with banks | 8,516 | 9,611 | ||||
| Federal Funds sold | 3,156 | 2,061 | ||||
| Total cash and cash equivalents | 18,727 | 18,029 | ||||
| Securities available-for-sale | 45,723 | 46,526 | ||||
| Securities held-to-maturity (fair values of $1,621 in 2016 and $1,936 in 2015) | 1,502 | 1,771 | ||||
| Federal Home Loan Bank Stock, at cost | 684 | 680 | ||||
| Loans held for sale | 92 | 582 | ||||
| Loans, net of allowance for loan losses of $3,714 in 2016 and $3,898 in 2015 | 296,023 | 275,972 | ||||
| Property and equipment, net | 8,866 | 8,056 | ||||
| Foreclosed assets | 4 | 44 | ||||
| Accrued interest receivable | 1,244 | 1,260 | ||||
| Bank owned life insurance | 5,513 | 5,441 | ||||
| Other assets | 2,579 | 2,870 | ||||
| Total assets | $ | 380,957 | $ | 361,231 | ||
| Liabilities and Stockholders’ Equity | ||||||
| Liabilities | ||||||
| Deposits: | ||||||
| Noninterest-bearing | $ | 47,305 | $ | 43,582 | ||
| Interest-bearing | 277,795 | 264,996 | ||||
| Total deposits | 325,100 | 308,578 | ||||
| Short-term borrowings | 8,500 | 8,500 | ||||
| Long-term borrowings | 1,625 | 2,000 | ||||
| Junior subordinated notes related to trust preferred securities | 8,248 | 8,248 | ||||
| Subordinated debentures | 5,519 | - | ||||
| Accrued interest payable | 135 | 122 | ||||
| Other liabilities | 4,234 | 4,081 | ||||
| Total liabilities | 353,361 | 331,529 | ||||
| Stockholders’ equity | ||||||
| Preferred stock, Series A, no par value, $1,000 per share liquidation preference; 7,700 shares authorized; 0 and 5,200 issued and outstanding in 2016 and 2015, respectively | - | 5,191 | ||||
| Common stock, no par value; 50,000,000 shares authorized; 2,386,514 and 2,257,891 issued and outstanding in 2016 and 2015, respectively | 19,875 | 19,241 | ||||
| Retained earnings | 6,051 | 4,329 | ||||
| Accumulated other comprehensive income | 1,670 | 941 | ||||
| Total stockholders’ equity | 27,596 | 29,702 | ||||
| Total liabilities and stockholders’ equity | $ | 380,957 | $ | 361,231 | ||
| Oak Ridge Financial Services, Inc. Consolidated Statements of Operations For the three and nine months ended September 30, 2016 and 2015 (Dollars in thousands except per share data) | |||||||||||||||||||||
| Three months ended September 30, | Nine months ended September 30, | ||||||||||||||||||||
| 2016 | 2015 | 2016 | 2015 | ||||||||||||||||||
| Interest and dividend income | |||||||||||||||||||||
| Loans and fees on loans | $ | 3,624 | $ | 3,404 | $ | 10,598 | $ | 10,252 | |||||||||||||
| Interest on deposits in banks | 12 | 8 | 38 | 21 | |||||||||||||||||
| Federal Home Loan Bank stock dividends | 4 | 5 | 16 | 14 | |||||||||||||||||
| Investment securities | 354 | 389 | 1,110 | 1,253 | |||||||||||||||||
| Total interest and dividend income | 3,994 | 3,806 | 11,762 | 11,540 | |||||||||||||||||
| Interest expense | |||||||||||||||||||||
| Deposits | 487 | 447 | 1,456 | 1,360 | |||||||||||||||||
| Short-term and long-term debt | 176 | 47 | 301 | 156 | |||||||||||||||||
| Total interest expense | 663 | 494 | 1,757 | 1,516 | |||||||||||||||||
| Net interest income | 3,331 | 3,312 | 10,005 | 10,024 | |||||||||||||||||
| Provision for loan losses | (100 | ) | (250 | ) | (150 | ) | (525 | ) | |||||||||||||
| Net interest income after provision for loan losses | 3,431 | 3,562 | 10,155 | 10,549 | |||||||||||||||||
| Noninterest income | |||||||||||||||||||||
| Service charges on deposit accounts | 181 | 184 | 528 | 559 | |||||||||||||||||
| Gain on sale of securities | 275 | 25 | 275 | 699 | |||||||||||||||||
| Gain (loss) on sale of property and equipment | - | - | (1 | ) | - | ||||||||||||||||
| Gain on sale of mortgage loans | 61 | 28 | 102 | 101 | |||||||||||||||||
| Investment commissions | 20 | 12 | 38 | 32 | |||||||||||||||||
| Insurance commissions | 74 | 55 | 178 | 146 | |||||||||||||||||
| Fee income from accounts receivable financing | 46 | 60 | 150 | 200 | |||||||||||||||||
| Debit card interchange income | 229 | 230 | 685 | 664 | |||||||||||||||||
| Income earned on bank owned life insurance | 24 | 28 | 73 | 84 | |||||||||||||||||
| Impairment loss on securities | (11 | ) | (29 | ) | (18 | ) | (65 | ) | |||||||||||||
| Other service charges and fees | 79 | 68 | 296 | 202 | |||||||||||||||||
| Total noninterest income | 978 | 661 | 2,306 | 2,622 | |||||||||||||||||
| Noninterest expense | |||||||||||||||||||||
| Salaries | 1,683 | 1,475 | 4,750 | 4,390 | |||||||||||||||||
| Employee benefits | 247 | 181 | 702 | 689 | |||||||||||||||||
| Occupancy expense | 181 | 177 | 566 | 568 | |||||||||||||||||
| Equipment expense | 186 | 192 | 505 | 561 | |||||||||||||||||
| Data and item processing | 379 | 364 | 1,124 | 983 | |||||||||||||||||
| Professional and advertising | 212 | 201 | 617 | 577 | |||||||||||||||||
| Stationary and supplies | 59 | 52 | 184 | 193 | |||||||||||||||||
| Net cost of foreclosed assets | - | (18 | ) | 13 | 262 | ||||||||||||||||
| Telecommunications expense | 104 | 79 | 311 | 340 | |||||||||||||||||
| FDIC assessment | 60 | 56 | 174 | 194 | |||||||||||||||||
| Accounts receivable financing expense | 14 | 18 | 45 | 61 | |||||||||||||||||
| Other expense | 217 | 233 | 582 | 878 | |||||||||||||||||
| Total noninterest expense | 3,342 | 3,010 | 9,573 | 9,696 | |||||||||||||||||
| Income before income taxes | 1,067 | 1,213 | 2,888 | 3,475 | |||||||||||||||||
| Income tax expense | 355 | 387 | 872 | 1,080 | |||||||||||||||||
| Net income | $ | 712 | $ | 826 | $ | 2,016 | $ | 2,395 | |||||||||||||
| Preferred stock dividends | - | (117 | ) | (234 | ) | (351 | ) | ||||||||||||||
| Net income available to common stockholders | $ | 712 | $ | 709 | $ | 1,782 | $ | 2,044 | |||||||||||||
| Basic net income per common share | $ | 0.30 | $ | 0.32 | $ | 0.76 | $ | 0.93 | |||||||||||||
| Diluted income per common share | $ | 0.30 | $ | 0.32 | $ | 0.76 | $ | 0.93 | |||||||||||||
| Basic weighted average common shares outstanding | 2,386,514 | 2,201,392 | 2,348,571 | 2,186,653 | |||||||||||||||||
| Diluted weighted average common shares outstanding | 2,397,723 | 2,211,267 | 2,359,667 | 2,195,744 | |||||||||||||||||
| Oak Ridge Financial Services, Inc. Selected Quarterly Financial Ratios (unaudited) | |||||||||||||||
| Selected Financial Ratios | September 30, 2016 | June 30, 2016 | March 31, 2016 | December 31, 2015 | September 30, 2015 | ||||||||||
| Return on average assets1 | 0.76 | % | 0.81 | % | 0.62 | % | 0.64 | % | 0.92 | % | |||||
| Return on average common stockholders' equity1 | 10.30 | % | 9.61 | % | 6.99 | % | 7.52 | % | 12.59 | % | |||||
| Net interest margin1 | 3.77 | % | 3.81 | % | 3.88 | % | 3.96 | % | 3.92 | % | |||||
| Net interest income to average assets1 | 3.54 | % | 3.65 | % | 3.67 | % | 3.69 | % | 3.69 | % | |||||
| Efficiency ratio | 77.6 | % | 77.3 | % | 78.4 | % | 76.8 | % | 75.8 | % | |||||
| Nonperforming assets to total assets | 0.90 | % | 0.82 | % | 0.83 | % | 0.85 | % | 0.88 | % | |||||
| 1Annualized | |||||||||||||||