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Oak Ridge Financial Services, Inc. Announces 2020 Results and Quarterly Cash Dividend of $0.06 Per Share

OAK RIDGE, N.C., Feb. 03, 2021 (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 2020, and a quarterly cash dividend of $0.06 per share. Fourth Quarter and Full Year 2020 Highlights Earnings per share of $1.23 for 2020, down 39 cents, or 24%, from 2019; earnings per share of $0.38 for the three months ended December 31, 2020, down one cent, or 3%, from 2019;Return on average common stockholders’ equity of 7.68% for 2020, compared to 11.25% for 2019; return on average common stockholders’ equity of 9.17% for the three months ended December 31, 2020, compared to 10.23% for the same period in 2019;Loan loss provision for the year ended December 31, 2020 of $2.7 million, up from $185,000 for 2019; 2020 loan loss provision of $2.7 million predominantly related to the potential adverse economic impact of the COVID-19 pandemic, and the primary reason for the decline in earnings per share and return on average common stockholders’ equity from 2019 to 2020;Tangible book value per common share of $16.86, up 9.8%, or $1.50, from $15.36 as of December 31, 2019.Through the end of the first round of the Small Business Administration (“SBA”) Payroll Protection Program (“PPP”) in August 2020, the Bank funded 606 PPP loans totaling $50.1 million, and has collected fees from the SBA of $2.1 million; these fees and associated origination costs will be recognized as interest income over the life of the PPP loans;Period end loans of $450.6 million, up 15.8% from December 31, 2019. period end loans, net of PPP loans, of $403.4 million, up 3.7% from December 31, 2019;Outstanding balance of loans granted deferrals of principal and/or interest payments in response to COVID-19 of $1.1 million (0.2% of total loans) as of December 31, 2020, down from a peak of $133.7 million (29.2% of loans);Period end allowance for loan losses of $5.5 million, up 89.1%, from $2.9 million at December 31, 2019.Nonperforming assets of $3.5 million, down 8.4% from $3.9 million at December 31, 2019.Period end deposits of $455.7 million, up 14.5% from December 31, 2019, period end noninterest-bearing deposits of $94.2 million, up 46.4% from December 31, 2019. Tom Wayne, Chief Executive Officer and Chief Financial Officer, reported, “In the midst of the unprecedented challenges presented by the ongoing COVID-19 pandemic, I am extremely pleased with our financial performance in 2020, and very proud of our Bank’s support of the local community through our participation in the PPP program and our loan deferral program, which was structured to assist borrowers that have been impacted by COVID-19. Loans in deferral peaked at 29% of total loans in the second quarter of 2020 and have declined significantly to just 0.2% of total loans at December 31, 2020, a very positive sign. Since the pandemic began, we have followed local, state, and national guidelines, and have adapted our sales and service processes to seamlessly service new and existing clients while keeping our team safe. While it is difficult to accurately predict the next few quarters and the impact of COVID-19 on our local and national economy, I am thankful to have our experienced team of bankers and a supportive board of directors as we address future challenges and opportunities.” A quarterly cash dividend of $0.06 per share of common stock is payable on March 1, 2021 to stockholders of record as of the close of business on February 16, 2021. “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 June 30, 2020. As of December 31, 2020 the Bank’s CBLR was 9.22%. As of December 31, 2020, the Company’s stockholders’ equity was $44.5 million, up 10.4%, from $40.3 million at December 31, 2019. With respect to the consolidated statement of operations for 2020 and 2019, net interest income was $17.6 million for 2020, up $1.3 million, or 8.0%, from $16.3 million during the year ending December 31, 2019. For 2020, the net interest margin was 3.50% compared to 3.69% for year ending December 31, 2019, a decrease of 19 basis points. The primary reason for the decrease in the net interest margin was an increase in interest expense associated with the Company’s $10 million subordinated debenture issue that closed in June 2020. The Company recorded a provision for loan losses of $2.7 million in 2020, compared with a loan loss provision of $185,000 in 2019. The allowance for loan losses as a percentage of total loans was 1.21% at December 31, 2020 compared to 0.90% at December 31, 2019. The allowance for loan losses as a percentage of total loans not including PPP loans was 1.35% as of December 31, 2020. The increase in the allowance for loan losses in 2020 was largely the result of the Company increasing the qualitative factors in its allowance for loan loss model due to the deteriorating economic outlook related to COVID-19. Nonperforming assets represented 0.64% of total assets as of December 31, 2020, compared to 0.82% at December 31, 2019. Noninterest income totaled $3.2 million in 2020, unchanged from 2019. Noninterest expense totaled $14.0 million in 2019, down slightly from $14.1 million in 2019. 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 of 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, Summerfield and Oak Ridge, North Carolina, or call 336.644.9944, or online at www.BankofOakRidge.com. Forward-looking InformationThis 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 December 31, 2020 (Unaudited) and December 31, 2019 (Audited) (Dollars in thousands) 2020 2019Assets Cash and due from banks$9,104 $4,030Interest-bearing deposits with banks 9,027 14,928Total cash and cash equivalents 18,131 18,958Federal Funds Sold 3,217 4,611Securities available-for-sale 46,357 41,183Securities held-to-maturity (fair values of $715 at year end 2020 and $898 at year end 2019) 564 730FRB and FHLB Stock, at cost 1,806 1,042Loans, net of allowance for loan losses of $5,458 at year end 2020 and $2,886 at year end 2019 445,127 386,056Property and equipment, net 10,632 10,491Accrued interest receivable 2,412 1,478Bank owned life insurance 5,930 5,837Right-of-use assets – operating leases 1,990 1,336Other assets 4,464 3,984Total assets$540,630 $475,706 Liabilities and Stockholders’ Equity Liabilities Deposits: Noninterest-bearing$94,225 $64,374Interest-bearing 361,512 333,752Total deposits 455,737 398,126Short-term borrowings 8,000 15,000Long-term borrowings 952 1,184Junior subordinated notes related to trust preferred securities 8,248 8,248Subordinated debentures 15,459 5,608Lease liabilities – operating leases 1,990 1,336Accrued interest payable 140 281Other liabilities 5,603 5,608Total liabilities 496,129 435,391 Stockholders’ equity Common stock, no par value; 50,000,000 shares authorized; 2,639,345 and 2,621,315 issued and outstanding as of December 31, 2020 and 2019, respectively 25,013 24,850Retained earnings 15,797 13,146Accumulated other comprehensive income 3,691 2,319Total stockholders’ equity 44,501 40,315Total liabilities and stockholders’ equity$540,630 $475,706 Oak Ridge Financial Services, Inc.Consolidated Statements of OperationsFor the three months and year ended December 31, 2020 and 2019 (Unaudited)(Dollars in thousands except per share data) Three months ended December 31,Year ended December 31, 2020201920202019Interest and dividend income Loans and fees on loans$5,196$5,029$20,649$20,077Interest on deposits in banks 4 73 83 371Federal Home Loan Bank stock dividends 48 16 98 66Investment securities 367 313 1,304 1,346Total interest and dividend income 5,615 5,431 22,134 21,860Interest expense Deposits 570 1,106 3,213 4,398Short-term and long-term debt 365 277 1,319 1,162Total interest expense 935 1,383 4,532 5,560Net interest income 4,680 4,048 17,602 16,300Provision for loan losses 500 – 2,746 185Net interest income after provision for loan losses 4,180 4,048 14,856 16,115 Noninterest income Service charges on deposit accounts 143 196 588 732Gain on sale of securities – – – 164Brokerage commissions on mortgage loans 86 69 381 306Insurance commissions 87 80 362 349Gain on sale of SBA loans – 195 464 278Fee income from accounts receivable financing – – – 13Debit and credit card interchange income 252 248 1,048 963Income earned on bank owned life insurance 23 25 93 98Other service charges and fees 57 67 226 267Total noninterest income 648 880 3,162 3,170Noninterest expense Salaries 1,731 1,701 6,138 6,678Employee benefits 286 296 1,117 1,159Occupancy expense 285 234 998 880Equipment expense 258 242 1,010 915Data and item processing 514 508 2,147 1,976Professional and advertising 118 176 579 658Stationery and supplies 29 29 132 141Net cost of foreclosed assets – 40 4 52Impairment loss on securities 5 12 58 28Telecommunications expense 86 97 351 403FDIC assessment 72 – 266 48Accounts receivable financing expense – – – 3Other expense 234 338 1,245 1,134Total noninterest expense 3,618 3,673 14,045 14,075Income before income taxes 1,210 1,255 3,973 5,210Income tax expense 200 225 714 960Net income and net income available to common stockholders$1,010$1,030$3,259$4,250Basic net income per common share$0.38$0.39$1.23$1.62Diluted income per common share$0.38$0.39$1.23$1.62Basic weighted average common shares outstanding 2,639,345 2,625,685 2,640,504 2,621,007Diluted weighted average common shares outstanding 2,639,345 2,634,729 2,640,504 2,630,244 Oak Ridge Financial Services, Inc.Selected Quarterly Financial Ratios (unaudited) Selected Financial DataDecember 31, 2020September 30, 2020June 30, 2020March 31, 2020December 31, 2019September 30, 2019Return on average common stockholders’ equity1 9.17% 8.50% 11.66% 1.68% 10.23% 11.08%Tangible book value per share$16.86 $16.36 $15.98 $15.22 $15.36 $14.99 Return on average assets1 0.73% 0.64% 0.92% 0.14% 0.86% 0.92%Net interest margin1 3.57% 3.42% 3.50% 3.49% 3.57% 3.80%Net interest income to average assets1 3.32% 3.27% 3.34% 3.32% 3.37% 3.51%Efficiency ratio 67.64% 68.67% 62.79% 71.82% 74.53% 69.9%Nonperforming assets to total assets 0.64% 0.64% 0.65% 0.78% 0.81% 0.91% 1Annualized Contact: Tom Wayne, CEO and CFOPhone: 336-644-9944

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