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Oak Ridge Financial Services Inc. Reports Operating Results (10-Q)
Posted by: gurufocus (IP Logged)
Date: May 13, 2010 10:15AM
Oak Ridge Financial Services Inc. (BKOR) filed Quarterly Report for the period ended 2010-03-31. Oak Ridge Financial Services Inc. has a market cap of $9.7 million; its shares were traded at around $5.48 with a P/E ratio of 34.3 and P/S ratio of 0.4.
Highlight of Business Operations:
Management has continued to focus on providing additional liquidity sources, both on-balance sheet and off. During the year ended December 31, 2009, we reduced our borrowings with the FHLB from $22 million to $9 million by increasing noninterest and interest bearing deposits by approximately $21.1million. The reduction in borrowings with the FHLB has provided us with additional availability to meet unforeseen liquidity demands that may arise. We currently have securities with a market value of $5.7 million pledged to the FHLB, and have unpledged securities held in safekeeping at the FHLB with a market value of $43.3 million that could be pledged or sold if needed. The Bank also has unused Federal Funds purchased lines totaling $6.0 million with two correspondent banks. In addition, management has plans to continue to build off-balance sheet sources of liquidity. In the fourth quarter of 2009, the Bank explored pledging qualifying commercial loans as collateral through the Federal Reserve Discount Window. Management decided not to explore this alternative but in the second half of 2010 intends to explore leveraging our existing relationship with the FHLB by pledging certain commercial loans as collateral for borrowings. Additionally, the Bank has had great success in attracting core deposits in the first quarter of 2010 through increased marketing, advertising and sales activities.
The Company was able to bolster its capital levels through its $7.7 million participation in the CPP on January 30, 2009. Of the total $7.7 million CPP funds received, to date $1.1 million of the CPP funds have been contributed to the Bank as additional equity capital. The remaining funds, approximately $6.6 million, are retained by the Company but could be pushed down to the Bank if needed. With total risk-based capital levels at the Bank of 11.70% and 11.45% at March 31, 2010 and December 31, 2009, respectively, the Bank is above the minimum 10% requirement to be classified as well-capitalized. If the remaining $6.6 million of available capital at the Company were contributed to the Bank as additional equity capital, the Banks total risk-based capital ratio would be 15.1% at March 31, 2010 and would place it well above the minimum well-capitalized requirement of 10%. Despite healthy capital levels, due to
In 2010, our income available to common stockholders was $484 thousand or $0.27 basic and diluted earnings per share, compared to loss available to common stockholders of $8 thousand or $0.00 basic and diluted earnings per share for 2009. The increase in earnings is primarily due to an increase in the net interest margin and noninterest income, offset by an increase in noninterest expense.
Total interest income decreased $63 thousand or 1.3% to $4.6 million in 2010 compared to $4.7 million in interest income in 2009. Increases in our average earning assets of $12.1 million in 2010 when compared to 2009 positively impacted interest income, however, the increase in average assets were more than offset by a 31 basis point decline in yields on interest-earning assets.
Professional and advertising expenses, which include audit, legal, consulting and marketing and advertising fees, increased $144 thousand or 49.7% to $434 thousand for 2010 compared to $290 thousand in 2009. Marketing and advertising expenses increased $98 thousand year over year due to a significant Move your Money advertising campaign launched in the first three months of 2010. Consulting fees increased $26 thousand in 2010 compared to 2009 due to the use of outside expertise for such matters as investment securities valuation and loan portfolio stress analyses. Increases in other expense items such as legal fees and other outside services made up the remainder of the increase.
Net charge-offs of $208 thousand in the first three months of 2010 increased $216 thousand when compared to the same period in 2009. Charge-offs from real estate secured loans were $210 thousand and $65 thousand in 2010 and 2009, respectively. There were no charge-offs from home equity lines of credit in the first three months of 2010 and 2009. Charge-offs from commercial and industrial loans were $5 thousand in the first three months of 2010 compared to no charge offs during the same period in 2009. Charge-offs from loans to individuals was $6 thousand and $10 thousand in the first three months of 2010 and 2009, respectively. There were minimal recoveries in the first three months of 2010, however, there were $83 thousand in commercial and industrial loan recoveries during the same period in 2009. Asset quality remains a top priority of the Bank. For the three months ended March 31, 2010, annualized net loan charge-offs were 0.33% of average loans compared to annualized net recoveries of 0.01% for the three months ended March 31, 2009. The ratio of annualized net charge-offs to average loans increased mainly due to the Bank writing off one real estate loan secured by a second deed of trust in the three months ended March 31, 2010. The increase in the allowance for loan losses to loans to 1.51% at March 31, 2010 from 1.12% at March 31, 2009 reflects the increase in our historical loss rate as our charge-offs have increased during the past year. Also, the increase reflects the recognition of additional loans identified as being impaired which require specific reserves. The ratio of our allowance for loan losses to nonperforming loans decreased to 64% as of March 31, 2010 compared to 99% at December 31, 2009. The decrease is the result of our allowance increasing approximately 35% year over year and our nonperforming loans increasing approximately 114% year over year.
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