Oak Ridge Financial Services Announces Third Quarter 2009 Results

Oak Ridge Financial Services, Inc. (Nasdaq:BKOR), parent company of Bank of Oak Ridge, headquartered in Oak Ridge, North Carolina, announced unaudited net income of $159,000 before adjusting for the effective dividend on preferred stock for the three months ended September 30, 2009, compared to net income of $375,000 for the prior year period. Net income available for common shareholders for the three months ended September 30, 2008 was $375,000 or $0.21 per diluted share. On the positive side, an increased net interest margin contributed to a significant increase in the Company's net interest income in the quarter ended September 30, 2009 compared to the same prior year period. Earnings in the current period were negatively impacted by higher loan loss provisions, charge offs, and other real estate owned write downs in response to current economic conditions. Increased noninterest operating expense and a slight decrease in noninterest income also contributed to the overall decline in earnings.

Oak Ridge Financial Services President, Ron Black, in commenting on the results, noted, “Given the difficult economic environment, we are pleased with our performance in the third quarter. As a true community bank our primary purpose continues to be helping our clients succeed in these difficult times. Pre-tax, pre-loan loss provision, and post-CPP dividend payment, earnings were $1.2 million for the third quarter of 2009, compared to $673,000 for the third quarter of 2008, an increase of approximately $511,000. Pre-tax, pre-loan loss provision, and post-CPP dividend payments, earnings were $2.5 million for the first nine months of 2009, compared to $1.6 million for the first nine months of 2008, an increase of approximately $912,000. Additionally, our core earnings have been strong enough to absorb significant charge offs and loan loss provisions. Our primary areas of focus for the foreseeable future are managing credit quality, building liquidity sources, managing capital, and improving operational earnings. We are pleased that despite significant charge-offs we were able to increase our allowance for loan loss from $2.5 million or 1.00% of total loans at December 31, 2008 to $3.3 million or 1.33% of loans at September 30, 2009.”

Mr. Black further commented, “We plan to continue to support our local economy by taking deposits, making loans, and providing financial advice for our clients in these challenging times. The community was incredibly supportive of our Bank in the first nine months of 2009 and we had increases in loans and deposits. Lastly, at September 30, 2009 we were well-capitalized with ample capital for future growth.”

About Bank of Oak Ridge

Bank of Oak Ridge, headquartered in Oak Ridge, NC, is a community Bank with five banking offices in Oak Ridge, Summerfield and Greensboro. The Bank's independent financial advisory division, Oak Ridge Wealth Management, operates out of an office in downtown Greensboro. The Bank offers a complete line of banking and investment services, including savings and checking accounts, mortgage and business loans, extended weekday and Saturday branch banking hours, same-day deposits, cash management services, business and personal internet banking with balance alerts and reminders, internet bill payment, mobile banking and accounts designed specifically for seniors, small businesses and civic organizations. For more information, contact Bank of Oak Ridge at 336-644-9944, or visit 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 collectibility 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.

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Oak Ridge Financial Services, Inc.
Financial Highlights (dollars in thousands, except share and per share data)
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	�	�	Three months ended September 30,								�	�	�		�	�	Nine months ended September 30,							�	�	�
			2009			�	�	2008					Change				2009			�	�	2008				Change
Income Statement Data:
Total interest income			$	4,974				$	4,457				11.6	%			$	14,714				$	13,358			10.2	%
Total interest expense			�	1,759	�			�	2,181	�			(19.3	)			�	6,020	�			�	6,947			(13.3	)
Net interest income				3,215					2,276				41.3					8,694					6,411			35.6
Provision for loan losses				877					74				1,085.1					1,546					337			358.8
Non-interest income				850					898				(5.3	)				2,544					2,549			(0.2	)
Non-interest expense			�	2,979	�			�	2,501	�			19.1				�	8,957	�			�	7,332			22.2
Net income before provision for income taxes				209					599				(65.1	)				735					1,291			(43.1	)
Provision for income taxes			�	50	�			�	224	�			(77.7	)			�	234	�			�	471			(50.3	)
Net income			$	159	�			$	375	�			(57.6	)			$	501	�			$	820			(38.9	)
Preferred stock dividends				98					-				n/a					259					-			n/a
Accretion of discount			�	68	�			�	-	�			n/a				�	178	�			�	-			n/a
Income available to common shareholders			$	(7	)			$	375	�			(101.9	)			$	64	�			$	820			(92.2	)
																										�
Per share data and shares outstanding: (1)
Basic net income per common share			$	-				$	0.21				(100.0	)%			$	0.04				$	0.46			(91.3	)%
Diluted net income per common share				-					0.21				(100.0	)				0.04					0.45			(91.2	)
Book value per common share at period end				11.57					9.26				24.9					11.57					9.26			24.9
																										�
Weighted average number of common shares outstanding (000's):
Basic				1,791.5					1,791.5				(0.0	)%				1,791.5					1,791.5			-	%
Diluted				1,791.5					1,791.2				0.0					1,791.5					1,809.4			(1.0	)
Shares outstanding at period end				1,791.5					1,791.5				-					1,791.5					1,791.5			(0.0	)
																										�
			September 30,					December 31,
Balance sheet data			2009					2008					Change
Total assets			$	339,682				$	320,672				5.9	%
Loans receivable				249,699					245,481				1.7
Allowance for loan losses				3,315					2,450				35.3
Other interest-earning assets				70,855					55,807				27.0
Noninterest-bearing deposits				20,469					18,181				12.6
Interest-bearing deposits				264,644					252,423				4.8
Borrowings				25,248					30,248				(16.5	)
Stockholders' equity				27,658					18,195				52.0
																										�
			Three months ended September 30,										Nine months ended September 30,
Selected performance ratios:			2009					2008					2009				2008
Return on average assets (2)				0.22	%				0.51	%			0.19	%				0.38	%
Return on average stockholders' equity (2)				1.20					8.48				1.89					6.21
Net interest margin (2)(3)				3.95					3.27				3.59					3.10
Net interest spread (2)(4)				3.68					2.99				3.43					2.85
Noninterest income as a % of total revenue				20.9					28.3				22.6					28.4
Noninterest income as a % of average assets (2)				1.0					1.2				1.5					1.2
Efficiency ratio (5)				73.28					78.80				79.70					81.83
Noninterest expense as a % of average assets (2)				3.4					3.5				3.5					3.4
																										�
			September 30,					December 31,
Asset quality ratios (at period end):			2009					2008
Nonperforming assets to period-end loans (6)				1.50	%				1.09	%
Nonperforming assets to period-end assets (6)				1.10					0.61
Allowance for loan losses to period-end loans				1.33					1.00
Allowance for loan losses to total assets				0.98					0.76
Net loan charge-offs to average loans outstanding (2)				1.48					0.12

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Oak Ridge Financial Services, Inc.
Financial Highlights (dollars in thousands, except share and per share data)
�
	�	�	September 30,			�	�	December 31,			�	�			�	�			�	�			�	�
Capital and liquidity ratios:			2009					2008
Equity to assets ratio				8.1	%				5.7	%
Loans to deposits				87.6					90.7
																									�
			Three months ended September 30,										�				Nine months ended September 30,								�
Total Revenue			2009					2008					Change				2009				2008				Change
Net interest income			$	3,215	�			$	2,276	�			41.3	%			$	8,694			$	6,411			35.6	%
Fees and other revenue:
Service charges on deposit accounts				237					222				6.8					645				575			12.2
Mortgage loan origination fees				102					98				4.1					403				330			22.1
Investment and insurance commissions				159					237				(32.9	)				495				687			(27.9	)
Fee income from purchase of accounts receivable				186					209				(11.0	)				541				561			(3.6	)
Income earned on bank owned life insurance				51					41				24.4					148				121			22.3
Other			�	115	�			�	91	�			26.4				�	312			�	275			13.5
Total noninterest income			�	850	�			�	898	�			(5.3	)			�	2,544			�	2,549			(0.2	)
Total revenue			$	4,065	�			$	3,174	�			28.1				$	11,238			$	8,960			25.4
																									�
			Three months ended September 30,														Nine months ended September 30,								�
Noninterest Expense			2009					2008					Change				2009				2008				Change
Salaries and employee benefits			$	1,474				$	1,339				10.1	%			$	4,258			$	3,885			9.6	%
Occupancy				209					171				22.2					574				434			32.3
Equipment				216					158				36.7					560				438			27.9
Data and items processing				162					122				32.8					462				334			38.3
Professional and advertising				350					259				35.1					964				850			13.4
Stationary and supplies				52					48				8.3					188				192			(2.1	)
Telecommunications expense				77					55				40.0					218				194			12.4
Other real estate expenses and writedowns				12					-				n/a					314				-			n/a
FDIC assessment				110					67				64.2					402				179			124.6
Accounts receivable financing expense				56					66				(15.2	)				165				210			(21.4	)
Other-than-temporary impairment loss				21					-				n/a					126				-			n/a
Other			�	240	�			�	216	�			11.1				�	726			�	616			17.9
Total noninterest expense			$	2,979	�			$	2,501	�			19.1				$	8,957			$	7,332			22.2
																									�
			Three months ended September 30,														Nine months ended September 30,								�
Average Balances			2009					2008					Change				2009				2008				Change
Total assets			$	349,289				$	293,729				18.9	%			$	344,071			$	285,346			20.6	%
Loans receivable				248,326					232,678				6.7					248,539				225,398			10.3
Allowance for loan losses				3,168					2,347				35.0					2,846				2,270			25.4
Other interest-earning assets				68,856					40,232				71.1					64,264				38,946			65.0
Total deposits				293,439					246,177				19.2					294,621				237,146			24.2
Total noninterest bearing deposits				20,723					17,213				20.4					19,525				16,029			21.8
Borrowings				23,400					30,408				(23.0	)				24,254				27,599			(12.1	)
Stockholders' equity				27,405					17,699				54.8					22,877				17,602			30.0

(1)	�	Computed based on the weighted average number of shares outstanding during each period.
(2)		Ratios for the three- and nine-month periods ended September 30, 2009 and 2008 are presented on an annualized basis.
(3)		Net interest margin is net interest income divided by average interest earning assets.
(4)		Net interest spread is the difference between the average yield on interest earning assets and the average cost of interest bearing liabilities.
(5)		Efficiency ratio is noninterest expense divided by the sum of net interest income and noninterest income.
(6)		Nonperforming assets consist of non-accruing loans, restructured loans and foreclosed assets, where applicable.

Contacts:

Oak Ridge Financial Services, Inc.
Ron Black, 336-644-9944
President & CEO