Oak Ridge Financial Services, Inc. Announces Third Quarter and Nine Months Ended September 30, 2026 Results and Quarterly Cash Dividend of $0.16 Per Common Share

OAK RIDGE, N.C., Oct. 30, 2026 (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 third quarter and nine months ended September 30, 2026 and a quarterly cash dividend of $0.16 per common share.

Third Quarter and Nine Months Ended September 30, 2026 Highlights

• Earnings per share of $0.72 for the three months ended September 30, 2026, compared to $0.69 for the same period in 2025, and $0.79 for the three months ended June 30, 2026.
• Net income of $5.6 million, or $2.03 per share, for the nine months ended September 30, 2026, compared to $5.7 million, or $2.08 per share, for the same period in 2025.
• Annualized return on average equity of 10.81% for the three months ended September 30, 2026, compared to 11.26% for the same period in 2025, and 12.10% for the three months ended June 30, 2026.
• Dividends declared per common share of $0.16 for the three months ended September 30, 2026, compared to $0.14 for the same period in 2025, and $0.16 for the three months ended June 30, 2026.
• Tangible book value per common share of $26.84 as of September 30, 2026, compared to $24.98 as of September 30, 2025, and $26.83 as of June 30, 2026.
• Net interest margin of 4.33% for the three months ended September 30, 2026, compared to 4.18% for the same period in 2025, and 4.51% for the three months ended June 30, 2026.
• Efficiency ratio of 66.2% for the three months ended September 30, 2026, compared to 59.0% for the same period in 2025, and 61.8% for the three months ended June 30, 2026.
• Loans receivable of $535.4 million as of September 30, 2026, up 1.7% from $526.6 million as of September 30, 2025, and up 2.5% from $522.1 million as of June 30, 2026.
• Nonperforming assets to total assets of 1.82% as of September 30, 2026, compared to 0.84% as of September 30, 2025, and 1.42% as of June 30, 2026.
• Nonperforming assets were $12.3 million at September 30, 2026, compared to $5.8 million at September 30, 2025, and $9.4 million at June 30, 2026. At September 30, 2026, nonperforming assets included 19 U.S. Small Business Administration (SBA) loans with an aggregate outstanding balance of $11.9 million, or 97% of nonperforming assets, comprising $8.8 million guaranteed by the SBA and a nonguaranteed balance of $3.1 million. Estimated credit losses on these loans are based on the fair value of the collateral, less estimated costs to sell, together with expected recoveries from the SBA guarantee, and have been recognized through the provision for credit losses.
• Securities available-for-sale and held-to-maturity of $91.2 million as of September 30, 2026, down 9.4% from $100.7 million as of September 30, 2025, and down 8.1% from $99.3 million as of June 30, 2026.
• Total deposits of $520.4 million as of September 30, 2026, down 4.2% from $543.2 million as of September 30, 2025, and up 2.9% from $505.7 million as of June 30, 2026.
• Total borrowings, junior subordinated notes and subordinated debentures of $69.2 million as of September 30, 2026, up 14.9% from $60.2 million as of September 30, 2025, and down 2.1% from $70.7 million as of June 30, 2026.
• Total stockholders’ equity of $74.4 million as of September 30, 2026, up 8.5% from $68.5 million as of September 30, 2025, and up 0.1% from $74.3 million as of June 30, 2026. At September 30, 2026, the Bank’s Community Bank Leverage Ratio was 11.7%, compared to 11.5% as of September 30, 2025, and 12.5% as of June 30, 2026.
  
  

Tom Wayne, Chief Executive Officer, stated, “Our third quarter net income improved modestly from the prior year's quarter. Net income increased 5.2% to $2.0 million, or $0.72 per share, compared to $1.9 million, or $0.69 per share, in the third quarter of 2025. The increase reflected a $178,000 increase in net interest income, as our net interest margin improved to 4.33% from 4.18%, and a $765,000 lower provision for credit losses. Those improvements were partially offset by a $367,000 decline in noninterest income, largely because we recognized no gains on the sale of SBA loans this quarter compared to $380,000 a year ago, and by a $458,000 increase in noninterest expense, of which $206,000 reflected higher employer payroll taxes following the recognition of our remaining Employee Retention Credits in 2025. As a result, pre-tax, pre-provision income, which is net interest income plus noninterest income less noninterest expense, was $2.7 million compared to $3.3 million a year ago. Improving this is a priority as we focus on loan growth following the redemption of our subordinated debentures in order to benefit our results. Our net interest margin moderated from 4.51% in the prior quarter but remains solid at 4.33%.

“Year to date, net income of $5.6 million is 1.2% below the same period last year. That comparison largely reflects two factors: we recognized no gains on the sale of SBA loans, compared to $709,000 in the first nine months of 2025; and employer payroll taxes increased $589,000 because the Employee Retention Credits we recognized in 2025 did not recur. Excluding those payroll taxes, salaries and employee benefits were $314,000 lower than in the first nine months of 2025. This year we realigned our organization across the entire Bank. In lending and retail banking, we hired commercial and SBA lenders and filled branch positions, and we strengthened the teams that support them in SBA, credit, sales support, our call center and our interactive teller machine (ITM) center. We also filled key positions in accounting and finance, human resources, marketing, deposit operations, Bank Secrecy Act and anti-money laundering compliance, and loan operations. Each area of the Bank now works more closely together under our executive team. Just as important, we used this realignment to strengthen the Bank’s culture, with a renewed focus on accountability, teamwork and service to our customers. Loans have grown $19.7 million, or 3.8%, since year-end, and we believe these changes have built a stronger foundation for performance and earnings in the periods ahead.

“Nonperforming assets remain our most critical challenge, and reducing them is our highest priority. Nonperforming assets were $12.3 million, or 1.82% of total assets, at quarter-end, including 19 SBA loans totaling $11.9 million, or 97% of nonperforming assets. Of that amount, $8.8 million is guaranteed by the SBA, subject to the Bank’s compliance with SBA loan program requirements. Through our quarterly evaluation of each of these loans under the current expected credit loss (CECL) methodology, we have already recognized $1.9 million of estimated credit losses through our provision for credit losses, reflecting the fair value of the collateral, less estimated costs to sell, and expected recoveries from the SBA guarantee. During the quarter we collected $838,000 of SBA guarantee proceeds, and $4.8 million of these loans are now in the final stages of the guarantee acceptance process. We have implemented a disciplined, loan-by-loan resolution process, with clear ownership, strict adherence to deadlines and monthly tracking of every nonperforming asset through servicing, collateral liquidation and the SBA guarantee process, and we expect this process will move the remaining nonperforming assets off our balance sheet at a faster pace in the quarters ahead.

“Our strong capital position also allowed us to redeem all of our subordinated debentures in September. Replacing debt with an effective rate of 9.82% per annum with Bank funding at approximately 4.15% per annum should save approximately $340,000 in pre-tax interest expense each year, a benefit that will be fully reflected in our results beginning next quarter. Tangible book value per share increased to $26.84, from $24.98 a year ago, and the Bank’s Community Bank Leverage Ratio of 11.7% remains well above well-capitalized levels, giving us the strength to resolve our problem assets while continuing to grow the Bank as we serve our customers and communities. I want to thank our employees for their dedication, our Board of Directors for its guidance, and our stockholders for their continued support.”

Redemption of Subordinated Debentures

On September 15, 2026, the Company redeemed all $6.0 million of its outstanding subordinated debentures. The debentures were redeemed at par, and the Company incurred no prepayment penalty or other redemption costs. The debentures had an effective interest rate of 9.82% per annum in 2026. The redemption was funded through a dividend from the Bank to the Company, and management estimates the Bank’s marginal cost of funding the redemption is approximately 4.15% per annum. Based on that difference, the redemption is expected to reduce the Company’s interest expense by approximately $340,000 annually, or approximately $85,000 per quarter, on a pre-tax basis. The redemption was made possible by the Bank’s strong capital position. The Bank’s Community Bank Leverage Ratio declined to 11.7% at September 30, 2026, from 12.5% at June 30, 2026, reflecting the capital provided to fund the redemption, but remains well above the 8.0% level required to be considered well capitalized.

Dividend Announcement

A quarterly cash dividend of $0.16 per share of common stock is payable on December 1, 2026 to stockholders of record as of the close of business on November 13, 2026. “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.”

Financial Review

Net Interest Income

For the three months ended September 30, 2026 and 2025, net interest income was $7.0 million and $6.8 million, respectively, an increase of $178,000, or 2.6%. The net interest margin was 4.33% and 4.18%, respectively. Total interest and dividend income decreased $351,000, primarily due to a $203,000 decrease in interest and fees on loans and a $165,000 decrease in interest on investment securities. Total interest expense decreased $529,000, primarily due to a $603,000 decrease in interest expense on deposits and a $50,000 decrease in interest on junior subordinated notes and subordinated debentures, partially offset by a $118,000 increase in interest on Federal Home Loan Bank advances. The yield on average earning assets decreased to 6.12% from 6.28%, and the cost of funds decreased to 1.97% from 2.27%. Average loans decreased $6.8 million to $526.4 million and the average loan yield decreased to 6.43% from 6.50%. Average investment securities decreased $2.6 million to $96.7 million, with an average yield that decreased to 4.69% from 5.23%. Average interest-bearing deposits decreased $39.6 million to $374.7 million and their cost decreased to 2.18% from 2.55%, while average noninterest-bearing deposits increased $9.7 million to $139.0 million and average borrowings increased $16.1 million to $72.2 million. On a linked-quarter basis, net interest income decreased $103,000, or 1.4%, from $7.1 million for the three months ended June 30, 2026, and the net interest margin contracted 18 basis points from 4.51%.

For the nine months ended September 30, 2026 and 2025, net interest income was $20.3 million and $19.9 million, respectively, an increase of $418,000, or 2.1%. The annualized net interest margin was 4.27% and 4.10%, respectively. Total interest and dividend income decreased $1.3 million, primarily due to a $880,000 decrease in interest and fees on loans and a $380,000 decrease in interest on investment securities. Total interest expense decreased $1.7 million, primarily due to a $1.5 million decrease in interest expense on deposits, a $103,000 decrease in interest on junior subordinated notes and subordinated debentures and a $78,000 decrease in interest on Federal Home Loan Bank advances. The yield on average earning assets decreased to 6.09% from 6.24%, and the cost of funds decreased to 1.99% from 2.31%. Average loans decreased $9.5 million to $519.8 million and the average loan yield decreased to 6.39% from 6.50%. Average investment securities decreased $2.4 million to $97.5 million, with an average yield that decreased to 4.71% from 5.10%. Average interest-bearing deposits decreased $28.8 million to $387.3 million and their cost decreased to 2.26% from 2.59%, while average noninterest-bearing deposits increased $10.0 million to $136.3 million and average borrowings decreased $61,000 to $57.6 million.

Provision for Credit Losses and Asset Quality

For the three months ended September 30, 2026 and 2025, the Company recorded provisions for credit losses of $112,000 and $877,000, respectively, a decrease of $765,000, or 87.2%. On a linked-quarter basis, the provision decreased $129,000 from $241,000 for the three months ended June 30, 2026. For the nine months ended September 30, 2026 and 2025, the Company recorded provisions for credit losses of $1.1 million and $1.6 million, respectively. Year to date, net loan charge-offs were $293,000 and the allowance for credit losses increased $749,000 from December 31, 2025 to $6.8 million. For the three months ended September 30, 2026, net loan charge-offs were $5,000. The allowance for credit losses as a percentage of total loans was 1.27% and 1.19% on September 30, 2026 and 2025, respectively, and 1.28% on June 30, 2026.

Nonperforming assets represented 1.82% of total assets on September 30, 2026, compared to 0.84% on September 30, 2025, and 1.42% on June 30, 2026. Nonperforming assets were $12.3 million at September 30, 2026, compared to $5.8 million at September 30, 2025, and $9.4 million at June 30, 2026. At September 30, 2026, nonperforming assets consisted of 28 loans, including 19 SBA loans with an aggregate outstanding balance of $11.9 million, or 97% of nonperforming assets, comprising $8.8 million guaranteed by the SBA and a nonguaranteed balance of $3.1 million. Of the nonperforming SBA loans, guarantee purchase requests have been submitted to the SBA for loans totaling $941,000; $3.8 million are in guarantor disposition, the final stage before the guarantee purchase request is submitted; $3.6 million are in collateral liquidation; and $3.5 million are being actively serviced, in workout or at the demand stage. During the quarter, $3.9 million of loans were placed on nonaccrual status and nonperforming assets were reduced by $1.1 million, including $838,000 of SBA guarantee proceeds. Estimated losses of $1.9 million on nonperforming loans, measured through the Bank’s quarterly individual evaluation of each nonperforming loan under the CECL methodology based on the fair value of the collateral, less estimated costs to sell, and expected recoveries from the SBA guarantee, have been recognized through the provision for credit losses, either charged off or reserved in the allowance for credit losses.

Noninterest Income

Noninterest income totaled $895,000 and $1.3 million for the three months ended September 30, 2026 and 2025, respectively, a decrease of $367,000, or 29.1%, primarily due to a $380,000 decrease in gains on sale of SBA loans, partially offset by a $62,000 increase in insurance commissions. Noninterest income represented 11.3% of total revenue compared to 15.5% for the same quarter in 2025. On a linked-quarter basis, noninterest income increased $73,000 from $822,000 for the three months ended June 30, 2026, primarily due to a $70,000 increase in insurance commissions and a $21,000 increase in service charges on deposit accounts. Insurance commissions included approximately $50,000 accrued in the third quarter to transition the Bank’s insurance department to the accrual basis of accounting.

Noninterest income totaled $2.7 million and $3.3 million for the nine months ended September 30, 2026 and 2025, respectively, a decrease of $544,000, or 16.6%, primarily due to a $709,000 decrease in gains on sale of SBA loans, partially offset by a $181,000 increase in gains on sale of securities. Noninterest income represented 11.8% of total revenue compared to 14.1% for the same period in 2025.

Noninterest Expense

Noninterest expense totaled $5.2 million and $4.8 million for the three months ended September 30, 2026 and 2025, respectively, an increase of $458,000, or 9.6%, primarily due to a $238,000 increase in salaries expense and a $129,000 increase in other expense, partially offset by a $127,000 decrease in equipment expense. Combined, salaries and employee benefits, the largest component of noninterest expense, totaled $3.1 million, an increase of $343,000, or 12.5%, from the same quarter in 2025. Employer payroll taxes increased $206,000, as the Company recognized its remaining Employee Retention Credits as a reduction of payroll tax expense in 2025, with no credits remaining in 2026. Excluding employer payroll taxes, salaries and employee benefits increased $137,000, reflecting higher base salaries of $166,000, group health insurance of $58,000 and lending and other sales commissions of $49,000, partially offset by lower net deferred loan origination costs of $146,000 and incentive compensation of $116,000. The efficiency ratio was 66.2% compared to 59.0% for the same quarter in 2025. On a linked-quarter basis, noninterest expense increased $327,000 from $4.9 million for the three months ended June 30, 2026, primarily due to a $158,000 increase in employee benefits expense, a $60,000 increase in salaries expense and a $51,000 increase in other expense. Combined, salaries and employee benefits increased $218,000, or 7.6%, from the prior quarter. The increase primarily reflected higher base salaries of $156,000, lending and other sales commissions of $105,000 and employee stock ownership plan (ESOP) expense of $86,000, partially offset by lower incentive compensation of $152,000 and stock-based compensation of $68,000. The increase in ESOP expense reflected a true-up to fund the 2025 contribution, completed before the October 15, 2026 deadline, and a higher accrual rate. ESOP expense and incentive compensation are both accrued under a performance-based methodology that measures the Bank’s results against three industry peer groups.

Noninterest expense totaled $14.8 million and $14.2 million for the nine months ended September 30, 2026 and 2025, respectively, an increase of $592,000, or 4.2%, primarily due to a $253,000 increase in salaries expense, a $212,000 increase in other expense and a $207,000 increase in professional and advertising expense. Combined, salaries and employee benefits totaled $8.5 million for the nine months ended September 30, 2026, an increase of $275,000, or 3.3%, from the same period in 2025. Employer payroll taxes increased $589,000 for the same reason. Excluding employer payroll taxes, salaries and employee benefits decreased $314,000, reflecting lower incentive compensation of $352,000 and net deferred loan origination costs of $184,000, partially offset by higher base salaries of $196,000 and group health insurance of $83,000. The efficiency ratio was 64.3% compared to 61.4% for the same period in 2025.

Income Taxes

Income tax expense was $578,000 and $558,000 for the three months ended September 30, 2026 and 2025, respectively, representing effective tax rates of 22.6% and 22.9%. For the nine months ended September 30, 2026 and 2025, income tax expense was $1.6 million and $1.7 million, respectively, representing effective tax rates of 21.7% and 22.7%.

Balance Sheet

Total assets were $673.5 million at September 30, 2026, up $13.2 million or 2.0% from December 31, 2025, and down $8.0 million or 1.2% from September 30, 2025. Loans receivable was $535.4 million at September 30, 2026, up $19.7 million or 3.8% from December 31, 2025, and up $8.8 million or 1.7% from September 30, 2025. Securities available-for-sale and held-to-maturity were $91.2 million at September 30, 2026, down $6.2 million or 6.4% from December 31, 2025, and down $9.5 million or 9.4% from September 30, 2025.

Total deposits were $520.4 million at September 30, 2026, down $14.6 million or 2.7% from December 31, 2025, and down $22.8 million or 4.2% from September 30, 2025. At September 30, 2026, deposits consisted of noninterest-bearing deposits of $141.9 million, interest-bearing checking, savings and money market accounts of $254.5 million, retail time deposits of $100.0 million and brokered time deposits of $24.0 million. Compared to September 30, 2025, noninterest-bearing deposits increased $10.0 million, or 7.6%; interest-bearing checking, savings and money market accounts increased $16.3 million, or 6.9%, including an increase of $32.6 million in reciprocal (ICS) money market deposits; retail time deposits decreased $39.8 million, or 28.5%, including a $24.0 million decrease in certificates of deposit obtained through a listing service; and brokered time deposits decreased $9.3 million, or 27.9%. Compared to June 30, 2026, noninterest-bearing deposits increased $6.9 million, or 5.1%; interest-bearing checking, savings and money market accounts increased $6.2 million, or 2.5%, including an increase of $3.3 million in reciprocal money market deposits; retail time deposits decreased $4.7 million, or 4.5%, including a $10.6 million decrease in listing service certificates of deposit; and brokered time deposits increased $6.2 million, or 35.1%. Noninterest-bearing deposits represented 27.3% and 24.3% of total deposits, and the loan-to-deposit ratio was 102.9% and 96.9%, at September 30, 2026 and 2025, respectively. Total borrowings, junior subordinated notes and subordinated debentures were $69.2 million at September 30, 2026, up $24.0 million or 53.0% from December 31, 2025, and up $9.0 million or 14.9% from September 30, 2025. Federal Home Loan Bank advances were $61.0 million and $46.0 million at September 30, 2026 and 2025, respectively, and the Company had no subordinated debentures outstanding at September 30, 2026, compared to $6.0 million at September 30, 2025.

Total stockholders’ equity was $74.4 million at September 30, 2026, up $3.1 million from December 31, 2025, reflecting year-to-date net income of $5.6 million, dividends declared and other retained earnings activity of $1.3 million, a $1.7 million decline in accumulated other comprehensive income (loss), and a $455,000 increase in common stock from the amortization of restricted stock awards granted in current and prior years, which vest ratably over five years. Equity to total assets was 11.0% and 10.1% at September 30, 2026 and 2025, respectively.

Basis of Presentation

The Company’s investment in a Small Business Investment Company (SBIC) fund, previously included in loans receivable, is presented in other assets for all periods. Certain other amounts in the prior period financial statements have been reclassified to conform to the current period presentation. These reclassifications had no effect on previously reported net income, net income available to common shareholders, or stockholders' equity. Quarterly amounts are presented as year-to-date amounts less prior year-to-date amounts so that quarterly results sum to year-to-date results; individual amounts may differ by $1 thousand from amounts previously reported due to rounding.

About Oak Ridge Financial Services, Inc. and 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, and 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

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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 the 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 the words “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.

(1) Annualized

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