Quarterly Report (10-q)

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2013

Commission File Number: 000-52640

OAK RIDGE FINANCIAL SERVICES, INC

(Exact name of registrant as specified in its charter)

North Carolina		20-8550086
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

Post Office Box 2

2211 Oak Ridge Road

Oak Ridge, North Carolina 27310

(Address of principal executive offices)

(336) 644-9944

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).Yes ¨ No x

The number of shares outstanding of each of the registrant’s classes of common stock, as of May 6, 2013, was as follows:

Class		Number of Shares
Common Stock, no par value		1,810,946

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This document contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements represent expectations and beliefs of Oak Ridge Financial Services, Inc. (hereinafter referred to as the “Company”) including but not limited to the Company’s operations, performance, financial condition, growth or strategies. These forward-looking statements are identified by words such as “expects”, “anticipates”, “should”, “estimates”, “believes” and variations of these words and other similar statements. For this purpose, any statements contained in this form that are not statements of historical fact may be deemed to be forward-looking statements. 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. These forward-looking statements involve estimates, assumptions, risks and uncertainties that could cause actual results to differ materially from current projections depending on a variety of important factors, including without limitation:

•

Revenues are lower than expected;

•

Credit quality deterioration which could cause an increase in the provision for credit losses;

•

Competitive pressure among depository institutions increases significantly;

•

Changes in consumer spending, borrowings and savings habits;

•

Technological changes and security and operations risks associated with the use of technology;

•

The cost of additional capital is more than expected;

•

A change in the interest rate environment reduces interest margins;

•

Asset/liability repricing risks, ineffective hedging and liquidity risks;

•

Counterparty risk;

•

General economic conditions, particularly those affecting real estate values, either nationally or in the market area in which we do or anticipate doing business, are less favorable than expected;

•

The effects of the Federal Deposit Insurance Corporation deposit insurance premiums and assessments;

•

The effects of and changes in monetary and fiscal policies and laws, including the interest rate policies of the Federal Reserve Board;

•

Volatility in the credit or equity markets and its effect on the general economy;

•

Demand for the products or services of the Company and the Bank of Oak Ridge, as well as their ability to attract and retain qualified people;

•

The costs and effects of legal, accounting and regulatory developments and compliance; and

•

Regulatory approvals for acquisitions cannot be obtained on the terms expected or on the anticipated schedule.

The Company undertakes no obligation to update any forward-looking statement, whether written or oral, that may be made from time to time, by or on behalf of the Company.

Oak Ridge Financial Services, Inc.

Table of Contents

Part 1: Financial Information

Item 1. Financial Statements

Consolidated Balance Sheets at March 31, 2013 (unaudited) and December 31, 2012 (audited)			4

Consolidated Statements of Operations for the three months ended March 31, 2013 and 2012 (unaudited)			5

Consolidated Statements of Comprehensive Income for the three months ended March 31, 2013 and 2012 (unaudited)			6

Consolidated Statements of Changes in Stockholders’ Equity for the three months ended March 31, 2013 and 2012 (unaudited)			7

Consolidated Statements of Cash Flows for the three months ended March 31, 2013 and 2012 (unaudited)			8

Notes to Unaudited Consolidated Financial Statements			10

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			34

Item 3. Quantitative and Qualitative Disclosures About Market Risk			43

Item 4. Controls and Procedures			43

Part II. Other Information

Item 6. Exhibits			44

Signature Page			46

Consolidated Balance Sheets

March 31, 2013 (unaudited) and December 31, 2012 (audited)

(Dollars in thousands)

	2013			2012

Assets

Cash and due from banks	$	2,860		$	5,134
Interest-bearing deposits with banks		23,305			11,909
Total cash and cash equivalents		26,165			17,043
Securities available-for-sale		44,045			43,937
Securities held-to-maturity (fair values of $3,999 in 2013 and $4,183 in 2012)		3,719			3,928
Federal Home Loan Bank Stock, at cost		411			528
Loans held for sale		228			1,787
Loans, net of allowance for loan losses of $5,367 in 2013 and $5,500 in 2012		253,948			254,347
Property and equipment, net		9,289			9,371
Foreclosed assets		1,627			2,116
Accrued interest receivable		1,245			1,514
Bank owned life insurance		5,112			5,078
Other assets		2,836			3,202
Total assets	$	348,625		$	342,851

Liabilities and Stockholders’ Equity

Liabilities
Deposits:
Noninterest-bearing	$	42,757		$	41,538
Interest-bearing		269,301			264,639
Total deposits		312,058			306,177
Junior subordinated notes related to trust preferred securities		8,248			8,248
Accrued interest payable		92			94
Other liabilities		2,416			2,342
Total liabilities		322,814			316,861

Commitments and contingencies (Note 9)

Stockholders’ equity
Preferred stock, Series A, 7,700 shares authorized and outstanding; no par value, $1,000 per share liquidation preference		7,448			7,366
Common stock, no par value; 50,000,000 shares authorized; 1,810,946 issued and outstanding in 2013 and 2012		17,202			15,956
Warrant		—			1,361
Retained earnings (deficit)		(171	)		(208	)
Accumulated other comprehensive income		1,332			1,515
Total stockholders’ equity		25,811			25,990
Total liabilities and stockholders’ equity	$	348,625		$	342,851