Oak Ridge Financial Services Boosts Dividend 17% Amid Strong Loan Growth

Oak Ridge Financial Services (BKOR) has announced a 17% increase in its quarterly dividend to $0.14 per share, marking the 26th consecutive quarterly dividend hike since 2023. This move underscores the bank’s robust financial performance and commitment to shareholder returns. The dividend, payable on June 9 to shareholders of record as of May 23, aligns with the company’s first-quarter 2025 earnings, which showed improving profitability and loan growth.

Q1 Financial Performance: Loans and Deposits Drive Growth

The dividend boost was supported by solid financial metrics:
- Net income rose to $1.6 million, up 6.7% from Q4 2024 and 14% year-over-year.
- Earnings per share (EPS) increased to $0.57, up from $0.56 in Q4 2024 and $0.50 in Q1 2024.
- Loan receivables grew to $528.5 million, a 10.7% year-over-year increase, driven by commercial and SBA lending.
- Deposits hit $542.5 million, a 9.2% annual rise, bolstering liquidity for lending.

The bank’s net interest margin expanded to 3.97%, up 18 basis points year-over-year, reflecting effective asset-liability management.

Risks: Rising Nonperforming Assets

Despite the positives, the quarter saw a notable increase in nonperforming assets (NPAs) to 0.67% of total assets, up from 0.07% in Q1 2024. This was due to $4.6 million in nonaccrual SBA loans, including $3.1 million guaranteed by the SBA. While the bank maintains a “well-capitalized” status with a Community Bank Leverage Ratio (CBLR) of 11.1%, the spike in NPAs warrants monitoring. Management noted these loans were isolated cases and emphasized the credit portfolio’s overall strength.

Dividend History: A Track Record of Growth

Oak Ridge has prioritized shareholder returns through consistent dividend hikes:
- 2023: Dividend increased 25% to $0.10 per share.
- 2024: A 20% hike to $0.12, marking 25 consecutive quarterly increases.
- 2025: The 17% increase to $0.14 extends the streak to 26 quarters.

The forward dividend yield now stands at 2.21%, with an annualized payout of $0.56 per share in 2025, a 16.7% rise from 2024’s $0.48.

Valuation and Investment Considerations

Oak Ridge’s tangible book value per share rose to $23.50, up 7.6% year-over-year, reflecting strong capital management. The stock’s price-to-book ratio of 1.4x is reasonable for a bank with its growth profile.

However, investors should weigh the dividend’s sustainability against the NPA trend. While the CBLR remains robust, further loan quality issues could pressure profitability.

Conclusion: A Solid Bet for Dividend Seekers, With Caution

Oak Ridge Financial Services presents an attractive opportunity for income-focused investors, thanks to its 18.65% average annual dividend growth since 2023 and a well-capitalized balance sheet. The bank’s loan growth and deposit expansion suggest continued earnings momentum.

Yet, the recent spike in NPAs—primarily tied to SBA loans—adds some risk. Investors should monitor this trend closely. For now, the dividend hike to $0.14 aligns with Oak Ridge’s track record, making it a Hold with upside potential if credit metrics stabilize.

Key Data Points:
- Forward dividend yield: 2.21%
- Loan growth (YOY): 10.7%
- Net interest margin: 3.97%
- CBLR: 11.1% (well above the 5% regulatory minimum)

With its community-focused model and consistent returns, Oak Ridge remains a solid choice for investors seeking steady dividends in a competitive regional banking sector.