Oak Ridge Financial Services : 2021 Financial Statements

Oak Ridge Financial Services, Inc.

Report on Consolidated Financial Statements

As of and for the years ended December 31, 2021 and 2020

Oak Ridge Financial Services, Inc.

Contents

Page

Independent Auditor's Report .............................................................................................................................. 1-2

Consolidated Financial Statements

Consolidated Balance Sheets ............................................................................................................................... 3

Consolidated Statements of Income .................................................................................................................... 4

Consolidated Statements of Comprehensive Income ......................................................................................... 5

Consolidated Statements of Changes in Stockholders' Equity ............................................................................ 6

Consolidated Statements of Cash Flows .............................................................................................................. 7

Notes to Consolidated Financial Statements ....................................................................................................... 9

Stockholder Information ......................................................................................................................................... 52

Independent Auditor's Report

Audit Committee of the Board of Directors

Oak Ridge Financial Services, Inc.

Oak Ridge, North Carolina

Opinion

We have audited the consolidated financial statements of Oak Ridge Financial Services, Inc. and its subsidiary (the "Company"), which comprise the consolidated balance sheets as of December 31, 2021 and 2020, the related consolidated statements of income, comprehensive income, changes in stockholders' equity, and cash flows for the years then ended, and the related notes to the consolidated financial statements (collectively, the "financial statements").

In our opinion, the accompanying financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America.

Basis for Opinion

We conducted our audits in accordance with auditing standards generally accepted in the United States of America (GAAS). Our responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the Financial Statements section of our report. We are required to be independent of the Company and to meet our other ethical responsibilities, in accordance with the relevant ethical requirements relating to our audits. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Responsibilities of Management for the Financial Statements

Management is responsible for the preparation and fair presentation of the financial statements in accordance with accounting principles generally accepted in the United States of America, and for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the Company's ability to continue as a going concern within one year after the date that the financial statements are issued (or within one year after the date that the financial statements are available to be issued when applicable).

elliottdavis.com

Auditor's Responsibilities for the Audit of the Financial Statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with GAAS will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the financial statements.

In performing an audit in accordance with GAAS, we:

• • Exercise professional judgment and maintain professional skepticism throughout the audit.

• • Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

• • Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control. Accordingly, no such opinion is expressed.

• • Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the financial statements.

• • Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt about the Company's ability to continue as a going concern for a reasonable period of time.

We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control related matters that we identified during the audit.

Charlotte, North Carolina April 8, 2022

Oak Ridge Financial Services, Inc.

Consolidated Balance Sheets

As of December 31, 2021 and 2020 (Dollars in thousands)

Assets

Cash and due from banks Interest-bearing deposits with banks

Total cash and cash equivalents Securities available-for-sale Securities held-to-maturity Restricted stock, at cost

Loans, net of allowance for loan losses of $3,756 and

2021

2020

$

8,998

79,086 11,994

• $ 9,354

  88,084 21,348

  46,948 46,357

  387 564

  1,324 1,806

  $5,458 at December 31, 2021 and 2020, respectively 425,900 445,127

  Property and equipment, net Accrued interest receivable Bank owned life insurance Right-of-use assets - operating leases Other assets

  Total assets

  Liabilities and Stockholders' Equity

  Liabilities

  Deposits

  Noninterest-bearing

  9,907 10,632

  1,842 2,412

  6,014 5,930

  1,594 1,990

  4,921 4,464

  $

  586,921

• $ 540,630

  $

  116,525

• $ 94,227

  Interest-bearing 392,754 361,510

  Total deposits 509,279 455,737

  Short-term borrowings Long-term borrowings

  Junior subordinated notes - trust preferred securities Subordinated debentures

  Lease liabilities - operating leases Accrued interest payable

  Other liabilities

  - 8,000

  683 952

  8,248 8,248

  9,863 15,484

  1,594 1,990

  110 140

  5,816 5,604

  Total liabilities 535,593 496,155

  Commitments and contingencies (Note 11)

  Stockholders' equity

  Common stock, no par value; 50,000,000 shares authorized; 2,672,620 and 2,639,345 issued and outstanding

  at December 31, 2021 and 2020, respectively Retained earnings

  Accumulated other comprehensive income

  Total stockholders' equity

  Total liabilities and stockholders' equity

  See Notes to Consolidated Financial Statements

  25,532 25,013 22,815 15,771 2,981 3,691 51,328 44,475

  $

  586,921

• $ 540,630

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