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| 8-K - OLD POINT FINANCIAL CORP | form8k.htm |
2011: Old Point Finishes the Year Strong
· Net income more than doubles
· Nonperforming assets improved by 46.00%
· Noninterest-bearing deposits grow $34.4 million
· Net interest margin increases to 3.81%
January 31, 2012 Hampton, VA Old Point Financial Corporation (NASDAQ "OPOF") posted a profit of $3.3 million, or $0.66 per diluted share, for the year ended December 31, 2011, compared to net income of $1.5 million, or $0.31 per diluted share, in 2010. The increase in net income was due to a reduction in the provision for loan losses, from $8.8 million in 2010 to $3.7 million in 2011. Decreases in loans and in nonperforming assets between December 31, 2010 and December 31, 2011 allowed management to reduce the provision.
On December 31, 2011, nonperforming assets were 46.00% lower than nonperforming assets as of December 31, 2010, due to a 59.41% decline in nonaccrual loans over the same time period. Nonaccrual loans totaling $13.4 million were sold without recourse in the second and third quarters of 2011. Although net loans charged off in 2011 totaled $8.4 million, $6.2 million was due to six loans. The majority of the $8.4 million was included in the 2010 provision for loan losses when management realized that these losses were probable.
The net interest margin for 2011 was 3.81%, an 18 basis-point improvement over the 3.63% net interest margin for 2010. The net interest margin continued to improve as higher-cost time deposits repriced to current, lower market rates. In addition, management focused on increasing lower-cost funds and promoting relationship management in the retail and corporate banking areas.
In 2011, noninterest income was down $446 thousand or 3.53% when compared to 2010. Overdraft fee income was $513 thousand lower in 2011 than in 2010, due to changes in Regulation E that went into effect during the third quarter of 2010. The changes require advance authorization from customers for overdrafts caused by debit card and ATM transactions. The Company has made an effort to educate customers on the benefits of its overdraft programs, and as a result, overdraft fee income for the second half of 2011 was up $60 thousand from the same period in 2010. Despite this trend, the Company expects continued uncertainty regarding overdraft fee income. To compensate, the Company is developing and marketing other income-producing products, such as remote deposit capture and lockbox services, to help drive future noninterest income. As a result of this emphasis, income from merchant processing and debit cards has grown $248 thousand, or 13.71%, between 2010 and 2011.
The Company’s noninterest expense increased $625 thousand or 1.89% between 2010 and 2011. This increase was due to an $843 thousand growth in salaries and benefits, as several higher-paid positions were filled in the second half of 2010 and in 2011. Many of these newly-hired employees are in the Company’s private banking and corporate lending areas and were hired to increase small business lending, treasury services, and lending in areas other than commercial real estate as part of management’s focus on increasing loans and noninterest income.
The increase in salaries and benefits was partially offset by decreases in other areas, particularly advertising, legal and audit expenses, and FDIC insurance expense. The Company has reduced advertising expenses as part of its effort to control noninterest expenses, and has focused on earned publicity rather than paid advertising. Legal and audit expenses decreased as the Company’s nonperforming assets decreased during the year. Finally, the reduction in FDIC insurance expense was due to changes in the method for calculating this expense which were effective April 1, 2011.
Assets as of December 31, 2011 were $849.5 million, a decrease of $37.3 million, or 4.21%, compared to assets as of December 31, 2010, largely due to the current loan environment. As quality loan demand decreased in recent years, management invested excess funds in securities that can be readily liquidated when loan demand recovers. Management also placed an increased emphasis on improving the Company’s net interest margin by reducing dependence on higher-cost sources of funding. As a result, the Company’s higher-cost time deposits decreased by $29.9 million.
Term repurchase agreements also decreased, partially due to the exiting of certain high-cost, non-relationship accounts and partially due to an internal restructuring of the accounts of a single large customer from repurchase agreements to noninterest-bearing deposit accounts. Because the FDIC recently modified how deposit insurance premiums are calculated, making noninterest-bearing deposits fully insured, the Company was able to make this change and free up securities that were used as collateral for the repurchase agreements.
In addition to improving the Company’s net interest margin, Old Point has focused on building relationships. Noninterest-bearing deposits grew $34.4 million. A portion of this growth was due to the sale of high-quality treasury services. Customers pay for these services either with compensating balances or with fees which flow to noninterest income. As seen on both the balance sheet and the income statement, these efforts are working. The liability side of the balance sheet has shifted from higher cost non-relationship funds to lower cost, service providing accounts.
In 2011, Old Point participated in a number of community initiatives and events, including the 50th Anniversary of Christopher Newport University, the Girl Scouts of the Colonial Coast’s Samoa Soiree, the American Red Cross’ Dress Down Under, the Norfolk Kiwanis’ Harbor Party, the James City/Bruton Volunteer Fire Department Fish Fry, the Chesapeake Wine Festival, and the Old Point National Bank Monster Mile held in conjunction with the Blue Moon Wicked 10K. For information about upcoming initiatives, please visit our website (www.oldpoint.com), our Facebook page (www.facebook.com/oldpoint), or join us on Twitter (www.twitter.com/opnb).
Other items of note:
Non-performing Assets (NPAs) as of December 31, 2011 were $18.4 million, down from $34.0 million on December 31, 2010. These numbers do not include restructured loans that are performing in accordance with their modified terms. Performing restructured loans totaled $4.3 million at December 31, 2011.
Allowance for Loan and Lease Losses (ALLL) as of December 31, 2011 was 1.63% of total loans; as of December 31, 2010, that measure was 2.25%.
Net loans charged off as a percent of total loans were 1.62% for the year ended December 31, 2011, compared to 0.59% in 2010.
Safe Harbor Statement Regarding Forward-Looking Statements. Statements in this press release which express “belief,” “intention,” “expectation,” and similar expressions, identify forward-looking statements. These forward-looking statements are based on the beliefs of the corporation's management, as well as estimates and assumptions made by, and information currently available to, the corporation's management. These statements are inherently uncertain, and there can be no assurance that the underlying estimates or assumptions will prove to be accurate. Actual results could differ materially from historical results or those anticipated by such statements. Factors that could have a material adverse effect on the operations and future prospects of the corporation include, but are not limited to, changes in: interest rates; general economic and business conditions, including unemployment levels; demand for loan products; the legislative/regulatory climate; monetary and fiscal policies of the U.S. Government, including policies of the U.S. Treasury and the Federal Reserve Board; the quality or composition of the loan or investment portfolios; the level of net charge-offs on loans; deposit flows; competition; demand for financial services in the corporation’s market area; technology; reliance on third parties for key services; the real estate market; the corporation’s expansion initiatives; accounting principles, policies and guidelines; and other factors detailed in the corporation's publicly filed documents, including its Annual Report on Form 10-K for the year ended December 31, 2010. These risks and uncertainties should be considered in evaluating the forward-looking statements contained herein, and readers are cautioned not to place undue reliance on such statements, which speak only as of date of the release.
Old Point Financial Corporation ("OPOF" - Nasdaq) is the parent company of Old Point National Bank, a locally owned and managed community bank serving Hampton Roads with 21 branches and more than 60 ATMs throughout Hampton Roads and Old Point Trust & Financial Services, N.A., a Hampton Roads wealth management services provider. Web: www.oldpoint.com. For more information, contact Erin Black, Vice President/Marketing Director, Old Point National Bank at 757- 251-2792.
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Old Point Financial Corporation and Subsidiaries
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Consolidated Balance Sheet
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(dollars in thousands, except share data)
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December 31,
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2011
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2010
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(unaudited)
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Assets
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Cash and due from banks
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$ | 9,548 | $ | 14,207 | ||||
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Interest-bearing due from banks
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13,953 | 1,396 | ||||||
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Federal funds sold
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1,354 | 12,828 | ||||||
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Cash and cash equivalents
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24,855 | 28,431 | ||||||
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Securities available-for-sale, at fair value
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236,599 | 206,092 | ||||||
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Securities held-to-maturity
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(fair value approximates $1,526 and $1,957)
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1,515 | 1,952 | ||||||
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Restricted securities
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3,451 | 4,320 | ||||||
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Loans, net of allowance for loan losses of $8,498 and $13,228
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511,829 | 573,391 | ||||||
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Premises and equipment, net
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30,264 | 29,616 | ||||||
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Bank owned life insurance
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21,593 | 18,020 | ||||||
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Foreclosed assets, net of valuation allowance of $1,851 and $2,124
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9,390 | 11,448 | ||||||
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Other assets
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10,008 | 13,572 | ||||||
| $ | 849,504 | $ | 886,842 | |||||
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Liabilities & Stockholders' Equity
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Deposits:
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Noninterest-bearing deposits
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$ | 163,639 | $ | 129,208 | ||||
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Savings deposits
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232,348 | 225,210 | ||||||
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Time deposits
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294,892 | 324,796 | ||||||
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Total deposits
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690,879 | 679,214 | ||||||
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Federal funds purchased and other borrowings
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0 | 731 | ||||||
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Overnight repurchase agreements
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35,001 | 50,757 | ||||||
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Term repurchase agreements
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1,480 | 38,959 | ||||||
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Federal Home Loan Bank advances
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35,000 | 35,000 | ||||||
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Accrued expenses and other liabilities
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1,279 | 1,229 | ||||||
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Total liabilities
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763,639 | 805,890 | ||||||
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Commitments and contingencies
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Stockholders' equity:
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Common stock, $5 par value, 10,000,000 shares authorized;
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4,959,009 and 4,936,989 shares issued and outstanding
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24,795 | 24,685 | ||||||
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Additional paid-in capital
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16,310 | 16,026 | ||||||
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Retained earnings
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45,109 | 42,810 | ||||||
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Accumulated other comprehensive loss
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(349 | ) | (2,569 | ) | ||||
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Total stockholders' equity
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85,865 | 80,952 | ||||||
| $ | 849,504 | $ | 886,842 | |||||
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Old Point Financial Corporation and Subsidiaries
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Consolidated Statements of Income
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(dollars in thousands, except per share data)
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Twelve Months Ended
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December 31,
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2011
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2010
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(unaudited)
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Interest and Dividend Income:
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Interest and fees on loans
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$ | 32,105 | $ | 37,081 | ||||
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Interest on due from banks
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22 | 3 | ||||||
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Interest on federal funds sold
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21 | 75 | ||||||
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Interest on securities:
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Taxable
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3,884 | 3,419 | ||||||
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Tax-exempt
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157 | 268 | ||||||
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Dividends and interest on all other securities
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62 | 44 | ||||||
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Total interest and dividend income
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36,251 | 40,890 | ||||||
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Interest Expense:
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Interest on savings and interest-bearing demand deposits
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408 | 413 | ||||||
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Interest on time deposits
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4,496 | 6,624 | ||||||
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Interest on federal funds purchased, securities sold under
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agreements to repurchase and other borrowings
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106 | 545 | ||||||
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Interest on Federal Home Loan Bank advances
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1,705 | 2,400 | ||||||
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Total interest expense
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6,715 | 9,982 | ||||||
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Net interest income
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29,536 | 30,908 | ||||||
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Provision for loan losses
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3,700 | 8,800 | ||||||
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Net interest income, after provision for loan losses
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25,836 | 22,108 | ||||||
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Noninterest Income:
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Income from fiduciary activities
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3,002 | 3,074 | ||||||
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Service charges on deposit accounts
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4,256 | 4,760 | ||||||
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Other service charges, commissions and fees
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3,003 | 2,846 | ||||||
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Income from bank owned life insurance
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823 | 972 | ||||||
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Gain on sale of available-for-sale securities, net
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787 | 541 | ||||||
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Other operating income
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325 | 449 | ||||||
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Total noninterest income
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12,196 | 12,642 | ||||||
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Noninterest Expense:
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Salaries and employee benefits
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19,139 | 18,296 | ||||||
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Occupancy and equipment
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4,292 | 4,254 | ||||||
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FDIC insurance
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1,222 | 1,365 | ||||||
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Data processing
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1,386 | 1,248 | ||||||
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Customer development
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908 | 839 | ||||||
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Advertising
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448 | 654 | ||||||
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Foreclosed property expenses
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505 | 416 | ||||||
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Other outside service fees
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612 | 621 | ||||||
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Employee professional development
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579 | 491 | ||||||
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Postage and courier expense
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488 | 511 | ||||||
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Legal and audit expenses
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696 | 874 | ||||||
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Loss on write-down/sale of foreclosed assets
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1,413 | 1,442 | ||||||
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Other operating expenses
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1,991 | 2,043 | ||||||
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Total noninterest expenses
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33,679 | 33,054 | ||||||
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Income before income taxes
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4,353 | 1,696 | ||||||
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Income tax expense
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1,063 | 149 | ||||||
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Net income
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$ | 3,290 | $ | 1,547 | ||||
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Basic Earnings per Share:
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Average shares outstanding
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4,952 | 4,928 | ||||||
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Net income per share of common stock
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$ | 0.66 | $ | 0.31 | ||||
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Diluted Earnings per Share:
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Average shares outstanding
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4,952 | 4,932 | ||||||
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Net income per share of common stock
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$ | 0.66 | $ | 0.31 | ||||
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Cash Dividends Declared
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$ | 0.20 | $ | 0.25 | ||||
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Old Point Financial Corporation and Subsidiaries
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Selected Ratios
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December 31,
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December 31,
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2011
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2010
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Net Interest Margin Year-to-Date
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3.81 | % | 3.63 | % | ||||
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NPAs/Total Assets
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2.16 | % | 3.84 | % | ||||
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Annualized Net Charge Offs/Total Loans
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1.62 | % | 0.59 | % | ||||
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Allowance for Loan Losses/Total Loans
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1.63 | % | 2.25 | % | ||||
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Non-Performing Assets (NPAs) (in thousands)
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Nonaccrual Loans
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$ | 8,475 | $ | 20,881 | ||||
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Loans> 90 days past due, but still accruing interest
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517 | 73 | ||||||
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Non-Performing Restructured Loans
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0 | 1,639 | ||||||
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Foreclosed Assets
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9,390 | 11,448 | ||||||
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Total Non-Performing Assets
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$ | 18,382 | $ | 34,041 | ||||
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Other Selected Numbers (in thousands)
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Loans Charged Off Year-to-Date, net of recoveries
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$ | 8,430 | $ | 3,436 | ||||
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Year-to-Date Average Loans
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$ | 544,523 | $ | 621,550 | ||||
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Year-to-Date Average Assets
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$ | 853,849 | $ | 924,709 | ||||
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Year-to-Date Average Earning Assets
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$ | 779,524 | $ | 855,824 | ||||
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Year-to-Date Average Deposits
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$ | 683,657 | $ | 687,457 | ||||
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Year-to-Date Average Equity
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$ | 83,322 | $ | 82,513 | ||||