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| 8-K - FORM 8-K - OLD POINT FINANCIAL CORP | form8k.htm |
Old Point Releases Second Quarter 2012 Earnings
· Year-to-date net income improves
· Annualized net charge-offs to total loans declines 58.71%
· Deposits increase $33.3 million
July 30, 2012 Hampton, VA Old Point Financial Corporation (NASDAQ "OPOF") posted a profit of $1.7 million, or $0.35 per diluted share for the six months ended June 30, 2012, an increase of $337 thousand over the same period in 2011. The increase in net income was due to a reduction in the provision for loan losses, from $2.3 million to $1.2 million when comparing the first six months of 2011 and 2012. Decreases in loans and in nonperforming assets between the two periods allowed management to reduce the provision. Sales of available-for-sale securities also contributed significantly to the increase in net income between the two periods.
Net income was $638 thousand, or $0.13 per diluted share, for the second quarter of 2012, compared to net income of $1.0 million for the second quarter of 2011. Net income for the second quarter 2012 declined $397 thousand over the second quarter 2011 due to a higher provision for loan losses, a decline in net interest income and higher noninterest expenses, which were partially mitigated by higher noninterest income.
On June 30, 2012, nonperforming assets were 17.75% lower than nonperforming assets as of June 30, 2011. Nonperforming assets declined primarily due to a $3.6 million decline in foreclosed assets. Net loans charged off in the first half of 2012 totaled $2.0 million, compared to $5.6 million in the first half of 2011. Between June 30, 2011 and June 30, 2012, average loans declined $74.0 million, allowing management to set aside less money through the provision for loan losses.
Assets as of June 30, 2012 were $872.3 million, an increase of $22.8 million, or 2.69%, compared to assets as of December 31, 2011. This growth in assets has been driven by increased deposits; low-cost deposits in particular grew $21.4 million. As quality loan demand has decreased in recent years, Old Point is investing excess funds in securities that can be readily liquidated when loan demand recovers. Between December 31, 2011 and June 30, 2012, net end-of-period loans decreased $43.0 million, while cash and cash equivalents and securities available-for-sale increased $70.3 million.
The net interest margin for the second quarter of 2012 was 3.48%, down 39 basis points from the second quarter of 2011. The year-to-date net interest margin for 2012 was 3.53%, down 28 basis points from 3.81% for the first half of 2011. Until recently, Old Point’s net interest margin had improved as higher-cost time deposits repriced to the current, lower market rates. While the average rate on liabilities continued to decrease, the rate of change has slowed over the last year as most longer-term deposits had already repriced. In addition, the average rate on loans decreased between the second quarter of 2011 and the second quarter of 2012, as higher-yielding loans paid off or were renewed at current, lower rates. More significantly, the composition of earning assets has shifted: as average total loans have decreased from a lack of quality loan demand, a larger percent of earning assets have been invested in lower-yielding securities. Since investment securities typically yield less than loans, this shift to lower-yielding investments has had an impact on the Bank’s net interest margin in 2012.
In the second quarter and the first six months of 2012, noninterest income was up $931 thousand and $1.4 million, respectively, when compared to the same periods in 2011. These increases were mainly due to realized gains on the sale of investment securities. During 2012, Old Point restructured the investment portfolio, selling government agency securities and reinvesting the proceeds in mortgage-backed securities. These investment transactions improved the portfolio’s cash flows and increased the yields, while only marginally increasing the duration of the portfolio.
Noninterest income improved in other areas as well, with the largest increases in income from fiduciary activities and in other service charges, commissions and fees. Income from fiduciary activities was up $33 thousand in the second quarter 2012 and $89 thousand for the first six months of 2012, as compared to the same periods in 2011. During the past year, the Trust company opened new accounts and expanded service offerings to existing customers, including an improved 401(k) product. A portion of the increase in income from fiduciary activities was a one-time event, but management hopes to continue introducing new customers to the many services Trust offers. Other service charges, commissions and fees grew $59 thousand and $119 thousand for the second quarter and first six months 2012, respectively, over the same periods in 2011. The increases in other service charges, commissions and fees were due to increased revenues from merchant processing services and investment brokerage services. Old Point has been focusing on diversifying noninterest income in response to declining interest income and new regulatory restrictions on some sources of noninterest income.
Old Point’s noninterest expense increased $448 thousand and $830 thousand between the second quarter and first six months, respectively, of 2011 and 2012. These increases were mainly due to growth in salaries and benefits, which was impacted by several management decisions made during the year. In 2012, Old Point made early retirement offers to eligible employees, which increased salaries and benefits expense in 2012 but will decrease it in future years. Salaries and benefits expense was also impacted by the filling of several higher-level positions in 2011 and 2012. These positions, which were in the private banking and commercial lending areas, were part of the Company’s strategic initiative to expand the corporate banking line of business and focus on increasing loans and noninterest income. Specifically, these positions focused on increasing small business lending, treasury services, and lending in areas other than commercial real estate.
Smaller increases in noninterest expense were also seen in the categories of data processing and losses on foreclosed assets for both the three and six months ended June 30, 2012, as compared to the same periods in 2011. Data processing expenses increased as Old Point added new services at both the Bank and Trust, as discussed above. Losses on foreclosed assets increased as Old Point continues to work to reduce its nonperforming assets.
The increases in noninterest expense for the first half of 2012 were partially offset by decreases in FDIC insurance expense and foreclosed assets expense of $105 thousand and $81 thousand, respectively. FDIC insurance expense declined due to regulatory changes effective April 1, 2011 in the method for calculating this expense. Expenses for the maintenance of foreclosed assets have declined as Old Point has worked successfully to sell these assets. Between June 30, 2011 and June 30, 2012, foreclosed assets decreased $3.6 million, or 33.02%, causing expenses to decline as well.
In the second quarter 2012, Old Point participated in a number of community initiatives and events, including the Dismal Swamp Stomp, 100 Black Men Gala, Virginia Beach SPCA’s Spring Gala, American Red Cross’ Dress Down Under, Foodbank of the Virginia Peninsula’s Tastefully Yours fundraiser and the Blackbeard Pirate Festival. 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 June 30, 2012 were $16.5 million, down from $20.0 million on June 30, 2011. These numbers do not include restructured loans that are performing in accordance with their modified terms. Performing restructured loans totaled $5.1 million at June 30, 2012.
Allowance for Loan and Lease Losses (ALLL) as of June 30, 2012 was 1.61% of total loans; as of December 31, 2011, that measure was 1.63%.
Net loans charged off as a percent of total loans, on an annualized basis, were 0.85% for the six months ended June 30, 2012, compared to 2.06% in the first six months of 2011.
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, 2011. 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 The Old Point National Bank of Phoebus, a locally owned and managed community bank serving all of 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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June 30,
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December 31,
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2012
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2011
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(unaudited)
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Assets
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Cash and due from banks
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$ | 15,149 | $ | 9,523 | ||||
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Interest-bearing due from banks
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20,019 | 13,978 | ||||||
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Federal funds sold
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790 | 1,354 | ||||||
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Cash and cash equivalents
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35,958 | 24,855 | ||||||
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Securities available-for-sale, at fair value
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295,795 | 236,599 | ||||||
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Securities held-to-maturity
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(fair value approximates $621 and $1,526)
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615 | 1,515 | ||||||
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Restricted securities
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3,110 | 3,451 | ||||||
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Loans, net of allowance for loan losses of $7,671 and $8,498
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468,819 | 511,829 | ||||||
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Premises and equipment, net
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30,354 | 30,264 | ||||||
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Bank owned life insurance
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22,043 | 21,593 | ||||||
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Foreclosed assets, net of valuation allowance of $1,949 and $1,851
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7,232 | 9,390 | ||||||
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Other assets
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8,393 | 10,008 | ||||||
| $ | 872,319 | $ | 849,504 | |||||
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Liabilities & Stockholders' Equity
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Deposits:
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Noninterest-bearing deposits
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$ | 173,579 | $ | 163,639 | ||||
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Savings deposits
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243,832 | 232,348 | ||||||
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Time deposits
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306,765 | 294,892 | ||||||
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Total deposits
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724,176 | 690,879 | ||||||
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Overnight repurchase agreements
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22,764 | 35,001 | ||||||
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Term repurchase agreements
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1,176 | 1,480 | ||||||
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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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1,813 | 1,279 | ||||||
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Total liabilities
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784,929 | 763,639 | ||||||
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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 4,959,009 shares issued and outstanding
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24,795 | 24,795 | ||||||
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Additional paid-in capital
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16,365 | 16,310 | ||||||
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Retained earnings
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46,330 | 45,109 | ||||||
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Accumulated other comprehensive loss
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(100 | ) | (349 | ) | ||||
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Total stockholders' equity
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87,390 | 85,865 | ||||||
| $ | 872,319 | $ | 849,504 | |||||
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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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Three Months Ended
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Six Months Ended
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June 30,
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June 30,
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2012
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2011
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2012
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2011
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(unaudited)
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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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$ | 6,750 | $ | 8,191 | $ | 13,819 | $ | 16,593 | ||||||||
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Interest on due from banks
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10 | 1 | 26 | 1 | ||||||||||||
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Interest on federal funds sold
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1 | 6 | 1 | 14 | ||||||||||||
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Interest on securities:
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Taxable
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1,379 | 896 | 2,601 | 1,799 | ||||||||||||
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Tax-exempt
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148 | 38 | 242 | 78 | ||||||||||||
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Dividends and interest on all other securities
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24 | 20 | 45 | 32 | ||||||||||||
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Total interest and dividend income
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8,312 | 9,152 | 16,734 | 18,517 | ||||||||||||
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Interest Expense:
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Interest on savings deposits
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94 | 103 | 188 | 208 | ||||||||||||
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Interest on time deposits
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965 | 1,144 | 1,940 | 2,410 | ||||||||||||
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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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15 | 18 | 31 | 71 | ||||||||||||
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Interest on Federal Home Loan Bank advances
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425 | 425 | 850 | 845 | ||||||||||||
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Total interest expense
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1,499 | 1,690 | 3,009 | 3,534 | ||||||||||||
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Net interest income
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6,813 | 7,462 | 13,725 | 14,983 | ||||||||||||
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Provision for loan losses
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1,000 | 500 | 1,200 | 2,300 | ||||||||||||
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Net interest income, after provision for loan losses
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5,813 | 6,962 | 12,525 | 12,683 | ||||||||||||
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Noninterest Income:
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Income from fiduciary activities
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793 | 760 | 1,620 | 1,531 | ||||||||||||
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Service charges on deposit accounts
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1,073 | 1,055 | 2,103 | 2,067 | ||||||||||||
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Other service charges, commissions and fees
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880 | 821 | 1,677 | 1,558 | ||||||||||||
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Income from bank-owned life insurance
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225 | 203 | 449 | 405 | ||||||||||||
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Gain on sale of available-for-sale securities, net
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770 | 51 | 1,084 | 51 | ||||||||||||
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Other operating income
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140 | 60 | 216 | 143 | ||||||||||||
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Total noninterest income
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3,881 | 2,950 | 7,149 | 5,755 | ||||||||||||
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Noninterest Expense:
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Salaries and employee benefits
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5,220 | 4,896 | 10,180 | 9,525 | ||||||||||||
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Occupancy and equipment
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1,069 | 1,050 | 2,163 | 2,136 | ||||||||||||
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Data processing
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392 | 339 | 774 | 666 | ||||||||||||
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FDIC insurance
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286 | 266 | 567 | 672 | ||||||||||||
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Customer development
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203 | 218 | 407 | 439 | ||||||||||||
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Legal and audit expense
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224 | 220 | 408 | 363 | ||||||||||||
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Other outside service fees
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141 | 157 | 293 | 301 | ||||||||||||
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Advertising
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147 | 142 | 292 | 287 | ||||||||||||
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Employee professional development
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188 | 179 | 330 | 312 | ||||||||||||
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Postage and courier expense
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119 | 120 | 243 | 243 | ||||||||||||
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Foreclosed assets expense
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96 | 117 | 167 | 248 | ||||||||||||
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Loss on write-down/sale of foreclosed assets
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380 | 269 | 637 | 458 | ||||||||||||
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Other operating expense
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482 | 526 | 1,035 | 1,016 | ||||||||||||
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Total noninterest expense
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8,947 | 8,499 | 17,496 | 16,666 | ||||||||||||
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Income before income taxes
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747 | 1,413 | 2,178 | 1,772 | ||||||||||||
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Income tax expense
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109 | 378 | 461 | 392 | ||||||||||||
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Net income
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$ | 638 | $ | 1,035 | $ | 1,717 | $ | 1,380 | ||||||||
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Basic Earnings per Share:
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Average shares outstanding
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4,959 | 4,955 | 4,959 | 4,946 | ||||||||||||
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Net income per share of common stock
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$ | 0.13 | $ | 0.21 | $ | 0.35 | $ | 0.28 | ||||||||
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Diluted Earnings per Share:
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Average shares outstanding
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4,959 | 4,955 | 4,959 | 4,946 | ||||||||||||
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Net income per share of common stock
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$ | 0.13 | $ | 0.21 | $ | 0.35 | $ | 0.28 | ||||||||
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Cash Dividends Declared
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$ | 0.05 | $ | 0.05 | $ | 0.10 | $ | 0.10 | ||||||||
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Old Point Financial Corporation and Subsidiaries
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Selected Ratios
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June 30,
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March 31,
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December 31,
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June 30,
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2012
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2012
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2011
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2011
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Net Interest Margin Year-to-Date
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3.53 | % | 3.59 | % | 3.81 | % | 3.81 | % | ||||||||
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NPAs/Total Assets
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1.89 | % | 2.45 | % | 2.16 | % | 2.41 | % | ||||||||
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Annualized Net Charge Offs/Total Loans
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0.85 | % | 0.50 | % | 1.62 | % | 2.06 | % | ||||||||
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Allowance for Loan Losses/Total Loans
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1.61 | % | 1.65 | % | 1.63 | % | 1.85 | % | ||||||||
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Non-Performing Assets (NPAs) (in thousands)
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Nonaccrual Loans
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$ | 8,848 | $ | 13,769 | $ | 8,475 | $ | 8,959 | ||||||||
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Loans > 90 days past due, but still accruing interest
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135 | 79 | 517 | 266 | ||||||||||||
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Non-Performing Restructured Loans
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254 | 0 | 0 | 0 | ||||||||||||
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Foreclosed Assets
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7,232 | 7,439 | 9,390 | 10,797 | ||||||||||||
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Total Non-Performing Assets
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$ | 16,469 | $ | 21,287 | $ | 18,382 | $ | 20,022 | ||||||||
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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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$ | 2,027 | $ | 611 | $ | 8,430 | $ | 5,554 | ||||||||
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Year-to-Date Average Loans
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$ | 488,346 | $ | 495,619 | $ | 544,523 | $ | 562,316 | ||||||||
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Year-to-Date Average Assets
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$ | 857,486 | $ | 850,069 | $ | 853,849 | $ | 863,582 | ||||||||
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Year-to-Date Average Earning Assets
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$ | 785,858 | $ | 777,856 | $ | 779,524 | $ | 789,835 | ||||||||
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Year-to-Date Average Deposits
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$ | 702,071 | $ | 694,049 | $ | 683,657 | $ | 679,465 | ||||||||
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Year-to-Date Average Equity
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$ | 86,841 | $ | 86,358 | $ | 83,322 | $ | 81,707 | ||||||||