Old Point Releases First Quarter 2020 Results

Hampton, VA, April 30, 2020 (PRNewswire) Old Point Financial Corporation (the Company or Old Point) (NASDAQ "OPOF") reported net income of $1.3 million and earnings per diluted common share of $0.24 for the quarter ended March 31, 2020, as compared to net income of $2.0 million or $0.39 earnings per diluted common share for the first quarter of 2019.

Robert Shuford, Jr., Chairman, President, and CEO of the Company and Old Point National Bank (the Bank) said, "The emergence of COVID-19 during the first quarter of 2020 has thrust the Company and our country into unparalleled times. Our focus has been the health and well-being of our employees, our customers, and our community. We have taken physical and financial measures to assist our employees, enhanced our online presence related to mobile access, deposit services, and lending platforms to assist our customers, and continued to provide a full suite of uninterrupted financial services to our community.

In the midst of the rapidly changing environment, our team embraced our participation in the SBA’s Payroll Protection Program under the Coronavirus Aid, Relief, and Economic Security (CARES) Act, working tirelessly to provide assistance not only to our customers, but to the community as a whole. During the initial appropriation, we secured approximately $90.0 million of funding for local businesses and continue our participation into the second appropriation, making every effort possible to aid in sustaining and helping our community.

Despite the challenges presented from the pandemic, our outlook for 2020 remains optimistic. We attracted high quality staff who are already providing momentum in 2020, completed process efficiency initiatives, and experienced continued improvement in asset quality. Even seasoned experts currently agree there is not sufficient visibility to estimate future potential impacts resulting from the COVID-19 pandemic. As the environment created by COVID-19 evolves, we will continue to closely monitor asset quality through our enhanced watch credit process and perform capital and liquidity stress testing.”

Highlights of the quarter are as follows:

Net interest income for the first quarter of 2020 was $8.4 million, an increase of $41 thousand, or 0.5%, from the prior quarter and $59 thousand, or 0.7%, from the first quarter of 2019. The slight quarter-over-quarter increase was primarily due to higher average earning asset balances, partially offset by higher average interest bearing liability balances. The tax-equivalent net interest margin for the quarter was 3.53%, up from 3.51% in the prior quarter and down from 3.67% in the same period a year ago.

Non-performing assets (NPAs) totaled $7.0 million as of March 31, 2020, down from $7.6 million at December 31, 2019 and $12.9 million at March 31, 2019. NPAs as a percentage of total assets improved to 0.65%, compared to 0.72% at December 31, 2019 and 1.26% at March 31, 2019. Non-accrual loans were $5.5 million at March 31, 2020, down from $6.0 million at December 3, 2019 and $11.2 million at March 31, 2019. Loans past due 90 days or more and still accruing interest decreased $263 thousand to $1.3 million at March 31, 2020 from $1.5 million at December 31, 2019 and by $424 thousand from $1.7 million at March 31, 2019. Of the loans past due 90 days or more at March 31, 2020, approximately $923 thousand were government-guaranteed student loans.

The Company recognized a provision for loan losses of $300 thousand during the first quarter of 2020 compared to $226 thousand in the comparative 2019 period and a recapture of $695 thousand during the fourth quarter of 2019. The allowance for loan and lease losses (ALLL) was $9.7 million at March 31, 2020 and December 31, 2019 compared to $10.1 million at March 31, 2019. The ALLL as a percentage of loans held for investment was 1.27% at March 31, 2020 compared to 1.29% at December 31, 2019 and 1.32% at March 31, 2019. Historical annualized net charge offs as a percentage of average loans outstanding remained stable at 0.15% for the first quarter of 2020 compared to 0.14% for the fourth quarter of 2019 and 0.13% in the first quarter of 2019. The Company continues to have higher levels of reserve in relation to peer resulting from significant improvement in non-performing assets and year-over-year positive quantitative factors balanced by increased qualitative factors. As the economic impact of the COVID-19 pandemic and the related federal relief efforts materialize, elevated levels of risk within the loan portfolio may require additional increases in the allowance for loan losses.

Total noninterest income for the first quarter was $3.3 million, a decrease of $73 thousand from the previous quarter and $138 thousand from the first quarter of 2019. Increases in other service charges, commissions and fees, fiduciary and management fees and bank-owned life insurance over the preceding quarter and the prior year quarter were offset by fluctuations in mortgage banking income and service charges on deposit accounts as well as a gain on sale of available-for-sale securities in the first quarter of 2019.

Noninterest expense totaled $10.0 million for the first quarter of 2020, a decrease of $113 thousand from the fourth quarter of 2019 and an increase of $739 thousand from the first quarter of 2019. The linked quarter decrease is related to salaries and employees benefits, occupancy and equipment, and professional services partially offset by data processing and other operating expenses. Year-over-year first quarter increases were primarily related to salaries and employee benefits, data processing, and other operating expenses, partially offset by decreases in occupancy and equipment. The increase in salaries and employee benefits was primarily due to the addition of five highly qualified commercial production officers in the last three quarters of 2019.  Bank-wide technology and efficiency initiatives were the drivers of the year-over-year increase in data processing. These included outsourcing of the bank’s core application, upgrades to critical infrastructure software related to imaging, digital platform migration to a new vendor, and final stages of implementing a new loan origination system. Additionally, occupancy and equipment costs associated with operating an in-house core environment during the first quarter of 2019 have migrated to data processing costs in the first quarter of 2020 as we outsourced our operational structure.

Total assets as of March 31, 2020 and December 31, 2019 were $1.1 billion. Net loans held for investment increased $12.3 million, or 1.7%, from December 31, 2019 to $750.6 million. Net loan growth in real estate secured portfolio segments were partially offset by pay-downs in the indirect automobile and commercial and industrial segments. Securities available for sale, at fair value, increased $6.9 million from December 31, 2019 to $152.6 million at March 31, 2020.

Total deposits as of March 31, 2020 increased $13.0 million, or 1.5%, to $902.5 million from December 31, 2019. Noninterest-bearing deposits seasonally decreased $4.5 million, or 1.7%, savings deposits increased $29.8 million, or 7.5%, and time deposits decreased $12.3 million, or 5.4%. Year-over-year, total deposits increased $66.4 million, or 7.9%.  The Company focused on re-pricing strategies for expanding low-cost deposits creating year-over-year average balance increases of 7.7% in non-interest bearing deposits and 13.5% in savings deposits, including interest-bearing transaction and money market accounts.

The Company’s total stockholders’ equity at March 31, 2020 increased $288 thousand or 0.3% from December 31, 2019 to $110.0 million. The Bank remains well capitalized with a Tier 1 Capital ratio of 11.67% at March 31, 2020 as compared to 11.72% at December 31, 2019. The Bank’s leverage ratio was 9.73% at March 31, 2020 as compared to 9.72% at December 31, 2019.

Safe Harbor Statement Regarding Forward-Looking Statements - Statements in this press release, including without limitation, statements made in Mr. Shuford’s quotations, which use language such as "believes," "expects," "plans," "may," "will," "should," "projects," "contemplates," "anticipates," "forecasts," "intends" and similar expressions, identify forward-looking statements. These forward-looking statements are based on the beliefs of Old Point's management, as well as estimates and assumptions made by, and information currently available to, 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. Forward-looking statements in this release may include, without limitation: statements regarding future financial performance; performance of the investment and loan portfolios, including performance of the consumer auto loan portfolio and the purchased student loan portfolio; the ability of the Company to manage the impact of the COVID-19 pandemic; the effects of diversifying the loan portfolio; strategic business initiatives; management's efforts to reposition the balance sheet; deposit growth; levels and sources of liquidity; use of proceeds from the sale of securities; future levels of charge-offs or net recoveries; the impact of changes in NPAs on future earnings; write-downs and expected sales of other real estate owned; and changes in interest rates.

Factors that could have a material adverse effect on the operations and future prospects of Old Point include, but are not limited to, changes in: interest rates and yields; general economic and business conditions, including unemployment levels and slowdowns in economic growth, especially related to further and sustained economic impacts of the COVID-19 pandemic; the effects of the COVID-19 pandemic on, among other things, the Company’s operations, liquidity, and credit quality and potential claims, damages and fines related to litigation or government actions, including litigation or actions arising from the Company’s participation in the administration of programs related to the COVID-19 pandemic (including, among other things, the CARES Act); demand for loan products; future levels of government defense spending, particularly in the Company’s service area; uncertainty over future federal spending or budget priorities of the current administration, particularly in connection with the Department of Defense, on the Company’s service area; 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 and any changes associated with the current administration; the quality or composition of the loan or securities portfolios; changes in the volume and mix of interest-earning assets and interest-bearing liabilities; the effects of management's investment strategy and strategy to manage the net interest margin; the U.S. Government's guarantee of repayment of student or small business loans purchased by Old Point; the level of net charge-offs on loans; deposit flows; competition; demand for financial services in Old Point's market area; technology; cyber threats, attacks and events; implementation of new technologies; the Company’s ability to develop and maintain secure and reliable electronic systems; any interruption or breach of security in the Company’s information systems or those of the Company’s third party vendors or other service providers; reliance on third parties for key services; the use of inaccurate assumptions in management's modeling systems; the real estate market; accounting principles, policies and guidelines; changes in management; and other factors detailed in Old Point's publicly filed documents, including its Annual Report on Form 10-K for the year ended December 31, 2019. 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 (Nasdaq: OPOF) is the parent company of Old Point National Bank, a locally owned and managed community bank, and Old Point Trust & Financial Services, N.A., a wealth management services provider, serving the Hampton Roads, Virginia region. Web: www.oldpoint.com. For more information, contact Elizabeth Beale, Chief Financial Officer/Senior Vice President of Old Point Financial Corporation at 757-325-8123, or Laura Wright, Vice President/Marketing Director, Old Point National Bank at 757-728-1743.

Consolidated Balance Sheets (dollars in thousands, except share data)		March 31, 2020				December 31, 2019
		(unaudited)
Assets
Cash and due from banks		$	26,896			$	37,280
Interest-bearing due from banks			51,228				48,610
Federal funds sold			6				3,975
Cash and cash equivalents			78,130				89,865
Securities available-for-sale, at fair value			152,608				145,715
Restricted securities, at cost			3,152				2,926
Loans held for sale			2,309				590
Loans, net			750,550				738,205
Premises and equipment, net			35,136				35,312
Premises and equipment, held for sale			907				907
Bank-owned life insurance			27,777				27,547
Goodwill			1,650				1,650
Other real estate owned, net			236				-
Core deposit intangible, net			352				363
Other assets			12,470				11,408
Total assets		$	1,065,277			$	1,054,488
Liabilities & Stockholders' Equity
Deposits:
Noninterest-bearing deposits		$	258,104			$	262,558
Savings deposits			428,836				399,020
Time deposits			215,596				227,918
Total deposits			902,536				889,496
Overnight repurchase agreements			4,817				11,452
Federal Home Loan Bank advances			42,000				37,000
Other borrowings			1,800				1,950
Accrued expenses and other liabilities			4,080				4,834
Total liabilities			955,233				944,732
Stockholders' equity:
Common stock, $5 par value, 10,000,000 shares authorized; 5,200,605 and 5,200,038 shares outstanding (includes 12,385 and 19,933 of nonvested restricted stock, respectively)			25,941				25,901
Additional paid-in capital			21,026				20,959
Retained earnings			63,601				62,975
Accumulated other comprehensive loss, net			(524	)			(79	)
Total stockholders' equity			110,044				109,756
Total liabilities and stockholders' equity		$	1,065,277			$	1,054,488

Consolidated Statements of Income (unaudited)		Three Months Ended
(dollars in thousands, except per share data)		Mar. 31, 2020				Dec. 31, 2019				Mar. 31, 2019
Interest and Dividend Income:
Loans, including fees		$	8,827			$	8,809			$	8,862
Due from banks			151				264				57
Federal funds sold			12				8				7
Securities:
Taxable			864				789				620
Tax-exempt			86				109				266
Dividends and interest on all other securities			46				45				64
Total interest and dividend income			9,986				10,024				9,876
Interest Expense:
Checking and savings deposits			340				319				251
Time deposits			972				1,016				870
Federal funds purchased, securities sold under agreements to repurchase and other borrowings			22				27				37
Federal Home Loan Bank advances			234				285				359
Total interest expense			1,568				1,647				1,517
Net interest income			8,418				8,377				8,359
Provision for (recovery of) loan losses			300				(695	)			226
Net interest income after provision for (recovery of) loan losses			8,118				9,072				8,133
Noninterest Income:
Fiduciary and asset management fees			1,017				1,013				959
Service charges on deposit accounts			895				1,003				1,053
Other service charges, commissions and fees			943				927				925
Bank-owned life insurance income			231				192				192
Mortgage banking income			157				163				216
Gain on sale of available-for-sale securities, net			-				2				26
Other operating income			35				51				45
Total noninterest income			3,278				3,351				3,416
Noninterest Expense:
Salaries and employee benefits			5,994				6,407				5,699
Occupancy and equipment			1,266				1,346				1,393
Data processing			819				555				363
Customer development			114				102				162
Professional services			475				585				514
Employee professional development			220				194				186
Other taxes			150				147				150
ATM and other losses			98				119				62
Gain on other real estate owned			-				-				(2	)
Other operating expenses			894				688				764
Total noninterest expense			10,030				10,143				9,291
Income before income taxes			1,366				2,280				2,258
Income tax expense			116				305				231
Net income		$	1,250			$	1,975			$	2,027
Basic Earnings per Share:
Weighted average shares outstanding			5,200,250				5,199,481				5,184,586
Net income per share of common stock		$	0.24			$	0.38			$	0.39
Diluted Earnings per Share:
Weighted average shares outstanding			5,200,989				5,199,494				5,184,599
Net income per share of common stock		$	0.24			$	0.38			$	0.39
Cash Dividends Declared per Share:		$	0.12			$	0.12			$	0.12

		For the quarter ended March 31,
(unaudited)		2020												2019
(dollars in thousands)		Average Balance				Interest Income/ Expense				Yield/ Rate**				Average Balance				Interest Income/ Expense				Yield/ Rate**
ASSETS
Loans*		$	754,710			$	8,839				4.71	%		$	771,143			$	8,876				4.67	%
Investment securities:
Taxable			142,853				863				2.43	%			103,264				620				2.43	%
Tax-exempt*			11,223				110				3.93	%			43,648				337				3.13	%
Total investment securities			154,076				973				2.54	%			146,912				957				2.64	%
Interest-bearing due from banks			47,931				151				1.27	%			9,933				57				2.31	%
Federal funds sold			3,367				12				1.45	%			1,124				7				2.38	%
Other investments			2,991				46				6.15	%			3,783				64				6.91	%
Total earning assets			963,075			$	10,021				4.19	%			932,895			$	9,961				4.33	%
Allowance for loan losses			(9,636	)											(10,462	)
Other non-earning assets			103,101												102,043
Total assets		$	1,056,540											$	1,024,476
LIABILITIES AND STOCKHOLDERS' EQUITY
Time and savings deposits:
Interest-bearing transaction accounts		$	49,222			$	3				0.02	%		$	28,145			$	3				0.04	%
Money market deposit accounts			280,955				317				0.45	%			251,086				227				0.37	%
Savings accounts			86,607				20				0.09	%			87,949				22				0.10	%
Time deposits			223,126				972				1.75	%			230,091				870				1.53	%
Total time and savings deposits			639,910				1,312				0.82	%			597,271				1,122				0.76	%
Federal funds purchased, repurchase agreements and other borrowings			8,595				22				1.03	%			25,220				37				0.60	%
Federal Home Loan Bank advances			38,484				234				2.45	%			58,222				359				2.50	%
Total interest-bearing liabilities			686,989				1,568				0.92	%			680,713				1,518				0.90	%
Demand deposits			253,429												235,381
Other liabilities			4,093												4,896
Stockholders' equity			112,029												103,486
Total liabilities and stockholders' equity		$	1,056,540											$	1,024,476
Net interest margin						$	8,453				3.53	%						$	8,443				3.67	%

Old Point Financial Corporation and Subsidiaries		As of or for the quarter ended,
Selected Ratios (unaudited) (dollars in thousands, except per share data)		March 31, 2020				December 31, 2019				March 31, 2019
Earnings per common share, diluted		$	0.24			$	0.38			$	0.39
Return on average assets (ROA)			0.48	%			0.75	%			0.80	%
Return on average equity (ROE)			4.49	%			7.11	%			7.94	%
Net Interest Margin (FTE)			3.53	%			3.51	%			3.67	%
Non-performing assets (NPAs) / total assets			0.65	%			0.72	%			1.26	%
Annualized Net Charge Offs / average total loans			0.15	%			0.14	%			0.13	%
Allowance for loan losses / total loans			1.27	%			1.29	%			1.32	%
Efficiency ratio (FTE)			85.50	%			86.18	%			78.34	%
Non-Performing Assets (NPAs)
Nonaccrual loans		$	5,471			$	6,037			$	11,245
Loans > 90 days past due, but still accruing interest			1,254				1,517				1,678
Other real estate owned			236				-				-
Total non-performing assets		$	6,961			$	7,554			$	12,923
Other Selected Numbers
Loans, net		$	750,550			$	738,205			$	752,799
Deposits			902,536				889,496				836,177
Stockholders equity			110,044				109,756				105,019
Total assets			1,065,277				1,054,488				1,026,880
Loans charged off during the quarter, net of recoveries			291				257				249
Quarterly average loans			754,710				741,663				771,143
Quarterly average assets			1,056,540				1,051,309				1,024,476
Quarterly average earning assets			963,075				951,876				932,895
Quarterly average deposits			893,339				876,563				832,652
Quarterly average equity			112,029				110,203				103,486

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