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:

• 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% at March 31, 2020 which compared to 0.72% at December 31, 2019 and 1.26% at March 31, 2019.
• Net interest income remained essentially steady at $8.4 million for the first quarter of 2020 compared to the first and fourth quarters of 2019.
• Net interest margin (on a fully tax-equivalent basis) improved slightly to 3.53% for the first quarter of 2020 from 3.51% for the fourth quarter of 2019, but compressed from 3.67% for the first quarter of 2019. 
• Net Loans grew $12.3 million, or 6.7% annualized, from December 31, 2019 to March 31, 2020.
• Deposits grew $13.0 million to $902.5 million at March 31, 2020 from December 31, 2019. 

Net Interest Income
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.

Asset Quality
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.       

Noninterest Income
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
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. 

Balance Sheet Review
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.

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SOURCE Old Point Financial Corporation