Old Point Reports Second Quarter 2019 Results

HAMPTON, Va., July 25, 2019 /PRNewswire/ -- Old Point Financial Corporation (the Company or Old Point) (NASDAQ "OPOF") reported net income of $1.6 million and earnings per diluted common share of $0.31 for the quarter ended June 30, 2019, as compared to net income of $992 thousand or $0.19 earnings per diluted common share for the second quarter of 2018. Net operating earnings (non-GAAP) for the second quarter of 2019 were also $1.6 million or $0.31 per diluted common share, which compares to $1.5 million, or $0.28 per diluted common share for the second quarter of 2018.  Net operating earnings (non-GAAP) for the second quarter of 2018 adjust for certain merger-related costs incurred in the acquisition of Citizens National Bank which closed on April 1, 2018.

Net income for the six months ended June 30, 2019 was $3.7 million or $0.70 earnings per diluted common share. For the comparative 2018 period, net income was $1.9 million or $0.38 earnings per diluted common share. Excluding the effect of $684 thousand in after tax merger costs, net operating earnings (non-GAAP) were $2.6 million, or $0.51 earnings per diluted common share, for the six month period ended June 30, 2018.

Robert Shuford, Jr., Chairman, President, and CEO of Old Point National Bank (the Bank) said, "We are pleased to report earnings of $3.7 million, or $0.70 earnings per diluted common share, for the first six months of 2019. Our Company experienced solid revenue growth and expense control during the first six months of 2019 compared to the same period in 2018 and continued improvement in overall asset quality."

Highlights of the quarter are as follows:

• Net interest income increased slightly to $8.5 million for the second quarter of 2019 compared to $8.4 million in the first quarter of 2019 and the second quarter of 2018, respectively.
• Net interest margin (on a fully tax-equivalent basis) improved to 3.68% from 3.67% in the prior quarter and 3.65% in the second quarter of 2018.
• Non-performing assets (NPAs) totaled $12.4 million as of June 30, 2019, down from $12.9 million at March 31, 2019 and $16.4 million at June 30, 2018. NPAs as a percentage of total assets improved to 1.21% at June 30, 2019 which compared to 1.26% at March 31, 2019 and 1.59% at June 30, 2018.
• Return on average assets (ROA) was 0.63% for the second quarter of 2019 compared to 0.80% in the prior quarter and 0.39% in the second quarter of 2018. Net operating ROA (non-GAAP) was 0.63% for the second quarter of 2019 compared to 0.80% and 0.58% in the first quarter of 2019 and the second quarter of 2018, respectively.
• Return on average equity (ROE) was 6.12% for the second quarter of 2019 compared to 7.94% in the prior quarter and 4.06% in the second quarter of 2018. Net operating ROE (non-GAAP) was 6.12% for the second quarter of 2019 compared to 7.94% and 6.02% in the first quarter of 2019 and the second quarter of 2018, respectively.
• The efficiency ratio improved to 78.06% for the second quarter of 2019 compared to 78.34% in the first quarter of 2019 and 85.54% in the second quarter of 2018.

Net Interest Income

Net interest income for the second quarter of 2019 was $8.5 million, an increase of $172 thousand, or 2.1%, from the prior quarter and $105 thousand, or 1.2%, from the second quarter of 2018. The year-over-year and quarter-over-quarter growth was positively impacted by higher average earning asset balances and higher yields which was partially offset by higher funding costs.  The tax-equivalent net interest margin for the quarter was 3.68%, up from 3.67% in the prior quarter and 3.65% in the same period a year ago.

Asset Quality

Non-performing assets (NPAs) totaled $12.4 million as of June 30, 2019, down from $12.9 million at March 31, 2019 and $16.4 million at June 30, 2018. NPAs as a percentage of total assets were 1.21%, which compares to 1.26% at March 31, 2019 and 1.59% at June 30, 2018. Non-accrual loans were $11.2 million at June 30, 2019 and March 31, 2019, down from $13.9 million at June 30, 2018. Loans past due 90 days or more and still accruing interest decreased $456 thousand to $1.2 million at June 30, 2019 from $1.7 million at March 31, 2019 and decreased by $1.1 million compared to $2.3 million at June 30, 2018. Of the loans past due 90 days or more at June 30, 2019, approximately $900 thousand were government-guaranteed student loans.

The provision for loan losses was $787 thousand for the second quarter of 2019, as compared to $226 thousand for the prior quarter and $575 thousand for the second quarter of 2018.  The allowance for loan and lease losses (ALLL) was $10.8 million at June 30, 2019 compared to $10.1 million at March 31, 2019 and $9.9 million at June 30, 2018. The ALLL as a percentage of loans held for investment was 1.41% at June 30, 2019, up from 1.32% at March 31, 2019 and 1.27% at June 30, 2018. Annualized net charge offs as a percentage of average loans outstanding was 0.06% for the second quarter of 2019, which compares to 0.13% in the preceding quarter and 0.22% in the second quarter of 2018.  Despite overall improving asset quality which positively impacted the level of provision for loan losses in the first quarter of 2019, the level of provision in the second quarter of 2019 was impacted by specific impairments of $707 thousand, or a 9 basis point increase in the ratio of the ALLL as a percentage of loans held for investment, associated with problem credit resolutions.   

Noninterest Income

Total noninterest income for the quarter was $3.6 million, an increase of $157 thousand from the previous quarter and an increase of $149 thousand, or 4.4% from the second quarter of 2018. Increases in other service charges, commissions and fees and mortgage banking income over the preceding quarter and the prior year quarter were partially offset by fluctuations in fiduciary and management fees and service charges on deposit accounts. 

Noninterest Expense

Noninterest expense totaled $9.5 million for the second quarter of 2019, an increase of $217 thousand from the first quarter of 2019 and a decrease of $710 thousand from the second quarter of 2018. Adjusting for the impact of merger expenses of $479 thousand in the second quarter of 2018, adjusted noninterest expense (non-GAAP) decreased $231 thousand comparing second quarter of 2019 to the same period in 2018. For the linked quarter, increases in salaries and employee benefits and data processing were partially offset by decreases in other operating expenses.

Balance Sheet Review

Total assets as of June 30, 2019 were $1.0 billion, essentially unchanged from December 31, 2018. Net loans held for investment decreased $13.5 million, or 1.8%, from December 31, 2018 to $750.4 million.  Securities available for sale, at fair value, decreased $2.8 million to $145.5 million at June 30, 2019.

Total deposits as of June 30, 2019 increased $4.6 million, or 0.6%, to $847.8 million from December 31, 2018. Noninterest-bearing deposits decreased $3.4 million, or 1.4%, savings deposits increased $1.6 million, or 0.4%, and time deposits increased $6.5 million, or 2.8%.

The Company's total stockholders' equity at June 30, 2019 increased $5.4 million or 5.3% from December 31, 2018 to $107.4 million.  The Bank remains well capitalized with a Tier 1 Capital ratio of 11.43% at June 30, 2019 as compared to 10.90% at December 31, 2018. The Bank's leverage ratio was 9.66% at June 30, 2019 as compared to 9.34% at December 31, 2018. 

Non-GAAP Financial Measures – In addition to the Company's results presented in accordance with GAAP, this release includes certain non-GAAP financial measures including net operating earnings, net operating earnings per share, net operating ROA, net operating ROE, operating efficiency ratio, and adjusted noninterest expense.  A schedule reconciling these non-GAAP financial measures is provided at the end of this press release.  The Company uses non-GAAP financial measures in its internal analysis of financial and operating performance and the Company's management believes that they provide greater transparency regarding management's view of the Company's performance.  These non-GAAP financial measures should be read in conjunction with, and not as a substitute for, the Company's GAAP results.  In addition, because not all companies use identical calculations, the Company's presentation of its non-GAAP financial measures may not be comparable to other similarly titled measures of other companies.

Safe Harbor Statement Regarding Forward-Looking Statements - Statements in this press release 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 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; 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 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 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; 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; 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, 2018. 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 Elizabeth Beale, Interim Chief Financial Officer 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