Old Point Reports First Quarter 2019 Results

HAMPTON, Va., April 24, 2019 /PRNewswire/ -- Old Point Financial Corporation (the Company or Old Point) (NASDAQ "OPOF") reported net income of $2.0 million and earnings per diluted common share of $0.39 for the quarter ended March 31, 2019, as compared to net income of $942 thousand or $0.19 earnings per diluted common share for the first quarter of 2018. Net operating earnings (non-GAAP) for the first quarter of 2019 were also $2.0 million or $0.39 per diluted common share, which compares to $1.1 million, or $0.23 per diluted common share for the first quarter of 2018.

Robert Shuford, Jr., President and CEO of Old Point National Bank (the Bank) said, "We are pleased to report earnings of $2.0 million, or $0.39 per diluted common share, for the first quarter of 2019. Our Company experienced solid revenue growth and expense control during the quarter as compared to the same period in 2018, with continuing improvement in asset quality."

Highlights of the quarter are as follows:

• Return on average assets (ROA) was 0.80% compared to 0.53% in the prior quarter and 0.39% in the first quarter of 2018. Net operating ROA (non-GAAP) was 0.80% compared to 0.54% and 0.47% in the fourth quarter of 2018 and the first quarter of 2018, respectively.
• Return on average equity (ROE) was 7.94% compared to 5.45% in the prior quarter and 3.97% in the first quarter of 2018. Net operating ROE (non-GAAP) was 7.94% compared to 5.50% and 4.83 % in the fourth quarter of 2018 and the first quarter of 2018, respectively.
• Net interest income declined slightly to $8.4 million compared to $8.6 million in the prior quarter but increased from $7.7 million in the first quarter of 2018.
• Net interest margin (on a fully tax-equivalent basis) improved to 3.67% from 3.52% in the first quarter of 2018 and decreased from 3.69% in the prior quarter. 
• Non-performing assets (NPAs) totaled $12.9 million as of March 31, 2019, down from $14.7 million at December 31, 2018 and down from $16.5 million at March 31, 2018. NPAs as a percentage of total assets improved to 1.26% at March 31, 2019 which compares to 1.42% at December 31, 2018 and 1.66% at March 31, 2018.
• The efficiency ratio improved to 78.34% compared to 78.51% in the fourth quarter of 2018 and 85.65% in the first quarter of 2018.

Net Interest Income

Net interest income for the first quarter of 2019 was $8.4 million, a decrease of $243 thousand, or 2.8%, from the prior quarter and an increase of $614 thousand, or 7.9%, from the first quarter of 2018. The year-over-year growth was positively impacted by higher average earning asset balances and higher yields which was partially offset by higher funding costs.  The quarter-over-quarter decrease in net interest income was principally the result of lower average earning assets combined with increasing funding costs. The tax-equivalent net interest margin for the quarter was 3.67%, down from 3.69% in the prior quarter and up from 3.52% in the same period a year ago. The margin compression during the first quarter of 2019 was primarily due to higher rates on interest-bearing deposits and borrowings.

Asset Quality

Non-performing assets (NPAs) totaled $12.9 million as of March 31, 2019, down from $14.7 million at December 31, 2018 and $16.5 million at March 31, 2018. NPAs as a percentage of total assets were 1.26%, which compares to 1.42% at December 31, 2018 and 1.66% at March 31, 2018. Non-accrual loans decreased to $11.2 million from $12.1 million at December 31, 2018 and $14.1 million at March 31, 2018. Loans past due 90 days or more and still accruing interest decreased $819 thousand to $1.7 million from $2.5 million at December 31, 2018 and decreased by $488 thousand compared to $2.2 million at March 31, 2018. Of the loans past due 90 days or more at March 31, 2019, approximately $1.4 million were government-guaranteed student loans.

The provision for loan losses was $226 thousand for the first quarter of 2019, as compared to $1.0 million for the prior quarter and $525 thousand for the first quarter of 2018.  The allowance for loan and lease losses (ALLL) was $10.1 million at March 31, 2019 and December 31, 2018 compared to $9.7 million at March 31, 2018. The ALLL as a percentage of loans held for investment was 1.32% at March 31, 2019, up slightly from 1.31% at December 31, 2018 and down slightly from 1.33% at March 31, 2018. Annualized net charge offs as a percentage of average loans outstanding was 0.13% for the first quarter of 2019, which compares to 0.58% in the preceding quarter and 0.13% in the first quarter of 2018.  Improving asset quality positively impacted the level of provision for loan losses in the first quarter of 2019, while the fourth quarter 2018 provision for loan losses was impacted by a $573 thousand charge-off.

Noninterest Income

Total noninterest income for the quarter was $3.4 million, an increase of $84 thousand from the previous quarter and an increase of $274 thousand, or 8.7% from the first 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 $9.3 million for the first quarter of 2019, a decrease of $149 thousand from the fourth quarter of 2018 and a decrease of $125 thousand from the first quarter of 2018. Adjusting for the impact of merger expenses of $205 thousand in the first quarter of 2018, adjusted noninterest expense (non-GAAP) increased $80 thousand or 0.9% comparing first quarter of 2019 to the same period in 2018. For the linked quarter, decreases in occupancy and equipment and professional services offset increases in salaries and employee benefits.

Balance Sheet Review

Total assets as of March 31, 2019 were $1.0 billion, essentially unchanged from December 31, 2018. Net loans held for investment decreased $11.1 million, or 1.5%, from December 31, 2018 to $752.8 million.  Securities available for sale, at fair value, increased $9.6 million to $157.8 million at March 31, 2019.

Total deposits as of March 31, 2019 decreased $7.0 million, or 0.8%, to $836.2 million from December 31, 2018. Noninterest-bearing deposits decreased $13.3 million, or 5.4%, savings deposits increased $4.3 million, or 1.2%, and time deposits increased $2.1 million, or 0.9%.

The Company's total stockholders' equity at March 31, 2019 increased $3.0 million or 3.0% from December 31, 2018 to $105.0 million.  The Bank remains well capitalized with a Tier 1 Capital ratio of 11.24% at March 31, 2019 as compared to 10.90% at December 31, 2018. The Bank's leverage ratio was 9.60% at March 31, 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, and operating efficiency ratio.  A schedule reconciling these non-GAAP financial measures is provided at the end of this press release.  The Company uses these 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 Jeff Farrar, Chief Financial Officer & Senior Vice President/Finance of Old Point Financial Corporation at 757-728-1248, or Laura Wright, Vice President/Marketing Director, Old Point National Bank at 757-728-1743.

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SOURCE Old Point Financial Corporation