Old Point Releases Second Quarter 2024 Results

HAMPTON, Va., July 25, 2024 /PRNewswire/ -- Old Point Financial Corporation (the "Company" or "Old Point") (NASDAQ "OPOF") reported net income of $2.5 million with diluted earnings per common share of $0.50 for the second quarter of 2024 compared to net income of $1.7 million with diluted earnings per common share of $0.34 for the first quarter of 2024, and net income of $1.8 million with diluted earnings per common share of $0.36 for the second quarter of 2023. Net income for the six months ended June 30, 2024 was $4.2 million with diluted earnings per common share of $0.84, and for the six months ended June 30, 2023, net income was $4.9 million with diluted earnings per common share of $0.97.

Robert Shuford, Jr., Chairman, President and CEO of the Company and Old Point National Bank (the "Bank") commented, "We are pleased to report to our shareholders that performance improved in the second quarter of 2024. We grew our earnings, we increased our net interest margin, and our asset quality remained strong. Net income was the highest it has been in five quarters at $2.5 million with book value at $21.66 per share. While loan growth slowed as expected, our core deposit growth was stronger than anticipated.

We continued our cost saving initiatives to reduce noninterest expense in the second quarter. Year to date, we have incurred $550 thousand of one-time costs with an additional $350 thousand expected to be incurred through the remainder of the year. We continue to believe that when fully implemented, these initiatives will reduce noninterest expense by approximately $5.0 million on an annualized pre-tax basis (excluding one-time costs). While the investments required for these cost saving initiatives have impacted our bottom line in the first half of the year, we expect them to become accretive to earnings in the third quarter of 2024.

Additionally, we will be closing our Crown Center branch, located at 580 East Main Street in Norfolk on September 27, 2024. This is not a decision we made lightly and we remain dedicated to serving customers in the community by providing banking services through our other nearby branches, online and mobile banking, and customer support center.

We approach the second half of 2024 with continued optimism given the strength of our company, driven by an outstanding team of employees. I remain fully confident about the ability of our team to drive value for our customers, our communities, and our shareholders."

Key highlights of the second quarter are as follows:

• Total assets were $1.4 billion at June 30, 2024, decreasing $23.0 million or 1.6% from December 31, 2023. Net loans held for investment were $1.0 billion at June 30, 2024, decreasing $25.3 million, or 2.4%, from December 31, 2023.
• Total deposits increased $6.2 million, or 0.5%, from December 31, 2023.
• Return on average equity (ROE) was 9.43% for the second quarter of 2024, compared to 6.44% for the first quarter of 2024, and 7.01% for the second quarter of 2023. Return on average assets (ROA) was 0.71% for the second quarter of 2024, compared to 0.48% for the first quarter of 2024, and 0.51% for the second quarter of 2023.
• Book value per share and tangible book value per share (non-GAAP) at June 30, 2024 increased 1.45% and 1.50%, from March 31, 2024 and 6.39% and 6.60%, respectively from June 30, 2023.
• Net income improved $812 thousand, or 47.3%, to $2.5 million for the second quarter of 2024 from $1.7 million for the first quarter of 2024 and improved $727 thousand, or 40.3% from $1.8 million for the second quarter of 2023.
• Net interest margin (NIM) was 3.62% for the second quarter of 2024 compared to 3.45% for the first quarter of 2024 and 3.67% for the second quarter of 2023. NIM on a fully tax-equivalent basis (FTE) (non-GAAP) was 3.63% for the second quarter of 2024 compared to 3.46% for the first quarter of 2024 and 3.69% for the second quarter of 2023.
• Net interest income increased $576 thousand, or 5.0%, to $12.1 million for the second quarter of 2024 from $11.5 million for the first quarter of 2024 and increased $17 thousand, or 0.1%, compared to the second quarter of 2023.
• Provision for credit losses of $261 thousand was recognized for the second quarter of 2024, compared to $80 thousand for the first quarter of 2024 and $361 thousand for the second quarter of 2023.
• Non-performing assets decreased by $193 thousand to $2.0 million or 0.14% of total assets at June 30, 2024 from $2.2 million or 0.15% of total assets at March 31, 2024 and increased $516 thousand from $1.4 million or 0.10% of total assets at June 30, 2023.
• Liquidity as of June 30, 2024, defined as cash and cash equivalents, unpledged securities, and available secured borrowing capacity, totaled $403.8 million, representing 28.4% of total assets compared to $342.5 million, representing 23.7% of total assets as of December 31, 2023.

For more information about financial measures that are not calculated in accordance with GAAP, please see "Non-GAAP Financial Measures" and "Reconciliation of Certain Non-GAAP Financial Measures" below.

Balance Sheet and Asset Quality
Total assets of $1.4 billion as of June 30, 2024 decreased $23.0 million from December 31, 2023. Net loans held for investment decreased $25.3 million, or 2.4% from December 31, 2023 to $1.0 billion at June 30, 2024, driven by the following: decreases in consumer loans of $21.6 million, construction loans of $17.1 million, and commercial loans of $7.5 million, partially offset by increases in residential real estate loans of $11.0 million and commercial real estate loans of $10.7 million. Securities available-for-sale, at fair value, decreased $10.1 million from December 31, 2023 to $192.1 million at June 30, 2024.

Total deposits of $1.2 billion as of June 30, 2024 increased $6.2 million, or 0.5%, from December 31, 2023. Noninterest-bearing deposits increased $28.3 million, or 8.5% and time deposits increased $8.8 million, or 3.6%, partially offset by decreases in savings deposits of $30.9 million, or 4.7%. The increased balance in noninterest bearing deposits is driven by increases from large commercial customers. Overnight repurchase agreements, Federal Home Loan Bank advances, and subordinated notes decreased $30.8 million to $70.7 million at June 30, 2024 from $101.5 million at December 31, 2023, as the Company used excess liquidity to pay down high cost borrowed funds.

The Company's total stockholders' equity at June 30, 2024 increased $3.2 million, or 3.0%, from December 31, 2023 to $110.0 million. The increase was primarily driven by net income and lower unrealized losses in the market value of securities available-for-sale, which are recorded as a component of accumulated other comprehensive loss, partially offset by cash dividend payments. The unrealized loss in market value of securities available-for-sale was a result of increases in market interest rates since the securities were acquired, rather than credit quality issues. The Company does not expect these unrealized losses to affect the earnings or regulatory capital of the Company or its subsidiaries. The Bank remains well capitalized with a Tier 1 Capital ratio of 12.07% at June 30, 2024 as compared to 11.45% at December 31, 2023. The Bank's leverage ratio was 9.87% at June 30, 2024 as compared to 9.46% at December 31, 2023.

Non-performing assets (NPAs) totaled $2.0 million as of June 30, 2024 compared to $2.2 million at March 31, 2024 and $1.4 million as of June 30, 2023. NPAs as a percentage of total assets were 0.14% at June 30, 2024, compared to 0.15% at March 31, 2024 and 0.10% at June 30, 2023. Non-accrual loans were $44 thousand at June 30, 2024, a decrease from $194 thousand at March 31, 2024 and a decrease from $235 thousand at June 30, 2023. The decrease in non-accrual loans from the prior year comparative quarter was related to the resolution of two relationships. Loans past due 90 days or more and still accruing interest decreased $434 thousand to $444 thousand at June 30, 2024 from $878 thousand at March 31, 2024 and decreased $764 thousand from $1.2 million at June 30, 2023. Repossessed assets were $1.5 million at June 30, 2024 compared to $1.1 million at March 31, 2024 and none at June 30, 2023. The increase in repossessed assets from the prior periods was driven by the resolution of certain loans that were previously past due.

The Company recognized a provision for credit losses of $261 thousand during the second quarter of 2024 compared to $80 thousand during the first quarter of 2024 and $361 thousand during the second quarter of 2023. The provision for credit losses for the second quarter of 2024 included a provision of $191 thousand for loans and $70 thousand for unfunded commitments. The allowance for credit losses (ACL) at June 30, 2024 was $12.1 million including an allowance for credit losses on loans of $11.8 million and the allowance for unfunded commitments of $309 thousand. The decrease in the allowance for credit losses on loans during the second quarter of 2024 was due primarily to reduction in the size of the portfolio, specifically the consumer automobile segment (within the consumer segment). The allowance for credit losses on loans as a percentage of loans held for investment was 1.12% at June 30, 2024 compared to 1.12% at March 31, 2024, and 1.06% at June 30, 2023. Quarterly annualized net charge-offs as a percentage of average loans outstanding were 0.12% for the second quarter of 2024, compared to 0.12% for the first quarter of 2024 and 0.08% for the second quarter of 2023. As of June 30, 2024, asset quality remains very strong. Management believes the level of the allowance for credit losses is sufficient to absorb expected losses in the loan portfolio; however, if elevated levels of risk are identified, the provision for credit losses may increase in future periods.

Net Interest Income
Net interest income for the second quarter of 2024 was $12.1 million, an increase of $576 thousand, or 5.0%, from the prior quarter and $17 thousand, or 0.1%, from the second quarter of 2023. The increase from the linked quarter was due to higher average yields on earning asset balances partially offset by lower average interest-bearing liabilities at higher average rates. The increase from the prior-year comparative quarter was due primarily to higher average earning asset balances at higher average yields partially offset by higher average interest-bearing liabilities at higher average rates. For the six months ended June 30, 2024 and 2023, net interest income was $23.7 million and $24.9 million, respectively. The decrease from the prior-year comparative period was due to higher average-interest bearing liabilities at higher average rates, partially offset by higher average earning assets at higher average earning yields.

Net Interest Margin (NIM) for the second quarter of 2024 was 3.62%, an increase from 3.45% for the first quarter of 2024, and a decrease from 3.67% for the prior year quarter. On a fully tax-equivalent basis (FTE) (non-GAAP), NIM was 3.63%, for the second quarter of 2024, compared to 3.46% for the first quarter of 2024 and 3.69% for the second quarter of 2023. Average earning asset balances increased $19.9 million at June 30, 2024 compared to June 30, 2023 with yields on average earning assets increasing 45 basis points due to deployment of liquidity into higher earning assets and the effects of the rising interest rate environment. Average interest-bearing liabilities increased $23.7 million for the quarter ended June 30, 2024 compared to the quarter ended June 30, 2023 with costs increasing 69 basis points. The higher interest cost of liabilities was primarily due to higher interest rates on money market and time deposits, partially offset by decreases in short term average FHLB advances during the period. During the first six months of 2024, average earning assets and average interest-bearing liabilities increased $35.3 million and $72.6 million, over the 2023 comparative period, respectively.

Average loans decreased $26.8 million, or 2.5%, for the second quarter compared to the same period of 2023. Average yields on loans and investment securities were 45 basis points and 28 basis points higher in the second quarter of 2024 due primarily to the effects of rising interest rates. The extent to which rising interest rates will ultimately affect the Company's NIM is uncertain. For more information about these FTE financial measures, please see "Non-GAAP Financial Measures" and "Reconciliation of Certain Non-GAAP Financial Measures," below.

Noninterest Income
Total noninterest income was $3.5 million for the second quarter of 2024 compared to $3.2 million for the first quarter of 2024 and $3.5 million for the comparative quarter of 2023. The $249 thousand increase during the second quarter of 2024 compared to the linked quarter was primarily driven by increases in service charges on deposit accounts and other service charges, commissions, and fees. The $6 thousand decrease compared to the second quarter of 2023 was driven by decreases in mortgage banking income and no gains on the sale of fixed assets, partially offset by increases in other service charges, commissions, and fees and no losses on available for sale securities. The decrease in mortgage banking income in the second quarter of 2024 compared to the second quarter of 2023 was due to declines in the volume of mortgage originations attributable to changes in mortgage market conditions. Noninterest income for the six months ended June 30, 2024 decreased $205 thousand to $6.7 million compared to the six months ended June 30, 2023 primarily driven by decreases in mortgage banking income.

Noninterest Expense
Noninterest expense totaled $12.3 million for the second quarter of 2024 compared to $12.7 million for the first quarter of 2024 and $13.1 million for the second quarter of 2023. The decrease in expenses from the linked quarter of $379 thousand was primarily related to decreases in salaries and employee benefits and ATM and other losses, partially offset by increases in customer development and occupancy and equipment. The decrease in expenses over the prior year quarter was primarily driven by decreases in salaries and employee benefit expense and employee professional development expense, partially offset by increases in occupancy and equipment and data processing. The decrease in salaries and employee benefits in the second quarter of 2024 was primarily driven by lower average headcount and fewer one-time costs related to the cost saving initiatives as the majority of these were incurred in the first quarter of 2024. The noninterest expense reduction initiatives reduced the employee headcount late in the first quarter of 2024 and into the second quarter by approximately 12%. Occupancy and equipment expenses increased over the comparative periods due to the impairment of the right-of-use asset for the upcoming closure of the Crown Center branch. For the six months ended June 30, 2024, noninterest expense decreased $288 thousand, or 1.1% over the six months ended June 30, 2023, primarily due to decreases in salary and employee benefits as discussed above.

Capital Management and Dividends
For the second quarter of 2024, the Company declared a dividend of $0.14 per share, consistent with the second quarter of 2023. The dividend represents a payout ratio of 28.0% of earnings per share for the second quarter of 2024. The Board of Directors of the Company continually reviews the amount of cash dividends per share and the resulting dividend payout ratio in light of changes in economic conditions, current and future capital requirements, and expected future earnings.

Total consolidated equity increased $3.2 million at June 30, 2024, compared to December 31, 2023, due primarily to net income and lower unrealized losses in the market value of securities available-for-sale, which are recognized as a component of accumulated other comprehensive loss, partially offset by cash dividend payments. The Company's securities available-for-sale are fixed income debt securities, and their unrealized loss position is a result of increases in market interest rates since the investments were acquired rather than credit quality issues. The Company expects to recover its investments in debt securities through scheduled payments of principal and interest and unrealized losses are not expected to affect the earnings or regulatory capital of the Company or its subsidiaries.

At June 30, 2024, the book value per share of the Company's common stock was $21.66, and tangible book value per share (non-GAAP) was $21.30. For more information about non-GAAP financial measures, please see "Non-GAAP Financial Measures" and "Reconciliation of Certain Non-GAAP Financial Measures," below.

Non-GAAP Financial Measures
In reporting the results as of and for the three and six months ended June 30, 2024, the Company has provided supplemental financial measures on a fully tax-equivalent, tangible, or adjusted basis. These non-GAAP financial measures are a supplement to GAAP, which is used to prepare the Company's financial statements, and should not be considered in isolation or as a substitute for comparable measures calculated in accordance with GAAP. In addition, the Company's non-GAAP financial measures may not be comparable to non-GAAP financial measures of other companies. The Company uses the non-GAAP financial measures discussed herein in its analysis of the Company's performance. The Company's management believes that these non-GAAP financial measures provide additional understanding of ongoing operations and enhance comparability of results of operations with prior periods presented without the impact of items or events that may obscure trends in the Company's underlying performance. A reconciliation of the non-GAAP financial measures used by the Company to evaluate and measure the Company's performance to the most directly comparable GAAP financial measures is presented below.

Safe Harbor Statement Regarding Forward-Looking Statements
Statements in this press release, including without limitation, statements made in Mr. Shuford's quotation , which use language such as "believes," "expects," "plans," "may," "will," "should," "projects," "contemplates," "anticipates," "forecasts," "intends" and similar expressions, may constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on the current beliefs of Old Point's management, as well as estimates and assumptions made by, and information currently available to, management, as of the time such statements are made. These statements are also subject to assumptions with respect to future business strategies and decisions that are subject to change. These statements are inherently uncertain, and there can be no assurance that the underlying beliefs, estimates, or assumptions will prove to be accurate. Actual results, performance, achievements, or trends could differ materially from historical results or those expressed or implied by such statements. The actual results or developments anticipated may not be realized or, even if substantially realized, they may not have the expected consequences to or effects on the Company or its businesses or operations. Forward-looking statements in this release may include, without limitation, statements regarding: efficiency and expense reduction initiatives, including the estimated effects and estimated future cost savings thereof, and the estimated timing of recognizing the benefits of such initiatives; future financial performance; future financial and economic conditions, industry conditions, and loan demand; Old Point's strategic focuses; impacts of economic uncertainties; performance of the loan and securities portfolios; deposit growth and future levels of rates paid on deposits; levels and sources of liquidity and capital resources; future levels of the allowance for credit losses, charge-offs or net recoveries; levels of or changes in interest rates and potential impacts on Old Point's NIM; changes in NIM and items affecting NIM; expected impact of unrealized losses on earnings and regulatory capital of Old Point or the Bank; and statements that include other projections, predictions, expectations, or beliefs about future events or results, or otherwise are not statements of historical fact.

These forward-looking statements are subject to significant risks and uncertainties due to factors that could have a material adverse effect on the operations and future prospects of Old Point including, but not limited to, changes in or the effects of: interest rates and yields, such as increases or volatility in short-term interest rates or yields on U.S. Treasury bonds and increase or volatility in U.S. Treasury bonds and increases or volatility in mortgage interest rates, and the impacts on macroeconomic conditions, customer and client behavior, Old Point's funding costs and Old Point's loan and securities portfolios; inflation and its impacts on economic growth and customer and client behavior; adverse developments in the financial services industry, such as the bank failures in 2023, responsive measures to mitigate and manage such developments, related supervisory and regulatory actions and costs, and related impacts on customer and client behavior; the sufficiency of liquidity and regulatory capital; general economic and business conditions in the United States generally and particularly in the Company's service area, including higher inflation, slowdowns in economic growth, unemployment levels, supply chain disruptions, and the impacts on customer and client behavior; conditions within the financial markets and in the banking industry, as well as the financial condition and capital adequacy of other participants in the banking industry, and the market reactions thereto; monetary and fiscal policies of the U.S. Government, including policies of the U.S. Department of the Treasury and the Federal Reserve, the effect of these policies on interest rates and business in our markets and any changes associated with the current administration; conditions in the banking industry and the financial condition and capital adequacy of other participants in the banking industry, and market, supervisory and regulatory reactions thereto; the quality or composition of the loan or securities portfolios and changes therein; effectiveness of expense control initiatives; an insufficient ACL or volatility in the ACL resulting from the CECL methodology, either alone or as may be affected by inflation, changing interest rates or other factors; the Company's liquidity and capital positions; the value of securities held in the Company's investment portfolios; deposit flows; the Company's technology, efficiency, and other strategic initiatives; the legislative/regulatory climate, regulatory initiatives with respect to financial institutions, products and services; the Consumer Financial Protection Bureau (the "CFPB") and the regulatory and enforcement activities of the CFPB; future levels of government defense spending, particularly in the Company's service areas; uncertainty over future federal spending or budget priorities, particularly in connection with the Department of Defense, on the Company's service areas; the impact of changes in the political landscape and related policy changes, including monetary, regulatory, and trade policies; the U.S. Government's guarantee of repayment of student or small business loans purchased by the Company; potential claims, damages and fines related to litigation or government actions; 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 NIM; the level of net charge-offs on loans; the performance of the Company's dealer/indirect lending program; the strength of the Company's counterparties; the Company's ability to compete in the market for financial services and increased competition from both banks and non-banks, including fintech companies; demand for financial services in Old Point's market area; 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 their service providers; reliance on third parties for key services; cyber threats, attacks, or events; the impact of changes in the political landscape and related policy changes, including monetary, regulatory, and trade policies; the potential adverse effects of unusual and infrequently occurring events, such as weather-related disasters, terrorist acts, financial crises, political crises, war, and other geopolitical conflicts, such as the war between Russia and Ukraine or in the Middle East, or public health events, and of governmental and societal responses thereto, on, among other things, the Company's operations, liquidity, and credit quality; the use of inaccurate assumptions in management's modeling systems; technological risks and developments; the commercial and residential real estate markets; the demand in the secondary residential mortgage loan markets; expansion of the Company's product offerings; effectiveness of expense control initiatives; changes in management; changes in accounting principles, standards, policies guidelines, and interpretations and elections made by the Company thereunder, and the related impact on the Company's financial statements; 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, 2023, which have been filed with the U.S. Securities and Exchange Commission ("SEC") and are available on the SEC's website at www.sec.gov. These risks and uncertainties should be considered in evaluating the forward-looking statements contained herein. Forward-looking statements are not statements of historical fact. Readers are cautioned not to place undue reliance on such statements, which speak only as of date they are made.

The Company does not intend or assume any obligation to update, revise or clarify any forward-looking statements that may be made from time to time or on behalf of the Company, whether as a result of new information, future events or otherwise, except as otherwise required by law. In addition, past results of operations are not necessarily indicative of future results.

Information about Old Point Financial Corporation
Old Point Financial Corporation (Nasdaq: OPOF) is the parent company of Old Point National Bank and Old Point Wealth Management, which serve the Hampton Roads and Richmond regions of Virginia. Old Point National Bank is a locally owned and managed community bank which offers a wide range of financial services from checking, insurance, and mortgage products to comprehensive commercial lending and banking products and services. Old Point Wealth Management is the largest wealth management services provider headquartered in Hampton Roads, Virginia, offering local asset management by experienced professionals. Additional information about the company is available at oldpoint.com.

For more information, contact Laura Wright, Vice President/Marketing Director, at lwright@oldpoint.com or (757) 728-1743.

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