Old Point Releases Third Quarter 2018 Results

Hampton, VA, October 24, 2018 (PRNewswire) Old Point Financial Corporation (the Company or Old Point) (NASDAQ "OPOF") reported net income of $1.6 million and earnings per share of $0.31 for the third quarter ended September 30, 2018. Net operating earnings (non-GAAP) for the third quarter of 2018, which excluded $48 thousand in after tax merger costs, were $1.6 million, or $0.32 per share.

Net income for the nine months ended September 30, 2018 was $3.5 million, or $0.69 per share. Excluding the effect of $732 thousand in after tax merger costs, net operating earnings (non-GAAP) for the nine months ended September 30, 2018 were $4.3 million, or $0.83 per share.

Robert Shuford, Jr., President and CEO of Old Point National Bank said, "Strong revenues and solid expense control contributed to continuing improvement in our core operating metrics this quarter. Our earnings of $1.6 million for the quarter reflects over 100% growth from the third quarter of last year and 12% growth over operating earnings in the second quarter of this year. Gross revenues were $13.2 million for the quarter, reflecting growth of 12.5% over the same quarter last year. We remain focused on building the franchise and improving our operational efficiency".

Highlights of the quarter are as follows:

·	Net interest income improved to $8.5 million, an increase of 1.1% over the previous quarter and 10.1% over the third quarter of 2017.

·	Return on average assets (ROA) was 0.62% compared to 0.39% in the prior quarter and 0.32% in the third quarter of 2017. Net operating ROA (non-GAAP) was 0.64% compared to 0.57% and 0.32% in the second quarter of 2018 and the third quarter of 2017, respectively.

·	The net interest margin (on a fully tax-equivalent basis) improved to 3.67% from 3.65% in the prior quarter and 3.64% in the third quarter of 2017.

·	Total assets as of September 30, 2018 were $1.0 billion, representing growth of $43.6 million, or 4.4%, from December 31, 2017 and $70.9 million, or 7.4%, from September 30, 2017.

Net interest income for the third quarter of 2018 was $8.5 million, an increase of $89 thousand, or 1.1%, from the prior quarter and an increase of $784 thousand, or 10.1%, from the third quarter of 2017. The quarter-over-quarter growth in net interest income was principally the result of higher yields on earnings assets which was partially offset by higher funding costs. The year-over-year growth was positively impacted by higher average earning asset balances as well as higher yields. The tax-equivalent net interest margin for the quarter was 3.67%, up from 3.65% in the prior quarter and 3.64% in the same period a year ago. The margin improvement was primarily due to increases in average loan yields which outweighed higher rates on interest-bearing deposits and borrowings.

Non-performing assets (NPAs) totaled $17.5 million as of September 30, 2018, up from $16.4 million at June 30, 2018 and $14.2 million at September 30, 2017. NPAs as a percentage of total assets were 1.70%, which compares to 1.59% at June 30, 2018 and 1.49% at September 30, 2017. Non-accrual loans decreased to $13.0 million from $13.9 million at June 30, 2018 but increased from $10.2 million at September 30, 2017. Loans past due 90 days or more and still accruing interest increased to $4.3 million from $2.3 million at June 30, 2018 and $4.0 million at September 30, 2017. Of the loans past due 90 days or more at September 30, 2018, approximately $2.4 million were government-guaranteed student and small business loans. Other real estate owned totaled $133 thousand at September 30, 2018 compared to $251 thousand at June 30, 2018.  The Company had no other real estate owned at September 30, 2017.

The allowance for loan and lease losses (ALLL) was $10.2 million at September 30, 2018 compared to $9.9 million at June 30, 2018 and $8.9 million at September 30, 2017. The ALLL as a percentage of loans held for investment was 1.31% at September 30, 2018 compared to 1.27% at June 30, 2018 and 1.28% at September 30, 2017. Annualized net charge offs as a percentage of average loans outstanding was 0.20% for the quarter ended September 30, 2018. This compares to 0.22% in the preceding quarter and 0.60% in the third quarter of 2017.

Total noninterest income for the quarter was $3.4 million which represents a decline of $51 thousand, or 1.5%, from the previous quarter and an increase of $219 thousand, or 6.9% from the third quarter of 2017. The decrease relative to the prior quarter was largely due to a $40 thousand net gain on securities sales in the second quarter; there were no security sales in the third quarter of 2018.  For both the nine months ended September 30, 2018 and 2017, total noninterest income was $10.0 million.

Noninterest expense totaled $9.4 million for the third quarter of 2018. This represents a decrease of $791 thousand, or 7.7%, from the second quarter of 2018 and an increase of $518 thousand, or 5.8%, from the third quarter of 2017. The linked quarter decline was mainly attributable to reduced salaries and employee benefits and merger related expenses, while the year ago quarter increase is mainly associated with increased staffing related to acquisition growth.

Total assets as of September 30, 2018 were $1.0 billion, an increase of $43.6 million, or 4.4%, from December 31, 2017. Net loans held for investment increased $40.1 million, or 5.5%, from December 31, 2017 to $769.2 million. The growth in net loans and total assets was largely the result of the Citizens National Bank (Citizens) acquisition, which was completed on April 1, 2018.

Total liabilities increased $40.4 million, or 4.6%, from December 31, 2017. Total deposits increased $57.7 million, or 7.4%, to $841.3 million from December 31, 2017. Noninterest-bearing deposits increased $14.8 million, or 6.6%, savings deposits increased $22.0 million, or 6.4%, and time deposits increased $20.9 million, or 9.8%. Overnight repurchase agreements declined $2.6 million, or 12.5%, and Federal Home Loan Bank advances decreased by $7.5 million, or 11.1%, from December 31, 2017.  Even though the Tier 1 leverage ratio was compressed a modest 14 basis points to 9.84% at September 30, 2018, total stockholders' equity increased 3.3% from December 31, 2017 to $99.6 million.

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, 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; future impacts of the Tax Cut and Jobs Act on the Company's operations; 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 increases 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, the possibility that any of the anticipated benefits of the acquisition of Citizens will not be realized or will not be realized within the expected time period. Other 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, 2017. 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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