Old Point Financial Corporation (OPOF) is a holding company that operates primarily through its two wholly-owned subsidiaries: The Old Point National Bank of Phoebus (the Bank) and Old Point Trust & Financial Services, N.A. (Wealth). The Company has a rich history spanning over a century, having been founded in 1922 as The Old Point National Bank of Phoebus. Over the years, Old Point has evolved into a diversified financial institution serving the Hampton Roads and Richmond regions of Virginia.
Business Overview and History
Old Point Financial Corporation traces its roots back to 1922, when it was founded as The Old Point National Bank of Phoebus. The Bank was established to serve the local community in the Hampton Roads region of Virginia, providing a range of banking services to individuals and businesses. Over the decades, the Company has grown both organically and through strategic acquisitions, expanding its footprint and service offerings.
In 1994, the Company established Old Point Trust & Financial Services, N.A. (Wealth) to provide a comprehensive suite of wealth management and trust services to its clients. This move diversified the Company’s revenue streams and allowed it to better serve the financial needs of its customer base.
The Company has demonstrated resilience throughout its history, successfully navigating various economic challenges. During the 2008 financial crisis, Old Point experienced increased levels of nonperforming assets but managed to maintain profitability due to its strong credit culture and risk management practices. This allowed the Company to emerge from the crisis in a position of strength.
In 2020, the COVID-19 pandemic presented new challenges for Old Point. The Company actively supported its customers and communities by participating in the Paycheck Protection Program and offering loan payment deferrals to those impacted by the pandemic. Despite these headwinds, Old Point remained profitable throughout 2020 and 2021, demonstrating its ability to adapt to challenging circumstances.
To further strengthen its capital position and support future growth, the Company completed a $30 million subordinated debt offering in 2022. This strategic move has enhanced Old Point’s financial flexibility and ability to pursue growth opportunities.
Today, Old Point Financial Corporation operates a network of 13 branch offices, primarily located in the Hampton Roads region, and offers a full range of banking, mortgage, and wealth management products and services. The Company’s banking segment provides traditional deposit and loan products, while the Wealth segment offers retirement planning, estate planning, financial planning, and investment management services.
Financial Ratios and Liquidity
Old Point Financial Corporation maintains a strong financial profile, as evidenced by its key financial ratios. As of the latest reporting period, the Company’s debt-to-equity ratio stood at 0.60, indicating a conservative capital structure. The Company’s current ratio, a measure of short-term liquidity, was 0.97, suggesting the ability to meet its short-term obligations.
The Company’s net interest margin (NIM), a critical metric for a bank’s profitability, was 3.54% for the nine months ended September 30, 2024, compared to 3.67% for the same period in the prior year. This slight decline can be attributed to the rising interest rate environment, which has put pressure on the Company’s funding costs.
Regarding asset quality, Old Point’s nonperforming assets to total assets ratio was 0.18% as of September 30, 2024, indicating a well-managed loan portfolio and strong credit underwriting practices. The Company’s allowance for credit losses to total loans ratio was 1.14%, reflecting its conservative approach to risk management.
As of September 30, 2024, Old Point reported a cash position of $176.85 million, providing ample liquidity to support its operations and growth initiatives. Additionally, the Company has a secured credit line with the Federal Home Loan Bank (FHLB) with remaining credit availability of $384.25 million, further enhancing its financial flexibility.
Quarterly Financial Performance
For the third quarter of 2024, Old Point Financial Corporation reported net income of $2.4 million, or $0.47 per diluted share, compared to $1.4 million, or $0.27 per diluted share, in the same period of the prior year. This improvement in profitability can be attributed to a 7.7% increase in net interest income, driven by higher average earning asset balances and yields.
The Company’s net interest margin for the third quarter of 2024 was 3.56%, a 23-basis point increase from the third quarter of 2023, reflecting the favorable impact of the rising interest rate environment on the Company’s asset yields.
Noninterest income for the third quarter of 2024 was $3.5 million, relatively flat compared to the same period in the prior year. The decrease in mortgage banking income was offset by increases in fiduciary and asset management fees.
Noninterest expense for the third quarter of 2024 decreased by 3.8% to $12.4 million, primarily due to lower salaries and employee benefits expense as a result of the Company’s cost-saving initiatives implemented in the first quarter of 2024.
For the nine months ended September 30, 2024, Old Point reported net income of $6.6 million, or $1.31 per diluted share, compared to $6.2 million, or $1.24 per diluted share, in the same period of the prior year. The 6.1% increase in net income was driven by the factors mentioned above.
Strategic Initiatives and Outlook
Old Point Financial Corporation is actively pursuing a strategic plan focused on enhancing profitability, improving operational efficiency, and expanding its customer base. The Company’s key initiatives include:
Mortgage Lending Transition: In January 2024, the Company announced a strategic alliance with Tidewater Home Funding, LLC, a local mortgage lender. This alliance allows Old Point to expand its mortgage product offerings while transitioning the processing of mortgage loans to Tidewater Home Funding.
Wealth Management Growth: The Company’s Wealth segment continues to be a focus for growth, as Old Point leverages its trusted brand and client relationships to expand its suite of wealth management and trust services.
Looking ahead, Old Point Financial Corporation remains cautiously optimistic about its future performance, acknowledging the potential challenges posed by the evolving economic and interest rate environment. The Company is committed to executing on its strategic initiatives, maintaining a strong balance sheet, and delivering value to its shareholders.
Financial Performance and Segment Analysis
Old Point Financial Corporation operates in three principal business segments: the Bank, Wealth, and the Parent. The Bank segment is the primary driver of OPOF’s earnings, generating the majority of the company’s revenue. This segment’s operations consist primarily of interest earned on loans and investment securities, as well as fees earned on deposit accounts, debit card interchange, and treasury and commercial services. The Bank serves individual and commercial customers, mostly in the Hampton Roads region of Virginia, offering a full range of deposit and loan products, including mortgage loan products through Old Point Mortgage. The Bank also offers insurance products through its partnership with Morgan Marrow Company.
The Wealth segment provides a full array of services for individuals and businesses, including retirement planning, estate planning, financial planning, estate and trust administration, retirement plan administration, tax services, and investment management services. This segment’s operating revenues consist principally of income from fiduciary and asset management fees.
The Parent segment represents the holding company, which conducts substantially all of its operations through the Bank and Wealth subsidiaries. The Parent’s revenues are mainly interest and dividends received from the Bank and Wealth segments.
For the fiscal year 2023, Old Point Financial Corporation reported total revenue of $61.85 million and net income of $7.73 million. The Company generated operating cash flow (OCF) of $11.00 million and free cash flow (FCF) of $9.94 million for the same period.
In the most recent quarter (Q3 2024), the Company saw significant year-over-year growth across key financial metrics. Revenue for the quarter reached $18.52 million, while net income increased to $2.38 million. Operating cash flow for Q3 2024 was $7.04 million, and free cash flow stood at $8.99 million. This growth was primarily driven by higher average earning asset balances at higher average yields, partially offset by higher average rates on interest-bearing liabilities.
Geographic Markets and Expansion
Old Point Financial Corporation primarily operates in the Hampton Roads region of Virginia. The Company’s strategic focus on this market has allowed it to build strong relationships with local customers and businesses, leveraging its deep understanding of the region’s economic dynamics and community needs.
Conclusion
Old Point Financial Corporation’s long history, diversified business model, and prudent risk management practices have positioned the Company as a reliable community bank in the Hampton Roads and Richmond regions of Virginia. The Company’s strong financial performance, particularly in the most recent quarter, demonstrates its ability to navigate the changing economic landscape and capitalize on growth opportunities.
While facing some near-term headwinds, the Company’s strategic focus on cost optimization, mortgage lending transition, and wealth management growth provides a solid foundation for long-term success. The Bank segment continues to be the primary driver of earnings, while the Wealth segment offers potential for further growth and diversification of revenue streams.
As Old Point navigates the evolving financial landscape, its strong liquidity position, conservative capital structure, and access to additional credit facilities provide financial flexibility to support future growth initiatives. The Company’s focus on maintaining strong asset quality, deploying capital in profitable growth initiatives, and managing its net interest margin and noninterest expenses has contributed to its solid financial performance.
Investors will be keen to monitor Old Point Financial Corporation’s ability to execute on its strategic initiatives, capitalize on emerging opportunities in its core markets, and deliver consistent value to shareholders in the coming years. The Company’s resilience and adaptability, as demonstrated throughout its long history, position it well to face future challenges and continue its trajectory of sustainable growth.
Disclaimer: This article is for informational purposes only. It does not constitute financial, legal, or other types of advice. While every effort has been made to ensure the accuracy of the information presented here, the author and the publisher do not make any guarantees about the completeness, reliability, and accuracy of this information.