DEFA14A: Old Point Financial Corporation Reports First Quarter 2025 Results, Announces Merger Agreement with TowneBank

Old Point Financial Corporation announced its first quarter 2025 results, reporting a net income of $2.2 million and highlighting its merger agreement with TowneBank.

Summary

• Old Point Financial Corporation reported a net income of $2.2 million for the first quarter of 2025, with diluted earnings per common share of $0.42.
• This compares to a net income of $2.9 million with diluted earnings per common share of $0.57 for the fourth quarter of 2024, and $1.7 million with diluted earnings per common share of $0.34 for the first quarter of 2024.
• Adjusted operating earnings (non-GAAP) for Q1 2025 were $2.0 million, or $0.39 per diluted share, compared to $1.7 million, or $0.34 per share, for Q1 2024.
• On April 2, 2025, Old Point entered into a merger agreement with TowneBank, subject to shareholder and regulatory approvals.
• Total assets were $1.5 billion at March 31, 2025, a slight increase from December 31, 2024.
• Net loans held for investment were $1.0 billion at March 31, 2025, also showing a slight increase from the end of 2024.
• Total deposits increased to $1.3 billion as of March 31, 2025.
• The return on average equity (ROE) was 7.50%, and the return on average assets (ROA) was 0.61% for the first quarter of 2025.
• Net interest margin (NIM) was 3.63% for the first quarter of 2025.
• The company recognized a provision for credit losses of $717 thousand for the first quarter of 2025.
• Non-performing assets were $4.2 million as of March 31, 2025, an increase from previous periods.
• Liquidity as of March 31, 2025, totaled $456.5 million, representing 31.5% of total assets.

Sentiment

Score: 7

Explanation: The sentiment is moderately positive due to the solid Q1 results and the potential benefits of the merger with TowneBank, although there are some concerns about increased non-performing assets and decreased net income compared to the previous quarter.

Positives

• The company reported a net income of $2.2 million for the first quarter of 2025.
• Adjusted operating earnings increased compared to the first quarter of 2024.
• Total assets, net loans, and total deposits all showed increases from December 31, 2024.
• Net interest margin increased to 3.63% for the first quarter of 2025.
• Book value per share and tangible book value per share increased from both December 31, 2024 and March 31, 2024.
• The Bank remains well capitalized with a Tier 1 Capital ratio of 13.04% at March 31, 2025.
• The Banks leverage ratio was 10.45% at March 31, 2025.

Negatives

• Net income decreased by $722 thousand compared to the fourth quarter of 2024.
• Non-performing assets increased to $4.2 million as of March 31, 2025.
• The company recognized a provision for credit losses of $717 thousand for the first quarter of 2025, a significant increase from previous quarters.
• Average loans were $1.0 billion, a decrease of $5.1 million, or 0.5%, for the first quarter of 2025 compared to the fourth quarter of 2024, and a decrease of $64.0 million, or 5.9%, for the first quarter of 2025 compared to the same period of 2024.

Risks

• The merger with TowneBank may not close in a timely manner or at all due to regulatory, shareholder, or other approvals not being received or satisfied.
• Legal proceedings related to the merger could adversely affect the company.
• The announcement or pendency of the merger could negatively impact business relationships, results of operations, and employee retention.
• Changes in interest rates and yields could impact macroeconomic conditions, customer behavior, and the company's funding costs and loan/securities portfolios.
• Adverse developments in the financial services industry, such as bank failures, could have negative consequences.
• Economic and business conditions, including inflation and supply chain disruptions, could affect customer behavior.
• Cyber threats and security breaches pose a risk to the company's information systems.
• Geopolitical conflicts and public health events could adversely affect the company's operations, liquidity, and credit quality.

Future Outlook

The company is actively working with TowneBank to complete the merger, believing it will provide a stronger platform for growth and create enhanced value for shareholders, customers, and employees.

Management Comments

• Building off our record earnings in 2024, we had a strong first quarter from an operating perspective, with revenues, deposits, total assets, and net interest margin all increasing compared to the first quarter of 2024.
• We are excited about our future partnership and are actively working with the TowneBank team to efficiently complete the Merger.
• We believe this partnership will provide the combined company with a stronger platform for growth and create enhanced value for our shareholders, customers and employees.

Industry Context

The announcement of the merger with TowneBank reflects a trend of consolidation within the banking industry, as institutions seek to achieve greater scale and efficiency in a competitive environment. This move could be seen as a strategic effort to enhance market presence and expand service offerings.

Comparison to Industry Standards

• Comparing Old Point's ROA of 0.61% to the industry average for community banks, which often ranges between 0.8% and 1.2%, suggests that Old Point is performing slightly below average in terms of asset utilization.
• Similarly, an ROE of 7.50% is lower than the typical range of 8% to 12% seen in well-performing community banks.
• However, the merger with TowneBank could potentially improve these metrics through synergies and economies of scale.
• Comparing Old Point to comparible companies such as Southern National Corporation and Xenith Bankshares, Old Point is smaller in terms of assets but has a similar focus on community banking.
• The merger with TowneBank, which has a larger asset base, is likely to bring Old Point closer to the scale of regional players like Xenith Bankshares.

Stakeholder Impact

• Shareholders are expected to benefit from the merger through enhanced value and a stronger platform for growth.
• Customers may experience expanded services and a broader network as a result of the merger.
• Employees could see new opportunities within the combined company.
• The merger is expected to provide a stronger platform for growth and create enhanced value for stakeholders.

Next Steps

• Obtain shareholder approval for the merger with TowneBank.
• Secure regulatory approvals from the FDIC, Office of the Comptroller of the Currency, and Bureau of Financial Institutions of the Virginia State Corporation Commission.
• Work with the TowneBank team to efficiently complete the merger.

Key Dates

Keywords

merger, TowneBank, Old Point Financial Corporation, earnings, financial results, first quarter 2025, net income, assets, deposits, loans, NIM, ROE, ROA, non-performing assets