DEFM14A: Old Point Financial to Merge with TowneBank in Cash and Stock Deal

Sentiment:

Merger Announcement 27 May 2025 7:51 PM

📋All filings for Old Point Financial CORP

Old Point Financial Corporation and its subsidiary bank will merge into TowneBank, offering Old Point shareholders a choice of $41.00 cash or 1.14 shares of TowneBank common stock per share, subject to proration.

Summary

Old Point Financial Corporation (OPOF) and its wholly-owned subsidiary, The Old Point National Bank of Phoebus, will merge with and into TowneBank (TOWN).
Old Point shareholders will have the right to elect to receive either $41.00 per share in cash or 1.14 shares of TowneBank common stock for each Old Point share.
The merger consideration is subject to proration procedures, ensuring that the total number of Old Point shares receiving stock consideration will be no less than 50% and no more than 60% of outstanding shares.
Based on TowneBank's closing price of $33.81 on April 1, 2025, the implied value of the stock consideration was $38.54 per Old Point share.
Based on TowneBank's closing price of $33.93 on May 23, 2025, the implied value of the stock consideration was approximately $38.68 per Old Point share.
The Old Point merger is intended to qualify as a reorganization for U.S. federal income tax purposes, generally allowing U.S. holders receiving solely stock to not recognize gain or loss.
Former Old Point shareholders are expected to own approximately 3.7% of TowneBank common stock following the merger, assuming 50% of shares elect stock consideration.
Old Point will hold a special meeting of shareholders virtually on July 2, 2025, at 10:00 a.m. Eastern Time, to approve the merger agreement and a necessary articles amendment.
Approval of the merger agreement and articles amendment requires the affirmative vote of more than two-thirds of the outstanding Old Point common stock entitled to vote.
Old Point's board of directors unanimously recommends that shareholders vote FOR all proposals related to the merger.
A termination fee of $8.2 million is payable by Old Point to TowneBank under certain specified circumstances if the merger agreement is terminated.
Old Point directors and PL Capital Advisors, LLC, holding approximately 29.5% of Old Point's voting power as of May 5, 2025, have entered into support agreements to vote in favor of the merger.

Sentiment

Score: 7

Explanation: The document presents the merger as a strategically sound decision for Old Point, offering a premium valuation and future growth opportunities within a larger, more diversified entity. While it transparently outlines inherent risks and potential dilution to TowneBank's tangible book value, the overall tone is positive, emphasizing the strategic rationale, unanimous board approval, and benefits for Old Point shareholders, including a fixed cash option and tax-free stock consideration.

Positives

Old Point shareholders are offered a choice between cash and stock consideration, providing flexibility and immediate liquidity for those electing cash.
The stock consideration allows Old Point shareholders to participate in the future performance and potential synergies of the larger combined entity.
The merger is expected to accelerate Old Point's achievement of its financial performance goals for shareholders.
The combination of TowneBank's and Old Point's businesses is anticipated to result in a surviving corporation with diversified revenue sources, a well-balanced loan portfolio, and an attractive funding base.
The increased size, asset base, capital, market capitalization, and geographic footprint of the combined entity are expected to provide expanded opportunities for organic growth and future acquisitions, along with greater economies of scale.
The surviving corporation is projected to have a strong capital position post-merger.
The stock portion of the merger consideration is generally expected to be tax-free for U.S. federal income tax purposes for Old Point shareholders.
TowneBank common stock offers greater liquidity in the trading market compared to Old Point common stock.
TowneBank's recent history of successfully and efficiently acquiring financial institutions suggests a lower execution risk for the integration process.
The proposed merger consideration represents a significantly higher purchase price per share and aggregate value compared to Old Point's standalone prospects and initial proposals from other bidders.
The Old Point board of directors unanimously determined the merger to be advisable, fair, and in the best interests of Old Point and its shareholders.
Keefe, Bruyette & Woods, Inc. (KBW) provided an opinion that the merger consideration is fair, from a financial point of view, to the holders of Old Point common stock.
The merger is projected to be accretive to TowneBank's estimated 2026 and 2027 earnings per share.

Negatives

The implied value of the stock consideration will fluctuate with TowneBank's market price, introducing uncertainty for Old Point shareholders electing stock.
Old Point shareholders are not guaranteed to receive their elected form of merger consideration due to proration and allocation procedures.
Old Point shareholders will experience a reduced ownership and voting interest (approximately 3.7%) in the surviving corporation, leading to less influence over management and policies.
No current Old Point directors will join the TowneBank board of directors following the merger.
The integration of Old Point's business into TowneBank may be more difficult, costly, or time-consuming than anticipated, potentially hindering the realization of expected synergies and cost savings.
The integration process could lead to the loss of key personnel, disruption of ongoing businesses, or inconsistencies in operational standards and policies.
The merger process may divert Old Point management's attention and resources from its core business operations.
Old Point will be subject to business uncertainties and contractual restrictions, including limitations on certain acquisitions and actions, while the merger is pending.
The merger agreement contains provisions, such as non-solicitation clauses and a termination fee, that could discourage potential alternative acquirers who might offer a higher price.
If the merger is not completed, Old Point may be required to pay an $8.2 million termination fee to TowneBank.
Failure to complete the merger could result in negative reactions from financial markets, customers, and personnel, and may lead to litigation.
Old Point shareholders are not entitled to appraisal or dissenters rights under Virginia law in connection with this merger.
Certain Old Point directors and executive officers have interests in the merger that are different from, or in addition to, those of general shareholders, including new employment agreements, severance payments, accelerated vesting of equity awards, and advisory board positions.
Regulatory approvals may be delayed or impose materially burdensome conditions that could adversely affect the surviving corporation or reduce the anticipated benefits of the merger.
The merger is expected to be dilutive to TowneBank's estimated tangible book value per share at closing.
TowneBank's pro forma capital ratios (tangible common equity to tangible assets, Tier 1 Leverage Ratio, Common Equity Tier 1 Ratio, and Total Risk-based Capital Ratio) are expected to be lower after the merger.

Risks

The market price of TowneBank common stock may fluctuate, affecting the value of the stock consideration received by Old Point shareholders.
Old Point shareholders may receive a form of merger consideration different from what they elect due to proration procedures.
Old Point shareholders who submit stock certificates to make an election will not be able to sell those shares until the merger is completed, unless they revoke their election prior to the deadline.
Combining Old Point into TowneBank may be more difficult, costly, or time-consuming than expected, and the anticipated benefits of the merger may not be fully realized or may take longer to achieve.
The surviving corporation may be unable to successfully retain key personnel from TowneBank and/or Old Point after the merger, leading to operational disruptions or increased costs.
Regulatory approvals for the merger may not be received, may take longer than expected, or may impose conditions that are not presently anticipated or that could have a material adverse effect on the surviving corporation.
The merger process may distract Old Point management from its other responsibilities, potentially affecting business operations and earnings.
The merger agreement may be terminated, and the merger may not be completed, leading to adverse consequences for both companies, including potential market price declines and litigation.
Old Point may be required to pay a termination fee of $8.2 million to TowneBank if the merger agreement is terminated under certain circumstances.
Old Point will be subject to business uncertainties and contractual restrictions while the merger is pending, which may prevent it from pursuing attractive business opportunities.
Provisions in the merger agreement, including the non-solicitation clause and termination fee, could discourage potential third-party acquirers from pursuing alternative transactions with Old Point.
The support agreements from Old Point directors and PL Capital, representing approximately 29.5% of voting power, could further discourage third parties from pursuing alternative transactions.
The shares of TowneBank common stock received by Old Point shareholders will have different rights from Old Point common stock.
TowneBank and Old Point will incur significant transaction and integration costs, and there is no assurance that expected benefits will offset these costs.
Old Point shareholders will have a reduced ownership and voting interest in the surviving corporation after the merger.
Old Point shareholders will have no appraisal rights in the Old Point merger under Virginia law.
Certain Old Point directors and executive officers have interests in the merger that may differ from the interests of general shareholders.
General market and economic conditions, changes in interest rates, and competitive factors could affect the combined entity's performance.
Operational issues stemming from, and/or capital spending necessitated by, the potential need to adapt to industry changes in information technology systems.
Cybersecurity threats or attacks, whether directed at TowneBank or Old Point or at vendors or other third parties.

Future Outlook

The merger is expected to close in the second half of 2025, subject to shareholder and regulatory approvals. TowneBank anticipates the merger to be accretive to its estimated 2026 and 2027 EPS, despite an expected dilution to tangible book value per share at closing. The combined entity is poised for expanded opportunities in organic growth and future acquisitions due to its larger scale and capital base.

Management Comments

G. Robert Aston, Jr., Executive Chairman of TowneBank, and Robert F. Shuford, Jr., Chairman, President and Chief Executive Officer of Old Point Financial Corporation, expressed pleasure in enclosing the proxy statement/offering circular relating to the proposed acquisition.
Mr. Shuford, Jr. provided a detailed description of current conditions in the banking industry and challenges impacting community banks, including funding and credit trends and regulatory developments.
The Old Point board of directors believes the merger will accelerate the achievement of its financial performance goals for Old Point's shareholders.
Management believes the complementary nature of the cultures of the two companies should facilitate integration and implementation of the transaction, as well as continue to support the communities in which Old Point operates.
Management expects that the surviving corporation will have a strong capital position upon completion of the transaction.

Industry Context

The merger between Old Point Financial Corporation and TowneBank reflects a broader trend of consolidation within the banking industry, particularly among community banks. The document highlights increasing government regulation, rising technology and human capital expenses, and intense competition as significant challenges for smaller institutions like Old Point. By merging with a larger entity like TowneBank, Old Point aims to achieve greater economies of scale, enhance operational efficiencies, and expand its product and service offerings to customers. TowneBank's recent history of successful acquisitions in the Virginia market (Farmers Bankshares, Inc. in January 2023 and Village Bank and Trust Financial Corp. in April 2025) further underscores this regional consolidation trend, positioning the combined entity for stronger competitive standing and growth in the Hampton Roads and Central Virginia, as well as Northeastern and Central North Carolina markets.

Comparison to Industry Standards

KBW compared TowneBank's financial and market performance to 12 selected major exchange-traded banks headquartered in Alabama, Arkansas, Florida, Georgia, Kentucky, Louisiana, Mississippi, North Carolina, South Carolina, Tennessee, Virginia, or West Virginia with total assets between $10.0 billion and $30.0 billion (excluding Live Oak Bancshares, Inc.).
KBW compared Old Point's financial and market performance to 19 selected major exchange-traded banks headquartered in Georgia, Maryland, North Carolina, South Carolina, Tennessee, Virginia, Washington D.C., and West Virginia with total assets between $1.0 billion and $4.0 billion.
KBW reviewed 18 selected U.S. whole bank and thrift transactions announced since December 31, 2022, with announced deal values between $100 million and $300 million (excluding merger-of-equals transactions), to benchmark the proposed merger's implied transaction statistics.
The implied Price / Tangible Book Value of 180% for the TowneBank/Old Point merger exceeded the 75th percentile (163%) of the selected transactions, indicating a premium valuation.
The One-Day Market Premium of 32.0% for the TowneBank/Old Point merger was higher than the median (15.4%) and average (30.8%) of selected transactions, but below the 75th percentile (48.6%).
The implied transaction multiples for the Old Point merger (18.7x Old Point's estimated 2025 net income and 16.2x Old Point's estimated 2026 net income) were derived and compared to the selected transactions.

Management Changes

Role	Previous Person	New Person	Effective Date	Reason
Chairman of the TowneBank Peninsula Board of Directors	NA	Robert F. Shuford, Jr. (previously Old Point Chairman, President & CEO)	Upon consummation of the merger	New employment agreement in connection with the merger
Executive Vice President and Director of Commercial Banking – Peninsula/Williamsburg	NA	Donald S. Buckless (previously Old Point Chief Banking Officer & Senior Vice President)	Upon consummation of the merger	New employment agreement in connection with the merger
Chief Executive Officer and President, Trust	NA	A. Eric Kauders, Jr. (previously Old Point Secretary to the Board of Directors)	Upon consummation of the merger	New employment agreement in connection with the merger
Regional Advisory Board Members	NA	All members of Old Point's board of directors serving immediately prior to the effective time	Effective at the effective time of the merger	Invitation to serve on a TowneBank regional advisory board post-merger
Directors and Officers of Surviving Corporation	Old Point's directors and officers	TowneBank's directors and officers	Following the merger	TowneBank is the surviving entity

Corporate Governance

Change Type	Description	Effective Date	Impact Assessment
Articles of Incorporation Amendment	Old Point will amend its articles of incorporation to provide it with banking powers under Virginia law solely for the purpose of consummating the merger with TowneBank.	Immediately prior to the Effective Time of the merger	This is a necessary legal step to facilitate the merger. If the merger is not consummated, this amendment will not take effect.
Board Structure	TowneBank's articles of incorporation provide for a classified board of directors with staggered three-year terms, unlike Old Point's current structure.	Upon completion of the merger	This structure may make it more difficult for shareholders to replace a majority of directors and could serve as an anti-takeover measure.
Preferred Stock Authorization	TowneBank's articles authorize the issuance of preferred stock with terms set by the board without shareholder approval, which Old Point's articles do not currently authorize.	Upon completion of the merger	The ability to issue preferred stock could be used to discourage third-party attempts to gain control of TowneBank by creating a series of preferred stock with rights designed to impede such transactions.
Supermajority Voting Provisions	TowneBank's articles require a majority vote for certain significant corporate actions if approved by at least two-thirds of directors, otherwise an 80% affirmative vote. Old Point's articles require a 75% vote for business combinations not approved by 80% of its board, otherwise a two-thirds vote.	Upon completion of the merger	TowneBank's provisions may make certain corporate actions more difficult to pass without strong board support, potentially providing anti-takeover protection.
Director Removal	TowneBank's articles provide that directors may only be removed for cause by a majority vote of the electing voting group. Old Point's articles do not include such a provision, allowing removal with or without cause by a majority vote under Virginia law.	Upon completion of the merger	This provision makes it more difficult for shareholders to remove and replace TowneBank directors, potentially perpetuating the terms of incumbent directors.
Special Meetings of Shareholders	TowneBank's bylaws state that special meetings of shareholders may only be called by the chairman of the board, the chief executive officer, the president, or by a majority of the board of directors. Old Point's bylaws allow calling by the chairman, board, or holders of not less than 25% of common stock.	Upon completion of the merger	This limits the ability of a minority of shareholders to call special meetings to consider proposed mergers or other business combinations in TowneBank.
Shareholder Nominations and Proposals	TowneBank's bylaws require shareholders to provide written notice for director nominations or new business within a specific timeframe (60-90 days prior to the first anniversary of the preceding year's annual meeting, with adjustments for meeting date changes). Old Point has similar but slightly different requirements.	Upon completion of the merger	These provisions are standard for publicly traded companies and are designed to ensure orderly shareholder meetings, but Old Point shareholders will be subject to TowneBank's specific rules.
Anti-takeover Statutes	Both TowneBank and Old Point are subject to Virginia's Affiliated Transactions Statute and Control Share Acquisitions Statute, and neither has opted out.	Ongoing	These state statutes provide additional anti-takeover protection by regulating certain transactions with interested shareholders and the voting rights of control share acquisitions.
Indemnification and Liability Limitation	Both TowneBank's and Old Point's articles of incorporation provide for indemnification of directors and officers to the fullest extent permitted by the VSCA and eliminate personal liability for monetary damages for breach of fiduciary duties, with certain exceptions.	Ongoing	These provisions offer standard protection for directors and officers against certain liabilities arising from their service.

Legal Proceedings

Neither Old Point nor any of its subsidiaries is a party to any, and there are no outstanding or pending or, to the knowledge of Old Point, threatened, legal, administrative, arbitral or other proceedings, claims, actions or governmental or regulatory investigations of any nature against Old Point or any of its Subsidiaries or any of their current or former directors or executive officers or challenging the validity or propriety of the transactions contemplated by this Agreement that would reasonably be expected to have a Material Adverse Effect on Company.
There is no material injunction, order, judgment, decree, or regulatory restriction imposed upon Old Point, any of its Subsidiaries or the assets of Old Point or any of its Subsidiaries (or that, upon consummation of the Merger, would apply to the Surviving Corporation or any of its affiliates).
Shareholder litigation against Old Point or its directors/officers relating to the merger is possible, and Old Point will give TowneBank the opportunity to participate in the defense or settlement of any such litigation.

Related Party Transactions

There are no transactions, agreements, arrangements, or understandings, nor any currently proposed transactions, between Old Point or any of its Subsidiaries, on the one hand, and any current or former director or executive officer or 5% or more shareholder (or their immediate family members or affiliates) on the other hand, of the type required to be reported in any Company Report pursuant to Item 404 of Regulation S-K that have not been so reported.

Stakeholder Impact

Shareholders of Old Point will be directly impacted by the merger consideration, having the option to receive cash for immediate liquidity or stock to participate in the future performance of the combined entity. However, they will have a reduced ownership and voting interest in the larger TowneBank.
Employees of Old Point who become TowneBank employees will receive employee benefits substantially comparable to similarly situated TowneBank employees for one year post-merger, with certain executives receiving new employment agreements and accelerated equity vesting.
Customers of both Old Point and TowneBank may benefit from enhanced products and services due to the combined entity's larger scale and expanded geographic footprint.
Suppliers and creditors of Old Point will see their contractual relationships transition to the larger TowneBank, with TowneBank assuming Old Point's subordinated debt obligations.
The communities served by Old Point are expected to continue receiving similar levels of community involvement from the combined TowneBank.

Next Steps

Old Point shareholders must approve the merger agreement and the Old Point articles amendment at the special meeting on July 2, 2025.
TowneBank and Old Point must obtain necessary regulatory approvals from the FDIC, the Bureau of Financial Institutions (BFI) of the Virginia State Corporation Commission (VSCC), and potentially the Office of the Comptroller of the Currency (OCC) and other state authorities.
TowneBank will cause the shares of TowneBank common stock to be issued in the merger to be approved for listing on Nasdaq.
Old Point common stock will be delisted from Nasdaq and deregistered under the Securities Exchange Act of 1934 following the merger.
An exchange agent will send instructions to Old Point shareholders for exchanging their stock certificates for the merger consideration after the merger is completed.
TowneBank will assume Old Point's 3.50% Fixed-to-Floating Rate Subordinated Notes due July 15, 2031.
TowneBank will invite all members of Old Point's board of directors to join a TowneBank regional advisory board.
TowneBank will grant restricted stock unit awards to Donald S. Buckless and A. Eric Kauders, Jr. within sixty days following the merger closing.
Robert F. Shuford, Jr. and Donald S. Buckless will receive lump sum cash closing payments on or within forty-five days following the merger closing.

Key Dates

Date	Description
2023-01-01	Start date for review period for certain Company and Parent reports, regulatory actions, and compliance.
2023-01	TowneBank completed its acquisition of Farmers Bankshares, Inc.
2023-09	Old Point board discussed possible strategic transactions with KBW.
2023-12	Old Point board special meeting to discuss banking industry conditions and strategic alternatives with KBW.
2024-01-01	Start date for review period for certain Company and Parent reports, regulatory actions, and compliance.
2024-05-28	Old Point's 2024 annual meeting of shareholders.
2024-11	Old Point board discussed strategic goals and possible transactions with KBW, deciding to solicit interest from other financial institutions.
2024-12-31	Fiscal year end for Old Point and TowneBank's latest audited financial statements; basis for certain financial metrics.
2025-01	Old Point prepared confidential information memorandum and data room for potential partners.
2025-01-09	KBW began contacting financial institutions, including TowneBank, regarding potential strategic transactions with Old Point.
2025-01-10	Date of Confidentiality Agreement between Parent and Company.
2025-01-13	TowneBank entered into a confidentiality agreement with Old Point.
2025-01-late to 2025-02-early	Old Point management conducted in-person meetings with potential business combination partners, including TowneBank.
2025-02-12	Old Point common stock closing price was $25.28 per share.
2025-02-13	Special meeting of Old Point board to review non-binding letters of intent.
2025-02-17	TowneBank submitted a revised letter of intent with increased maximum stock portion.
2025-02-18	Old Point board held regularly scheduled meeting, discussed TowneBank's updated letter of intent, and accepted 45-day exclusivity period. Mr. Shuford executed TowneBank's letter of intent.
2025-02-18 to 2025-04-02	Period of mutual confirmatory due diligence and negotiation of definitive merger agreement.
2025-03-14	Wachtell, Lipton, Rosen & Katz delivered draft merger agreement and support agreement to Troutman Pepper.
2025-03-20	Mr. Shuford, Jr. met with senior executives of TowneBank to discuss combined management, organizational structures, and integration plans.
2025-03-26	Old Point board special meeting to discuss merger status; Piper Sandler communicated TowneBank's proposed exchange ratio of 1.14 shares.
2025-03-28	KBW communicated Old Point's acceptance of the 1.14 exchange ratio.
2025-03-31	Mr. Shuford had a telephone conversation with Rich Lashley of PL Capital, who expressed support for the merger.
2025-04-01	Last full trading day before public announcement of the merger. TowneBank common stock closing price: $33.81; Old Point common stock closing price: $29.95.
2025-04-02	Date of Agreement and Plan of Merger. Old Point and TowneBank boards approved the merger. KBW delivered fairness opinion to Old Point board. Old Point and TowneBank executed the merger agreement. Old Point directors and PL Capital executed support agreements.
2025-04-03	Public announcement of the transaction before stock markets opened.
2025-04	TowneBank completed its acquisition of Village Bank and Trust Financial Corp.
2025-05-05	Record date for the Old Point special meeting. Parties to support agreements held ~29.5% of voting power. Old Point directors and executive officers owned ~16.5% of outstanding shares.
2025-05-16	TowneBank filed required applications with the FDIC and BFI seeking approval of the merger.
2025-05-22	As of this date, 75,399,173 shares of TowneBank common stock were issued and outstanding.
2025-05-23	Last practicable date before the date of the proxy statement/offering circular. TowneBank common stock closing price: $33.93; Old Point common stock closing price: $39.01.
2025-05-27	Date of the accompanying proxy statement/offering circular.
2025-05-29	First mailing date of the proxy statement/offering circular to holders of Old Point common stock.
2025-06-25	Deadline for Old Point common stock holders to request documents for timely delivery before the special meeting (5 business days before July 2, 2025).
2025-06-26	Deadline for street name holders to register in advance to virtually attend the Old Point special meeting (5:00 p.m. ET).
2025-07-02	Old Point special meeting of shareholders to be held virtually at 10:00 a.m. Eastern Time. Deadline for internet, QR code scan, or telephone proxy submission.
2025-second half	Expected timing for the completion of the merger.
2026-04-02	Termination Date for the merger agreement if the merger has not been consummated by this date.
2027-12-31	Expiration date for Donald S. Buckless's new employment agreement with TowneBank, subject to automatic extension.
2028-12-31	Expiration date for Robert F. Shuford, Jr. and A. Eric Kauders, Jr.'s new employment agreements with TowneBank, subject to automatic extension.
2029-12-01	Maturity date of TowneBank's 6.0% Convertible Subordinated Capital Note.
2030-09-13	Date A. Eric Kauders, Jr. attains specified age and service for split dollar insurance agreement.
2031-07-15	Maturity date of Old Point's 3.50% Fixed-to-Floating Rate Subordinated Notes.

Recommendation

hold

Keywords

Bank Merger, Financial Services, Acquisition, TowneBank, Old Point Financial Corporation, OPOF, TOWN, SEC Filing, Proxy Statement, Merger Agreement, Shareholder Vote, Cash Consideration, Stock Consideration, Proration, Regulatory Approval, Risk Management, Corporate Governance, Financial Reporting, Banking Industry, Virginia, North Carolina

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