Old Point (OPOF) Q2 EPS Falls 52%

Old Point Financial (OPOF -0.70%), a regional bank based in Virginia’s Hampton Roads area, released second quarter 2025 results on July 30, 2025. Headline net earnings per diluted share fell to $0.24 (GAAP), as merger-related expenses and higher costs weighed on Q2 2025 results. The company’s non-GAAP earnings per share was $0.43, compared to $0.50 for Q2 2024, a decrease of 14.0%. While net interest margin (FTE, non-GAAP) improved to 3.71%, asset and deposit declines and a rising efficiency ratio signaled mounting challenges in Q2 2025. With a pending merger on the horizon and pressure from both operating costs and the deposit base, this quarter provided a snapshot of a community bank actively navigating industry transition without offering forward financial guidance.

Business Overview and Strategic Focus

Old Point Financial is a community-focused banking and wealth management company with roots in one of Virginia’s most competitive deposit markets. Its core business is traditional banking -- accepting deposits, making loans, and offering financial services to households and businesses across Hampton Roads. Wealth management, through a dedicated subsidiary, is also a notable part of its business, reinforcing stability and diversification.

The company’s recent strategy centers on several priorities: maintaining a strong local presence, investing in digital tools for customers, and deepening regulatory compliance. Success depends on building relationships with small and mid-sized businesses, adapting to technology shifts, and efficiently managing the balance between lending, deposits, and capital. With competition increasing from both large banks and fintechs, customer service remains central to its approach.

Quarter in Review: Financial and Operational Highlights

The period was defined by steep drops in headline profitability, as total net income (GAAP) fell to $1.2 million. Merger-related expenses played a significant role, with nearly $1.0 million in costs tied to the pending combination with TowneBank. Non-GAAP earnings also declined, falling to $2.2 million due to higher costs and a decrease in core banking profitability. Net interest income (GAAP), a main revenue source from lending minus interest paid on deposits, barely grew -- up 0.5% year over year. Despite this, the net interest margin (FTE, non-GAAP) improved by eight basis points to 3.71%. While this margin expansion in net interest margin (NIM) to 3.70% is positive, it was not enough to offset shrinking assets and ongoing costs.

Balance sheet contraction was another key story, with total assets, loans, and deposits all declining between December 31, 2024 and June 30, 2025. Total assets fell $21 million from a year ago, ending the period at $1.4 billion. Net loans held for investment dropped $4.4 million between December 31, 2024 and June 30, 2025, as commercial real estate and construction lending declined. While consumer auto and multifamily loans grew moderately, these increases did not fully balance declines elsewhere. The bank’s deposit base shrank by $46.2 million, from $1.25 billion at December 31, 2024 to $1.21 billion at June 30, 2025, with notable declines in time deposits (down 21.3%) and noninterest-bearing accounts. Savings deposits provided a bright spot, growing 2.7% sequentially, but the overall deposit outflow highlights challenges in customer retention and market share.

Credit quality metrics remained a relative strength, with non-performing assets—loans or owned property that are not producing income—dropping to $3.3 million in Q2 2025, down from $4.1 million in Q1 2025. This brought the ratio of non-performing assets to total assets down to 0.24% in Q2 2025, after nearly reaching 0.29% in Q1 2025, although still higher than the prior year. The allowance for credit losses, a reserve fund to absorb future loan problems, was 1.19% of loans at Q2 2025. Management noted some growth in repossessed assets in Q2 2025, indicating increased collection activity, but overall reserves and asset quality remain adequate for the current environment.

Noninterest income, which includes fees and commissions outside of lending, decreased to $3.2 million (GAAP) in Q2 2025 compared to the prior year. This drop was partly due to the absence of a one-time gain from bond redemptions (specifically, a $656,000 gain on redemption and retirement of subordinated notes recognized in Q1 2025) that benefited the prior quarter. Wealth management fees, however, trended higher -- showing resilience in advisory and asset management services. Costs soared, with noninterest expense (GAAP) rising by $1.0 million year over year, as both payroll and merger-related items spiked in Q2 2025. The efficiency ratio (GAAP) surged to 86.62%, signaling elevated expense pressure in Q2 2025. Even with adjustments, the adjusted efficiency ratio (non-GAAP) stood at 92.5%, a marked rise from Q2 2024.

Management cited the ongoing merger process with TowneBank as a cause of some of these trends. According to the company, ““We began the second quarter announcing our agreement to merge with TowneBank and have spent considerable time working with the TowneBank team to prepare for our future partnership.” Merger expenses weighed heavily on results, and while regulatory approvals are still pending, the integration process is underway. No new banking products or major digital platform launches were highlighted in this quarter, although deposit mix management and loan repricings helped to sustain margins in the face of pressure on growth and client retention. No increases or trend changes were declared for the quarterly dividend, which remained at $0.14 per share in both Q2 2025 and the prior year. However, with net income lower, the payout ratio rose to 58.3% in Q2 2025.

Looking Ahead: Management Outlook and Key Watch Points

Management did not provide quantitative guidance for the second half of fiscal 2025. Company leadership’s commentary focused primarily on the anticipated merger, upcoming regulatory reviews, and the expected “enhanced value” resulting from the combination with TowneBank. As a result, investors did not receive clarity on expected future earnings, loan growth, or cost targets for the rest of the year.

For the quarters ahead, key watch points include progress on merger integration, any updates to deposit and lending trends, and continued cost control. Competitive pressure from larger banks and technology-driven challengers will remain a challenge to Old Point Financial’s current business model.

The quarterly dividend remained unchanged at $0.14 per share. No changes were announced to dividend policy or payout level for this quarter.

Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.