Old Point Announces Branch Optimization and Expense Reduction Initiatives

Rhea-AI Summary

Old Point Financial Corporation (OPOF) is optimizing its branch network by closing two locations, resulting in an 11% reduction in brick-and-mortar facilities. This move aims to enhance operating efficiencies in response to changing customer behaviors. The company plans to incur one-time pre-tax expenses of approximately $1.0 million in Q4 2020 related to the prepayment of $38.5 million in Federal Home Loan Bank advances and an Early Retirement Incentive Plan. The reduction in FHLB advances is expected to decrease future interest expenses by $560,000, while the ERIP is projected to save over $800,000 annually.

Positive

• 11% reduction in branch facilities enhances operational efficiency.
• One-time expenses from FHLB advances decrease future interest by $560,000.
• Early Retirement Incentive Plan expected to save over $800,000 annually.

Negative

• None.

HAMPTON, Va., Jan. 21, 2021 /PRNewswire/ -- Old Point Financial Corporation (the Company) plans to optimize its branch network as part of its ongoing efforts to accommodate changing customer behaviors and improve operating efficiencies.  The Company fully executed the previously disclosed planned closure of two branch locations as of year-end, 2020, effectively creating an 11% reduction in brick and mortar branch facilities. During 2021, the Company plans to continue to evaluate its branch network by utilizing retail branch performance and resource allocation analytics. 

The Company also announced that it will include one-time pre-tax expenses of approximately $1.0 million in its fourth quarter 2020 results.  These expenses are related to two strategic initiatives: prepayment of $38.5 million of Federal Home Loan Bank (FHLB) advances and a voluntary Early Retirement Incentive Plan (ERIP).  The prepayment of the FHLB advances will reduce future interest expense by approximately $560 thousand.  The ERIP, offered in the fourth quarter of 2020, is expected to result in annual salary cost saves in excess $800 thousand, of which a significant portion is projected to be redeployed in additional sales and relationship officers as well as technology enhancements designed to improve process efficiencies. The ERIP was planned in conjunction with branch optimization and as part of a manpower analysis initiative.

"The transition towards greater utilization of bank technologies has been underway for quite some time, but the COVID-19 pandemic has accelerated that shift throughout the banking industry for both consumer and commercial customers.  During 2020, we experienced significant increases in the use of digital and technological channels including online banking, mobile banking, remote deposit capture, and electronic bill pay.  As we look forward in 2021, we must continue to evaluate our delivery channels to shift focus and resources while still providing the community bank experience our customers expect," said Rob Shuford, Jr., Chairman, President and Chief Executive Officer.

ABOUT OLD POINT FINANCIAL CORPORATION
Old Point Financial Corporation (Nasdaq: OPOF) is the parent company of Old Point National Bank, a locally owned and managed community bank, and Old Point Trust & Financial Services, N.A., a wealth management services provider, serving the Hampton Roads, Virginia region. Additional information on the Company is available at www.OldPoint.com under "Investor Relations".

Contact: Laura Wright, VP/Marketing Director, 757.728.1743

 

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SOURCE Old Point Financial Corporation

FAQ

What actions is Old Point Financial Corporation (OPOF) taking to optimize its branch network?

Old Point Financial Corporation is closing two branch locations, which results in an 11% reduction in its brick-and-mortar facilities to enhance operating efficiencies.

What are the expected financial impacts of the strategic initiatives announced by OPOF?

The initiatives, including the prepayment of FHLB advances and the Early Retirement Incentive Plan, are expected to save approximately $1.36 million annually.

What is the amount of one-time pre-tax expenses Old Point is reporting in Q4 2020?

Old Point Financial Corporation plans to report approximately $1.0 million in one-time pre-tax expenses related to its optimization initiatives.

How will the Early Retirement Incentive Plan (ERIP) benefit Old Point Financial Corporation (OPOF)?

The ERIP is expected to result in salary cost savings exceeding $800,000 annually, allowing for reinvestment into sales, relationship officers, and technology improvements.

What future plans does OPOF have regarding its branch network?

The company will continue to evaluate its branch network throughout 2021 by analyzing retail branch performance and resource allocation.