SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[ X ] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For quarterly period Ended September 30, 1997
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from to
Commission File No. 0-12896 (1934 Act)
OLD POINT FINANCIAL CORPORATION
(Exact name of registrant as specified in its charter)
Virginia 54-1265373
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification No.)
1 West Mellen Street, Hampton, Va. 23663
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (757) 728-1200
Not Applicable
Former name, former address and former fiscal year, if changed
since last report.
Check whether the registrant (1) has filed all reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act during the preceding 12
months (or for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements for the
past 90 days. Yes X No
State the number of shares outstanding of each of the issuer's classes of
common stock as of October 31, 1997.
Class Outstanding at October 31, 1997
Common Stock, $5.00 par value 1,283,086 shares
<PAGE>
OLD POINT FINANCIAL CORPORATION
FORM 10-Q
INDEX
PART I - FINANCIAL INFORMATION Page
Item 1. Financial Statements . . . . . . . . . . . . . . . . . . . . . 1
Consolidated Balance Sheets
September 30, 1997 and December 31, 1996 . . . . . . . . . 1
Consolidated Statement of Earnings
Three months ended September 30, 1997 and 1996 . . . . . . 2
Nine months ended September 30, 1997 and 1996. . . . . . . 2
Consolidated Statement of Cash Flows
Nine months ended September 30, 1997 and 1996 . . . . . . 3
Consolidated Statements of Changes in Stockholders' Equity
Nine months ended September 30, 1997 and 1996 . . . . . . 4
Notes to Consolidated Financial Statements . . . . . . . . . . . . . 5
Parent Only Balance Sheets
September 30, 1997 and December 31, 1996. . . . . . . 6
Parent Only Statement of Earnings
Three months ended September 30, 1997 and 1996. . . . 6
Nine months ended September 30, 1996 and 1996 . . . . 6
Parent Only Statement of Cash Flows
Three months ended September 30, 1997 and 1996. . . . 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations. . . . . . . . . . . . 8
Analysis of Changes in Net Interest Income . . . . . . . . 9
Interest Sensitivity Analysis. . . . . . . . . . . . . . .12
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . .13
(i)
<PAGE>
<TABLE>
<CAPTION>
PART 1. - FINANCIAL INFORMATION
OLD POINT FINANCIAL CORPORATION
Consolidated Balance Sheets September 30 December 31,
(Unaudited) 1997 1996
Assets
<S> <C> <C>
Cash and due from banks........................ $ 8,854,736 $ 10,938,067
Interest bearing balances due from banks....... 75,435 50,428
Securities available for sale, at market....... 71,933,242 70,088,789
Securities to be held to maturity.............. 25,974,219 24,967,429
Trading account securities..................... -- --
Federal funds sold............................. 5,163,507 560,915
Loans, total (excluding unearned income)....... 219,320,557 198,584,252
Less reserve for loan losses............... 2,473,438 2,330,029
----------- -----------
Net loans.............................. 216,847,119 196,254,223
Bank premises and equipment.................... 9,397,974 9,402,579
Other real estate owned........................ 773,864 353,864
Other assets................................... 3,900,715 3,728,410
----------- -----------
Total assets.............................. $ 342,920,811 $ 316,344,704
=========== ===========
Liabilities
Noninterest-bearing deposits................... $ 52,735,189 $ 47,533,417
Savings deposits............................... 98,153,576 96,196,174
Time deposits.................................. 131,909,187 119,789,184
----------- -----------
Total deposits.............................. 282,797,952 263,518,775
Federal funds purchased and securities sold
under agreement to repurchase.................. 19,448,202 17,135,126
Interest-bearing demand notes issued to the
United States Treasury and other
liabilities for borrowed...................... 4,027,445 2,301,267
Other liabilities.............................. 1,418,699 989,636
----------- -----------
Total liabilities........................... 307,692,298 283,944,804
Stockholders' Equity
Common stock, $5.00 par value.................. 6,415,430 6,367,730
1997 1996
Shares authorized.....6,000,000 6,000,000
Shares outstanding....1,283,086 1,273,546
Surplus........................................ 9,693,301 9,345,091
Undivided profits.............................. 18,588,909 16,638,880
Unrealized gain/(loss) on securities .......... 530,873 48,199
----------- -----------
Total stockholders' equity................. 35,228,513 32,399,900
----------- -----------
Total liabilities and stockholders' equity. $ 342,920,811 $ 316,344,704
============ ===========
See accompanying notes
</TABLE>
1
<PAGE>
<TABLE>
<CAPTION>
OLD POINT FINANCIAL CORPORATION Three Months Ended Nine Months Ended
Consolidated Statements of Earnings September 30, September 30,
(Unaudited) 1997 1996 1997 1996
Interest Income
<S> <C> <C> <C> <C>
Interest and fees on loans..................... $ 4,813,519 $ 4,460,152 $ 13,863,861 $ 13,054,996
Interest on federal funds sold................. 86,515 28,963 189,410 151,757
Interest on securities:
Taxable..................................... 1,133,518 1,200,303 3,390,617 3,571,490
Exempt from federal income tax.............. 339,442 226,949 919,222 611,716
Interest on trading account securities......... 0 0 0 0
---------- --------- --------- ---------
Total interest on securities............. 1,472,960 1,427,252 4,309,839 4,183,206
---------- --------- --------- ---------
Total interest income...................... 6,372,994 5,916,367 18,363,110 17,389,959
Interest Expense
Interest on savings deposits................... 700,397 684,902 2,065,006 2,024,800
Interest on time deposits...................... 1,794,177 1,640,881 5,111,683 4,957,966
Interest on federal funds purchased and
securities sold under agreement to repurchase. 243,406 189,489 620,535 538,522
Interest on demand notes (note balances) issued
United States Treasury and on
other borrowed money........................ 22,030 21,386 73,727 60,871
---------- --------- --------- ---------
Total interest expense..................... 2,760,010 2,536,658 7,870,951 7,582,159
Net interest income............................ 3,612,984 3,379,709 10,492,159 9,807,800
Provision for loan losses...................... 100,000 150,000 300,000 450,000
---------- --------- --------- ---------
Net interest income after provision
for loan loss................................. 3,512,984 3,229,709 10,192,159 9,357,800
Other Income
Income from fiduciary activities............... 434,805 389,838 1,304,505 1,169,514
Service charges on deposit accounts............ 431,440 455,226 1,284,963 1,426,909
Other service charges, commissions and fees.... 153,252 85,942 424,365 258,891
Other operating income......................... 37,530 28,951 195,356 193,766
Income from trading account.................... 0 0 0 0
Security gains (losses)........................ 0 1,659 (4,068) 1,631
---------- --------- --------- ---------
Total other income......................... 1,057,027 961,616 3,205,121 3,050,711
Other Expenses
Salaries and employee benefits................. 1,941,618 1,849,979 5,757,690 5,537,206
Occupancy expense of Bank premises............. 207,132 193,075 624,658 562,456
Furniture and equipment expense................ 277,825 264,261 814,473 761,733
Other operating expenses....................... 761,831 734,914 2,346,816 2,011,738
---------- --------- --------- ---------
Total other expenses....................... 3,188,406 3,042,229 9,543,637 8,873,133
---------- --------- --------- ---------
Income before taxes............................ 1,381,605 1,149,096 3,853,643 3,535,378
Applicable income taxes ....................... 335,600 312,600 970,276 982,874
---------- --------- --------- ---------
Net income..................................... $ 1,046,005 $ 836,496 $ 2,883,367 $ 2,552,504
========== ========== ========== ==========
Per Share
Based on weighted average number of
common shares outstanding.................... 1,282,748 1,273,542 1,279,678 1,273,539
Net income..................................... $ 0.82 $ 0.66 $ 2.25 $ 2.00
See accompanying notes
2
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
OLD POINT FINANCIAL CORPORATION Nine Months Ended
Consolidated Statements of Cash Flows September 30,
(Unaudited) 1997 1996
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C>
Net income................................................ $ 2,883,367 $ 2,552,504
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization........................... 703,477 649,216
Provision for loan losses............................... 300,000 450,000
(Gains) loss on sale of investment securities, net...... 4,068 (1,631)
Net amortization & accretion of securities
available for sale..................................... 310,772 547,188
Net (increase) decrease in trading account.............. 0 0
(Increase) in other real estate owned................... (565,000) 0
(Increase) decrease in other assets
(net of tax effect of FASB 115 adjustment)............ (420,955) 226,562
Increase (decrease) in other liabilities................ 429,063 72,044
Net cash provided by operating activities............. 3,644,791 4,495,883
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of securities ................................ (18,401,556) (25,044,655)
Proceeds from maturities & calls of securities ......... 9,749,000 20,870,000
Proceeds from sales of available-for-sale securities.... 6,217,797 2,003,437
Proceeds from sales of held-to-maturity securities ..... 0 0
Loans made to customers................................. (93,637,350) (70,399,973)
Principal payments received on loans.................... 72,744,454 62,808,808
Proceeds from sales of other real estate owned.......... 145,000 529,783
Purchases of premises and equipment..................... (698,872) (1,865,991)
(Increase) decrease in federal funds sold............... (4,602,592) (748,602)
----------- ------------
Net cash provided by (used in) investing activities... (28,484,119) (11,847,193)
CASH FLOWS FROM FINANCING ACTIVITIES
Increase (decrease) in non-interest bearing deposits.... 5,201,772 5,695,042
Increase (decrease) in savings deposits................. 1,957,402 562,839
Proceeds from the sale of certificates of deposit....... 46,257,128 33,434,522
Payments for maturing certificates of deposit........... (34,137,125) (31,899,210)
Increase (decrease) in federal funds purchased &
repurchase agreements.................................. 2,313,076 (2,003,157)
Increase (decrease) in other borrowed money............. 1,726,178 3,479,342
Proceeds from issuance of common stock.................. 230,431 25
Dividends paid.......................................... (767,859) (636,769)
---------- ---------
Net cash provided by financing activities............. 22,781,003 8,632,634
Net increase (decrease) in cash and due from banks.... (2,058,324) 1,281,324
Cash and due from banks at beginning of period........ 10,988,495 10,931,545
---------- ----------
Cash and due from banks at end of period.............. $ 8,930,171 $ 12,212,869
========= ==========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash payments for:
Interest.............................................. $ 7,780,638 $ 7,652,673
Income taxes.......................................... 1,025,000 1,025,000
</TABLE>
See accompanying notes
- 3 -
<PAGE>
<TABLE>
<CAPTION>
OLD POINT FINANCIAL CORPORATION
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(Unaudited)
Unrealized
Common Stock Undivided Gain/(Loss)
Shares Amount Surplus Profits On Securities Total
FOR NINE MONTHS ENDED SEPTEMBER 30, 1997
<S> <C> <C> <C> <C> <C> <C>
Balance at beginning of period. 1,273,546 $ 6,367,730 $ 9,345,091 $ 16,638,880 $ 48,199 $ 32,399,900
Net income..................... -- -- -- 2,883,367 -- 2,883,367
Sale of common stock........... 9,540 47,700 348,210 (165,479) -- 230,431
Cash dividends................. -- -- -- (767,859) -- (767,859)
Increase in unrealized gain
on securities................. -- -- -- -- 482,674 482,674
--------- --------- --------- ---------- -------- ----------
Balance at end of period....... 1,283,086 $ 6,415,430 $ 9,693,301 $ 18,588,909 $ 530,873 $ 35,228,513
FOR NINE MONTHS ENDED SEPTEMBER 30, 1996
Balance at beginning of period. 1,273,537 $ 6,367,685 $ 9,344,798 $ 14,085,650 $ 529,784 $ 30,327,917
Net income..................... -- -- -- 2,552,504 -- 2,552,504
Sale of common stock........... 9 45 293 (313) -- 25
Cash dividends................. -- -- -- (636,770) -- (616,770)
Increase in unrealized loss
on securities................. -- -- -- -- (681,591) (681,591)
--------- --------- --------- ---------- -------- ----------
Balance at end of period....... 1,273,546 $ 6,367,730 $ 9,345,091 $ 16,001,071 ($151,807) $ 31,562,085
See accompanying notes
-4-
</TABLE>
<PAGE>
OLD POINT FINANCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. The accounting and reporting policies of the Registrant conform to
generally accepted accounting principles and to the general practices
within the banking industry. The interim financial statements have not
been audited; however, in the opinion of management, all adjustments
necessary for a fair presentation of the consolidated financial
statements have been included. These adjustments include estimated
provisions for bonus, profit sharing and pension plans that are settled
at year-end. These financial statements should be read in conjunction
with the financial statements included in the Registrant's 1996 Annual
Report to Shareholders and Form 10-K.
2. Earnings per common share outstanding are computed by dividing income
by the weighted average number of outstanding common shares for each
period presented.
5
<PAGE>
<TABLE>
<CAPTION>
OLD POINT FINANCIAL CORPORATION
Parent only Balance Sheets September 30, December 31,
(Unaudited) 1997 1996
Assets
<S> <C> <C>
Cash in bank................................ $ 301,820 $ 142,683
Investment Securities....................... 1,878,589 1,675,761
Total Loans................................. 0 49,884
Investment in Subsidiary.................... 33,046,926 30,456,307
Equipment................................... 0 14,411
Other assets................................ 7,278 60,854
--------- ---------
Total Assets................................ $ 35,234,613 $ 32,399,990
========== ==========
Liabilities and Stockholders' Equity
Total Liabilities........................... $ 6,100 $ 0
Stockholders' Equity........................ 35,228,513 32,399,900
---------- ----------
Total Liabilities & Stockholders' Equity.... $ 35,234,613 $ 32,399,900
</TABLE>
<TABLE>
<CAPTION>
OLD POINT FINANCIAL CORPORATION Three Months Ended: Nine Months Ended:
Parent only Income Statements September 30, September 30,
(Unaudited) 1997 1996 1997 1996
Income
<S> <C> <C> <C> <C>
Cash dividends from Subsidiary.............. $ 250,000 $ 250,000 $ 750,000 $ 750,000
Interest and fees on loans.................. 0 1,074 579 3,253
Interest income from investment securities.. 26,978 23,742 78,683 70,563
Gains (losses) from sale of
investment securities...................... 0 0 0 0
Other income................................ 0 0 0 0
------- ------- ------- -------
Total Income................................ 276,978 274,816 829,262 823,816
Expenses
Salaries and employee benefits.............. 0 48,514 0 148,062
Other expenses.............................. 10,192 11,650 42,706 48,934
------- ------- ------- -------
Total Expenses.............................. 10,192 60,164 42,706 196,996
------- ------- ------- -------
Income before taxes & undistributed
net income of subsidiary................ 266,786 214,652 786,556 626,820
Income tax.................................. 5,600 (12,400) 13,000 (42,200)
------- ------- ------- -------
Net income before undistributed
net income of subsidiary.................. 261,186 227,052 773,556 669,020
Undistributed net income of subisdiary...... 784,819 609,444 2,109,811 1,883,484
------- ------- ------- -------
Net Income.................................. $ 1,046,005 $ 836,496 $ 2,883,367 $ 2,552,504
========= ======= ========= =========
- 6 -
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
OLD POINT FINANCIAL CORPORATION Nine Months Ended:
Parent only Statements of Cash Flows September 30,
(Unaudited) 1997 1996
Cash Flows from Operating Activities:
<S> <C> <C>
Net Income.................................. $ 2,883,367 $ 2,552,504
Adjustments to reconcile net income to
net cash provided by operating activities:
Equity in undistributed income
of subsidiary........................... (2,109,811) (1,883,484)
Depreciation.............................. 0 2,664
Gains(losses) on sale of securities [net] 0 0
(Increase) Decrease in other assets...... 52,614 16,531
Increase (decrease in other liabilities) 6,100 0
---------- ----------
Net cash provided by operating activities... 832,270 688,215
Cash flows from investing activities:
(Increase)decrease in investment securities. (200,000) 0
Sale of equipment........................... 14,411 0
Purchase of equipment....................... 0 0
Repayment of loans by customers............. 49,884 1,153
---------- ----------
Net cash provided by investing activities... (135,705) 1,153
Cash flows from financing activities:
Proceeds from issuance of common stock...... 230,431 25
Dividends paid.............................. (767,859) (636,769)
---------- ----------
Net cash provided by financing activities... (537,428) (636,744)
Net increase (decrease) in cash &
due from banks............................. 159,137 52,624
Cash & due from banks at beginning of period 142,683 122,263
---------- ----------
Cash & due from banks at end of period...... $ 301,820 $ 174,887
========== ==========
- 7 -
</TABLE>
<PAGE>
Item 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Summary
Net income for the third quarter of 1997 increased 25% to $1,046,005
from $836,496 for the comparable period in 1996. Earnings per share were
$0.82 in the third quarter of 1997 compared with $0.66 in 1996.
For the nine months ended September 30, 1997 net income increased 13%
to $2,883,367 from $2,552,504 in 1996. Earnings per share were $2.25 for the
first nine months of 1997 compared with $2.00 in 1996.
Return on average assets was 1.24% for the third quarter of 1997 and
1.06% for the comparable period in 1996. Return on average equity was 11.96%
for the third quarter of 1997 and 10.66% for the third quarter of 1996.
For the nine months ended September 30, 1997 and 1996 return on average
assets was 1.17% and 1.09% respectively. Return on average equity was 11.35%
in 1997 and 10.99% in 1996.
Net Interest Income
Net interest income, on a fully tax equivalent basis, increased $286
thousand, or 8.1%, for the third quarter of 1997 over 1996. Average earning
assets increased 9.1% and the net interest yield, defined as the ratio of net
interest income on a fully tax equivalent basis to total earning assets,
decreased from 4.82% in 1996 to 4.78% in 1997.
For the nine months ended September 30, 1997 net interest income
increased $826 thousand, or 8.1%, over the comparable period in 1996.
Average earning assets increased 6.3% and the net interest yield increased
from 4.69% in 1996 to 4.77% in 1997. This increase in earning assets is
primarily due to loan growth. Based on a nine month average, Commercial
loans grew by 16.9%, Real Estate by 5.5% and Installment loans by 4.5% over
1996. During 1997 there has been a shift in investment securities from
taxable to tax exempt which have higher tax equivalent yields. Interest
rates on deposits decreased during 1997 over the comparable period in 1996
contributing to the increase in the net interest yield.
Page 9 shows an analysis of average earning assets, interest bearing
liabilities and rates and yields.
-8-
<PAGE>
<TABLE>
<CATION>
_________________________________________ ________________________________________________________________________________
OLD POINT FINANCIAL CORPORATION
NET INTEREST INCOME ANALYSIS For the quarter ended September 30,
(Fully taxable equivalent basis) * 1997 1996
_________________________________________ ____________________________________ ____________________________________
Dollars in thousands Average Average
Interest Rates Interest Rates
Average Income/ Earned/ Average Income/ Earned/
Balance Expense Paid Balance Expense Paid
_________________________________________ ____________________________________ ____________________________________
<S> <C> <C> <C> <C> <C> <C>
Loans (net of unearned income)**......... $214,992 4,835 9.00% $193,956 4,485 9.25%
Investment securities:***
Taxable................................ 72,088 1,131 6.28% 79,251 1,200 6.06%
Tax-exempt............................. 25,414 515 8.11% 16,413 344 8.38%
________ ________ ________ ________
Total investment securities.......... 97,502 1,646 6.75% 95,664 1,544 6.46%
Federal funds sold....................... 6,009 86 5.72% 2,308 29 5.03%
________ ________ ________ ________
Total earning assets................... $318,503 $6,567 8.25% $291,928 $6,058 8.30%
Time and savings deposits:
Interest-bearing transaction accounts.. $25,446 $140 2.20% $49,364 $300 2.43%
Money market deposit accounts.......... 48,550 381 3.14% 21,911 205 3.74%
Savings accounts....................... 25,954 179 2.76% 25,997 180 2.77%
Certificates of deposit, $100,000
or more............................... 20,655 307 5.95% 17,448 222 5.09%
Other certificates of deposit.......... 110,022 1,487 5.41% 103,119 1,419 5.50%
________ ________ ________ ________
Total time and savings deposits...... 230,627 2,494 4.33% 217,839 2,326 4.27%
Federal funds purchased and securities
sold under agreement to repurchase..... 20,301 244 4.81% 15,661 189 4.83%
Other short term borrowings.............. 1,560 22 5.64% 1,598 22 5.51%
________ ________ ________ ________
Total interest bearing liabilities..... $252,488 2,760 4.37% $235,098 2,537 4.32%
Net interest income/yield................ $3,807 4.78% $3,521 4.82%
===== ==== ===== =====
</TABLE>
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<TABLE>
<CAPTION>
________________________________________________________________________________
For the nine months ended September 30,
1997 1996
____________________________________ ____________________________________
Average Average
Interest Rates Interest Rates
Average Income/ Earned/ Average Income/ Earned/
Balance Expense Paid Balance Expense Paid
_________________________________________ ____________________________________ ____________________________________
<S> <C> <C> <C> <C> <C> <C>
Loans (net of unearned income)**......... $207,666 $13,928 8.94% $191,828 $13,132 9.13%
Investment securities:***
Taxable................................ 72,915 3,388 6.20% 79,496 3,571 5.99%
Tax-exempt............................. 22,876 1,393 8.12% 14,552 927 8.49%
________ ________ ________ ________
Total investment securities.......... 95,791 4,781 6.65% 94,048 4,498 6.38%
Federal funds sold....................... 4,554 189 5.53% 3,889 152 5.21%
________ ________ ________ ________
Total earning assets................... $308,011 $18,898 8.18% $289,765 $17,782 8.18%
Time and savings deposits:
Interest-bearing transaction accounts.. $25,891 $428 2.20% $49,870 $903 2.41%
Money market deposit accounts.......... 47,405 1,108 3.12% 20,774 578 3.71%
Savings accounts....................... 25,816 529 2.73% 26,544 544 2.73%
Certificates of deposit, $100,000
or more............................... 18,433 787 5.69% 16,991 680 5.34%
Other certificates of deposit.......... 107,561 4,325 5.36% 103,238 4,278 5.53%
________ ________ ________ ________
Total time and savings deposits...... 225,106 7,177 4.25% 217,417 6,983 4.28%
Federal funds purchased and securities
sold under agreement to repurchase..... 17,631 621 4.70% 15,160 538 4.73%
Other short term borrowings.............. 1,805 74 5.47% 1,531 61 5.31%
________ ________ ________ ________
Total interest bearing liabilities..... $244,542 7,872 4.29% $234,108 7,582 4.32%
Net interest income/yield................ $11,026 4.77% $10,200 4.69%
====== ==== ====== ====
</TABLE>
* Tax equivalent yields based on 34% tax rate.
** Nonaccrual loans are included in the average loan balances and income
on such loans is recognized on a cash basis.
*** All investment securities are reported at amortized
cost for this schedule.
- 9 -
<PAGE>
Provision/Allowance for Loan Losses
The provision for loan losses was $300,000 for the first nine months of
1997, down significantly over the comparable period in 1996. Loans charged
off (net of recoveries) were $156,591 in the first nine months of 1997,
compared with $421,285 for the same period in 1996. During 1994 and 1995
there was significant growth in the Installment loan portfolio especially in
indirect dealer loans. In the first nine months of 1996, $337,518 of these
dealer loans were charged off net of recoveries. Since the beginning of 1996
the underwriting standards for dealer loans has been raised thus reducing
the loans charged off. On an annualized basis net loan charge-offs were
0.10% of total loans for the first nine months of 1997 compared with .29% for
the same period in 1996.
On September 30, 1997 nonperforming assets totalled $1.84 million
compared with $2.02 million on September 30, 1996. The September 1997 total
consisted of $420 thousand in foreclosed real estate, $354 thousand in a
former branch site now listed for sale, and $1.063 million in nonaccrual
loans. The September 1996 total consisted of $70 thousand in foreclosed real
estate, $354 thousand in the former branch site, and $1.6 million in
nonaccrual loans. Loans still accruing interest but past due 90 days or more
increased to $769 thousand as of September 30, 1997 compared with $641
million on September 30, 1996.
The allowance for loan losses on September 30, 1997 was $2.47 million. It
represented a multiple of 1.34 times nonperforming assets and 2.32 times
nonperforming loans. The allowance for loan losses on September 30, 1997 was
1.13% of loans compared to 1.17% at September 30, 1996.
Other Income
Other income increased $95,411, or 10%, for the third quarter of 1997
over the same period in 1996. Income from fiduciary activities increased 12%
over the same period in 1996 due to higher trust assets under management.
For the nine months ended September 30, 1997 other income increased
$154,410 or 5% from 1996. The higher income in 1997 was primarily a result of
increases in trust department, merchant processing, debit card and ATM fee
income. The company began charging a $1.00 surcharge on non-customer ATM
transactions in 1997.
Other Expenses
Other expenses increased $146,177, or 5%, in the third quarter of 1997
over 1996. Salaries and employee benefits increased 5% due to normal
increases in pay and increased health and insurance costs. Occupancy
expenses were up 7% due to the opening of the new Kiln Creek Branch in August
1996. Furniture and equipment expenses increased 5% due to higher
depreciation on computer equipment. Other operating expenses were up 4%.
For the nine months ended September 30, 1997 other expenses increased
$670,504 or 8%, from 1996, primarily due to higher legal expenses associated
with the company's defense of a lawsuit. The company believes it will
ultimately prevail in this lawsuit.
10
<PAGE>
Financial Condition
At September 30, 1997 total assets were $342.9 million, up 8% from
$316.3 million at December 31, 1996. Total loans grew $20.7 million, or 10%
and investment securities and federal funds sold grew $7.4 million, or 8%, in
1997. Total deposits increased $19.3 million, or 7% in 1997 and demand note
balances to the U. S. Treasury increased $1.7 million to $4.0 from $2.3
million at year end 1996.
Capital Resources
The Company's capital position remains strong as evidenced by the
regulatory capital measurements. At September 30, 1997 the Tier I capital
ratio was 14.92%, the total capital ratio was 15.99% and the leverage ratio
was 10.23%. These ratios were all well above the regulatory minimum levels
of 4.00%, 8.00%, and 3.00%, respectively.
Liquidity and Interest Sensitivity
Liquidity is the ability of the Company to meet present and future
obligations to depositors and borrowers. As loan demand increases, liquidity
will be provided by liquidation of short term investment securities as well
as other means of financing such as purchase of federal funds and demand note
to the U.S. Treasury.
The Company was liability sensitive as of September 30, 1997. There
were $85.183 million more in liabilities than assets subject to repricing
within three months. Net interest income should improve if interest rates
fall since liabilities will reprice faster than assets. Conversely, if
interest rates rise, net interest income should decline. It should be noted,
however, that the savings deposits; which consist of interest checking, money
market, and savings accounts; are less interest sensitive than other market
driven deposits. In a rising rate environment these deposit rates have
historically lagged behind the changes in earning asset rates, thus
mitigating somewhat the impact from the liability sensitivity position. The
table on page 12 reflects the earlier of the maturity or repricing data for
various assets and liabilities as of September 30, 1997.
General
The Company has started construction of a 15,000 square-foot building
in Oyster Point of Newport News. This facility will house the Old Point
Commercial Lending Department as well as the Real Estate Lending Department.
The new building will also be home to the Trust and Financial Services
Department. The building will be ready for occupancy mid 1998.
Management has developed and initiated a Year 2000 project plan to
determine which of the Company's computer hardware and software is year 2000
compliant. The plan is a five phase project consisting of Awareness,
Assessment, Renovation, Validation and Implementation Phases. The Awareness
Phase is completed and the Assessment Phase is expected to be completed by
December 31, 1997. During the first six months of 1998 the Company expects
to have identified all hardware and software that is not Year 2000 compliant.
At this time management does not expect Year 2000 compliance to have an
adverse material impact on the Company.
11
<PAGE>
<TABLE>
<CAPTION>
INTEREST SENSITIVITY ANALYSIS
As of September 30, 1997 MATURITY
(in thousands) Within 4-12 1-5 Over 5
3 Months Months Years Years Total
Uses of funds
<S> <C> <C> <C> <C> <C>
Federal funds sold.............. 5,164 -- -- -- 5,164
Taxable investments............. 9,340 13,122 38,106 9,887 70,455
Tax-exempt investments.......... -- -- 826 26,626 27,452
------- ------- ------- ------- -------
Total investments............. 14,504 13,122 38,932 36,513 103,071
Loans:
Commercial.................... 32,420 10,534 24,489 2,462 69,905
Tax-exempt.................... 1,884 45 140 117 2,186
Installment................... 4,547 12,803 36,153 2,401 55,904
Real estate................... 20,546 21,021 36,537 12,542 90,646
Other......................... 286 -- 394 -- 680
------- ------- ------- ------- -------
Total loans..................... 59,683 44,403 97,713 17,522 219,321
------- ------- ------- ------- -------
Total earning assets............ 74,187 57,525 136,645 54,035 322,392
Sources of funds
Interest checking deposits...... 18,197 -- -- -- 18,197
Money market deposit accounts... 54,378 -- -- -- 54,378
Regular savings accounts........ 25,579 -- -- -- 25,579
Certificates of deposit.........
$100,000 or more.............. 6,423 9,865 5,864 -- 22,152
Other time deposits............. 31,345 38,205 40,207 -- 109,757
Federal funds purchased and
securities sold under
agreements to repurchase...... 19,448 -- -- -- 19,448
Other borrowed money............ 4,000 -- 27 -- 4,027
------- ------- ------- ------- -------
Total interest bearing liabilities 159,370 48,070 46,098 0 253,538
Rate sensitivity GAP............ (85,183) 9,455 90,547 54,035 68,854
Cumulative GAP.................. (85,183) (75,728) 14,819 68,854
</TABLE>
- 12 -
<PAGE>
PART II - OTHER INFORMATION
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) none
(b) No reports on Form 8-K were filed during
the third quarter of 1997
13
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
OLD POINT FINANCIAL CORPORATION
November 14, 1997
By: /s/Robert F. Shuford
President and Director
Principal Executive Officer
By: /s/Louis G. Morris
Senior Vice President and Treasurer
Principal Financial and Accounting Officer
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 8930
<INT-BEARING-DEPOSITS> 75
<FED-FUNDS-SOLD> 5164
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 71933
<INVESTMENTS-CARRYING> 25974
<INVESTMENTS-MARKET> 26055
<LOANS> 219321
<ALLOWANCE> 2474
<TOTAL-ASSETS> 342921
<DEPOSITS> 282798
<SHORT-TERM> 4000
<LIABILITIES-OTHER> 1419
<LONG-TERM> 27
0
0
<COMMON> 6415
<OTHER-SE> 28283
<TOTAL-LIABILITIES-AND-EQUITY> 342921
<INTEREST-LOAN> 13864
<INTEREST-INVEST> 4310
<INTEREST-OTHER> 189
<INTEREST-TOTAL> 18363
<INTEREST-DEPOSIT> 7177
<INTEREST-EXPENSE> 7871
<INTEREST-INCOME-NET> 10492
<LOAN-LOSSES> 300
<SECURITIES-GAINS> (4)
<EXPENSE-OTHER> 9544
<INCOME-PRETAX> 3853
<INCOME-PRE-EXTRAORDINARY> 3853
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2883
<EPS-PRIMARY> 2.25
<EPS-DILUTED> 2.25
<YIELD-ACTUAL> 4.77
<LOANS-NON> 1063
<LOANS-PAST> 755
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 3346
<ALLOWANCE-OPEN> 2330
<CHARGE-OFFS> 626
<RECOVERIES> 740
<ALLOWANCE-CLOSE> 2473
<ALLOWANCE-DOMESTIC> 2473
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 1058
</TABLE>
