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 June 30, 1998
[ ] 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) 722-7451
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 July 31, 1998.
Class Outstanding at July 31,1998
Common Stock, $5.00 par value 2,572,925 shares
<PAGE>
OLD POINT FINANCIAL CORPORATION
FORM 10-Q
INDEX
PART I - FINANCIAL INFORMATION
Page
Item 1. Financial Statements 1
Consolidated Balance Sheets
June 30, 1998 and December 31, 1997 1
Consolidated Statement of Earnings
Three months ended June 30, 1998 and 1997 2
Six months ended June 30, 1998 and 1997 2
Consolidated Statement of Cash Flows
Six months ended June 30, 1998 and 1997 3
Consolidated Statements of Changes in Stockholders' Equity
Six months ended June 30, 1998 and 1997 4
Notes to Consolidated Financial Statements 5
Parent Only Balance Sheets
June 30, 1998 and December 31, 1997 6
Parent Only Statement of Earnings
Three months ended June 30, 1998 and 1997 6
Six months ended June 30, 1998 and 1997 6
Parent Only Statement of Cash Flows
Six months ended June 30, 1998 and 1997 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 13
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 14
(i)
<PAGE>
<TABLE>
<CAPTION>
PART 1. - FINANCIAL INFORMATION
- ------------------------------------------------
OLD POINT FINANCIAL CORPORATION
Consolidated Balance Sheets June 30, December 31,
(Unaudited) 1998 1997
Assets
- ------------------------------------------------
<S> <C> <C>
Cash and due from banks.......................... $ 10,966,132 $ 12,114,450
Interest bearing balances due from banks......... 46,57 93,958
Securities available for sale, at market......... 67,838,012 67,546,008
Securities to be held to maturity................ 58,916,338 28,979,825
Trading account securities.......................
Federal funds sold............................... 9,427,617 6,977,386
Loans, total (excluding unearned income)......... 227,410,315 221,743,937
Less reserve for loan losses................. 2,648,106 2,671,174
----------- -----------
Net loans................................ 224,762,209 219,072,763
Bank premises and equipment...................... 11,454,198 9,742,209
Other real estate owned.......................... 604,864 773,864
Other assets..................................... 4,237,142 3,370,689
----------- -----------
Total assets................................ $ 388,253,091 $ 348,671,152
============= ==============
Liabilities
Noninterest-bearing deposits..................... $ 60,408,650 $ 52,359,579
Savings deposits................................. 111,922,959 99,991,102
Time deposits.................................... 149,042,687 134,749,126
----------- -----------
Total deposits................................ 321,374,296 287,099,807
Federal funds purchased and securities sold under
agreement to repurchase...................... 23,367,527 20,164,902
Interest-bearing demand notes issued to the
Unoted States Treasury and other liabilities
for borrowed money............................ 4,020,238 4,025,090
Other liabilities................................ 1,444,825 1,048,885
----------- -----------
Total liabilities............................. 350,206,886 312,338,684
Stockholders' Equity
Common stock, $5.00 par value.................... 12,838,860 12,830,860
1998 1997
Shares authorized......6,000,000 6,000,000
Shares outstanding.. ..2,567,772 2,566,172
Surplus.......................................... 9,746,301 9,693,301
Undivided profits................................ 14,842,923 13,097,716
Unrealized gain/(loss) on securities ............ 618,121 710,591
----------- -----------
Total stockholders' equity................... 38,046,205 36,332,468
----------- -----------
Total liabilities and stockholders' equity... $ 388,253,091 $ 348,671,152
============== ===============
</TABLE>
See accompanying notes
1
<PAGE>
<TABLE>
<CAPTION>
OLD POINT FINANCIAL CORPORATION Three Months Ended Six Months Ended
Consolidated Statements of Earnings June 30, June 30,
(Unaudited) 1998 1997 1998 1997
Interest Income
<S> <C> <C> <C> <C>
Interest and fees on loans..................... $ 5,123,567 $ 4,644,469 $ 10,046,890 $ 9,050,342
Interest on federal funds sold................. 141,119 62,469 323,275 102,895
Interest on securities:
Taxable..................................... 1,364,267 1,146,187 2,489,948 2,257,099
Exempt from federal income tax.............. 396,024 306,180 768,673 579,780
Interest on trading account securities......... 0 0 0 0
Total interest on securities............. 1,760,291 1,452,367 3,258,621 2,836,879
--------- --------- ---------- ----------
Total interest income...................... 7,024,977 6,159,305 13,328,786 11,990,116
Interest Expense
Interest on savings deposits................... 856,052 691,562 1,608,267 1,364,609
Interest on time deposits...................... 2,028,975 1,705,902 3,944,326 3,317,506
Interest on federal funds purchased and securit
sold under agreement to repurchase........... 222,751 191,778 456,452 377,129
Interest on demand notes (note balances) issued
United States Treasury and on other borrowed 25,036 29,530 52,846 51,697
--------- --------- ---------- ----------
Total interest expense..................... 3,132,814 2,618,790 6,061,891 5,110,941
Net interest income............................ 3,892,163 3,540,515 7,566,895 6,879,175
Provision for loan losses...................... 200,000 100,000 350,000 200,000
--------- --------- ---------- -----------
Net interest income after provision
for loan loss................................. 3,692,163 3,440,515 7,216,895 6,679,175
Other Income
Income from fiduciary activities............... 449,850 434,850 899,700 869,700
Service charges on deposit accounts............ 474,047 430,532 906,773 853,523
Other service charges, commissions and fees.... 143,865 149,183 344,054 271,113
Other operating income......................... 112,221 42,146 201,004 157,826
Income from trading account.................... 0 0 0 0
Security gains (losses)........................ 9 (3,361) 9 (4,068)
------- -------- -------- ---------
Total other income......................... 1,179,992 1,053,350 2,351,540 2,148,094
Other Expenses
Salaries and employee benefits................. 1,915,250 1,941,227 3,758,777 3,816.072
Occupancy expense of Bank premises............. 224,596 205,345 443,363 417,526
Furniture and equipment expense................ 295,694 263,044 586,672 536,648
Other operating expenses....................... 843,313 870,945 1,586,875 1,584,985
--------- --------- --------- ---------
Total other expenses....................... 3,278,853 3,280,561 6,375,687 6,355,231
--------- --------- --------- ---------
Income before taxes............................ 1,593,302 1,213,304 3,192,748 2,472,038
Applicable income taxes ....................... 424,600 310,500 851,100 634,676
--------- --------- ---------
Net income..................................... $ 1,168,702 $ 902,804 $ 2,341,648 $ 1,837,362
========= ======= ========= =========
Per Share
Based on weighted average number of
common shares outstanding.................... 2,567,394 2,561,892 2,566,793 2,556,234
Net income..................................... $ 0.46 $ 0.35 $ 0.91 $ 0.72
0.46 0.35 0.90 0.72
</TABLE>
See accompanying notes
-2-
<PAGE>
<TABLE>
<CAPTION>
______________________________________________________________________________________________
OLD POINT FINANCIAL CORPORATION Six Months Ended
Consolidated Statements of Cash Flows June 30,
(Unaudited) 1998 1997
_______________________________________________________________________________________________
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C>
Net income.................................................... $ 2,341,648 $ 1,837,362
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization............................... 482,632 468,476
Provision for loan losses................................... 350,000 200,000
(Gains) loss on sale of investment securities, net.......... (9) 4,068
Net amortization & accretion of securities available for sale 77,038 236,188
Net (increase) decrease in trading account.................. 0 0
(Increase) in other real estate owned....................... (296,909) (265,000)
(Increase) decrease in other assets
(net of tax effect of FASB 115 adjustment)................ (818,817) (266,052)
Increase (decrease) in other liabilities.................... 395,940 255,625
---------- ---------
Net cash provided by operating activities................. 2,531,523 2,470,667
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of securities .................................... (53,989,103) (13,064,823)
Proceeds from maturities & calls of securities ............. 23,543,441 3,594,000
Proceeds from sales of available - for - sale securities.... 9 6,017,813
Proceeds from sales of held - to - maturity securities...... 0 0
Loans made to customers..................................... (70,763,610) (56,384,292)
Principal payments received on loans........................ 64,724,164 42,722,655
Proceeds from sales of other real estate owned.............. 465,910 145,000
Purchases of premises and equipment......................... (2,194,621) (435,888)
(Increase) decrease in federal funds sold................... (2,450,231) (3,349,811)
------------ ------------
Net cash provided by (used in) investing activities....... (40,664,041) (20,755,346)
CASH FLOWS FROM FINANCING ACTIVITIES
Increase (decrease) in non-interest bearing deposits........ 8,049,071 4,768,644
Increase (decrease) in savings deposits..................... 11,931,857 1,924,076
Proceeds from the sale of certificates of deposit........... 29,992,267 25,959,615
Payments for maturing certificates of deposit............... (15,698,706) (17,607,033)
Increase (decrease) in federal funds purchased &
repurchase agreements...................................... 3,202,625 1,612,918
Increase (decrease) in other borrowed money................. (4,852) 1,728,486
Proceeds from issuance of common stock...................... 29,250 142,100
Dividends paid.............................................. (564,691) (511,241)
----------- -----------
Net cash provided by financing activities................. 36,936,821 18,017,565
Net increase (decrease) in cash and due from banks........ (1,195,697) (267,114)
Cash and due from banks at beginning of period............ 12,208,408 10,988,495
----------- ----------
Cash and due from banks at end of period.................. $ 11,012,711 $ 10,721,381
========== ==========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash payments for:
Interest.................................................. $5,931,609 $5,084,286
Income taxes.............................................. 900,000 700,000
</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 SIX MONTHS ENDED JUNE 30, 1998
<S> <C> <C> <C> <C> <C> <C>
Balance at beginning of period...... 2,566,172 $12,830,860 $9,693,301 $13,097,716 $710,591 $36,332,468
Net income.......................... -- -- -- 2,341,648 -- 2,341,648
Sale of common stock................ 1,600 8,000 53,000 (31,750) -- 29,250
Cash dividends............... ...... -- -- -- (564,691) -- (564,691)
Increase in unrealized gain
on securities...................... -- -- -- -- (92,470) (92,470)
------------- ------------ ------------ ------------ ------------ ------------
Balance at end of period............ 2,567,772 $12,838,860 $9,746,301 $14,842,923 $618,121 $38,046,205
</TABLE>
<TABLE>
<CAPTION>
FOR SIX MONTHS ENDED JUNE 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.......................... -- -- -- 1,837,362 -- 1,837,362
Sale of common stock................ 7,400 37,000 270,100 (165,000) -- 142,100
Cash dividends............... ...... -- -- -- (511,242) -- (511,242)
Increase in unrealized gain
on securities...................... -- -- -- -- 138,057 138,057
------------- ------------ ------------ ------------ ------------ ------------
Balance at end of period............ 1,280,946 $6,404,730 $9,615,191 $17,800,000 $186,256 $34,006,177
See accompany notes -4-
<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 1997
Annual Report to Shareholders and Form 10-K.
Basic earnings per common share outstanding are computed by
dividing income by the weighted average number of
outstanding common shares for each period presented.
Diluted earnings per share are computed using the treasury
stock method.
-5-
<PAGE>
</TABLE>
<TABLE>
<CAPTION>
OLD POINT FINANCIAL CORPORATION
Parent only Balance Sheets June 30, December 31,
(Unaudited) 1998 1997
____________________________________________________________________________
<S> <C> <C>
Assets
Cash in bank................................ $ 122,663 $ 289,230
Investment Securities....................... 2,118,691 1,877,175
Total Loans................................. 0 0
Investment in Subsidiary.................... 35,812,607 34,170,604
Equipment................................... 0 0
Other assets................................ 10,644 7,759
---------- ----------
Total Assets................................ $ 38,064,605 $ 36,344,768
========== ==========
Liabilities and Stockholders' Equity
Total Liabilities........................... $ 18,400 $ 12,300
Stockholders' Equity........................ 38,046,205 36,332,468
---------- ----------
Total Liabilities & Stockholders' Equity.... $ 38,064,605 $ 36,344,768
========== ==========
</TABLE>
<TABLE>
<CAPTION>
_________________________________________________________________________________________________________
OLD POINT FINANCIAL CORPORATION Three Months Ended: Six Months Ended:
Parent only Income Statements June 30, June 30,
(Unaudited) 1998 1997 1998 1997
_________________________________________________________________________________________________________
<S> <C> <C> <C> <C>
Income
Cash dividends from Subsidiary.............. $ 300,000 $ 250,000 $ 600,000 $ 500,000
Interest and fees on loans.................. 0 0 0 579
Interest income from investment securities.. 25,400 27,234 51,880 51,705
Gains (losses) from sale of investment
securities.................................. 0 0 0 0
Other income................................ 0 0 0 0
---------- ---------- ---------- ----------
Total Income................................ 325,400 277,234 651,880 552,284
Expenses
Salaries and employee benefits.............. 0 0 0 0
Other expenses.............................. 11,219 27,940 33,007 32,514
---------- ---------- ---------- ----------
Total Expenses.............................. 11,219 27,940 33,007 32,514
---------- ---------- ---------- ----------
Income before taxes & undistributed
net income of subsidiary................ 314,181 249,294 618,873 519,770
Income tax.................................. 4,600 500 6,100 7,400
---------- ---------- ---------- ----------
Net income before undistributed
net income of subsidiary.................. 309,581 248,794 612,773 512,370
Undistributed net income of subisdiary...... 859,121 654,010 1,728,875 1,324,992
---------- ---------- ---------- ----------
Net Income.................................. $ 1,168,702 $ 902,804 $ 2,341,648 $ 1,837,362
========== ========== ========== ==========
</TABLE>
- 6 -
<PAGE>
<TABLE>
<CAPTION>
OLD POINT FINANCIAL CORPORATION Six Months Ended:
Parent only Statements of Cash Flows June 30,
(Unaudited) 1998 1997
<S> <C> <C>
Cash Flows from Operating Activities:
Net Income.................................. $ 2,341,648 $ 1,837,362
Adjustments to reconcile net income to
net cash provided by operating activities:
Equity in undistributed income
of subsidiary.......................... (1,728,875) (1,324,992)
Depreciation.............................. 0 0
Gains(losses) on sale of securities [net 0 0
(Increase) Decrease in other assets..... 0 52,614
Increase (decrease in other liabilities) 6,100 500
---------- ----------
Net cash provided by operating activities... 618,873 565,484
Cash flows from investing activities:
(Increase)decrease in investment securities. (250,000) (200,000)
Sale of equipment........................... 0 14,411
Repayment of loans by customers............. 0 49,884
---------- ----------
Net cash provided by investing activities... (250,000) (135,705)
Cash flows from financing activities:
Proceeds from issuance of common stock...... 29,250 142,100
Dividends paid.............................. (564,690) (511,242)
---------- ----------
Net cash provided by financing activities... (535,440) (369,142)
Net increase(decrease)in cash
& due from banks........................... (166,567) 60,637
Cash & due from banks at beginning of period 289,230 142,683
---------- ----------
Cash & due from banks at end of period...... $ 122,663 $ 203,320
========== ==========
</TABLE>
-7-
<PAGE>
Item 2.
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Earnings Summary
Net income for the second quarter of 1998 increased 29.5% to
$1,168,702 from $902,804 for the comparable period in 1997.
Basic earnings per share were $0.46 in the second quarter of 1998
compared with $0.35 in 1997.
For the six months ended June 30, 1998 net income increased
27.4% to $2,341,648 from $1,837,362 in 1997. Basic earnings per
share were $.91 for the first six months of 1998 compared with
$.72 in 1997.
Return on average assets was 1.24% for the second quarter of
1998 and 1.10% for the comparable period in 1997. Return on
average equity was 12.36% for the second quarter of 1998 and
10.72% for the second quarter of 1997.
For the six months ended June 30, 1998 and 1997 return on
average assets was 1.28% and 1.14% respectively. Return on
average equity was 12.50% in 1998 and 11.02% in 1997.
Net Interest Income
Net interest income, on a fully tax equivalent basis,
increased $436 thousand, or 11.9%, for the second quarter of 1998
over 1997. Average earning assets increased 15.6% 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 4.78% in 1997 to 4.62% in 1998.
For the six months ended June 30, 1998 net interest income
increased $778 thousand, or 10.8%, over the comparable period in
1997. Comparing the first six months of 1998 to 1997 average
loans increased $19.6 million or 9.5% while investment securities
increased $15.6 million or 16.4%. Average earning assets
increased 14.1% and the net interest yield decreased from 4.77%
in 1997 to 4.63% in 1998.
Interest expense increased $513 thousand or 19.6% in the
second quarter of 1998 from the second quarter of 1997, interest
bearing liabilities increased $37.9 million or 15.6 % in the
second quarter of 1998 over the same period in 1997. The cost of
funding those liabilities increased 15 basis points due to the
higher cost of interest bearing deposits.
For the six months ended June 30, 1998 interest expense increased
$950 thousand, or 18.6% over the same period in 1997. The cost
of funding those liabilities increased 17 basis points over 1997.
The Bank introduced a premium rate money market account in 1998
which has generated deposits totalling $13 million.
Page 9 shows an analysis of average earning assets, interest
bearing liabilities and rates and yields.
-8-
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------
OLD POINT FINANCIAL CORPORATION
NET INTEREST INCOME ANALYSIS For the quarter ended June 30,
(Fully taxable equivalent basis) * 1998 1997
- -------------------------------------------------------------------------------------------
Average Average
Interest Rates Interest Rates
Average Income/ Earned/ Average Income/ Earned/
Dollars in thousands Balance Expense Paid Balance Expense Paid
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Loans (net of unearned income)**... $225,381 $5,140 8.98% $207,269 $4,624 8.92%
Investment securities:
Taxable.......................... 89,990 1,364 5.98% 73,297 1,146 6.25%
Tax-exempt....................... 30,637 600 7.83% 22,842 464 8.13%
------- ----- ------ ------
Total investment securities.... 120,627 1,964 6.45% 96,139 1,610 6.70%
Federal funds sold................. 9,910 141 5.69% 4,529 62 5.48%
------- ----- ------ ------
Total earning assets............. $355,918 $7,245 8.03% $307,937 $6,296 8.18%
Time and savings deposits:
Interest-bearing transaction
accounts $19,963 $109 2.18% $26,307 $145 2.20%
Money market deposit accounts.... 67,413 567 3.36% 47,378 369 3.12%
Savings accounts................. 26,575 181 2.72% 25,863 177 2.74%
Certificates of deposit, $100,000
or more 25,451 338 5.31% 17,721 250 5.64%
Other certificates of deposit.... 120,544 1,690 5.61% 108,378 1,456 5.37%
------- ----- ------ ------
Total time and savings deposits 259,946 2,885 4.44% 225,647 2,397 4.25%
Federal funds purchased and
securities under agreement
to repurchase.................... 20,173 223 4.42% 16,474 193 4.69%
Other short term borrowings........ 2,035 25 4.91% 2,136 30 5.62%
------- ----- ------ ------
Total interest bearing liabilities $282,154 3,135 4.44% $244,257 2,620 4.29%
Net interest income/yield.......... $4,112 4.62% $3,676 4.78%
====== ===== ====== =====
- -------------------------------------------------------------------------------------------
For the six months ended June 30,
1998 1997
- -------------------------------------------------------------------------------------------
Average Average
Interest Rates Interest Rates
Average Income/ Earned/ Average Income/ Earned/
Dollars in thousands Balance Expense Paid Balance Expense Paid
- -------------------------------------------------------------------------------------------
Loans (net of unearned income)**... $223,421 $10,081 8.89% $203,927 $9,093 8.92%
Investment securities:
Taxable.......................... 81,487 2,490 6.02% 73,329 2,257 6.16%
Tax-exempt....................... 29,001 1,165 8.03% 21,607 878 8.13%
------- ----- ------ ------
Total investment securities.... 110,488 3,616 6.55% 94,936 3,135 6.60%
Federal funds sold................. 11,455 323 5.64% 3,826 103 5.38%
------- ----- ------ ------
Total earning assets............. $345,364 $14,059 8.14% $302,689 $12,331 8.15%
Time and savings deposits:
Interest-bearing transaction
accoounts....................... $19,999 $213 2.13% $26,113 $288 2.21%
Money market deposit accounts.... 63,399 1,037 3.27% 46,833 727 3.10%
Savings accounts................. 26,321 358 2.72% 25,747 350 2.72%
Certificates of deposit, $100,000
or more......................... 24,823 696 5.61% 17,322 480 5.54%
Other certificates of deposit.... 117,692 3,249 5.52% 106,330 2,838 5.34%
------- ----- ------ ------
Total time and savings deposits 252,234 5,553 4.40% 222,345 4,683 4.21%
Federal funds purchased and
securities under agreement
to repurchase.................. 19,992 456 4.56% 16,298 377 4.63%
Other short term borrowings........ 1,928 53 5.50% 1,927 52 5.40%
------- ----- ------ ------
Total interest bearing liabilities $274,154 6,062 4.42% $240,570 5,112 4.25%
Net interest income/yield.......... $7,997 4.63% $7,219 4.77%
====== ===== ====== =====
</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.
- 9 -
<PAGE>
Provision/Allowance for Loan Losses
The provision for loan losses is a charge against earnings
necessary to maintain the allowance for loan losses at a level
consistent with management's evaluation of the portfolio.
The provision for loan losses was $350,000 for the first six
months of 1998, up from $200,000 in the comparable period in
1997. Loans charged off (net of recoveries) were $373,068
compared with loans charged off (net of recoveries) of $125,303
in the first six months of 1997. Loans charged off were up due
to several deficiencies recorded on foreclosed real estate as well
as a commercial loan relationship charged off due to a bankruptcy
On an annualized basis net loan charge-offs were
0.33% of total loans for the first half of 1998 compared with
.12% for the same period in 1997.
On June 30, 1998 nonperforming assets totaled $1.1 million
compared with $1.6 million on June 30, 1997. The June 1998 total
consisted of $251 thousand in foreclosed real estate, $354
thousand in a former branch site, and $466 thousand in nonaccrual
loans. The June 1997 total consisted of $120 thousand in
foreclosed real estate, $354 thousand in a former branch site now
listed for sale, and $1.1 million in nonaccrual loans. Loans
still accruing interest but past due 90 days or more decreased to
$670 thousand as of June 30, 1998 compared with $1 million as of
June 30, 1997. The allowance for loan losses on June 30, 1998
was $2.6 million compared with $2.4 million on June 30, 1997. It
represented a multiple of 2.36 times nonperforming assets and
5.58 times nonperforming loans. The allowance for loan losses on
June 30, 1998 was 1.16% of loans compared to 1.13% at June 30,
1997.
Other Income
Other income increased $126,642, or 12.0%, for the second
quarter of 1998 over the same period in 1997. Income from the
sale of real estate loans increased $51 thousand and deposit
service charges increased $43 thousand.
For the six months ended June 30, 1998 other income increased
$203,446 or 9.5% from 1997. The higher income in 1998 resulted
from higher sales of real estate loans and deposit service
charges.
Other Expenses
Other expenses decreased $2 thousand during the second
quarter of 1998 from 1997. Salaries and employees benefits
decreased 1.3% due to a reduction in full time employees. Other
operating expenses decreased by 3.2% primarily due to lower legal
fees.
For the six months ended June 30, 1998 other expenses
increased $20 thousand or 0.3%, from 1997, primarily due to
higher maintenance costs associated with repairs and remodeling
of bank buildings.
Assets
At June 30, 1998 total assets were $388.2 million, up 11%
from $348.7 million at December 31, 1997. Total loans grew $5.7
million, or 3% and investment securities and federal funds sold
grew $32.7 million, or 32%, in 1998. Total deposits increased
$34.3 million, or 12% in 1998 and demand note balances to the
United States Treasury remained constant at $4.0 million from
year end 1997.
The Company opened a new facility which is now home to the Old
Point Commercial Services as well as the Trust and Financial
Services. The Company has also acquired property in
Norge, VA on which a full service branch office will be built.
This office is scheduled to be open in the fourth quarter of
1998.
-10-
<PAGE>
Capital Resources
The Company's capital position remains strong as evidenced
by the regulatory capital measurements. At June 30, 1998 the
Tier I capital ratio was 14.84%, the total capital ratio was
15.89% and the leverage ratio was 9.88%. 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 US
Treasury.
The Company was liability sensitive as of June 30, 1998.
There were $117.5 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 13
reflects the earlier of the maturity or repricing data for
various assets and liabilities as of June 30, 1998.
Effects of Inflation
Management believes that the key to achieving
satisfactory performance in an inflationary environment is its
ability to maintain or improve its net interest margin and
to generate additional fee income. The Company's policy of
investing in and funding with interest-sensitive assets and
liabilities is intended to reduce the risks inherent in a
volatile inflationary economy.
Year 2000
The "Year 2000" problem relates to the fact that many
computer programs use two digits to define a year and assume
that the century is 1900. Therefore, these programs will not
recognize the turn of the century. For example, the year 1998
is defined as "98" and the year 2003 is defined as "03".
Because the assumed century is 1900 computers recognize the
year 2003, defined as "03", as 1903. The Company is aware of
the Year 2000 problem and is taking action to ensure that all
of its computer hardware and software will be Year 2000
compliant. The Company has a five-step plan to identify,
correct, upgrade and test all of its hardware and software by
the end of 1998. A Year 2000 project team has been assembled
which meets on a monthly basis to monitor progress and address
any new issues that might arise.
The Company has identified and cataloged all of its hardware and
software. Software and hardware that is not Year 2000 compliant
is being identified and plans are being developed to upgrade
and/or replace hardware and software that is not Year 2000
compliant. Additionally, the Company's vendors and major
customers are being contacted to determine their Year 2000
efforts so that the Company can plan accordingly.
-11-
<PAGE>
The Company is testing its core applications which process loans,
deposits and the general ledger. This testing is expected to be
complete by year-end or the first quarter of 1999. The Company
continues to upgrade all other hardware and software as needed.
Operating and capital budgets incorporate projected expenditures
necessary to ensure that all systems are Year 2000 compliant. At
this time management does not believe that related expenditures
will have an adverse material effect on the Company.
-12-
<PAGE>
<TABLE>
<CAPTION>
INTEREST SENSITIVITY ANALYSIS
As of June 30, 1998 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.............. 9,428 -- -- -- 9,428
Taxable investments............. 8,460 8,085 47,557 28,065 92,167
Tax-exempt investments.......... -- 367 1,340 32,880 34,587
-------- -------- -------- -------- --------
Total investments............. 17,888 8,452 48,897 60,945 136,182
Loans:
Commercial.................... 19,393 1,776 30,127 2,483 53,779
Tax-exempt.................... 1,524 88 164 0 1,776
Installment................... 5,033 2,607 53,944 2,436 64,020
Real estate................... 19,953 10,544 59,921 16,692 107,110
Other......................... 284 -- 441 0 725
-------- -------- -------- -------- --------
Total loans..................... 46,187 15,015 144,597 21,611 227,410
Total earning assets............ 64,075 23,467 193,494 82,556 363,592
Sources of funds
Interest checking deposits...... 19,981 -- -- -- 19,981
Money market deposit accounts... 65,781 -- -- -- 65,781
Regular savings accounts........ 26,161 -- -- -- 26,161
Certificates of deposit.........
$100,000 or more.............. 8,002 8,502 9,778 -- 26,282
Other time deposits............. 34,327 44,721 43,713 -- 122,761
Federal funds purchased and
securities sold under
agreements to repurchase...... 23,368 -- -- -- 23,368
Other borrowed money............ 4,000 -- 20 -- 4,020
-------- -------- -------- ------- --------
Total interest bearing liabilities 181,620 53,223 53,511 0 288,354
Rate sensitivity GAP............ (117,545) (29,756) 139,983 82,556 75,238
Cumulative GAP.................. (117,745) (147,301) (7,318) 75,238
</TABLE>
-13-
<PAGE>
PART II - OTHER INFORMATION
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
None
(b)No reports on Form 8-K were filed during the second
quarter of 1998.
-14-
<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
August 14, 1998
By: /s/ Robert F. Shuford
Robert F. Shuford
President and Director
Principal Executive Officer
By: /s/ Louis G. Morris
Louis G. Morris
Senior Vice President and Treasurer
Principal Financial and Accounting Officer
-15-
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 10,966
<INT-BEARING-DEPOSITS> 47
<FED-FUNDS-SOLD> 9428
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 67,838
<INVESTMENTS-CARRYING> 58,916
<INVESTMENTS-MARKET> 59,027
<LOANS> 227,410
<ALLOWANCE> 2,648
<TOTAL-ASSETS> 388,253
<DEPOSITS> 321,374
<SHORT-TERM> 4,000
<LIABILITIES-OTHER> 1,445
<LONG-TERM> 20
0
0
<COMMON> 12,839
<OTHER-SE> 24,588
<TOTAL-LIABILITIES-AND-EQUITY> 388,253
<INTEREST-LOAN> 10,047
<INTEREST-INVEST> 3,259
<INTEREST-OTHER> 323
<INTEREST-TOTAL> 13,629
<INTEREST-DEPOSIT> 5,552
<INTEREST-EXPENSE> 6,062
<INTEREST-INCOME-NET> 7,567
<LOAN-LOSSES> 350
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 6,376
<INCOME-PRETAX> 3,193
<INCOME-PRE-EXTRAORDINARY> 3,193
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,342
<EPS-PRIMARY> .91
<EPS-DILUTED> .90
<YIELD-ACTUAL> 4.62
<LOANS-NON> 466
<LOANS-PAST> 678
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 1,734
<ALLOWANCE-OPEN> 2,671
<CHARGE-OFFS> 592
<RECOVERIES> 219
<ALLOWANCE-CLOSE> 2,648
<ALLOWANCE-DOMESTIC> 2,648
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 1,365
</TABLE>
