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, 1999
[ ] 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, 1999.
Class Outstanding at October 31, 1999
Common Stock, $5.00 par value 2,581,822 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, 1999 and December 31, 1998...........1
Consolidated Statement of Earnings
Three months ended September 30, 1999 and 1998...........2
Nine months ended September 30, 1999 and 1998..............2
Consolidated Statement of Cash Flows
Nine months ended September 30, 1999 and 1998...........3
Consolidated Statements of Changes in Stockholders' Equity
Nine months ended September 30, 1999 and 1998...........4
Notes to Consolidated Financial Statements......................5
Parent Only Balance Sheets
September 30, 1999 and December 31, 1998..........6
Parent Only Statement of Earnings
Three months ended September 30, 1999 and 1998..6
Nine months ended September 30, 1999 and 1998...6
Parent Only Statement of Cash Flows
Three months ended September 30, 1999 and 1998..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)
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<CAPTION>
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OLD POINT FINANCIAL CORPORATION September 30, December 31,
Consolidated Balance Sheets 1999 1998
Unaudited (Dollars in Thousands)
-----------------------------------------------------------------------------------
Assets
<S> <C> <C>
Cash and due from banks........................ $8,358,617 $10,310,839
Investments:
Securities available for sale, at market..... 83,328,553 82,568,024
Securities to be held to maturity............ 49,933,230 54,919,340
Trading account securities..................... 0 0
Federal funds sold............................. 9,166,493 6,577,903
Loans, total .................................. 270,248,553 235,865,038
Less reserve for loan losses............... 2,969,430 2,854,952
------------- -------------
Net loans.............................. 267,279,123 233,010,086
Bank premises and equipment.................... 13,758,390 12,051,677
Other real estate owned........................ 413,864 483,864
Other assets................................... 5,345,690 4,195,963
------------- -------------
Total assets.............................. $437,583,960 $404,117,696
============= =============
Liabilities
Noninterest-bearing deposits................... $68,036,446 $65,335,643
Savings deposits............................... 124,923,457 121,681,505
Time deposits.................................. 168,345,060 156,395,329
------------ ------------
Total deposits.............................. 361,304,963 343,412,477
Federal funds purchased and securities sold
under agreement to repurchase.............. 20,626,805 19,128,382
Federal Home Loan Bank Advances................ 9,000,000 0
Interest-bearing demand notes issued to the
United States Treasury and other
liabilities for borrowed money.............. 4,007,227 348,057
Other liabilities.............................. 1,987,532 1,215,785
------------ ------------
Total liabilities........................... 396,926,527 364,104,701
Stockholders' Equity
Common stock, $5.00 par value.................. 12,909,110 12,877,220
1999 1998
Shares authorized..6,000,000 6,000,000
Shares outstanding.2,581,822 2,575,444
Surplus........................................ 10,157,505 10,020,066
Undivided profits.............................. 18,938,701 16,284,552
Unrealized gain/(loss) on securities........... (1,347,883) 831,157
----------- ------------
Total stockholders' equity................. 40,657,433 40,012,995
Total liabilities and stockholders' equity. $437,583,960 $404,117,696
============= =============
1
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OLD POINT FINANCIAL CORPORATION Three Months Ended Nine Months Ended
Consolidated Statements of Earnings September 30, September 30,
Unaudited 1999 1998 1999 1998
----------------------------------------------------------------------------------------------------------
(Dollars in Thousands except per share amounts)
Interest Income
<S> <C> <C> <C>
Interest and fees on loans..................... $5,545,428 $5,065,052 $15,953,718 $15,111,942
Interest on federal funds sold................. 39,109 132,098 131,448 455,373
Interest on securities:
Taxable..................................... 1,213,301 1,406,532 3,736,005 3,896,480
Exempt from Federal income tax.............. 687,098 462,728 1,999,121 1,231,401
Interest on trading account.................... 0 0 0 0
--------------------- ------------------------
1,900,399 1,869,260 5,735,126 5,127,881
--------------------- ------------------------
Total interest income...................... 7,484,936 7,066,410 21,820,292 20,695,196
Interest Expense
Interest on savings deposits................... 960,832 888,466 2,789,471 2,496,733
Interest on time deposits...................... 2,184,869 2,118,854 6,453,596 6,063,180
Interest on federal funds purchased and
securities sold under agreement to repurchase. 242,744 301,014 716,710 757,466
Interest on Federal Home Loan Bank Advances.... 127,471 0 179,340 0
Interest on demand notes (note balances)
issued to the United States Treasury and on
other borrowed money......................... 20,608 21,562 57,465 74,408
--------------------- ------------------------
Total interest expense..................... 3,536,524 3,329,896 10,196,582 9,391,787
Net interest income............................ 3,948,412 3,736,514 11,623,710 11,303,409
Provision for loan losses...................... 150,000 150,000 450,000 500,000
--------------------- ------------------------
Net interest income after provision
for loan losses............................... 3,798,412 3,586,514 11,173,710 10,803,409
Other Income
Income from fiduciary activities............... 569,872 449,850 1,679,572 1,349,550
Service charges on deposit accounts............ 538,397 495,878 1,615,897 1,402,651
Other service charges, commissions and fees.... 151,924 153,124 515,057 497,178
Other operating income......................... 63,182 74,621 198,155 275,625
Security gains (losses)........................ (53,932) 0 (53,932) 9
Trading account income......................... 0 0 0 0
--------------------- ------------------------
Total other income......................... 1,269,443 1,173,473 3,954,749 3,525,013
Other Expenses
Salaries and employee benefits................. 2,133,266 1,960,710 6,358,490 5,719,487
Occupancy expense of Bank premises............. 240,827 251,186 713,589 694,549
Furniture and equipment expense................ 321,879 289,313 927,664 875,985
Other operating expenses....................... 794,200 760,652 2,432,983 2,347,527
--------------------- ------------------------
Total other expenses....................... 3,490,172 3,261,861 10,432,726 9,637,548
--------------------- ------------------------
Income before taxes............................ 1,577,683 1,498,126 4,695,733 4,690,874
Applicable income taxes ....................... 346,400 343,000 980,400 1,194,100
--------------------- ------------------------
Net income..................................... $1,231,283 $1,155,126 $3,715,333 $3,496,774
===================== ========================
Per Share
Based on weighted average number of
common shares outstanding.................... 2,581,822 2,573,235 2,578,030 2,568,964
Basic Earnings Per Share....................... $0.48 $0.45 $1.44 $1.36
Diluted Earnings Per Shares.................... $0.48 $0.45 $1.44 $1.36
2
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OLD POINT FINANCIAL CORPORATION Nine Months Ended
Consolidated Statements of Cash Flows September 30,
(Unaudited) 1999 1998
--------------------------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C>
Net income.................................................... $ 3,715,333 $ 3,496,774
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization............................... 807,531 717,882
Provision for loan losses................................... 450,000 500,000
(Gains) loss on sale of investment securities, net.......... 53,932 (9)
Net amortization & accretion of securities ................. 63,821 121,766
Net (increase) decrease in trading account.................. 0 0
(Increase) in other real estate owned....................... (275,056) (296,909)
(Increase) decrease in other assets
(net of tax effect of FASB 115 adjustment)................ (27,191) (1,193,989)
Increase (decrease) in other liabilities.................... 771,747 664,494
------------ -------------
Net cash provided by operating activities................. 5,560,117 4,010,009
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of securities .................................... (25,559,816) (64,422,396)
Proceeds from maturities & calls of securities ............. 25,020,000 27,745,253
Proceeds from sales of available - for - sale securities.... 1,346,068 0
Proceeds from sales of held - to - maturity securities...... 0 0
Loans made to customers..................................... (130,798,723) (103,860,859)
Principal payments received on loans........................ 96,079,685 94,639,573
Proceeds from sales of other real estate owned.............. 345,056 586,910
Purchases of premises and equipment......................... (2,514,244) (3,011,815)
(Increase) decrease in federal funds sold................... (2,588,590) 79,487
------------ -------------
Net cash provided by (used in) investing activities....... (38,670,564) (48,243,847)
CASH FLOWS FROM FINANCING ACTIVITIES
Increase (decrease) in non-interest bearing deposits........ 2,700,803 5,784,968
Increase (decrease) in savings deposits..................... 3,241,952 14,999,686
Proceeds from the sale of certificates of deposit........... 41,097,830 49,570,250
Payments for maturing certificates of deposit............... (29,148,099) (30,659,073)
Increase (decrease) in federal funds purchased &
repurchase agreements...................................... 1,498,423 4,249,252
Increase (decrease) in other borrowed money................. 12,659,170 (2,688,885)
Proceeds from issuance of common stock...................... 139,424 142,138
Dividends paid.............................................. (1,031,279) (899,222)
------------ -------------
Net cash provided by financing activities................. 31,158,225 40,499,114
Net increase (decrease) in cash and due from banks........ (1,952,222) (3,734,724)
Cash and due from banks at beginning of period............ 10,310,839 12,208,408
------------ -------------
Cash and due from banks at end of period.................. $ 8,358,617 $ 8,473,684
============ =============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash payments for:
Interest.................................................. $ 12,588,918 $ 9,212,018
Income taxes.............................................. 900,000 1,350,000
See accompanying notes
- 3 -
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OLD POINT FINANCIAL CORPORATION
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(Unaudited)
Accumulated
Other Total
Common Stock Par Capital Retained Comprehensive Stockholder's
Shares Value Surplus Earnings Income(Loss) Equity
-----------------------------------------------------------------------------------------------------------------------------
FOR NINE MONTHS ENDED SEPTEMBER 31, 1999
<S> <C> <C> <C> <C> <C> <C>
Balance at beginning of period...... 2,575,444 $12,877,220 $10,020,066 $16,284,552 $ 831,157 $40,012,995
Comprehensive Income
Net income........................ 0 0 0 3,715,333 0 3,715,333
Increase (decrease) in unrealized
gain on investment securities..... 0 0 0 0 (2,179,040) (2,179,040)
----------------------------------------------------------------------------------
Total Comprehensive Income........ 3,715,333 (2,179,040) 1,536,293
Sale of common stock................ 6,378 31,890 137,439 (29,905) 0 139,424
Cash dividends...................... 0 0 0 (1,031,279) 0 (1,031,279)
----------------------------------------------------------------------------------
Balance at end of period............ 2,581,822 $12,909,110 $10,157,505 $18,938,701 ($1,347,883) $40,657,433
FOR NINE MONTHS ENDED SEPTEMBER 31, 1998
Balance at beginning of period...... 2,566,172 $12,830,860 $ 9,693,301 $13,097,716 $ 710,591 $36,332,468
Comprehensive Income
Net income........................ 0 0 0 3,496,774 0 3,496,774
Increase (decrease) in unrealized
gain on investment securities..... 0 0 0 0 594,144 594,144
---------------------------------------------------------------------------------
Total Comprehensive Income........ 3,496,774 594,144 4,090,918
Sale of common stock................ 8,472 42,360 303,565 (203,787) 0 142,138
Cash dividends............... ...... 0 0 0 (899,222) 0 (899,222)
---------------------------------------------------------------------------------
Balance at end of period............ 2,574,644 $12,873,220 $ 9,996,866 $15,491,481 $ 1,304,735 $39,666,302
</TABLE>
See accompany notes
4
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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 1998
Annual Report to Shareholders and Form 10-K.
2. 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
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<CAPTION>
- ---------------------------------------------------------------------------------------------
OLD POINT FINANCIAL CORPORATION
Parent only Balance Sheets September 30, December 31,
Unaudited) 1999 1998
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
Assets
Cash in bank................................... $ 33,935 $ 293,695
Investment Securities.......................... 2,050,000 2,107,380
Total Loans.................................... 0 0
Investment in Subsidiaries..................... 38,565,748 37,597,430
Equipment...................................... 0 0
Other assets................................... 7,750 14,490
--------------- --------------
Total Assets................................... $ 40,657,433 $ 40,012,995
=============== ==============
Liabilities and Stockholders' Equity
Total Liabilities.............................. $ 0 $ 0
Stockholders' Equity........................... 40,657,433 40,012,995
--------------- --------------
Total Liabilities & Stockholders' Equity....... $ 40,657,433 $ 40,012,995
=============== ==============
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
OLD POINT FINANCIAL CORPORATION Three Months Ended: Nine Months Ended:
Parent only Income Statements September 30, September 30,
(Unaudited) 1999 1998 1999 1998
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Income <C>
Cash dividends from Subsidiary.................... $ 375,000 $ 350,000 $ 1,585,000 $ 950,000
Interest and fees on loans........................ 0 0 0 0
Interest income from investment securities........ 24,873 27,401 74,738 79,281
Gains (losses) from sale of investment securities. (53,932) 0 (53,932) 0
Other income...................................... 0 0 0 0
-------------- -------------- ------------- ------------
Total Income...................................... 345,941 377,401 1,605,806 1,029,281
Expenses
Salaries and employee benefits.................... 0 0 0 0
Other expenses.................................... 4,829 37,406 34,662 37,406
-------------- -------------- ------------- ------------
Total Expenses.................................... 4,829 37,406 34,662 37,406
-------------- -------------- ------------- ------------
Income before taxes & undistributed
net income of subsidiary...................... 341,112 339,995 1,571,144 991,875
Income tax........................................ 4,500 8,000 11,300 14,100
Net income before undistributed
net income of subsidiary........................ 336,612 331,995 1,559,844 977,775
-------------- -------------- ------------- ------------
Undistributed net income of subisdiary............ 894,671 790,124 2,155,489 2,518,999
--------------- -------------- ------------- ------------
Net Income........................................ $ 1,231,283 $ 1,122,119 $ 3,715,333 $ 3,496,774
</TABLE>
6
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<CAPTION>
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OLD POINT FINANCIAL CORPORATION Nine Months Ended:
Parent only Statements of Cash Flows September 30,
(Unaudited) 1999 1998
---------------------------------------------------------------------------------------------
<S> <C> <C>
Cash Flows from Operating Activities:
Net Income.......................................... $ 3,715,333 $ 3,496,774
Adjustments to reconcile net income to
net cash provided by operating activities:
Equity in undistributed income of subsidiary.... (2,155,489) (2,518,999)
Depreciation...................................... 0 0
(Gain) or loss on sale of assets................. 53,932 0
(Increase) decrease in other assets............. (7,750) 0
Increase (decrease) in other liabilities........ 0 14,100
--------------- --------------
Net cash provided by operating activities........... 1,606,026 991,875
Cash flows from investing activities:
Purchases of securities............................. (1,500,000) 0
Proceeds from sales of available-for-sale securities 1,346,068 0
Proceeds from sales of held- to-maturity securities. 0 0
Payments for investments in and advances
to susidiaries...................................... (1,020,000) 0
Sale or repayment of investments in and advances
to subsidiaries................................... 200,000 (250,000)
--------------- --------------
Net cash provided by investing activities........... (973,932) (250,000)
Cash flows from financing activities:
Proceeds from issuance of common stock.............. 139,425 142,138
Dividends paid...................................... (1,031,279) (899,222)
--------------- --------------
Net cash provided by financing activities........... (891,854) (757,084)
Net increase (decrease) in cash & due from banks.... (259,760) (15,209)
Cash & due from banks at beginning of period........ 293,695 289,230
--------------- --------------
Cash & due from banks at end of period.............. $ 33,935 $ 274,021
=============== ==============
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7
<PAGE>
Item 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATION
Summary
Net income for the third quarter of 1999 increased 7% to
$1,231,283 from $1,155,126 for the comparable period in 1998.
Basic earnings per share were $0.48 in the third quarter of 1999
compared with $0.45 in 1998.
For the nine months ended September 30, 1999 net income
increased 6.25% to $3,715,333 from $3,496,774 in 1998. Basic
earnings per share were $1.44 for the first nine months of 1999
compared with $1.36 in 1998.
Return on average assets was 1.15% for the third quarter of
1999 and 1.19% for the comparable period in 1998. Return on
average equity was 12.10% for the third quarter of 1999 and
11.81% for the third quarter of 1998.
For the nine months ended September 30, 1999 and 1998 return
on average assets was 1.18% and 1.24% respectively. Return on
average equity was 12.12% in 1999 and 12.26% in 1998.
Net Interest Income
Net interest income, on a fully tax equivalent basis,
increased $330 thousand, or 8%, for the third quarter of 1999
over 1998. Average earning assets increased 11% 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 4.37% in 1998 to 4.27% in 1999.
For the nine months ended September 30, 1999 net interest
income, on a fully tax equivalent basis, increased $720 thousand,
or 6%, over the comparable period in 1998. Average earning
assets increased 12% and the net interest yield decreased from
4.55% in 1998 to 4.30% in 1999. Loans increased $28 million and
investment securities increased $22 million from the same period
last year. A large percent of the increase was invested in tax
exempt securities that have higher tax equivalent yields.
Interest rates on deposits decreased 14 basis points during the
first nine months of 1999 over the comparable period in 1998
while loan rates decreased 55 basis points during the same
period. This contributed to the decrease in the net interest
yield.
Page 9 shows an analysis of average earning assets, interest
bearing liabilities and rates and yields.
8
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OLD POINT FINANCIAL CORPORATION
NET INTEREST INCOME ANALYSIS For the quarter ended September 30,
(Fully taxable equivalent basis) * 1999 1998
---------------------------------------------------------------------------------------------------------------
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)**.............. $264,172 5,566 8.43% $228,335 5,082 8.90%
Investment securities:***
Taxable..................................... 80,152 1,213 6.05% 91,557 1,406 6.14%
Tax-exempt.................................. 57,372 1,041 7.26% 36,625 701 7.66%
-------------------- -----------------
Total investment securities............... 137,524 2,254 6.56% 128,182 2,107 6.58%
Federal funds sold............................ 2,885 39 5.41% 9,252 132 5.71%
-------------------- -----------------
Total earning assets........................ $404,581 $7,859 7.77% $365,769 $7,321 8.01%
Time and savings deposits:
Interest-bearing transaction accounts....... $3,973 $24 2.42% $ 19,643 $108 2.20%
Money market deposit accounts............... 94,555 741 3.13% 69,982 601 3.44%
Savings accounts............................ 28,495 197 2.77% 26,081 180 2.76%
Certificates of deposit, $100,000 or more... 30,839 423 5.49% 26,677 385 5.77%
Other certificates of deposit............... 132,216 1,762 5.33% 124,156 1,733 5.58%
-------------------- -----------------
Total time and savings deposits........... 290,078 3,147 4.34% 266,539 3,007 4.51%
Federal funds purchased and securities sold
under agreement to repurchase............... 21,971 243 4.42% 24,314 301 4.95%
Federal Home Loan Bank advances............... 9,548 127 5.32% 0 0 0.00%
Other short term borrowings................... 1,704 20 4.69% 1,541 21 5.45%
-------------------- -----------------
Total interest bearing liabilities.......... $323,301 3,537 4.38% $292,394 3,329 4.55%
Net interest income/yield..................... $4,322 4.27% $3,992 4.37%
===== ===== ===== =====
<CAPTION>
----------------------------------------------------------------------------------------------------------------------
For the nine months ended September 30,
1999 1998
----------------------------------------------------------------------------------------------------------------------
Average Average
Interest Rates Interest Rates
Average Income/ Earned/ Average Income/ Earned/
Dollars in thousands Balance Expense Paid Balance Expense Paid
----------------------------------------------------------------------------------------------------------------------
<S> <C>
Loans (net of unearned income)**.............. $253,236 $16,010 8.43% $225,059 $15,163 8.98%
Investment securities:***
Taxable..................................... 82,120 3,736 6.07% 84,174 3,896 6.17%
Tax-exempt.................................. 55,331 3,029 7.30% 31,542 1,866 7.89%
-------------------- ------------------
Total investment securities............... 137,451 6,765 6.56% 115,716 5,762 6.64%
Federal funds sold............................ 3,442 131 5.07% 10,721 455 5.66%
-------------------- ------------------
Total earning assets........................ $394,129 $22,906 7.75% $351,496 $21,380 8.11%
Time and savings deposits:
Interest-bearing transaction accounts....... $ 3,948 $70 2.36% $19,880 $321 2.15%
Money market deposit accounts............... 93,470 2,152 3.07% 65,593 1,638 3.33%
Savings accounts............................ 27,710 568 2.73% 26,241 538 2.73%
Certificates of deposit, $100,000 or more... 29,834 1,233 5.51% 25,441 1,081 5.67%
Other certificates of deposit............... 131,610 5,221 5.29% 119,847 4,982 5.54%
------------------- ------------------
Total time and savings deposits........... 286,572 9,244 4.30% 257,002 8,560 4.44%
Federal funds purchased and securities sold
under agreement to repurchase............... 22,209 717 4.30% 21,419 757 4.71%
Federal Home Loan Bank advances............... 4,479 179 5.33% 0 0 0.00%
Other short term borrowings................... 1,657 57 4.59% 1,799 74 5.48%
-------------------- ------------------
Total interest bearing liabilities.......... $314,917 10,197 4.32% $280,220 9,391 4.47%
Net interest income/yield..................... $12,709 4.30% $11,989 4.55%
====== ===== ===== =====
* 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.
</TABLE>
9
<PAGE>
Provision/Allowance for Loan Losses
The provision for loan losses was $450,000 for the first
nine months of 1999, down $50,000 over the comparable period in
1998. Loans charged off (net of recoveries) were $335,523 in the
first nine months of 1999, compared with $425,215 for the same
period in 1998. On an annualized basis net loan charge-offs were
0.17% of period end total loans for the first nine months of 1999
compared with 0.25% for the same period in 1998.
On September 30, 1999 nonperforming assets totaled $555
thousand compared with $838 thousand on September 30, 1998. The
September 1999 total consisted of $60 thousand in foreclosed real
estate, $354 thousand in a former branch site, and $141 thousand
in nonaccrual loans. The September 1998 total consisted of $130
thousand in foreclosed real estate, $354 thousand in a former
branch site now listed for sale, and $354 thousand in nonaccrual
loans. Loans still accruing interest but past due 90 days or more
decreased to $557 thousand as of September 30, 1999 compared with
$1.18 million on September 30, 1998.
The allowance for loan losses on September 30, 1998 was $2.97
million. It represented a multiple of 5.35 times nonperforming
assets and 21.06 times nonperforming loans. The allowance for
loan losses on September 30, 1999 was 1.10% of loans compared to
1.19% at September 30, 1998.
Other Income
Other income increased $95,970 or 8%, for the third quarter
of 1999 over the same period in 1998. Income from fiduciary
activities increased 27% and service charges on deposit accounts
increased 8%. These areas were also the main contributors to the
1999 nine month increase of $429,736 or 12% from 1998.
Other Expenses
Other expenses increased $228,311 or 7%, in the third
quarter of 1999 over 1998. Salary and furniture & equipment
expenses had the greatest impact on the increase in other
expenses due to the opening of two new branches.
For the nine months ended September 30, 1999 other expenses
increased $795,178 or 8%, from 1998. As mentioned above the
increase is primarily due to salaries and furniture & equipment
expenses related to the opening of the two new offices.
Financial Condition
At September 30, 1999 total assets were $437.6 million, up
8% from $404.1 million at December 31, 1998. Total loans grew
$34.4 million, or 15% and investment securities decreased $4.2
million, or 3%, in 1999. Total deposits increased $17.9 million,
or 5% in 1999 and demand note balances to the U. S. Treasury
increased $3.67 million to $4.0 million from $333 thousand at
year-end 1998.
Capital Resources
The Company's capital position remains strong as evidenced
by the regulatory capital measurements. At September 30, 1999
the Tier I capital ratio was 14.31%, the total capital ratio was
15.32% and the leverage ratio was 9.79%. These ratios were all
well above the regulatory minimum levels of 4.00%, 8.00%, and
3.00%, respectively.
10
<PAGE>
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 and Federal Home Loan Bank advances.
The Company was liability sensitive as of September 30,
1999. There were $130 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 totaling $125 million; 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, 1999.
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.
General
The Company opened two new branch offices in 1999. One in
Norge, Virginia and one in Chesapeake, Virginia. Additionally,
the Company is expanding its Woodland Road office.
Year 2000
The Company has been working on Year 2000 problem preparations
for the past few years to ensure its hardware and software are
Year 2000 compliant.
The Company has followed a five phase plan, which conforms to the
standards established by the Federal Financial Institutions
Examination Council (FFIEC). The plan includes testing all
software and hardware owned by the Company for Year 2000
compliance. The core application for processing loans, deposits
and general ledger has been successfully tested by the vendor
Fiserv. The Company has also successfully tested the core
application. Any hardware or software that was not Year 2000
compliant was replaced and new purchases are tested for Year 2000
compliance.
The Office of the Comptroller of the Currency is responsible for
examining the Bank for compliance to regulatory standards. The
internal audit department has completed a review and determined
the Bank complies with the FFIEC's five phase plan.
11
<PAGE>
During the second quarter of 1999 the Company completed the
capital expenditures and operating costs associated with Year
2000 compliance. The Company spent approximately $750 thousand
to upgrade and/or replace computer systems. In addition, the
Company spent approximately $250 thousand in operating expenses
to test and implement the Year 2000 plan.
During the third quarter of 1999 the Company has been focusing
its Year 2000 efforts on informing its customers about the safety
of FDIC deposits and risks of potential Y2K scams. These efforts
have taken the form of in house displays, statement stuffers and
posts to the Company's web site, www.oldpoint.com. Additionally
the Company is advertising with other local community banks.
12
<PAGE>
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------
INTEREST SENSITIVITY ANALYSIS
As of September 30, 1999 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.............. 9,166 0 0 0 9,166
Taxable investments............. 4,780 0 46,435 25,291 76,506
Tax-exempt investments.......... 201 1,573 5,236 49,746 56,756
-------- -------- -------- -------- --------
Total investments............. 14,147 1,573 51,671 75,037 142,428
Loans:
Commercial.................... 22,849 1,509 29,109 3,876 57,343
Tax-exempt.................... 824 43 25 2,021 2,913
Installment................... 4,135 2,718 49,881 6,552 63,286
Real estate................... 19,403 6,607 82,794 37,070 145,874
Other......................... 300 0 533 0 833
-------- -------- -------- -------- --------
Total loans..................... 47,511 10,877 162,342 49,519 270,249
-------- -------- -------- -------- --------
Total earning assets............ 61,658 12,450 214,013 124,556 412,677
Sources of funds
Interest checking deposits...... 3,673 0 0 0 3,673
Money market deposit accounts... 92,856 0 0 0 92,856
Regular savings accounts........ 28,394 0 0 0 28,394
Certificates of deposit.........
$100,000 or more.............. 6,916 17,882 9,196 0 33,994
Other time deposits............. 33,214 56,701 44,436 0 134,351
Federal funds purchased and
securities sold under
agreements to repurchase...... 20,627 0 0 0 20,627
Other borrowed money............ 6,000 0 7,007 0 13,007
-------- -------- -------- -------- --------
Total interest bearing liabilities 191,680 74,583 60,639 0 326,902
Rate sensitivity GAP............ (130,022) (62,133) 153,374 124,556 85,775
Cumulative GAP.................. (130,022) (192,155) (38,781) 85,775
13
</TABLE>
<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 1999.
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
November 15, 1999
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-31-1999
<PERIOD-END> SEP-30-1999
<CASH> 8,136
<INT-BEARING-DEPOSITS> 223
<FED-FUNDS-SOLD> 9,166
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 88,329
<INVESTMENTS-CARRYING> 49,933
<INVESTMENTS-MARKET> 49,906
<LOANS> 270,249
<ALLOWANCE> 2,969
<TOTAL-ASSETS> 437,584
<DEPOSITS> 361,305
<SHORT-TERM> 4,000
<LIABILITIES-OTHER> 1,988
<LONG-TERM> 9,007
0
0
<COMMON> 12,909
<OTHER-SE> 29,097
<TOTAL-LIABILITIES-AND-EQUITY> 437,584
<INTEREST-LOAN> 15,954
<INTEREST-INVEST> 5,735
<INTEREST-OTHER> 131
<INTEREST-TOTAL> 21,820
<INTEREST-DEPOSIT> 9,243
<INTEREST-EXPENSE> 10,197
<INTEREST-INCOME-NET> 11,174
<LOAN-LOSSES> 450
<SECURITIES-GAINS> (54)
<EXPENSE-OTHER> 10,433
<INCOME-PRETAX> 4,696
<INCOME-PRE-EXTRAORDINARY> 4,696
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,715
<EPS-BASIC> 1.44
<EPS-DILUTED> 1.44
<YIELD-ACTUAL> 4.30
<LOANS-NON> 141
<LOANS-PAST> 557
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 2,267
<ALLOWANCE-OPEN> 2,855
<CHARGE-OFFS> 653
<RECOVERIES> 218
<ALLOWANCE-CLOSE> 2,969
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 1,622
</TABLE>
