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, 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) 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, 1999.
Class Outstanding at July 31, 1999
Common Stock, $5.00 par value 2,581,822 shares
OLD POINT FINANCIAL CORPORATION
FORM 10-Q
INDEX
PART I - FINANCIAL INFORMATION
Page
Item 1. Financial Statements........................................1
Consolidated Balance Sheets
June 30, 1999 and December 31, 1998.......................1
Consolidated Statement of Earnings
Three months ended June 30, 1999 and 1998.................2
Six months ended June 30, 1999 and 1998...................2
Consolidated Statement of Cash Flows
Six months ended June 30, 1999 and 1998...................3
Consolidated Statements of Changes in Stockholders' Equity
Six months ended June 30, 1999 and 1998...................4
Notes to Consolidated Financial Statements.....................5
Parent Only Balance Sheets
June 30, 1999 and December 31, 1998.......................6
Parent Only Statement of Earnings
Three months ended June 30, 1999 and 1998.................6
Six months ended June 30, 1999 and 1998...................6
Parent Only Statement of Cash Flows
Six months ended June 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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PART 1. - FINANCIAL INFORMATION
OLD POINT FINANCIAL CORPORATION
Consolidated Balance Sheets June 30, December 31,
(Unaudited) 1999 1998
-------------------------------------------------------------------------------------------------------
<S>
Assets <C> <C>
Cash and due from banks.................................. $11,160,308 $10,200,201
Interest bearing balances due from banks................. 60,747 110,638
Securities available for sale, at market................. 88,032,159 82,568,024
Securities to be held to maturity........................ 48,432,264 54,919,340
Trading account securities............................... 0 0
Federal funds sold....................................... 1,361,831 6,577,903
Loans, total (excluding unearned income)................. 260,303,309 235,865,038
Less reserve for loan losses......................... 2,859,191 2,854,952
--------------- ---------------
Net loans........................................ 257,444,118 233,010,086
Bank premises and equipment.............................. 13,298,437 12,051,677
Other real estate owned.................................. 413,864 483,864
Other assets............................................. 4,991,140 4,195,963
--------------- ---------------
Total assets........................................ $425,194,868 $404,117,696
=============== ===============
Liabilities
Noninterest-bearing deposits............................. $66,476,614 $65,335,643
Savings deposits......................................... 124,806,274 121,681,505
Time deposits............................................ 161,192,915 156,395,329
--------------- ---------------
Total deposits........................................ 352,475,803 343,412,477
Federal funds purchased and securities sold under
agreement to repurchase.............................. 21,923,435 19,128,382
Federal Home Loan Bank Advances 5,000,000 0
Interest-bearing demand notes issued to the United States
Treasury and other liabilities for borrowed money..... 4,009,934 348,057
Other liabilities........................................ 1,520,228 1,215,785
--------------- ---------------
Total liabilities..................................... 384,929,400 364,104,701
Stockholders' Equity
Common stock, $5.00 par value............................ 12,883,540 12,877,220
1999 1998
Shares authorized........6,000,000 6,000,000
Shares outstanding...... 2,576,708 2,575,444
Surplus.................................................. 10,052,975 10,020,066
Undivided profits........................................ 18,075,368 16,284,552
Unrealized gain/(loss) on securities .................... (746,415) 831,157
--------------- ---------------
Total stockholders' equity........................... 40,265,468 40,012,995
--------------- ---------------
Total liabilities and stockholders' equity........... $425,194,868 $404,117,696
=============== ===============
-1-
See accompanying notes
</TABLE>
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OLD POINT FINANCIAL CORPORATION Three Months Ended Six Months Ended
Consolidated Statements of Earnings June 30, June 30,
(Unaudited) 1999 1998 1999 1998
------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Interest Income
Interest and fees on loans........................ $5,293,175 $5,123,567 $10,408,290 $10,046,890
Interest on federal funds sold.................... 30,939 141,119 92,339 323,275
Interest on securities:
Taxable........................................ 1,251,604 1,364,267 2,522,704 2,489,948
Exempt from federal income tax................. 677,283 396,024 1,312,023 768,673
Interest on trading account securities............ 0 0 0 0
---------------------------------------------------------------------
Total interest on securities................ 1,928,887 1,760,291 3,834,727 3,258,621
---------------------------------------------------------------------
Total interest income......................... 7,253,001 7,024,977 14,335,356 13,628,786
Interest Expense
Interest on savings deposits...................... 932,676 856,052 1,828,639 1,608,267
Interest on time deposits......................... 2,143,927 2,028,975 4,268,727 3,944,326
Interest on federal funds purchased and securities
sold under agreement to repurchase.............. 235,626 222,751 473,966 456,452
Interest on Federal Home Loan Bank advances....... 51,869 0 51,869 0
Interest on demand notes (note balances) issued to
United States Treasury and on other borrowed money 20,038 25,036 36,857 52,846
---------------------------------------------------------------------
Total interest expense........................ 3,384,136 3,132,814 6,660,058 6,061,891
Net interest income............................... 3,868,865 3,892,163 7,675,298 7,566,895
Provision for loan losses......................... 150,000 200,000 300,000 350,000
---------------------------------------------------------------------
Net interest income after provision for loan losses 3,718,865 3,692,163 7,375,298 7,216,895
Other Income
Income from fiduciary activities.................. 599,850 449,850 1,109,700 899,700
Service charges on deposit accounts............... 552,167 474,047 1,077,500 906,773
Other service charges, commissions and fees....... 156,207 143,865 363,133 344,054
Other operating income............................ 51,516 112,221 134,973 201,004
Income from trading account....................... 0 0 0 0
Security gains (losses)........................... 0 9 0 9
---------------------------------------------------------------------
Total other income............................ 1,359,740 1,179,992 2,685,306 2,351,540
Other Expenses
Salaries and employee benefits.................... 2,154,511 1,915,250 4,225,224 3,758,777
Occupancy expense of Bank premises................ 242,617 224,596 472,762 443,363
Furniture and equipment expense................... 318,286 295,694 605,785 586,672
Other operating expenses.......................... 844,849 843,313 1,638,783 1,586,875
---------------------------------------------------------------------
Total other expenses.......................... 3,560,263 3,278,853 6,942,554 6,375,687
---------------------------------------------------------------------
Income before taxes............................... 1,518,342 1,593,302 3,118,050 3,192,748
Applicable income taxes .......................... 282,700 424,600 634,000 851,100
---------------------------------------------------------------------
Net income........................................ $1,235,642 $1,168,702 $ 2,484,050 $ 2,341,648
=====================================================================
<CAPTION>
<S> <C> <C> <C> <C>
Per Share
Based on weighted average number of
common shares outstanding....................... 2,576,377 2,567,394 2,576,103 2,566,793
Basic Earnings per Share $0.48 $0.46 $0.96 $0.91
Diluted Earnings per Share 0.48 0.45 0.96 0.90
</TABLE>
-2-
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OLD POINT FINANCIAL CORPORATION Six Months Ended
Consolidated Statements of Cash Flows June 30,
(Unaudited) 1999 1998
-------------------------------------------------------------------------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income.................................................... $ 2,484,050 $ 2,341,648
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization............................... 531,145 482,632
Provision for loan losses................................... 300,000 350,000
(Gains) loss on sale of investment securities, net.......... 0 (9)
Net amortization & accretion of securities ................. 44,931 77,038
Net (increase) decrease in trading account.................. 0 0
(Increase) in other real estate owned....................... (215,056) (296,909)
(Increase) decrease in other assets
(net of tax effect of FASB 115 adjustment)................ 17,512 (818,817)
Increase (decrease) in other liabilities.................... 304,443 395,940
------------ -------------
Net cash provided by operating activities................. 3,467,025 2,531,523
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of securities .................................... (22,912,251) (53,989,103)
Proceeds from maturities & calls of securities ............. 21,500,000 23,543,450
Proceeds from sales of available - for - sale securities.... 0 0
Proceeds from sales of held - to - maturity securities...... 0 0
Loans made to customers..................................... (83,237,793) (70,763,610)
Principal payments received on loans........................ 58,503,760 64,724,164
Proceeds from sales of other real estate owned.............. 285,056 465,910
Purchases of premises and equipment......................... (1,777,905) (2,194,621)
(Increase) decrease in federal funds sold................... 5,216,072 (2,450,231)
------------ -------------
Net cash provided by (used in) investing activities....... (22,423,061) (40,664,041)
CASH FLOWS FROM FINANCING ACTIVITIES
Increase (decrease) in non-interest bearing deposits........ 1,140,971 8,049,071
Increase (decrease) in savings deposits..................... 3,124,769 11,931,857
Proceeds from the sale of certificates of deposit........... 21,650,490 29,992,267
Payments for maturing certificates of deposit............... (16,852,904) (15,698,706)
Increase (decrease) in federal funds purchased &
repurchase agreements...................................... 2,795,053 3,202,625
Increase (decrease) in other borrowed money................. 8,661,877 (4,852)
Proceeds from issuance of common stock...................... 15,819 29,250
Dividends paid.............................................. (669,823) (564,691)
------------ -------------
Net cash provided by financing activities................. 19,866,252 36,936,821
Net increase (decrease) in cash and due from banks........ 910,216 (1,195,697)
Cash and due from banks at beginning of period............ 10,310,839 12,208,408
------------ -------------
Cash and due from banks at end of period.................. $ 11,221,055 $ 11,012,711
============ =============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash payments for:
Interest.................................................. $6,623,481 $5,931,609
Income taxes.............................................. 650,000 900,000
</TABLE>
-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 SIX MONTHS ENDED JUNE 30, 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 2,484,050 0 2,484,050
Increase (decrease) in unrealized
gain on investment securities.... 0 0 0 0 (1,577,572) (1,577,572)
---------------------------------------------------------------------------------
Total Comprehensive Income 2,484,050 (1,577,572) 906,478
Sale of common stock............... 1,264 6,320 32,909 (23,410) 0 15,819
Cash dividends............... ..... 0 0 0 (669,824) 0 (669,824)
---------------------------------------------------------------------------------
Balance at end of period........... 2,576,708 $12,883,540 $10,052,975 $18,075,368 ($746,415) $40,265,468
<CAPTION>
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
Comprehensive Income
Net income....................... 0 0 0 2,341,648 0 2,341,648
Increase (decrease) in unrealized
gain on investment securities.... 0 0 0 0 (92,470) (92,470)
Total Comprehensive Income 2,341,648 (92,470) 2,249,178
---------------------------------------------------------------------------------
Sale of common stock............... 1,600 8,000 53,000 (31,750) 0 29,250
Cash dividends............... ..... 0 0 0 (564,691) 0 (564,691)
---------------------------------------------------------------------------------
Balance at end of period........... 2,567,772 $12,838,860 $9,746,301 $14,842,923 $618,121 $38,046,205
</TABLE>
See accompanying 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.
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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OLD POINT FINANCIAL CORPORATION
Parent only Balance Sheets June 30, December 31,
(Unaudited) 1999 1998
-----------------------------------------------------------------------------------------
<S> <C> <C>
Assets
Cash in bank.......................................... $ 45,422 $ 293,695
Investment Securities................................. 1,903,138 2,107,380
Total Loans........................................... 0 0
Investment in Subsidiaries............................ 38,303,476 37,597,430
Equipment............................................. 0 0
Other assets.......................................... 15,932 14,490
------------- -------------
Total Assets.......................................... $ 40,267,968 $ 40,012,995
============= =============
Liabilities and Stockholders' Equity
Total Liabilities..................................... $ 2,500 $ 0
Stockholders' Equity.................................. 40,265,468 40,012,995
------------- -------------
Total Liabilities & Stockholders' Equity.............. $ 40,267,968 $ 40,012,995
============= =============
<CAPTION>
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OLD POINT FINANCIAL CORPORATION Three Months Ended: Six Months Ended:
Parent only Income Statements June 30, June 30,
(Unaudited) 1999 1998 1999 1998
---------------------------------------------------------------------------------------------------------------------
<S> <C>
Income <C> <C> <C>
Cash dividends from Subsidiary........................ $ 350,000 $ 300,000 $ 1,210,000 $ 600,000
Interest and fees on loans............................ 0 0 0 0
Interest income from investment securities............ 23,758 25,400 49,865 51,880
Gains (losses) from sale of investment securities..... 0 0 0 0
Other income.......................................... 0 0 0 0
-----------------------------------------------------------
Total Income.......................................... 373,758 325,400 1,259,865 651,880
Expenses
Salaries and employee benefits........................ 0 0 0 0
Other expenses........................................ 7,168 11,219 29,833 33,007
-----------------------------------------------------------
Total Expenses........................................ 7,168 11,219 29,833 33,007
Income before taxes & undistributed
net income of subsidiaries........................ 366,590 314,181 1,230,032 618,873
Income tax............................................ 5,500 4,600 6,800 6,100
Net income before undistributed -----------------------------------------------------------
net income of subsidiaries.......................... 361,090 309,581 1,223,232 612,773
Undistributed net income of subisdiaries.............. 874,552 859,121 1,260,818 1,728,875
-----------------------------------------------------------
Net Income............................................ $ 1,235,642 $ 1,168,702 $ 2,484,050 $ 2,341,648
===========================================================
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- 6 -
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OLD POINT FINANCIAL CORPORATION Six Months Ended:
Parent only Statements of Cash Flows June 30,
(Unaudited) 1999 1998
-----------------------------------------------------------------------------------------
<S> <C> <C>
Cash Flows from Operating Activities:
Net Income............................................ $ 2,484,050 $ 2,341,648
Adjustments to reconcile net income to
net cash provided by operating activities:
Equity in undistributed income of subsidiary...... (1,260,818) (1,728,875)
Depreciation........................................ 0 0
Gains(losses) on sale of securities [net]......... 0 0
(Increase) Decrease in other assets............... 0 0
Increase (decrease in other liabilities).......... 2,500 6,100
------------- -------------
Net cash provided by operating activities............. 1,225,732 618,873
Cash flows from investing activities:
(Increase)decrease in investment securities........... 200,000 (250,000)
Investment in subsidiaries............................ (1,020,000) 0
Sale of equipment..................................... 0 0
Repayment of loans by customers....................... 0 0
------------- -------------
Net cash provided by investing activities............. (820,000) (250,000)
Cash flows from financing activities:
Proceeds from issuance of common stock................ 15,819 29,250
Dividends paid........................................ (669,823) (564,690)
------------- -------------
Net cash provided by financing activities............. (654,004) (535,440)
Net increase (decrease) in cash & due from banks...... (248,273) (166,567)
Cash & due from banks at beginning of period.......... 293,695 289,230
------------- -------------
Cash & due from banks at end of period................ $ 45,422 $ 122,663
============= =============
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- 7 -
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Item 2.
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Earnings Summary
Net income for the second quarter of 1999 increased 5.7% to
$1,235,642 from $1,168,702 for the comparable period in 1998.
Basic earnings per share were $0.48 in the second quarter of 1999
compared with $0.46 in 1998.
For the six months ended June 30, 1999 net income increased
6.1% to $2,484,050 from $2,341,648 in 1998. Basic earnings per
share were $.96 for the first six months of 1999 compared with
$.91 in 1998.
Return on average assets was 1.18% for the second quarter of
1999 and 1.24% for the comparable period in 1998. Return on
average equity was 12.06% for the second quarter of 1999 and
12.36% for the second quarter of 1998.
For the six months ended June 30, 1999 and 1998 return on
average assets was 1.20% and 1.28% respectively. Return on
average equity was 12.13% in 1999 and 12.50% in 1998.
Net Interest Income
Net interest income, on a fully tax equivalent basis,
increased $126 thousand, or 3.1%, for the second quarter of 1999
over 1998. Average earning assets increased 11.2% 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 4.62% in 1998 to 4.28% in 1999.
For the six months ended June 30, 1999 net interest income
increased $390 thousand, or 4.9%, over the comparable period in
1998. Comparing the first six months of 1999 to 1998, average
loans increased $24.3 million or 10.9% while investment
securities increased $28.2 million or 25.5%. Average earning
assets increased 13.0% and the net interest yield decreased from
4.63% in 1998 to 4.30% in 1999.
Interest expense increased $264 thousand or 8.4% in the
second quarter of 1999 from the second quarter of 1998, interest
bearing liabilities increased $33.0 million or 11.7 % in the
second quarter of 1999 over the same period in 1998.
For the six months ended June 30, 1999 interest expense increased
$598 thousand, or 9.9% over the same period in 1998. The cost of
funding those liabilities decreased 13 basis points from 1998.
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 June 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)**............... $254,178 $5,313 8.36% $225,381 $5,140 9.12%
Investment securities:
Taxable...................................... 83,276 1,252 6.01% 89,990 1,364 6.06%
Tax-exempt................................... 56,138 1,026 7.31% 30,637 600 7.83%
--------------------------------------------------------------------
Total investment securities................ 139,414 2,278 6.54% 120,627 1,964 6.51%
Federal funds sold............................. 2,344 31 5.29% 9,910 141 5.69%
--------------------------------------------------------------------
Total earning assets......................... $395,936 $7,622 7.70% $355,918 $7,245 8.14%
Time and savings deposits:
Interest-bearing transaction accounts........ $3,947 $23 2.33% $19,963 $109 2.18%
Money market deposit accounts................ 94,088 718 3.05% 67,413 567 3.36%
Savings accounts............................. 27,960 191 2.73% 26,575 181 2.72%
Certificates of deposit, $100,000 or more.... 31,502 446 5.66% 25,451 338 5.31%
Other certificates of deposit................ 130,234 1,698 5.22% 120,544 1,690 5.61%
--------------------------------------------------------------------
Total time and savings deposits............ 287,731 3,076 4.28% 259,946 2,885 4.44%
Federal funds purchased and securities sold
under agreement to repurchase................ 21,864 236 4.32% 20,173 223 4.42%
Federal Home Loan Bank advances................ 3,889 52 5.35% 0 0 0.00%
Other short term borrowings.................... 2,034 20 3.93% 2,035 25 4.91%
--------------------------------------------------------------------
Total interest bearing liabilities........... $315,518 3,384 4.29% $282,154 3,133 4.44%
Net interest income/yield...................... $4,238 4.28% $4,112 4.62%
<CAPTION>
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For the six months ended June 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> <C> <C> <C> <C> <C>
Loans (net of unearned income)**............... $247,768 $10,444 8.43% $223,421 $10,081 9.02%
Investment securities:
Taxable...................................... 84,347 2,523 5.98% 81,487 2,490 6.11%
Tax-exempt................................... 54,311 1,988 7.32% 29,001 1,165 8.03%
--------------------------------------------------------------------
Total investment securities................ 138,658 4,511 6.51% 110,488 3,655 6.62%
Federal funds sold............................. 3,690 92 4.99% 11,455 323 5.64%
--------------------------------------------------------------------
Total earning assets......................... $390,116 $15,047 7.71% $345,364 $14,059 8.14%
Time and savings deposits:
Interest-bearing transaction accounts........ $3,936 $46 2.34% $19,999 $213 2.13%
Money market deposit accounts................ 92,927 1,411 3.04% 63,399 1,037 3.27%
Savings accounts............................. 27,318 371 2.72% 26,321 358 2.72%
Certificates of deposit, $100,000 or more.... 29,332 810 5.52% 24,823 696 5.61%
Other certificates of deposit................ 131,308 3,459 5.27% 117,692 3,249 5.52%
--------------------------------------------------------------------
Total time and savings deposits............ 284,821 6,097 4.28% 252,234 5,553 4.40%
Federal funds purchased and securities sold
under agreement to repurchase................ 22,372 474 4.24% 19,992 456 4.56%
Federal Home Loan Bank advances................ 1,945 52 5.35% 0 0 0.00%
Other short term borrowings.................... 1,633 37 4.53% 1,928 53 5.50%
--------------------------------------------------------------------
Total interest bearing liabilities........... $310,771 6,660 4.29% $274,154 6,062 4.42%
Net interest income/yield...................... $8,387 4.30% $7,997 4.63%
* 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
</TABLE>
- 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 $300,000 for the first six
months of 1999, down from $350,000 in the comparable period in
1998. Loans charged off (net of recoveries) were $295,762
compared with loans charged off (net of recoveries) of $373,068
in the first six months of 1998. On an annualized basis net loan
charge-offs were 0.23% of total loans for the first half of 1999
compared with .33% for the same period in 1998.
On June 30, 1999 nonperforming assets totaled $570 thousand
compared with $1.1 million on June 30, 1998. The June 1999 total
consisted of $60 thousand in foreclosed real estate, $354
thousand in a former branch site now listed for sale, and $156
thousand in nonaccrual loans. 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. Loans
still accruing interest but past due 90 days or more increased to
$679 thousand as of June 30, 1999 compared with $670 thousand as
of June 30, 1998. The allowance for loan losses on June 30, 1999
was $2.9 million compared with $2.6 million on June 30, 1998. It
represented a multiple of 5.1 times nonperforming assets and 18.6
times nonperforming loans. The allowance for loan losses on June
30, 1999 was 1.10% of loans compared to 1.16% at June 30, 1998.
Other Income
For the second quarter of 1999 other income increased
$179,748, or 15.2%, and for the six months ended June 30, 1999
other income increased $334 thousand or 14.2%. In both periods,
the increase in income is attributed to an increase in fiduciary
income as well as higher deposit service charge income. ATM and
debit card income were also higher. The higher deposit fee
income increased mainly due to a fee increase in the fourth
quarter of 1998.
Other Expenses
For the second quarter of 1999 other expenses increased $281
thousand or 8.6% over the second quarter of 1998. For the six
months ending June 1999 other expenses increased $567 thousand
or 8.9% over the same period in 1998. These increases are due
to higher cost associated with opening two new branch
facilities. The costs include higher salary expense to staff
the new facilities and higher depreciation costs for buildings
and furniture.
Assets
At June 30, 1999 total assets were $425.2 million, up 5.2%
from $404.1 million at December 31, 1998. Total loans grew $24.4
million, or 10.4% and investment securities and federal funds
sold decreased by $6.2 million, or 4.3%, in 1999. Total deposits
increased $9.1 million, or 2.6% in 1999 and demand note balances
to the United States Treasury increased $3.6 million from year-
end 1998.
The Company purchased and opened a new facility in Chesapeake, VA
and will be opening a new branch in Norge, VA in August 1999.
The Company completed a spin-off of its Trust Division creating
the Old Point Trust and Financial Services, N. A. a wholly owned
subsidiary of the Company in April 1999.
10
<PAGE>
Capital Resources
The Company's capital position remains strong as evidenced
by the regulatory capital measurements. At June 30, 1999 the
Tier I capital ratio was 14.39%, the total capital ratio was
15.40% and the leverage ratio was 9.73%. 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, demand note to the US Treasury
and Federal Home Loan Bank advances.
The Company was liability sensitive as of June 30, 1999.
There were $140.4 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 $124.8 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 13 reflects the earlier of the maturity or
repricing data for various assets and liabilities as of June 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.
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 has taken action to ensure that all of its computer
hardware and software are Year 2000 compliant.
The Company has substantially completed 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.
11
<PAGE>
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 to determine the
Bank's compliance with the FFIEC's five phase plan.
The Company has substantially completed the capital expenditures
and operating costs associated with Year 2000 compliance. The
Company spent approximately $750 thousand in operating expenses
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.
12
<PAGE>
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------
INTEREST SENSITIVITY ANALYSIS
As of June 30, 1999 MATURITY
(in thousands) Within 4-12 1-5 Over 5
3 Months Months Years Years Total
-----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Uses of funds
Federal funds sold..................... 1,362 0 0 0 1,362
Taxable investments.................... 7,748 0 46,858 25,877 80,483
Tax-exempt investments................. 0 682 6,363 48,936 55,981
------------------------------------------------------
Total investments.................... 9,110 682 53,221 74,813 137,826
Loans:
Commercial........................... 21,370 2,816 44,528 3,352 72,066
Tax-exempt........................... 745 66 159 2,029 2,999
Installment.......................... 3,708 2,488 49,665 6,206 62,067
Real estate.......................... 18,881 6,734 62,963 33,704 122,282
Other................................ 356 0 533 0 889
------------------------------------------------------
Total loans............................ 45,060 12,104 157,848 45,291 260,303
------------------------------------------------------
Total earning assets................... 54,170 12,786 211,069 120,104 398,129
Sources of funds
Interest checking deposits............. 3,773 0 0 0 3,773
Money market deposit accounts.......... 93,056 0 0 0 93,056
Regular savings accounts............... 27,977 0 0 0 27,977
Certificates of deposit................
$100,000 or more..................... 8,269 13,110 8,756 0 30,135
Other time deposits.................... 35,558 56,002 39,498 0 131,058
Federal funds purchased and
securities sold under
agreements to repurchase............. 21,923 0 0 0 21,923
Other borrowed money................... 4,000 0 5,010 0 9,010
------------------------------------------------------
Total interest bearing liabilities..... 194,556 69,112 53,264 0 316,932
Rate sensitivity GAP................... (140,386) (56,326) 157,805 120,104 81,197
Cumulative GAP......................... (140,386) (196,712) (38,907) 81,197
</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 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
August 13, 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> JUN-30-1999
<CASH> 11,160
<INT-BEARING-DEPOSITS> 61
<FED-FUNDS-SOLD> 1,362
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 88,032
<INVESTMENTS-CARRYING> 48,432
<INVESTMENTS-MARKET> 47,745
<LOANS> 260,303
<ALLOWANCE> 2,859
<TOTAL-ASSETS> 425,195
<DEPOSITS> 352,476
<SHORT-TERM> 4,000
<LIABILITIES-OTHER> 1,520
<LONG-TERM> 5,010
0
0
<COMMON> 12,884
<OTHER-SE> 28,128
<TOTAL-LIABILITIES-AND-EQUITY> 425,195
<INTEREST-LOAN> 10,337
<INTEREST-INVEST> 3,835
<INTEREST-OTHER> 92
<INTEREST-TOTAL> 14,335
<INTEREST-DEPOSIT> 6,097
<INTEREST-EXPENSE> 6,660
<INTEREST-INCOME-NET> 7,675
<LOAN-LOSSES> 300
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 6,943
<INCOME-PRETAX> 3,118
<INCOME-PRE-EXTRAORDINARY> 3,118
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,484
<EPS-BASIC> .96
<EPS-DILUTED> .96
<YIELD-ACTUAL> 4.30
<LOANS-NON> 156
<LOANS-PAST> 680
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 2,990
<ALLOWANCE-OPEN> 2,855
<CHARGE-OFFS> 296
<RECOVERIES> 208
<ALLOWANCE-CLOSE> 28592
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 1,553
</TABLE>
