UNITED STATES
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, 2000
-------------------------------------------
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITES EXCHANGE ACT of 1934
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 May 1, 2000.
Class Outstanding at July 31, 2000
Common Stock, $5.00 par value 2,590,540 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, 2000 and December 31, 1999....................1
Consolidated Statement of Earnings
Three ended June 30, 2000 and 1999.....................2
Six months ended June 30, 2000 and 1999................2
Consolidated Statement of Cash Flows
Six months ended June 30, 2000 and 1999................3
Consolidated Statements of Changes in Stockholders' Equity
Six months ended June 30, 2000 and 1999................4
Notes to Consolidated Financial Statements......................5
Parent Only Balance Sheets
June 3, 2000 and December 31, 1999.....................6
Parent Only Statement of Earnings
Three months ended June 30, 2000 and 1999..............6
Six Months ended June 30, 2000 and 1999................6
Parent Only Statement of Cash Flows
Six months ended June 30, 2000 and 1999................7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations........................8
Analysis of Changes in Net Interest Income..................9
Item 3. Quantitative and Qualitative Disclosures about Market Risk.12
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K............................14
(i)
<PAGE>
<TABLE>
<CAPTION>
------------------------------------------------------------------------------
Unaudited June 30, December 31,
Consolidated Balance Sheets 2000 1999
------------------------------------------------------------------------------
<S>
Assets
<C> <C>
Cash and due from banks...................... $ 10,678,621 $ 10,226,423
Interest bearing balances due
from banks.................................. 280,744 173,914
Investments:
Securities available for sale,
at market................................. 81,145,014 81,146,906
Securities to be held to maturity.......... 45,835,238 45,838,726
Trading account securities................... 0 0
Federal funds sold........................... 8,983,082 241,055
Loans, total ................................ 310,219,254 281,646,439
Less reserve for loan losses............. 3,384,856 3,110,804
------------ ------------
Net loans............................ 306,834,398 278,535,635
Bank premises and equipment.................. 14,632,592 14,323,764
Other real estate owned...................... 353,864 353,864
Other assets................................. 6,164,496 5,453,316
------------ ------------
Total assets............................ $474,908,049 $436,293,603
Liabilities
Noninterest-bearing deposits................. $ 72,423,375 63,005,586
Savings deposits............................. 123,929,557 128,763,117
Time deposits................................ 170,231,126 169,148,814
------------ ------------
Total deposits............................ 366,584,058 360,917,517
Federal funds purchased and
securities sold under agreement to
repurchase.................................. 23,252,400 22,840,778
Interest-bearing demand notes issued
to the United States Treasury and
other liabilities for....................... 6,399,245 3,317,437
Federal Home Loan Bank....................... 34,000,000 7,000,000
Other liabilities............................ 2,096,308 1,404,194
------------ ------------
Total liabilities......................... 432,332,011 395,479,926
Stockholders' Equity
Common stock, $5.00 par value................ 12,917,005 12,916,310
2000 1999
Shares authorized.10,000,000 6,000,000
Shares outstanding 2,583,401 2,583,262
Surplus...................................... 10,188,069 10,185,985
Undivided profits............................ 21,405,925 19,674,272
Unrealized gain/(loss) on securities......... (1,934,961) (1,962,890)
------------ ------------
Total stockholders' equity............... 42,576,038 40,813,677
------------ ------------
Total liabilities and stockholders....... $474,908,049 $436,293,603
</TABLE>
1
<PAGE>
<TABLE>
<CAPTION>
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Three Months Ended Six Months Ended
Consolidated Statements of Earnings June 30, June 30,
2000 1999 2000 1999
---------------------------------------------------------------------------------------------------
<S>
Interest Income
<C> <C> <C> <C>
Interest and fees on loans $6,385,334 $5,293,175 $12,331,676 $10,408,290
Interest on federal funds sold 29,843 30,939 49,284 92,339
Interest on securities:
Interest on United States Treasury
securities (taxable) 15,956 1,251,604 31,856 2,522,704
Interest on obligations of other
United States Government agencies (taxable) 976,883 0 1,954,329 0
Interest on obligations of states and
political subdivisions (tax exempt) 688,545 677,283 1,381,973 1,312,023
Interest on obligations of states and
political subdivisions (taxable) 19,907 39,813 0
Interest on trading account securities 0 0 0 0
Dividends and interest on all other securities 87,344 0 167,958 0
---------- ---------- ---------- ----------
Total interest on securities 1,788,635 1,928,887 3,575,929 3,834,727
Trading account securities 0 0 0 0
---------- ---------- ---------- ----------
Total interest income 8,203,812 7,253,001 15,956,889 14,335,356
Interest Expense
Interest on savings deposits 952,789 932,676 1,927,416 1,828,639
Interest on time deposits 2,333,873 2,143,927 4,584,347 4,268,727
Interest on federal funds purchased and
securities sold under agreement
to repurchase 369,994 235,626 659,428 473,966
Interest on Federal Home Loan Bank advances 343,458 51,869 513,541 51,869
Interest on demand notes (note balances)
issued to the United States Treasury
and on other borrowed 35,586 20,038 62,310 36,857
---------- ---------- ---------- ----------
Total interest expense 4,035,700 3,384,136 7,747,042 6,660,058
Net interest income 4,168,112 3,868,865 8,209,847 7,675,298
Provision for loan losses 150,000 150,000 325,000 300,000
---------- ---------- ---------- ----------
Net interest income after provision
for loan losses 4,018,112 3,718,865 7,884,847 7,375,298
Other Income
Income from fiduciary activities 630,000 599,850 1,260,000 1,109,700
Service charges on deposit accounts 553,458 552,167 1,094,733 1,077,500
Other service charges, commissions and fees 163,292 156,207 369,824 363,133
Other operating income 49,127 51,516 100,998 134,973
Security gains (losses) 6,734 0 6,734 0
Trading account income 0 0 0 0
---------- ---------- ---------- ----------
Total other income 1,402,611 1,359,740 2,832,289 2,685,306
Other Expenses
Salaries and employee benefits 2,286,757 2,154,511 4,592,608 4,225,224
Occupancy expense of Bank premises 248,237 242,617 514,605 472,762
Furniture and equipment expense 391,104 318,286 766,979 605,785
Other operating expenses 933,224 844,849 1,779,174 1,638,783
---------- ---------- ---------- ----------
Total other expenses 3,859,322 3,560,263 7,653,366 6,942,554
---------- ---------- ---------- ----------
Income before taxes 1,561,401 1,518,342 3,063,770 3,118,050
Applicable income taxes 319,000 282,700 606,000 634,000
---------- ---------- ---------- ----------
Net income $1,242,401 $1,235,642 $2,457,770 $2,484,050
<CAPTION>
Per Share
<S> <C> <C> <C> <C>
Based on weighted average number of
common shares outstanding 2,583,401 2,576,377 2,583,396 2,576,103
Basic Earnings per Share 0.48 0.48 0.95 0.96
Diluted Earnings per Share 0.48 0.48 0.95 0.96
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
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OLD POINT FINANCIAL CORPORATION Six Months Ended
Consolidated Statements of Cash Flows June 30,
Unaudited 2000 1999
----------------------------------------------------------------------------------------------------------------------
<S>
CASH FLOWS FROM OPERATING ACTIVITIES <C> <C>
Net income..................................................................... $ 2,457,770 $ 2,484,050
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization................................................ 630,526 531,145
Provision for loan losses.................................................... 325,000 300,000
(Gains) loss on sale of investment securities, net........................... (6,734) 0
Net amortization & accretion of securities .................................. 36,468 44,931
Net (increase) decrease in trading account................................... 0 0
(Increase) in other real estate owned........................................ 0 (215,056)
(Increase) decrease in other assets
(net of tax effect of FASB 115 adjustment)................................. (725,568) 17,512
Increase (decrease) in other liabilities..................................... 692,114 304,443
----------- ----------
Net cash provided by operating activities.................................. 3,409,576 3,467,025
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of securities ..................................................... (712,037) (22,912,251)
Proceeds from maturities & calls of securities .............................. 730,000 21,500,000
Proceeds from sales of available - for - sale securities..................... 0 0
Proceeds from sales of held - to - maturity securities....................... 0 0
Loans made to customers...................................................... (86,656,197) (83,237,793)
Principal payments received on loans......................................... 58,032,434 58,503,760
Proceeds from sales of other real estate owned............................... 0 285,056
Purchases of premises and equipment.......................................... (939,354) (1,777,905)
(Increase) decrease in federal funds sold.................................... (8,742,027) 5,216,072
----------- ----------
Net cash provided by (used in) investing activities........................ (38,287,181) (22,423,061)
CASH FLOWS FROM FINANCING ACTIVITIES
Increase (decrease) in non-interest bearing deposits......................... 9,417,789 1,140,971
Increase (decrease) in savings deposits...................................... 4,833,560) 3,124,769
Proceeds from the sale of certificates of deposit............................ 33,126,846 21,650,490
Payments for maturing certificates of deposit................................ (32,044,534) (16,852,904)
Increase (decrease) in federal funds purchased &
repurchase agreements....................................................... 411,622 2,795,053
Increase (decrease) in Federal home Loan Bank Advances...................... 27,000,000 0
Increase (decrease) in other borrowed money.................................. 3,081,808 8,661,877
Proceeds from issuance of common stock....................................... 14 15,819
Dividends paid............................................................... (723,352) (669,823)
----------- ----------
Net cash provided by financing activities.................................. 35,436,633 19,866,252
Net increase (decrease) in cash and due from banks......................... 559,028 910,216
Cash and due from banks at beginning of period............................. 10,400,337 10,310,839
Cash and due from banks at end of period................................... $10,959,365 $11,221,055
=========== ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash payments for:
Interest................................................................... $ 7,525,157 $ 6,623,481
Income taxes............................................................... 650,000 650,000
</TABLE>
See accompanying notes
3
<PAGE>
<TABLE>
<CAPTION>
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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
---------------------------------------------------------------------------------------------------------------------------
<S>
FOR SIX MONTHS ENDED JUNE 30, 2000
<C> <C> <C> <C> <C> <C>
Balance at beginning of period...... 2,583,262 $12,916,310 $10,185,985 $19,674,272 $(1,962,890) $40,813,677
Comprehensive Income
Net income........................ 0 0 0 2,457,770 0 2,457,770
Increase (decrease) in unrealized
gain on investment securities 0 0 0 0 27,929 27,929
--------- ---------- ---------- ---------- --------- -----------
Total Comprehensive Income 2,457,770 27,929 2,485,699
Sale of common stock................ 139 695 2,084 (2,765) 0 14
Cash dividends............... ...... 0 0 0 (723,352) 0 (723,352)
--------- ---------- ---------- ---------- --------- -----------
Balance at end of period............ 2,583,401 $12,917,005 $10,188,069 $21,405,925 $(1,934,961) $42,576,038
FOR SIX MONTHS ENDED JUNE 30, 1999
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
</TABLE>
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 1999
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
<PAGE>
<TABLE>
<CAPTION>
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OLD POINT FINANCIAL CORPORATION
Parent only Balance Sheets June 30, December 31,
(Unaudited) 2000 1999
-------------------------------------------------------------------------------
<S> <C> <C>
Assets
Cash in bank................................ $ 98,523 $ 59,502
Investment Securities....................... 2,075,000 2,105,000
Total Loans................................. 0 0
Investment in Subsidiaries.................. 40,347,892 38,550,254
Equipment................................... 0 0
Other assets................................ 54,623 25,361
------------ ------------
Total Assets................................ $ 42,576,038 $ 40,740,117
============ ============
Liabilities and Stockholders' Equity
Total Liabilities........................... $ 0 $ 0
Stockholders' Equity........................ 42,576,038 40,740,117
------------ ------------
Total Liabilities & Stockholders' Equity.... $ 42,576,038 $ 40,740,117
============ ============
<CAPTION>
------------------------------------------------------------------------------------------------------------
OLD POINT FINANCIAL CORPORATION Three Months Ended: Six Months Ended:
Parent only Income Statements June 30, June 30,
(Unaudited) 2000 1999 2000 1999
------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Income
Cash dividends from Subsidiary.............. $ 400,000 $ 350,000 $ 800,000 $ 1,210,000
Interest and fees on loans.................. 0 0 0 0
Interest income from investment securities.. 29,594 23,758 58,567 49,865
Gains (losses) from sale of investment secur 0 0 0 0
Other income................................ 36,000 0 72,000 0
----------- ------------ ------------ ------------
Total Income................................ 465,594 373,758 930,567 1,259,865
Expenses
Salaries and employee benefits.............. 58,188 0 119,758 0
Other expenses.............................. 39,968 7,168 87,189 29,833
----------- ------------ ------------ ------------
Total Expenses.............................. 98,156 7,168 206,947 29,833
----------- ------------ ------------ ------------
Income before taxes & undistributed
net income of subsidiaries.............. 367,438 366,590 723,620 1,230,032
Income tax.................................. (18,000) 5,500 (38,000) 6,800
----------- ------------ ------------ ------------
Net income before undistributed
net income of subsidiaries................ 385,438 361,090 761,620 1,223,232
Undistributed net income of subsidiaries.... 856,963 874,552 1,696,150 1,260,818
----------- ------------ ------------ ------------
Net Income.................................. $ 1,242,401 $ 1,235,642 $ 2,457,770 $ 2,484,050
============ ============ ============ ============
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
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OLD POINT FINANCIAL CORPORATION Six Months Ended:
Parent only Statements of Cash Flows June 30,
(Unaudited) 2000 1999
-----------------------------------------------------------------------------
<S> <C> <C>
Cash Flows from Operating Activities:
Net Income.................................. $ 2,457,770 $ 2,484,050
Adjustments to reconcile net income to
net cash provided by operating activities:
Equity in undistributed income
of subsidiaries........................ (1,696,151) (1,260,819)
Depreciation.............................. 0 0
Gains(losses) on sale of securities[net] 0 0
(Increase) Decrease in other assets..... (29,261) 0
Increase (decrease in other liabilities) 0 2,500
----------- ------------
Net cash provided by operating activities... 732,358 1,225,731
Cash flows from investing activities:
(Increase)decrease in investment securities. 30,000 200,000
Investment in subsidiaries ................. 0 (1,020,000)
Sale of equipment........................... 0 0
Repayment of loans by customers............. 0 0
Net cash provided by investing activities... 30,000 (820,000)
----------- ------------
Cash flows from financing activities:
Proceeds from issuance of common stock...... 15 15,819
Dividends paid.............................. (723,352) (669,823)
----------- ------------
Net cash provided by financing activities... (723,337) (654,004)
Net increase (decrease) in cash & due
from banks................................. 39,021 (248,273)
Cash & due from banks at beginning of period 59,502 293,695
----------- ------------
Cash & due from banks at end of period...... $ 98,523 $ 45,422
============ ============
</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 2000 increased .55% to
$1,242,401 from $1,235,642 for the comparable period in 1999.
Basic earnings per share were $0.48 in the second quarter of 2000
compared with $0.48 in 1999.
For the six months ended June 30, 2000 net income decreased 1.1%
to $2,457,770 from $2,484,050 in 1999. Basic earnings per share
were $.95 for the first six months of 2000 compared with $.96 in
1999.
Return on average assets was 1.09% for the second quarter of 2000
and 1.18% for the comparable period in 1999. Return on average
equity was 11.82% for the second quarter of 2000 and 12.06% for
the second quarter of 1999.
For the six months ended June 30, 2000 and 1999 return on average
assets was 1.10% and 1.20% respectively. Return on average
equity was 11.83% in 1999 and 12.13% in 1999.
Net Interest Income
Net interest income, on a fully tax equivalent basis, increased
$360 thousand, or 8.5%, for the second quarter of 2000 over 1999.
Average earning assets increased 9.2% 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 4.28% in
1999 to 4.25% in 2000.
For the six months ended June 30, 2000 net interest income on a
fully tax equivalent basis increased $581 thousand, or 7.0%, over
the comparable period in 1999. Comparing the first six months of
2000 to 1999, average loans increased $45.4 million or 18.3%
while investment securities decreased $8.7 million or 6.3%.
Average earning assets increased 8.6% and the net interest yield
decreased from 4.30% in 1999 to 4.22% in 2000.
Interest expense increased $652 thousand or 19.3% in the second
quarter of 2000 from the second quarter of 1999, interest bearing
liabilities increased $33.6 million or 10.7 % in the second
quarter of 2000 over the same period in 1999.
For the six months ended June 30, 2000 interest expense increased
$1.1 million, or 16.3% over the same period in 1999. The cost of
funding those liabilities increased 27 basis points from 1999.
Page 9 shows an analysis of average earning assets, interest
bearing liabilities and rates and yields.
8
<PAGE>
<TABLE>
<CAPTION>
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OLD POINT FINANCIAL CORPORATION
NET INTEREST INCOME ANALYSIS For the quarter ended June 30,
(Fully taxable equivalent basis) * 2000 1999
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)** $301,102 $6,412 8.52% $254,178 $5,313 8.36%
Investment securities:
Taxable 72,906 1,100 6.04% 83,276 1,252 6.01%
Tax-exempt 56,910 1,092 7.68% 56,138 1,026 7.31%
-------- ------ -------- ------
Total investment securities 129,816 2,192 6.75% 139,414 2,278 6.54%
Federal funds sold 1,795 30 6.69% 2,344 31 5.29%
-------- ------ -------- ------
Total earning assets $432,713 $8,634 7.98% $395,936 $7,622 7.70%
======== ====== ======== ======
Time and savings deposits:
Interest-bearing transaction accounts $ 3,923 23 2.35% $3,947 $ 23 2.33%
Money market deposit accounts 96,943 735 3.03% 94,088 718 3.05%
Savings accounts 28,552 194 2.72% 27,960 191 2.73%
Certificates of deposit, $100,000 or more 31,647 465 5.88% 31,502 446 5.66%
Other certificates of deposit 135,279 1,869 5.53% 130,234 1,698 5.22%
-------- ------ -------- -----
Total time and savings deposits 296,344 3,286 4.44% 287,731 3,076 4.28%
Federal funds purchased and securities sold
under agreement to repurchase 28,145 371 5.27% 21,864 236 4.32%
Federal Home Loan Bank advances 21,975 344 6.26% 3,889 52 0.00%
Other short term borrowings 2,665 35 5.25% 2,034 20 3.93%
-------- ------ -------- ------
Total interest bearing liabilities $349,129 4,036 4.62% $315,518 3384 4.29%
Net interest income/yield $4,598 4.25% $4,238 4.28%
====== ======
<CAPTION>
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OLD POINT FINANCIAL CORPORATION
NET INTEREST INCOME ANALYSIS For the six months ended June 30,
(Fully taxable equivalent basis) * 2000 1999
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)** $293,154 $12,377 8.44% $247,768 $10,444 8.43%
Investment securities:
Taxable 63,536 2,194 6.91% 84,347 2,523 5.98%
Tax-exempt 66,413 2,094 6.31% 54,311 1,988 7.32%
-------- ------ -------- ------
Total investment securities 129,949 4,288 6.60% 138,658 4,511 6.51%
Federal funds sold. 1,530 49 6.41% 3,690 92 4.99%
-------- ------ -------- -----
Total earning assets $424,633 $16,714 7.87% $390,116 $15,047 7.71%
Time and savings deposits:
Interest-bearing transaction accounts $ 3,967 $ 47 2.37% $ 3,936 $ 46 2.34%
Money market deposit accounts 95,245 1,492 3.13% 92,927 1,411 3.04%
Savings accounts 28,535 388 2.72% 27,318 371 2.72%
Certificates of deposit, $100,000 or more 31,571 890 5.64% 29,332 810 5.52%
Other certificates of deposit 135,138 3,694 5.47% 131,308 3,459 5.27%
-------- ------ -------- -----
Total time and savings deposits 294,455 6,511 4.42% 284,821 6,097 4.28%
Federal funds purchased and securities sold
under agreement to repurchase. 26,234 660 5.03% 22,372 474 4.24%
Federal Home Loan Bank advance 16,934 514 6.07% 1,945 52 0.00%
Other short term borrowings 2,291 62 5.41% 1,633 37 4.53%
-------- ------ --------- -----
Total interest bearing liabilities $339,914 7,747 4.56% $310,771 6,660 4.29%
Net interest income/yield $8,967 4.22% $ 8,387 4.30%
====== ==== ======= =====
</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 $325 thousand for the first six
months of 2000, up from $300 thousand in the comparable period in
1999. Loans charged off (net of recoveries) were $50,948
compared with loans charged off (net of recoveries) of $295,762
in the first six months of 1999. On an annualized basis net loan
charge-offs were 0.03% of total loans for the first half of 2000
compared with 0.23% for the same period in 1999.
On June 30, 2000 nonperforming assets totaled $833 thousand
compared with $570 thousand on June 30, 1999. The June 2000 total
consisted of $354 thousand in a former branch site now listed for
sale, and $479 thousand in nonaccrual loans. The June 1999 total
consisted of $60 thousand in foreclosed real estate, $354
thousand in a former branch site, and $156 thousand in nonaccrual
loans. Loans still accruing interest but past due 90 days or
more increased to $687 thousand as of June 30, 2000 compared with
$679 thousand as of June 30, 1999. The allowance for loan losses
on June 30, 2000 was $3.4 million compared with $2.9 million on
June 30, 1999. It represented a multiple of 4.1 times
nonperforming assets and 7.1 times nonperforming loans. The
allowance for loan losses was 1.10% of loans on June 30, 2000 and
1999.
Other Income
For the second quarter of 2000 other income increased $43
thousand, or 3.2%, and for the six months ended June 30, 2000
other income increased $147 thousand or 5.5%. In both periods,
the increase in income is attributed to an increase in fiduciary
income as well as an increase in other commissions and fees.
Other Expenses
For the second quarter of 2000 other expenses increased $299
thousand or 8.4% over the second quarter of 1999. For the six
months ending June 2000 other expenses increased $711 thousand or
10.2% over the same period in 1999. 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, 2000 total assets were $474.9 million, up 8.9% from
$436.3 million at December 31, 1999. Total loans grew $28.6
million or 10.1%. The majority of this growth was in the
installment and real estate portfolios. Federal Home Loan Bank
advances increased $27 million in 2000 from year-end 1999 to fund
the to the loan growth.
Investment securities and federal funds sold decreased by $1.8
million, or 1.4%, in 2000. Total deposits increased $5.7 million,
or 1.6% in 2000 and demand note balances to the United States
Treasury increased $3.1 million from year-end 1999.
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Capital Ratios
The Company's capital position remains strong as evidenced by the
regulatory capital measurements. At June 30, 2000 the Tier I
capital ratio was 13.39%, the total capital ratio was 14.41% and
the leverage ratio was 9.60%. These ratios were all well above
the regulatory minimum levels of 4.00%, 8.00%, and 3.00%,
respectively.
Capital Resources
The Company purchased land for a new branch site in Williamsburg,
Virginia. An office building will be constructed on this site in
2001. The Company has committed to purchase an item processing
system and an imaging system. Testing and implementation for
these systems are expected to be completed by the end of 2000.
The Company believes that it has adequate internal and external
resources available to fund its capital expenditure requirements.
Liquidity
Liquidity is the ability of the Company to meet present and
future obligations to depositors and borrowers. As stated above
total loans increased $28.6 million since year-end 1999. Funding
of these loans has been provided by Federal Home Loan Bank
advances. Management does not expect this strong loan demand to
continue. However, if this trend does continue liquidity can be
provided internally 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.
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.
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Item 3
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Interest Sensitivity
Old Point Financial Corporation does not have any risk sensitive
instruments entered into for trading purposes.
Trading market risk is the risk to net income from changes in the
fair values of assets and liabilities that are marked-to-market
through the income statement. The Company does not carry a
trading portfolio and is currently not exposed to trading risk.
Old Point Financial Corporation does have risk sensitive
instruments entered into for other than trading purposes. Based
on scheduled maturities, the Company was liability sensitive as
of June 30, 2000. There were $134 million more in liabilities
than assets subject to repricing within three months. This is a
slight improvement from the December 31, 1999.
When the company is liability sensitive, 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 deposits totaling $123.9 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.
Market risk is the risk of loss due to changes in instrument
values or earnings variations caused by changes in interest
rates, commodity prices and market variables such as equity price
risk. Old Point Financial Corporation's equity price risk is
immaterial and the company's primary exposure is to interest rate
risk.
Non-trading market risk is the risk to net income from changes in
interest rates on asset and liabilities, other than trading. The
risk arises through the potential mismatch resulting from timing
differences in repricing of loans and deposits. Old Point
Financial Corporation monitors this risk by reviewing the timing
differences and using a portfolio rate shock model that projects
various changes in interest income under a changing rate
environment of up to plus or minus 300 basis points. The rate
shock model reveals that a 200 basis point rise in rates would
cause approximately a 1.49% decease in net income. The model
indicates a 300 basis point rise in rates would cause
approximately a 2.29% decrease in net income at June 30, 2000.
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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 2000.
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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 11, 2000
By: /s/Louis G Morris
Louis G. Morris
Executive Vice President and CFO
By: /s/ Laurie D Grabow
Laurie D. Grabow
Senior Vice President
Principal Financial and Accounting Officer
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