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 March 31, 2001 [ ] 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 April 30, 2001. Class Outstanding at April 30, 2001 Common Stock, $5.00 par value 2,590,540 shares
OLD POINT FINANCIAL CORPORATION FORM 10-Q INDEX PART I - FINANCIAL INFORMATION Page ---- Item 1. Financial Statements ............................................ 1 Consolidated Balance Sheets March 31, 2001 and December 31, 2000 ..................... 1 Consolidated Statement of Earnings Three months ended March 31, 2001 and 2000 ............... 2 Consolidated Statement of Cash Flows Three months ended March 31, 2001 and 2000 ............... 3 Consolidated Statements of Changes in Stockholders' Equity Three months ended March 31, 2001 and 2000 ............... 4 Notes to Consolidated Financial Statements ...................... 5 Parent Only Balance Sheets March 31, 2001 and December 31, 2000 .............. 6 Parent Only Statement of Earnings Three months ended March 31, 2001 and 2000 ........ 6 Parent Only Statement of Cash Flows Three months ended March 31, 2001 and 2000 ........ 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 ............................... 13 (i)
<TABLE> <CAPTION> - ----------------------------------------------------------------------------------------------- Unaudited March 31, December 31, Consolidated Balance Sheets 2001 2000 - ----------------------------------------------------------------------------------------------- <S> <C> <C> Assets Cash and due from banks......................................... $ 9,640,884 $ 10,770,982 Interest bearing balances due from banks........................ 82,078 272,790 ------------ ------------ Total cash due from banks $ 9,722,962 $ 11,043,772 Investments: Securities available for sale, at market...................... 78,503,979 77,096,247 Securities to be held to maturity............................. 44,245,787 46,240,703 Trading account securities...................................... - - Federal funds sold.............................................. 22,749,381 5,397,087 Loans, total ................................................... 327,103,860 319,909,569 Less reserve for loan losses.................................. 3,461,666 3,648,819 Net loans.................................................. 323,642,194 316,260,750 Bank premises and equipment..................................... 15,076,362 15,059,350 Other real estate owned......................................... 750,000 750,000 Other assets.................................................... 4,392,762 5,248,347 ------------ ------------ Total assets.................................................. $499,083,427 $477,096,256 ============ ============ Liabilities Noninterest-bearing deposits.................................... $ 69,272,128 $ 65,055,835 Savings deposits................................................ 134,808,834 127,659,896 Time deposits................................................... 192,154,041 182,063,287 ------------ ------------ Total deposits................................................ 396,235,003 374,779,018 Federal funds purchased and securities sold under agreement to repurchase....................................... 26,400,174 27,038,033 Interest-bearing demand notes issued to the United States Treasury and other liabilities for borrowed money............. 626,584 2,088,637 Federal Home Loan Bank.......................................... 25,000,000 25,000,000 Other liabilities............................................... 2,555,813 1,693,083 ------------ ------------ Total liabilities............................................. 450,817,574 430,598,771 Stockholders' Equity Common stock, $5.00 par value................................... $ 12,952,700 $ 12,952,700 2001 2000 Shares authorized........ 10,000,000 10,000,000 Shares outstanding....... 2,590,540 2,590,540 Surplus......................................................... 10,288,301 10,288,301 Undivided profits............................................... 24,150,337 23,297,402 Unrealized gain/(loss) on securities............................ 874,515 (40,918) ------------ ------------ Total stockholders' equity.................................... 48,265,853 46,497,485 ------------ ------------ Total liabilities and stockholders' equity.................... $499,083,427 $477,096,256 ============ ============ </TABLE> -1-
<TABLE> <CAPTION> - ------------------------------------------------------------------------------------ Three Months Ended Consolidated Statements of Earnings March 31 2001 2000 - ------------------------------------------------------------------------------------ <S> <C> <C> Interest Income Interest and fees on loans............................... $6,930,782 $5,946,342 Interest on federal funds sold........................... 170,863 19,441 Interest on securities: Interest on United States Treasury securities (taxable).. 23,997 15,900 Interest on obligations of other United States Government agencies (taxable)............ 904,798 977,446 Interest on obligations of states and political subdivisions (tax exempt).................... 635,463 692,534 Interest on obligations of states and political subdivisions (taxable)....................... 19,906 - Interest on trading account securities................... - - Dividends and interest on all other securities........... 91,322 101,414 ---------- ---------- Total interest on securities........................... 1,675,486 1,787,294 Trading account securities............................... - - Total interest income.................................. 8,777,131 7,753,077 Interest Expense Interest on savings deposits............................. 930,394 974,627 Interest on time deposits................................ 2,838,115 2,250,474 Interest on federal funds purchased and securities sold under agreement to repurchase..................... 314,808 289,434 Interest on Federal Home Loan Bank advances.............. 379,375 170,083 Interest on demand notes (note balances) issued to the United States Treasury and on other borrowed money..... 25,769 26,724 ---------- ---------- Total interest expense................................ 4,488,461 3,711,342 Net interest income...................................... 4,288,670 4,041,735 Provision for loan losses................................ 150,000 175,000 ---------- ---------- Net interest income after provision for loan losses...... 4,138,670 3,866,735 Other Income Income from fiduciary activities......................... 621,930 630,000 Service charges on deposit accounts...................... 600,679 541,275 Other service charges, commissions and fees.............. 209,280 206,533 Other operating income................................... 49,843 51,870 Security gains (losses).................................. - - Trading account income................................... - - ---------- ---------- Total other income..................................... 1,481,732 1,429,678 Other Expenses Salaries and employee benefits........................... 2,403,413 2,305,851 Occupancy expense of Bank premises....................... 263,132 266,368 Furniture and equipment expense.......................... 419,665 375,875 Other operating expenses................................. 939,451 845,950 ---------- ---------- Total other expenses................................... 4,025,661 3,794,044 ---------- ---------- Income before taxes...................................... 1,594,741 1,502,369 Applicable income taxes ................................. 353,225 287,000 ---------- ---------- Net income............................................... $1,241,516 $1,215,369 ========== ========== Per Share Based on weighted average number of common shares outstanding.............................. 2,590,540 2,583,396 Basic Earnings per Share 0.48 0.47 Diluted Earnings per Share 0.48 0.47 </TABLE> -2-
<TABLE> <CAPTION> - -------------------------------------------------------------------------------------------- OLD POINT FINANCIAL CORPORATION Three Months Ended Consolidated Statements of Cash Flows March 31, (Unaudited) 2001 2000 - -------------------------------------------------------------------------------------------- <S> <C> <C> CASH FLOWS FROM OPERATING ACTIVITIES Net income....................................................... $ 1,241,516 $ 1,215,369 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization.................................. 346,226 327,688 Provision for loan losses...................................... 150,000 175,000 (Gains) loss on sale of investment securities, net............. - - Net amortization & accretion of securities .................... 8,363 18,251 Net (increase) decrease in trading account..................... - - (Increase) in other real estate owned.......................... - - (Increase) decrease in other assets (net of tax effect of FASB 115 adjustment)................... 383,998 (57,941) Increase (decrease) in other liabilities....................... 862,730 559,156 ----------- ----------- Net cash provided by operating activities.................... 2,992,833 2,237,523 CASH FLOWS FROM INVESTING ACTIVITIES Purchases of securities ....................................... (6,009,159) (119,504) Proceeds from maturities & calls of securities ................ 7,700,000 475,000 Proceeds from sales of available - for - sale securities....... 275,000 - Proceeds from sales of held - to - maturity securities......... - - Loans made to customers........................................ (38,294,407) (39,185,829) Principal payments received on loans........................... 30,762,963 26,475,704 Proceeds from sales of other real estate owned................. - - Purchases of premises and equipment............................ (363,238) (288,826) (Increase) decrease in federal funds sold...................... (17,352,294) (9,611,225) ----------- ----------- Net cash provided by (used in) investing activities.......... (23,281,135) (22,254,680) CASH FLOWS FROM FINANCING ACTIVITIES Increase (decrease) in non-interest bearing deposits........... 4,216,293 12,611,766 Increase (decrease) in savings deposits........................ 7,148,938 2,125,966 Proceeds from the sale of certificates of deposit.............. 339,440,889 12,649,748 Payments for maturing certificates of deposit.................. (329,350,135) (16,979,690) Increase (decrease) in federal funds purchased & repurchase agreements......................................... (637,859) 422,734 Increase (decrease) in Federal Home Loan Bank advances......... - 10,000,000 Increase (decrease) in other borrowed money.................... (1,462,053) 276,652 Proceeds from issuance of common stock......................... - 14 Dividends paid................................................. (388,581) (361,676) ----------- ----------- Net cash provided by financing activities.................... 18,967,492 20,745,514 Net increase (decrease) in cash and due from banks........... (1,320,810) 728,357 Cash and due from banks at beginning of period............... 11,043,772 10,400,337 ----------- ----------- Cash and due from banks at end of period..................... $ 9,722,962 $11,128,694 =========== =========== SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION Cash payments for: Interest..................................................... $ 4,376,996 $ 3,657,156 Income taxes................................................. - - </TABLE> See accompanying notes -3-
<TABLE> <CAPTION> - -------------------------------------------------------------------------------------------------------------------------------- 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> <C> <C> <C> <C> <C> <C> FOR THREE MONTHS ENDED MARCH 31, 2001 Balance at beginning of period.............. 2,590,540 $12,952,700 $10,288,301 $23,297,402 $ (40,918) $46,497,485 Comprehensive Income Net income................................ - - - 1,241,516 - 1,241,516 Increase (decrease) in unrealized gain on investment securities - - - - 915,433 915,433 --------- ----------- ----------- ----------- ----------- ----------- Total Comprehensive Income 1,241,516 915,433 2,156,949 Sale of common stock........................ - - - - - - Cash dividends............... .............. - - - (388,581) - (388,581) --------- ----------- ----------- ----------- ----------- ----------- Balance at end of period.................... 2,590,540 $12,952,700 $10,288,301 $24,150,337 $ 874,515 $48,265,853 FOR THREE MONTHS ENDED MARCH 31, 2000 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................................ - - - 1,215,369 - 1,215,369 Increase (decrease) in unrealized gain on investment securities - - - - (9,222) (9,222) --------- ----------- ----------- ----------- ----------- ----------- Total Comprehensive Income 1,215,369 (9,222) 1,206,147 Sale of common stock........................ 139 695 2,084 (2,765) - 14 Cash dividends............... .............. - - - (361,676) - (361,676) --------- ----------- ----------- ---------- ----------- ----------- Balance at end of period.................... 2,583,401 $12,917,005 $10,188,069 $20,525,200 $(1,972,112) $41,658,162 </TABLE> See accompanying notes -4-
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 2000 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. 3. Certain amounts in the financial statements have been reclassified to conform with classifications adopted in the current year. -5-
<TABLE> <CAPTION> - ------------------------------------------------------------------------------------ OLD POINT FINANCIAL CORPORATION Parent only Balance Sheets March 31, December 31, (Unaudited) 2001 2000 - ------------------------------------------------------------------------------------ <S> <C> <C> Assets Cash in bank.......................................... $ 63,414 $ 225,339 Investment Securities................................. 2,305,000 2,170,000 Total Loans........................................... - - Investment in Subsidiaries............................ 45,832,306 44,089,034 Other assets.......................................... 69,308 13,112 ----------- ----------- Total Assets.......................................... $48,270,028 $46,497,485 =========== =========== Liabilities and Stockholders' Equity Total Liabilities..................................... $ 4,175 $ - Stockholders' Equity.................................. 48,265,853 46,497,485 ----------- ----------- Total Liabilities & Stockholders' Equity.............. $48,270,028 $46,497,485 =========== =========== <CAPTION> - ---------------------------------------------------------------------------------- OLD POINT FINANCIAL CORPORATION Three Months Ended: Parent only Income Statements March 31, (Unaudited) 2001 2000 - ---------------------------------------------------------------------------------- <S> <C> <C> Income Cash dividends from Subsidiaries...................... $ 425,000 $ 400,000 Interest and fees on loans............................ - - Interest income from investment securities............ 31,356 28,973 Gains (losses) from sale of investment securities..... - - Other income.......................................... 36,000 36,000 ----------- ----------- Total Income.......................................... 492,356 464,973 Expenses Salaries and employee benefits........................ 62,014 61,570 Other expenses........................................ 32,440 47,221 ----------- ----------- Total Expenses........................................ 94,454 108,791 ----------- ----------- Income before taxes & undistributed net income of subsidiaries........................ 397,902 356,182 Income tax............................................ (15,775) (20,000) ----------- ----------- Net income before undistributed net income of subsidiaries.......................... 413,677 376,182 Undistributed net income of subsidiaries.............. 827,839 839,187 ----------- ----------- Net Income............................................ $ 1,241,516 $ 1,215,369 =========== =========== </TABLE> -6-
<TABLE> <CAPTION> - ------------------------------------------------------------------------------------ OLD POINT FINANCIAL CORPORATION Three Months Ended: Parent only Statements of Cash Flows March 31, (Unaudited) 2001 2000 - ------------------------------------------------------------------------------------ <S> <C> <C> Cash Flows from Operating Activities: Net Income............................................ $ 1,241,516 $ 1,215,369 Adjustments to reconcile net income to net cash provided by operating activities: Equity in undistributed income of subsidiaries.... (827,839) (839,187) Depreciation........................................ - - Gains(losses) on sale of securities [net]......... - - (Increase) Decrease in other assets............... (56,196) (76,021) Increase (decrease) in other liabilities.......... 4,175 - ----------- ----------- Net cash provided by operating activities............. 361,656 300,161 Cash flows from investing activities: (Increase)decrease in investment securities........... (135,000) 30,000 Payments for investment in subsidiaries - - Repayment of loans by customers....................... - - ----------- ----------- Net cash provided by investing activities............. (135,000) 30,000 Cash flows from financing activities: Proceeds from issuance of common stock................ - 14 Dividends paid........................................ (388,581) (361,676) ----------- ----------- Net cash provided by financing activities............. (388,581) (361,662) Net increase (decrease) in cash & due from banks...... (161,925) (31,501) Cash & due from banks at beginning of period.......... 225,339 59,502 ----------- ----------- Cash & due from banks at end of period................ $ 63,414 $ 28,001 =========== =========== </TABLE> -7-
Item 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Earnings Summary - ---------------- Net income for the first quarter of 2001 increased 2.15% to $1.24 million from $1.22 million for the comparable period in 2000. Basic earnings per share were $0.48 in the first quarter of 2001 compared with $0.47 in 2000. Return on average assets was 1.03% for the first quarter of 2001 and 1.11% for the comparable period in 2000. Return on average equity was 10.36% for the first quarter of 2001 and 11.85% for the first quarter of 2000. Net Interest Income - ------------------- The principal source of earnings for the Company is net interest income. Net interest income is the difference between interest and fees generated by earning assets and interest expense paid to fund them. Net interest income, on a fully tax equivalent basis, increased $180 thousand, or 4.12%, for the first quarter of 2001 over the same period in 2000. The net interest yield, defined as the ratio of net interest income on a fully tax equivalent basis to total earning assets, decreased to 3.99% in 2001 from 4.20% in 2000. Tax equivalent interest income increased $957 thousand, or 11.84%, in the first quarter of 2001 from the same period of 2000. Average earning assets increased $39.4 million, or 9.45% in the first quarter of 2001 compared to the first quarter of 2000. Comparing the first three months of 2001 to 2000, average loans increased $36.4 million or 12.76% while investment securities decreased $8.3 million or 6.38%. Certificates of deposits increased $21.3 million or 12.80% while checking and savings accounts decreased $1.4 million or 1.08%. Interest expense increased $777 thousand or 20.94% in the first quarter of 2001 from the first quarter of 2000 while interest bearing liabilities increased $35.0 million or 10.46 % in the first quarter of 2001 over the same period in 2000. The cost of funding those liabilities increased 42 basis points from 2000. Page 9 shows an analysis of average earning assets, interest bearing liabilities and rates and yields. -8-
<TABLE> <CAPTION> - ----------------------------------------------------------------------------------------------------------------------- OLD POINT FINANCIAL CORPORATION NET INTEREST INCOME ANALYSIS For the quarter ended March 31, (Fully taxable equivalent basis)* 2001 2000 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)**................. $321,592 $6,954 8.65% $285,206 $5,965 8.36% Investment securities: Taxable........................................ 64,553 949 5.88% 72,761 1,094 6.01% Tax-exempt..................................... 57,225 962 6.73% 57,322 1,002 6.99% -------- ------ -------- ------ Total investment securities.................. 121,778 1,912 6.28% 130,083 2,096 6.45% Federal funds sold............................... 12,538 171 5.46% 1,264 19 6.01% -------- ------ -------- ------ Total earning assets........................... $455,908 $9,037 7.93% $416,553 $8,080 7.76% Time and savings deposits: Interest-bearing transaction accounts.......... $ 5,610 $ 32 2.28% $ 4,012 $ 24 2.39% Money market deposit accounts.................. 94,340 708 3.00% 96,943 757 3.12% Savings accounts............................... 28,152 190 2.70% 28,552 194 2.72% Certificates of deposit, $100,000 or more...... 43,079 682 6.33% 31,494 425 5.40% Other certificates of deposit.................. 144,716 2,156 5.96% 134,995 1,825 5.41% -------- ------ -------- ------ Total time and savings deposits.............. 315,897 3,768 4.77% 295,996 3,225 4.36% Federal funds purchased and securities sold under agreement to repurchase.................. 26,205 315 4.81% 24,322 289 4.75% Federal Home Loan Bank advances.................. 25,000 379 6.06% 11,892 170 5.72% Other short term borrowings...................... 1,991 26 5.22% 1,918 27 5.63% -------- ------ -------- ------ Total interest bearing liabilities............. $369,093 4,488 4.86% $334,128 $3,711 4.44% Net interest income/yield........................ $4,549 3.99% $4,369 4.20% ====== ====== * 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-
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 $150 thousand for the first three months of 2001, down from $175 thousand in the comparable period in 2000. Loans charged off (net of recoveries) were $337 thousand compared with loans charged off (net of recoveries) of $50 thousand in the first three months of 2000. On March 31, 2001 nonperforming assets totaled $879 thousand compared with $847 thousand on March 31, 2000. The March 2001 total consisted of $585 thousand in foreclosed real estate, $165 thousand in a former branch site now listed for sale, and $129 thousand in nonaccrual loans. The March 2000 total consisted of $354 thousand in a former branch site, and $493 thousand in nonaccrual loans. Loans still accruing interest but past due 90 days or more increased to $1.37 million as of March 31, 2001 compared with $404 thousand as of March 31, 2000. The allowance for loan losses on March 31, 2001 was $3.46 million compared with $3.24 million on March 31, 2000. It represented a multiple of 3.94 times nonperforming assets and 26.82 times nonperforming loans. The allowance for loan losses was 1.06% of loans on March 31, 2001 compared to 1.10% at March 31, 2000. Other Income - ------------ For the first quarter of 2001 other income increased $52 thousand, or 3.64% over the same period in 2000. The increase in income is attributed to an increase in service charges on deposit accounts. Other Expenses - -------------- For the first quarter of 2001 other expenses increased $232 thousand or 6.1% over the same period in 2000. Salaries and employee benefits increased $98 thousand or 4.2%. Furniture and equipment expense increased $44 thousand or 11.65%. Other operating expense increased $94 thousand or 11.05%. Assets - ------ At March 31, 2001 total assets were $499.1 million, up 4.61% from $477.1 million at December 31, 2000. Total loans grew $7.2 million or 2.3%. Investment securities decreased by $587 thousand, or .48%, in 2001. Federal funds sold increased $17.4 million or 321.5%. Total deposits increased $21.5 million, or 5.7% in 2001 and demand note balances to the United States Treasury decreased $1.5 million from year-end 2000. -10-
Capital Ratios - -------------- The Company's capital position remains strong as evidenced by the regulatory capital measurements. At March 31, 2001 the Tier I capital ratio was 13.75%, the total capital ratio was 14.75% and the leverage ratio was 9.78%. 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 imaging system which was implemented in 2000 is being further developed as the Company prepares to implement check and statement imaging. 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. The Company experienced strong deposit growth in the first quarter of 2001 and is well above targeted projections made for 2001. Loan growth for the first quarter of 2001 met targeted projections. The Company is extremely liquid as reflected in the large growth in federal funds sold balance as of March 31, 2001. The Company continues to monitor and seek investment opportunities in an environment of falling interest rates. Effects of Inflation - -------------------- Management believes that the key to achieving satisfactory performance 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 economy. -11-
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 March 31, 2001. There were $121 million more in liabilities than assets subject to repricing within three months. As of December 31, 2000 the Company had $143 million more in liabilities than assets subject to repricing within three months. 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 $134.8 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. 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 0.38% decrease in net income. The model indicates a 300 basis point rise in rates would cause approximately a 1.85% decrease in net income at March 31, 2001. -12-
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 first quarter of 2001. -13-
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 May 9, 2001 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 -14-