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, 1997 [ ] 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, 1997. Class Outstanding at April 30, 1997 Common Stock, $5.00 par value 1,280,946 shares
OLD POINT FINANCIAL CORPORATION FORM 10-Q INDEX PART I - FINANCIAL INFORMATION Page Item 1. Financial Statements . . . . . . . . . . . . . . . . 1 Consolidated Balance Sheets March 31, 1997 and December 31, 1996 . . . . . . . 1 Consolidated Statement of Earnings Three months ended March 31, 1997 and 1996 . . . . 2 Consolidated Statement of Cash Flows Three months ended March 31, 1997 and 1996 . . . . 3 Consolidated Statements of Changes in Stockholders' Equity Three months ended March 31, 1997 and 1996 . . . . 4 Notes to Consolidated Financial Statements . . . . . . 5 Parent Only Balance Sheets March 31, 1997 and December 31, 1996. . . . . 6 Parent Only Statement of Earnings Three months ended March 31, 1997 and 1996. . 6 Parent Only Statement of Cash Flows Three months ended March 31, 1997 and 1996. . 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. . . . . . . . . . .12 PART II - OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . .13 (i)
<TABLE> <CAPTION> PART 1. - FINANCIAL INFORMATION OLD POINT FINANCIAL CORPORATION Consolidated Balance Sheets March 31, December 31 (Unaudited) 1997 1996 Assets <S> <C> <C> Cash and due from banks........................ $ 9,241,050 $ 10,938,066 Interest bearing balances due from banks....... 31,536 50,429 Securities available for sale, at market....... 66,004,354 70,088,789 Securities to be held to maturity.............. 24,966,684 24,967,429 Trading account securities..................... -- -- Federal funds sold............................. 12,899,935 560,915 Loans, total................................... 202,834,762 198,584,252 Less reserve for loan losses............... 2,381,430 2,330,029 Net loans.............................. 200,453,332 196,254,223 Bank premises and equipment.................... 9,361,031 9,402,579 Other real estate owned........................ 568,864 353,864 Other assets................................... 4,017,283 3,728,410 Total assets.............................. $ 327,544,069 $ 316,344,704 Liabilities Noninterest-bearing deposits................... $ 49,487,280 $ 47,533,417 Savings deposits............................... 98,906,850 96,196,174 Time deposits.................................. 124,264,963 119,789,184 Total deposits.............................. 272,659,093 263,518,775 Federal funds purchased and securities sold under agreement to repurchase.............. 16,427,627 17,135,126 Interest-bearing demand notes issued to the United States Treasury and other liabilities for borrowed money.......................... 4,032,015 2,301,267 Other liabilities.............................. 1,480,176 989,636 Total liabilities........................... 294,598,911 283,944,804 Stockholders' Equity Common stock, $5.00 par value.................. 6,404,730 6,367,730 1997 1996 Shares authorized...6,000,000 6,000,000 Shares outstanding..1,280,946 1,273,546 Surplus........................................ 9,615,191 9,345,091 Undivided profits.............................. 17,153,386 16,638,880 Unrealized gain/(loss) on securities .......... (228,149) 48,199 Total stockholders' equity................. 32,945,158 32,399,900 Total liabilities and stockholders' equity. $ 327,544,069 $ 316,344,704 </TABLE> See accompanying notes 1 <TABLE> <CAPTION> OLD POINT FINANCIAL CORPORATION Three Months Ended Consolidated Statements of Earnings March 31, (Unaudited) 1997 1996 Interest Income <S> <C> <C> Interest and fees on loans..................... $ 4,405,873 $ 4,199,063 Interest on federal funds sold................. 40,426 40,876 Interest on securities: Taxable..................................... 1,110,912 1,183,523 Exempt from Federal income tax.............. 273,600 179,937 Total interest on securities............. 1,384,512 1,363,460 Total interest income...................... 5,830,811 5,603,399 Interest Expense Interest on savings deposits................... 673,047 660,198 Interest on time deposits...................... 1,611,586 1,663,554 Interest on federal funds purchased and securit sold under agreement to repurchase........... 185,349 182,070 Interest on demand notes (note balances) issued United States Treasury and on other borrowed 22,167 21,624 Total interest expense..................... 2,492,151 2,527,446 Net interest income............................ 3,338,662 3,075,953 Provision for loan losses...................... 100,000 50,000 Net interest income after provision for loan loss................................. 3,238,662 3,025,953 Other Income Income from fiduciary activities............... 434,850 389,838 Service charges on deposit accounts............ 422,990 487,336 Other service charges, commissions and fees.... 121,930 77,664 Other operating income......................... 115,680 130,374 Security gains (losses)........................ (707) 0 Trading account income............................... 0 0 Total other income......................... 1,094,743 1,085,212 Other Expenses Salaries and employee benefits................. 1,874,845 1,846,561 Occupancy expense of Bank premises............. 212,181 187,739 Furniture and equipment expense................ 273,604 247,316 Other operating expenses....................... 714,040 604,189 Total other expenses....................... 3,074,670 2,885,805 Income before taxes............................ 1,258,735 1,225,360 Applicable income taxes ....................... 324,176 347,600 Net income..................................... $ 934,559 $ 877,760 Per Share Based on weighted average number of common shares outstanding.................... 1,275,257 1,273,537 Net income..................................... $ 0.73 $ 0.69 </TABLE> See accompanying notes 2 <TABLE> <CAPTION> OLD POINT FINANCIAL CORPORATION Three Months Ended Consolidated Statements of Cash Flows March 31, (Unaudited) 1997 1996 <S> <C> <C> CASH FLOWS FROM OPERATING ACTIVITIES Net income................................................ $ 934,559 $ 877,760 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization........................... 239,158 211,435 Provision for loan losses............................... 100,000 50,000 (Gains) loss on sale of investment securities, net...... 707 0 Net amortization & accretion of securities available for 131,311 215,927 Net (increase) decrease in trading account.............. 0 0 (Increase) in other real estate owned................... (215,000) 0 (Increase) decrease in other assets (net of tax effect of FASB 115 adjustment)............ (146,512) (384,161) Increase (decrease) in other liabilities................ 490,540 1,010,476 Net cash provided by operating activities............. 1,534,763 1,981,437 CASH FLOWS FROM INVESTING ACTIVITIES Purchases of securities ................................ (1,059,860) (8,989,256) Proceeds from maturities & calls of securities ......... 2,594,000 6,250,000 Proceeds from sales of securities....................... 2,000,312 0 Loans made to customers................................. (23,816,444) (17,694,398) Principal payments received on loans.................... 19,517,336 14,762,377 Proceeds from sales of other real estate owned.......... 0 245,731 Purchases of premises and equipment..................... (197,610) (667,939) (Increase) decrease in federal funds sold............... (12,339,020) (7,785,823) Net cash provided by (used in) investing activities... (13,301,287) (13,879,307) CASH FLOWS FROM FINANCING ACTIVITIES Increase (decrease) in non-interest bearing deposits.... 1,953,863 3,872,335 Increase (decrease) in savings deposits................. 2,710,676 801,312 Proceeds from the sale of certificates of deposit....... 11,065,275 8,710,326 Payments for maturing certificates of deposit........... (6,589,496) (5,424,524) Increase (decrease) in federal funds purchased & repurchase agreements.................................. (707,499) (896,776) Increase (decrease) in other borrowed money............. 1,730,748 3,142,810 Proceeds from issuance of common stock.................. 142,100 0 Dividends paid.......................................... (255,052) (200,400) Net cash provided by financing activities............. 10,050,615 10,005,083 Net increase (decrease) in cash and due from banks.... (1,715,909) (1,892,787) Cash and due from banks at beginning of period........ 10,988,495 10,931,545 Cash and due from banks at end of period.............. $ 9,782,586 $ 9,038,758 SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION Cash payments for: Interest.............................................. 2,479,767 2,477,201 Income taxes.......................................... 0 0 </TABLE> <TABLE> <CAPTION> OLD POINT FINANCIAL CORPORATION STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (Unaudited) Unrealized Common Stock Undivided Gain/(Loss) Shares Amount Surplus Profits On Securities Total FOR THREE MONTHS ENDED MARCH 31, 1997 <S> <C> <C> <C> <C> <C> <C> Balance at beginning of period.......... 1,273,546 $6,367,730 $9,345,091 16,638,880 48,199 32,399,900 Net income.............................. -- -- -- 934,559 -- 934,559 Sale of common stock.................... 7,400 37,000 270,100 (165,000) -- 142,100 Cash dividends............... .......... -- -- -- (255,053) -- (255,053) Increase in unrealized gain on securities -- -- -- -- (276,348) (276,348) Balance at end of period................ 1,280,946 $6,404,730 $9,615,191 $17,153,386 ($228,149) $32,945,158 FOR THREE MONTHS ENDED MARCH 31, 1996 Balance at beginning of period.......... 1,273,537 $6,367,685 $9,344,798 14,085,650 529,784 30,327,917 Net income.............................. -- -- -- 877,760 -- 877,760 Sale of common stock.................... -- -- -- -- -- -- Cash dividends............... .......... -- -- -- (200,400) -- (200,400) Increase in unrealized gain on securities -- -- -- -- (496,893) (496,893) Balance at end of period................ 1,273,537 $6,367,685 $9,344,798 $14,763,010 $32,891 $30,508,384 </TABLE> See accompanying notes 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 1996 Annual Report to Shareholders and Form 10-K. 2. Earnings per common share outstanding are computed by dividing income by the weighted average number of outstanding common shares for each period presented. <TABLE> <CAPTION> OLD POINT FINANCIAL CORPORATION Parent only Balance Sheets March 31, December 31 (Unaudited) 1997 1996 <S> <C> <C> Assets Cash in bank................................ $ 217,116 $ 142,683 Investment Securities....................... 1,874,347 1,675,761 Total Loans................................. 0 49,884 Investment in Subsidiary.................... 30,851,874 30,456,307 Equipment................................... 0 14,411 Other assets................................ 8,721 60,854 Total Assets................................ $ 32,952,058 $ 32,399,900 Liabilities and Stockholders' Equity Total Liabilities........................... $ 6,900 $ 0 Stockholders' Equity........................ 32,945,158 32,399,900 Total Liabilities & Stockholders' Equity.... $ 32,952,058 $ 32,399,900 <CAPTION> OLD POINT FINANCIAL CORPORATION Three Months Ended: Parent only Income Statements March 31, (Unaudited) 1997 1996 <S> <C> <C> Income Cash dividends from Subsidiary.............. $ 250,000 $ 250,000 Interest and fees on loans.................. 579 1,097 Interest income from investment securities.. 24,471 20,589 Gains (losses) from sale of investment securities................................. 0 0 Other income................................ 0 0 Total Income................................ 275,050 271,686 Expenses Salaries and employee benefits.............. 0 50,209 Other expenses.............................. 4,573 11,198 Total Expenses.............................. 4,573 61,407 Income before taxes & undistributed net income of subsidiary................ 270,477 210,279 Income tax.................................. 6,900 (12,400) Net income before undistributed net income of subsidiary.................. 263,577 222,679 Undistributed net income of subisdiary...... 670,982 655,081 Net Income.................................. $ 934,559 $ 877,670 - 6 - </TABLE> <TABLE> <CAPTION> OLD POINT FINANCIAL CORPORATION Three Months Ended: Parent only Statements of Cash Flows March 31, (Unaudited) 1997 1996 <S> <C> <C> Cash Flows from Operating Activities: Net Income.................................. $ 934,559 $ 877,760 Adjustments to reconcile net income to net cash provided by operating activities: Equity in undistributed income of subsidiary............................. (670,982) (655,081) Depreciation.............................. 0 888 Gains(losses) on sale of securities [net] 0 0 (Increase) Decrease in other assets..... 52,614 47,404 Increase (decrease in other liabilities) 6,900 0 Net cash provided by operating activities... 323,091 270,971 Cash flows from investing activities: (Increase)decrease in investment securities. (200,000) 0 Sale of Assets.............................. 14,411 Repayment of loans by customers............. 49,884 570 Net cash provided by investing activities... (135,705) 570 Cash flows from financing activities: Proceeds from issuance of common stock...... 142,100 0 Dividends paid.............................. (255,053) (200,400) Net cash provided by financing activities... (112,953) (200,400) Net increase (decrease) in cash & due from banks................................ 74,443 71,141 Cash & due from banks at beginning of period of period................................. 142,683 122,263 Cash & due from banks at end of period...... $ 217,116 $ 193,404 </TABLE> Item 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Summary Net income for the first quarter of 1997 increased 6% to $934,559 from $877,760 for the comparable period in 1996. Earnings per share were $0.73 in the first quarter of 1997 compared with $0.69 in 1996. Return on average assets was 1.18% for the first quarter of 1997 and 1.15% for the comparable period in 1996. Return on average equity was 11.34% for the first quarter of 1997 and 11.44% for the first quarter of 1996. Net Interest Income Net interest income, on a fully tax equivalent basis, increased $307,000, or 10%, for the first three months of 1997 over 1996. Average earning assets increased 3% and the net interest yield, defined as the ratio of net interest income on a fully tax equivalent basis to total earning assets, increased from 4.43% in 1996 to 4.71% in 1997. Comparing the first quarter 1997 to 1996, average loans increased 4% while average federal funds sold decreased 10% and average investment securities increased 1%. Certificates of deposit increased 2% and interest checking and savings accounts increased 2%. Page 9 shows an analysis of average earning assets, interest bearing liabilities and rates and yields. <TABLE> <CAPTION> OLD POINT FINANCIAL CORPORATION NET INTEREST INCOME ANALYSIS For the quarter ended March 31, (Fully taxable equivalent basis)* 1997 1996 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 **........................... $200,584 $4,428 8.83% $192,291 $4,226 8.79% Investment securities: Taxable.......................... 73,362 1,111 6.06% 80,155 1,183 5.90% Tax-exempt....................... 20,371 415 8.15% 12,596 273 8.66% Total investment securities.... 93,733 1,526 6.51% 92,751 1,456 6.28% Federal funds sold................. 3,123 40 5.12% 3,464 41 4.73% Total earning assets............. $297,440 $5,994 8.06% $288,506 $5,723 7.93% Time and savings deposits: Interest-bearing transaction accounts....................... $ 25,920 $ 142 2.19% $ 49,458 $ 298 2.41% Money market deposit accounts.... 46,287 358 3.09% 19,529 179 3.67% Savings accounts................. 25,632 173 2.70% 27,118 183 2.70% Certificates of deposit, $100,000 or more........................ 16,923 230 5.44% 16,031 219 5.46% Other certificates of deposit.... 104,282 1,382 5.30% 103,187 1,445 5.60% Total time and savings deposits 219,044 2,285 4.17% 215,323 2,324 4.32% Federal funds purchased and securities sold under agreement to repurchase.................... 16,121 185 4.59% 14,933 182 4.88% Other short term borrowings........ 1,687 22 5.22% 1,419 22 6.20% Total interest bearing liabilities $ 236,852 2,492 4.21% $231,675 $2,528 4.36% Net interest income/yield.......... $3,502 4.71% $3,195 4.43% * 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 increased to $100,000 during the first three months of 1997 compared with $50,000 for the same period in 1996. Loans charged off (net of recoveries) were $48,598 in the first three months of 1997, compared to $14,432 for the same period in 1996. On an annualized basis net loan charge-offs were 0.10% of total loans for the first quarter of 1997 compared with 0.03% for the same period in 1996. On March 31, 1997 nonperforming assets totalled $1.86 million compared with $3.15 million on March 31, 1996. The March 1997 total consisted of $215 thousand in foreclosed real estate, $354 thousand in a former branch site now listed for sale, and $1.29 million in nonaccrual loans. The March 1996 total consisted of $354 thousand in foreclosed real estate, $354 thousand in a former branch site now listed for sale, and $2.44 million in nonaccrual loans. Loans still accruing interest but past due 90 days or more increased to $1.16 million as of March 31, 1997 compared with $652 thousand on March 31, 1996. The allowance for loan losses on March 31, 1997 was $2.38 million. It represented a multiple of 1.28 times nonperforming assets and 1.85 times nonperforming loans. The allowance for loan losses on March 31, 1997 was 1.17% of loans compared to 1.20% at March 31, 1996. Other Income Other income increased $9,531 or 0.88%, for the first three months of 1997 over the same period in 1996. Income from fiduciary activities increased 12%. Other Expenses Other expenses increased $188,865 or 6.5%, in the first three months of 1997 over 1996. Salaries and employees benefits increased 1.5% due to normal increases in pay. Furniture and equipment expense increased $26,288, or 11%. The Company has started construction of a 15,000 square-foot building in Oyster Point of Newport News. This facility will house the Old Point Commercial Lending Department as well as the Real Estate Lending Department. The new building will also be home to the Trust and Financial Services Departments. The building will be ready for occupancy late in early 1998. Financial Condition At March 31, 1997 total assets were $327.5 million, up from $316.3 million at December 31, 1996. Total loans increased $4.3 million, or 2.1% and investment securities decreased $4.1 million, or 4.3%, in 1997. Total deposits increased $9.1 million, or 3.5% in 1997; and interest bearing demand notes to the United States Treasury increased $1.7 million, or 76.2%, while repurchase agreements, used as a cash management vehicle by commercial customers, decreased $707 thousand, or 4.1%. Capital Resources The Company's capital position remains strong as evidenced by the regulatory capital measurements. At March 31, 1997 the Tier I capital ratio was 15.48%, the total capital ratio was 16.59% and the leverage ratio was 10.43%. 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. The liquidity position of the Company is adequate in light of the increase in short term investment securities and federal funds sold. The Company was liability sensitive as of March 31, 1997. There were $73.1 million more in liabilities than assets subject to repricing within three months. This generally indicates that net interest income should improve if interest rates fall since liabilities will reprice faster than assets. Conversely, if interest rates rise, net interest income should decline. It should be noted, however, that the savings deposits; which consist of interest checking, money market, and savings accounts; are less interest sensitive than other market driven deposits. In a rising rate environment these deposit rates have historically lagged behind the changes in earning asset rates, thus mitigating somewhat the impact from the liability sensitivity position. The table on page 12 reflects the earlier of the maturity or repricing data for various assets and liabilities as of March 31, 1997. <TABLE> <CAPTION> INTEREST SENSITIVITY ANALYSIS As of March 31, 1997 MATURITY (in thousands) Within 4-12 1-5 Over 5 3 Months Months Years Years Total Uses of funds <S> <C> <C> <C> <C> <C> Federal funds sold................ 12,900 -- -- -- 12,900 Taxable investments............... 7,326 12,705 45,228 5,279 70,538 Tax-exempt investments............ -- 155 828 19,451 20,434 Total investments............... 20,226 12,860 46,056 24,730 103,872 Loans: Commercial...................... 31,794 8,653 20,460 768 61,675 Tax-exempt...................... 2,017 45 174 129 2,365 Installment..................... 4,387 12,043 35,151 2,430 54,011 Real estate..................... 18,922 19,107 34,679 11,465 84,173 Other........................... 254 -- 352 4 610 Total loans....................... 57,374 39,848 90,816 14,796 202,834 Total earning assets.............. 77,600 52,708 136,872 39,526 306,706 Sources of funds Interest checking deposits........ 26,267 -- -- -- 26,267 Money market deposit accounts..... 46,665 -- -- -- 46,665 Regular savings accounts.......... 25,974 -- -- -- 25,974 Certificates of deposit......... $100,000 or more................ 3,813 7,450 6,124 -- 17,387 Other time deposits............... 27,069 46,552 33,258 -- 106,879 Federal funds purchased and securities sold under agreements to repurchase........ 16,928 -- -- -- 16,928 Other borrowed money.............. 4,000 -- 32 -- 4,032 Total interest bearing liabilities 150,716 54,002 39,414 0 244,132 Rate sensitivity GAP.............. (73,116) (1,294) 97,458 39,526 62,574 Cumulative GAP.................... (73,116) (74,410) 23,048 62,574 </TABLE> - 12 - PART II - OTHER INFORMATION Item 6. EXHIBITS AND REPORTS ON FORM 8-K (a) none (b) No Reports on Form 8-K were filed during the first quarter of 1997. 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 13, 1997 By: /s/Robert F. Shuford President and Director Principal Executive Officer By: /s/Louis G. Morris Senior Vice President and Treasurer Principal Financial and Accounting Officer