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 September 30, 2000 --------------------------------------------- [ ] 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 October 31, 2000. Class Outstanding at October 31, 2000 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 September 30, 2000 and December 31, 1999..........1 Consolidated Statements of Earnings Three months ended September 30, 2000 and 1999....2 Nine months ended September 30, 2000 and 1999.....2 Consolidated Statements of Cash Flows Nine months ended September 30, 2000 and 1999.....3 Consolidated Statements of Changes in Stockholders' Equity Nine months ended September 30, 2000 and 1999.....4 Notes to Consolidated Financial Statements.................5 Parent Only Balance Sheets September 30, 2000 and December 31, 1999..........6 Parent Only Statement of Earnings Three months ended September 30, 2000 and 1999....6 Nine months ended September 30, 2000 and 1999.....6 Parent Only Statement of Cash Flows Nine months ended September 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.......................13 (i)
<TABLE> <CAPTION> - ----------------------------------------------------------------------------- Unaudited September 30, December 31, Consolidated Balance Sheets 2000 1999 - ----------------------------------------------------------------------------- <S> Assets <C> <C> Cash and due from banks........................... $ 9,445,700 $ 10,226,423 Interest bearing balances due from banks.......... 305,514 173,914 ------------ ------------ Total cash due from banks 9,751,214 10,400,337 Investments: Securities available for sale, at market........ 79,539,008 81,146,906 Securities to be held to maturity............... 45,836,258 45,838,726 Trading account securities........................ - - Federal funds sold................................ 7,123,166 241,055 Loans, total ..................................... 313,369,705 281,646,439 Less reserve for loan losses.................. 3,494,544 3,110,804 ------------ ------------ Net loans................................. 309,875,161 278,535,635 Bank premises and equipment....................... 14,687,542 14,323,764 Other real estate owned........................... 553,864 353,864 Other assets...................................... 5,737,121 5,453,316 ------------ ------------ Total assets................................. $473,103,334 $436,293,603 ============ ============ Liabilities Noninterest-bearing deposits...................... $ 67,512,497 $ 63,005,586 Savings deposits.................................. 123,919,484 128,763,117 Time deposits..................................... 178,461,254 169,148,814 ------------ ------------ Total deposits................................. 369,893,235 360,917,517 Federal funds purchased and securities sold under agreement to repurchase.......................... 24,996,522 22,840,778 Interest-bearing demand notes issued to the United States Treasury and other liabilities for borrowed money................................... 4,577,417 3,317,437 Federal Home Loan Bank............................ 27,000,000 7,000,000 Other liabilities................................. 2,112,067 1,404,194 ------------ ------------ Total liabilities.............................. 428,579,241 395,479,926 Stockholders' Equity Common stock, $5.00 par value..................... $ 12,952,700 $ 12,916,310 2000 1999 Shares authorized.... 10,000,000 6,000,000 Shares outstanding... 2,590,540 2,581,822 Surplus........................................... 10,288,301 10,185,985 Undivided profits................................. 22,265,659 19,674,272 Unrealized gain/(loss) on securities.............. (982,567) (1,962,890) ------------ ------------ Total stockholders' equity.................... 44,524,093 40,813,677 ------------ ------------ Total liabilities and stockholders' equity.... $473,103,334 $436,293,603 ============ ============ </TABLE> 1
<TABLE> <CAPTION> - --------------------------------------------------------------------------------------------------------------------- Three Months Ended Nine Months Ended Consolidated Statements of Earnings September 30, September 30, - --------------------------------------------------------------------------------------------------------------------- <S> Interest Income <C> <C> <C> <C> Interest and fees on loans.....................$6,734,942 $5,545,428 $19,066,618 $15,953,718 Interest on federal funds sold................. 77,934 39,109 127,218 131,448 Interest on securities: Interest on United States Treasury securities (taxable).......................... 16,006 22,648 47,862 124,061 Interest on obligations of other United States Government agencies (taxable).. 972,194 1,089,264 2,926,523 3,331,358 Interest on obligations of states and political subdivisions (tax exempt).......... 670,849 687,098 2,052,822 1,999,121 Interest on obligations of states and political subdivisions (taxable)............. 19,906 19,907 59,719 28,975 Interest on trading account securities......... - - - - Dividends and interest on all other securities. 101,479 81,482 269,437 251,611 ---------- ---------- ----------- ----------- Total interest on securities............. 1,780,434 1,900,399 5,356,363 5,735,126 Trading account securities..................... - - - - ---------- ---------- ----------- ----------- Total interest income...................... 8,593,310 7,484,936 24,550,199 21,820,292 Interest Expense Interest on savings deposits................... 987,865 960,832 2,915,281 2,789,471 Interest on time deposits...................... 2,560,744 2,184,869 7,145,091 6,453,596 Interest on federal funds purchased and securities sold under agreement to repurchase. 342,494 242,744 1,001,922 716,710 Interest on Federal Home Loan Bank advances.... 510,211 127,471 1,023,752 179,340 Interest on demand notes (note balances)issued to the United States Treasury and on other borrowed money................................ 30,464 20,608 92,774 57,465 ---------- ---------- ----------- ----------- Total interest expense..................... 4,431,778 3,536,524 12,178,820 10,196,582 Net interest income............................ 4,161,532 3,948,412 12,371,379 11,623,710 Provision for loan losses...................... 150,000 150,000 475,000 450,000 ---------- ---------- ----------- ----------- Net interest income after provision for loan losses........................................ 4,011,532 3,798,412 11,896,379 11,173,710 Other Income Income from fiduciary activities............... 630,000 569,872 1,890,000 1,679,572 Service charges on deposit accounts............ 564,943 538,397 1,659,676 1,615,897 Other service charges, commissions and fees.... 156,900 151,924 526,724 515,057 Other operating income......................... 41,122 63,182 142,120 198,155 Security gains (losses)........................ 3,525 (53,932) 10,259 (53,932) Trading account income......................... - - - - ---------- ---------- ----------- ----------- Total other income........................ 1,396,490 1,269,443 4,228,779 3,954,749 Other Expenses Salaries and employee benefits................. 2,353,627 2,133,266 6,946,235 6,358,490 Occupancy expense of Bank premises............. 261,802 240,827 776,407 713,589 Furniture and equipment expense................ 353,493 321,879 1,120,472 927,664 Other operating expenses....................... 852,902 794,200 2,632,076 2,432,983 ---------- ---------- ----------- ----------- Total other expenses...................... 3,821,824 3,490,172 11,475,190 10,432,726 ---------- ---------- ----------- ----------- Income before taxes............................ 1,586,198 1,577,683 4,649,968 4,695,733 Applicable income taxes........................ 331,100 346,400 937,100 980,400 ---------- ---------- ----------- ----------- Net income.....................................$1,255,098 $1,231,283 $ 3,712,868 $ 3,715,333 ========== ========== =========== =========== <CAPTION> Per Share <S> <C> <C> <C> <C> Based on weighted average number of common shares outstanding.................... 2,590,540 2,581,822 2,585,797 2,578,030 Basic Earnings per Share....................... 0.48 0.48 1.44 1.44 Diluted Earnings per Share..................... 0.47 0.48 1.41 1.44 </TABLE> 2
<TABLE> <CAPTION> - --------------------------------------------------------------------------------------------------- OLD POINT FINANCIAL CORPORATION Nine Months Ended Consolidated Statements of Cash Flows September 30, Unaudited 2000 1999 - --------------------------------------------------------------------------------------------------- <S> <C> <C> CASH FLOWS FROM OPERATING ACTIVITIES Net income..........................................................$ 3,712,868 $ 3,715,333 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization..................................... 978,264 807,531 Provision for loan losses......................................... 475,000 450,000 (Gains) loss on sale of investment securities, net................ (10,259) 53,932 Net amortization & accretion of securities ....................... 52,148 63,821 Net (increase) decrease in trading account........................ 0 0 (Increase) in other real estate owned............................. (200,000) (275,056) (Increase) decrease in other assets (net of tax effect of FASB 115 adjustment)...................... (788,820) (27,191) Increase (decrease) in other liabilities.......................... 707,873 771,747 ------------- ------------- Net cash provided by operating activities....................... 4,927,074 5,560,117 CASH FLOWS FROM INVESTING ACTIVITIES Purchases of securities .......................................... (1,096,576) (25,559,816) Proceeds from maturities & calls of securities ................... 1,360,500 25,020,000 Proceeds from sales of available - for - sale securities.......... 2,789,891 1,346,068 Proceeds from sales of held - to - maturity securities............ 0 0 Loans made to customers........................................... (126,387,975) (130,798,723) Principal payments received on loans.............................. 94,573,449 96,079,685 Proceeds from sales of other real estate owned.................... 0 345,056 Purchases of premises and equipment............................... (1,342,042) (2,514,244) (Increase) decrease in federal funds sold......................... (6,882,111) (2,588,590) ------------- ------------- Net cash provided by (used in) investing activities............. (36,984,864) (38,670,564) CASH FLOWS FROM FINANCING ACTIVITIES Increase (decrease) in non-interest bearing deposits.............. 4,506,911 2,700,803 Increase (decrease) in savings deposits........................... (4,843,633) 3,241,952 Proceeds from the sale of certificates of deposit................. 57,136,267 41,097,830 Payments for maturing certificates of deposit..................... (47,823,827) (29,148,099) Increase (decrease) in federal funds purchased & repurchase agreements............................................ 2,155,744 1,498,423 Increase (decrease) in Federal Home Loan Bank Advances............ 20,000,000 0 Increase (decrease) in other borrowed money....................... 1,259,980 12,659,170 Proceeds from issuance of common stock............................ 129,158 139,424 Dividends paid.................................................... (1,111,933) (1,031,279) ------------- ------------- Net cash provided by financing activities....................... 31,408,667 31,158,225 Net increase (decrease) in cash and due from banks.............. (649,123) (1,952,222) Cash and due from banks at beginning of period.................. 10,400,337 10,310,839 ------------- ------------- Cash and due from banks at end of period........................ $ 9,751,214 $ 8,358,617 ============ ============= SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION Cash payments for: Interest........................................................ $ 12,025,878 $ 10,145094 Income taxes.................................................... 1,050,000 900,000 </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> FOR NINE MONTHS ENDED SEPTEMBER 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................................. - - - 3,712,868 - 3,712,868 Increase (decrease) in unrealized gain on investment securities.............. - - - - 980,323 980,323 --------- ------------ ------------ ------------ ------------ ------------ Total Comprehensive Income 3,712,868 980,323 4,693,191 Sale of common stock......................... 7,278 36,390 102,316 (9,548) - 129,158 Cash dividends............... ............... - - - (1,111,933) - (1,111,933) --------- ------------ ------------ ------------ ------------ ------------ Balance at end of period..................... 2,590,540 $ 12,952,700 $ 10,288,301 $ 22,265,659 $ (982,567) $ 44,524,093 FOR NINE MONTHS ENDED SEPTEMBER 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................................. - - - 3,715,333 - 3,715,333 Increase (decrease) in unrealized gain on investment securities.............. - - - - (2,179,040) (2,179,040) --------- ------------ ------------ ------------ ------------ ------------ Total Comprehensive Income 3,715,333 (2,179,040) 1,536,293 Sale of common stock......................... 6,378 31,890 137,439 (29,905) - 139,424 Cash dividends............... ............... - - - (1,031,279) - (1,031,279) --------- ------------ ------------ ------------ ------------ ------------ Balance at end of period..................... 2,581,822 $ 12,909,110 $ 10,157,505 $ 18,938,701 $ (1,347,883) $ 40,657,433 </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 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
<TABLE> <CAPTION> - ----------------------------------------------------------------------------- OLD POINT FINANCIAL CORPORATION Parent only Balance Sheets September 30, December 31, (Unaudited) 2000 1999 - ----------------------------------------------------------------------------- <S> <C> <C> Assets Cash in bank................................ $ 36,890 $ 59,502 Investment Securities....................... 2,265,000 2,105,000 Total Loans................................. 0 0 Investment in Subsidiaries.................. 42,141,440 38,550,254 Equipment................................... 0 0 Other assets................................ 80,763 25,361 ----------- ----------- Total Assets................................ $ 44,524,093 $ 40,740,117 =========== =========== Liabilities and Stockholders' Equity Total Liabilities........................... $ 0 $ 0 Stockholders' Equity........................ 44,524,093 40,740,117 ----------- ----------- Total Liabilities & Stockholders' Equity.... $ 44,524,093 $ 40,740,117 =========== =========== <CAPTION> - ------------------------------------------------------------------------------------------------------------ OLD POINT FINANCIAL CORPORATION Three Months Ended: Nine Months Ended: Parent only Income Statements September 30, September 30, (Unaudited) 2000 1999 2000 1999 - ------------------------------------------------------------------------------------------------------------ <S> <C> <C> <C> <C> Income Cash dividends from Subsidiary.............. $ 425,000 $ 375,000 $ 1,225,000 $ 1,585,000 Interest and fees on loans.................. 0 0 0 0 Interest income from investment securities.. 32,224 24,873 90,791 74,738 Gains (losses) from sale of investment securities................................. 0 (53,932) 0 (53,932) Other income................................ 36,000 0 108,000 0 ----------- ----------- ----------- ----------- Total Income................................ 493,224 345,941 1,423,791 1,605,806 Expenses Salaries and employee benefits.............. 57,084 0 176,842 0 Other expenses.............................. 39,095 4,829 126,284 34,662 ----------- ----------- ----------- ----------- Total Expenses.............................. 96,179 4,829 303,126 34,662 ----------- ----------- ----------- ----------- Income before taxes & undistributed net income of subsidiaries................ 397,045 341,112 1,120,665 1,571,144 Income tax.................................. (16,900) 4,500 (54,900) 11,300 ----------- ----------- ----------- ----------- Net income before undistributed net income of subsidiaries................ 413,945 336,612 1,175,565 1,559,844 Undistributed net income of subsidiaries.... 841,153 894,671 2,537,303 2,155,489 ----------- ----------- ----------- ----------- Net Income.................................. $ 1,255,098 $ 1,231,283 $ 3,712,868 $ 3,715,333 =========== =========== =========== =========== </TABLE> 6
<TABLE> <CAPTION> - ------------------------------------------------------------------------------ OLD POINT FINANCIAL CORPORATION Nine Months Ended: Parent only Statements of Cash Flows September 30, (Unaudited) 2000 1999 - ------------------------------------------------------------------------------ <S> <C> <C> Cash Flows from Operating Activities: Net Income.................................. $ 3,712,868 $ 3,715,333 Adjustments to reconcile net income to net cash provided by operating activities: Equity in undistributed income of subsidiary............................. (2,537,303) (2,155,489) Depreciation.............................. 0 0 Gains(losses) on sale of securities[net] 0 53,932 (Increase) Decrease in other assets..... (55,403) (7,750) Increase (decrease in other liabilities) 0 0 ----------- ----------- Net cash provided by operating activities... 1,120,162 1,606,026 Cash flows from investing activities: Purchase of securities 0 (1,500,000) Proceeds froms sales of available-for-sale securities................................. 0 1,346,068 (Increase)decrease in investment securities. (160,000) 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... (160,000) (973,932) Cash flows from financing activities: Proceeds from issuance of common stock...... 129,159 139,425 Dividends paid.............................. (1,111,933) (1,031,279) ----------- ----------- Net cash provided by financing activities... (982,774) (891,854) Net increase (decrease) in cash & due from banks...................................... (22,612) (259,760) Cash & due from banks at beginning of period 59,502 293,695 ----------- ----------- Cash & due from banks at end of period...... $ 36,890 $ 33,935 =========== =========== </TABLE> 7
Item 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Earnings Summary Net income for the third quarter of 2000 increased 1.93% to $1,255,098 from $1,231,283 for the comparable period in 1999. Basic earnings per share were $0.48 in the third quarter of 2000 compared with $0.48 in 1999. For the nine months ended September 30, 2000 net income decreased .07% to $3,712,868 from $3,715,333 in 1999. Basic earnings per share were $1.44 for the first nine months of 2000 compared with $1.44 in 1999. Return on average assets was 1.07% for the third quarter of 2000 and 1.15% for the comparable period in 1999. Return on average equity was 11.34% for the third quarter of 2000 and 12.10% for the third quarter of 1999. For the nine months ended September 30, 2000 and 1999 return on average assets was 1.09% and 1.18% respectively. Return on average equity was 11.66% in 2000 and 12.12% in 1999. Net Interest Income Net interest income, on a fully tax equivalent basis, increased $179 thousand, or 4.14%, for the third quarter of 2000 over 1999. Average earning assets increased 10.04% 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 4.27% in 1999 to 4.04% in 2000. For the nine months ended September 30, 2000 net interest income on a fully tax equivalent basis increased $759 thousand, or 5.97%, over the comparable period in 1999. Comparing the first nine months of 2000 to 1999, average loans increased $46.3 million or 18.3% while investment securities decreased $7.8 million or 5.7%. Average earning assets increased 9.5% and the net interest yield decreased from 4.30% in 1999 to 4.16% in 2000. Interest expense increased $927 thousand or 26.2% in the third quarter of 2000 from the third quarter of 1999, interest bearing liabilities increased $36.1 million or 11.2 % in the third quarter of 2000 over the same period in 1999. For the nine months ended September 30, 2000 interest expense increased $2.0 million, or 19.8% over the same period in 1999. The cost of funding those liabilities increased 37 basis points from 1999. 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 September 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)** $312,201 $6,760 8.66% $264,172 $5,566 8.43% Investment securities: Taxable 72,886 1,110 6.09% 80,152 1,213 6.05% Tax-exempt 55,795 1,017 7.29% 57,372 1,041 7.26% -------- ------ -------- ------ Total investment securities 128,681 2,127 6.61% 137,524 2,254 6.56% Federal funds sold 4,304 78 7.25% 2,885 39 5.41% -------- ------ --------- ------ Total earning assets $445,186 $8,965 8.05% $404,581 $7,859 7.77% ======== ====== ======== ====== Time and savings deposits: Interest-bearing transaction accounts $ 5,100 $ 30 2.35% $ 3,973 $ 24 2.42% Money market deposit accounts 91,802 766 3.34% 94,555 741 3.13% Savings accounts 27,906 192 2.75% 28,495 197 2.77% Certificates of deposit, $100,000 or more 34,663 544 6.28% 30,839 423 5.49% Other certificates of deposit 139,420 2,017 5.79% 132,216 1,762 5.33% -------- ------ -------- ------ Total time and savings deposits 298,891 3,549 4.75% 290,078 3,147 4.34% Federal funds purchased and securities sold under agreement to repurchase 26,809 374 5.58% 21,971 243 4.42% Federal Home Loan Bank advances 32,000 510 6.38% 9,548 127 5.32% Other short term borrowings 1,677 31 7.39% 1,704 20 4.69% -------- ------ -------- ------ Total interest bearing liabilities $359,377 4,464 4.97% $323,301 3,537 4.38% Net interest income/yield $4,501 4.04% $4,322 4.27% ====== ===== ====== ===== <CAPTION> - -------------------------------------------------------------------------------------------------------- For the nine months ended September 30, 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)** $299,503 $19,138 8.52% $253,236 $16,010 8.43% Investment securities: Taxable 72,964 3,304 6.04% 82,120 3,736 6.07% Tax-exempt 56,676 3,111 7.32% 55,331 3,029 7.30% -------- ------- -------- ------- Total investment securities 129,640 6,415 6.60% 137,451 6,765 6.56% Federal funds sold 2,454 127 6.90% 3,442 131 5.07% -------- -------- -------- ------- Total earning assets $431,597 $25,680 7.93% $394,129 $22,906 7.75% ======== ======= ======== ======= Time and savings deposits: Interest-bearing transaction accounts $ 4,345 $ 77 2.36% $ 3,948 $ 70 2.36% Money market deposit accounts 94,098 2,258 3.20% 93,470 2,152 3.07% Savings accounts 28,325 580 2.73% 27,710 568 2.73% Certificates of deposit, $100,000 or more 32,601 1,434 5.86% 29,834 1,233 5.51% Other certificates of deposit 136,565 5,711 5.58% 131,610 5,221 5.29% -------- ------- -------- ------- Total time and savings deposits 295,934 10,060 4.53% 286,572 9,244 4.30% Federal funds purchased and securities sold under agreement to repurchase 27,151 1,034 5.08% 22,209 717 4.30% Federal Home Loan Bank advance 21,956 1,024 6.22% 4,479 179 5.33% Other short term borrowings 2,087 93 5.94% 1,657 57 4.59% -------- ------- -------- ------- Total interest bearing liabilities $347,128 12,211 4.69% $314,917 10,197 4.32% Net interest income/yield $13,469 4.16% $12,709 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
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 $475 thousand for the first nine months of 2000, up from $450 thousand in the comparable period in 1999. Loans charged off (net of recoveries) were $91,260 compared with loans charged off (net of recoveries) of $335,523 in the first nine months of 1999. On an annualized basis net loan charge-offs were 0.04% of total loans for the first three quarters of 2000 compared with 0.16% for the same period in 1999. On September 30, 2000 nonperforming assets totaled $1.02 million compared with $555 thousand on September 30, 1999. The September 2000 total consisted of $200 thousand in foreclosed real estate, $354 thousand in a former branch site now listed for sale, and $465 thousand in nonaccrual loans. The September 1999 total consisted of $60 thousand in foreclosed real estate, $354 thousand in a former branch site, and $141 thousand in nonaccrual loans. Loans still accruing interest but past due 90 days or more increased to $977 thousand as of September 30, 2000 compared with $557 thousand as of September 30, 1999. The allowance for loan losses on September 30, 2000 was $3.5 million compared with $2.97 million on September 30, 1999. It represented a multiple of 3.43 times nonperforming assets and 7.53 times nonperforming loans. The allowance for loan losses was 1.12% of loans on September 30, 2000 compared to 1.10% at September 30, 1999. Other Income For the third quarter of 2000 other income increased $127 thousand, or 10.0%, and for the nine months ended September 30, 2000 other income increased $274 thousand or 6.9%. In both periods, the increase in income is attributed to an increase in fiduciary income. Other Expenses For the third quarter of 2000 other expenses increased $332 thousand or 9.5% over the third quarter of 1999. For the nine months ending September 2000 other expenses increased $1.0 million or 10.0% 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 September 30, 2000 total assets were $473.1 million, up 8.4% from $436.3 million at December 31, 1999. Total loans grew $31.7 million or 11.3%. The majority of this growth was in the installment and real estate portfolios. Federal Home Loan Bank advances increased $20 million in 2000 from year-end 1999 to fund the to the loan growth. Investment securities decreased by $1.6 million, or 1.3%, in 2000. Total deposits increased $9.0 million, or 2.5% in 2000 and demand note balances to the United States Treasury increased $1.3 million from year-end 1999. 10
Capital Ratios The Company's capital position remains strong as evidenced by the regulatory capital measurements. At September 30, 2000 the Tier I capital ratio was 12.21%, the total capital ratio was 13.16% and the leverage ratio was 10.0%. 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 $31.7 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. 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 September 30, 2000. There were $123 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 0.37% decrease in net income. The model indicates a 300 basis point rise in rates would cause approximately a 0.98% decrease in net income at September 30, 2000. 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 third quarter of 2000. 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 November 9, 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 14