-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, NcxA/0caXbxpk+JNqnSzlfj5CCs8QCQh8Vl5CdmtfY15varwgz7QH1Pg18L7/sO/ nOT5L0mzGRQPt0cq4k/ZuQ== 0000740971-02-000020.txt : 20021114 0000740971-02-000020.hdr.sgml : 20021114 20021114141735 ACCESSION NUMBER: 0000740971-02-000020 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20020930 FILED AS OF DATE: 20021114 FILER: COMPANY DATA: COMPANY CONFORMED NAME: OLD POINT FINANCIAL CORP CENTRAL INDEX KEY: 0000740971 STANDARD INDUSTRIAL CLASSIFICATION: STATE COMMERCIAL BANKS [6022] IRS NUMBER: 541265373 STATE OF INCORPORATION: VA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-12896 FILM NUMBER: 02824133 BUSINESS ADDRESS: STREET 1: 1 WEST MELLEN ST CITY: HAMPTON STATE: VA ZIP: 23663 BUSINESS PHONE: 7577281247 MAIL ADDRESS: STREET 1: 1 WEST MELLEN ST CITY: HAMPTON STATE: VA ZIP: 23663 10-Q 1 form10q093002.txt 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, 2002 [ ] 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, 2002. Class Outstanding at October 31, 2002 ----- ------------------------------- Common Stock, $5.00 par value 2,618,356 shares OLD POINT FINANCIAL CORPORATION FORM 10-Q INDEX ----- PART I - FINANCIAL INFORMATION Page ---- Item 1. Financial Statements...............................................1 Consolidated Balance Sheets September 30, 2002 and December 31, 2001....................1 Consolidated Statement of Earnings Three months ended September 30, 2002 and 2001..............2 Nine months ended September 30, 2002 and 2001...............2 Consolidated Statement of Cash Flows Nine months ended September 30, 2002 and 2001...............3 Consolidated Statements of Changes in Stockholders' Equity Nine months ended September 30, 2002 and 2001...............4 Notes to Consolidated Financial Statements.........................5 Parent Only Balance Sheets September 30, 2002 and December 31, 2001.............6 Parent Only Statement of Earnings Three months ended September 30, 2002 and 2001.......6 Nine months ended September 30, 2002 and 2001........6 Parent Only Statement of Cash Flows Nine months ended September 30, 2002 and 2001........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........14 Item 4. Disclosure Controls and Procedures................................15 PART II - OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K..................................16 (i)
- ---------------------------------------------------------------------------------------- Unaudited September 30, December 31, Consolidated Balance Sheets 2002 2001 - ---------------------------------------------------------------------------------------- Assets Cash and due from banks................................... $ 12,644,491 $ 14,402,541 Interest bearing balances due from banks.................. 306,739 383,324 ------------ ------------ Total cash due from banks.............................. $ 12,951,230 $ 14,785,865 Investments: Securities available for sale, at market................ 101,191,699 97,917,884 Securities to be held to maturity....................... 33,361,348 38,082,927 Trading account securities................................ - - Federal funds sold........................................ 20,885,802 5,018,240 Loans, total ............................................. 372,874,638 346,482,751 Less reserve for loan losses.......................... 4,538,725 3,893,559 ------------ ------------ Net loans......................................... 368,335,913 342,589,192 Bank premises and equipment............................... 13,362,766 14,419,564 Other real estate owned................................... 1,496,341 1,003,229 Other assets.............................................. 10,534,203 4,942,161 ------------ ------------ Total assets......................................... $562,119,302 $518,759,062 ============ ============ Liabilities Noninterest-bearing deposits.............................. $ 88,468,421 $ 79,978,127 Savings deposits.......................................... 150,060,002 140,848,118 Time deposits............................................. 203,444,278 191,476,949 ------------ ------------ Total deposits......................................... 441,972,701 412,303,194 Federal funds purchased and securities sold under agreement to repurchase............................... 24,327,232 28,320,881 Interest-bearing demand notes issued to the United States Treasury and other liabilities for borrowed money...... 6,000,000 369,075 Federal Home Loan Bank.................................... 30,000,000 25,000,000 Other liabilities......................................... 2,916,935 1,853,841 ------------ ------------ Total liabilities...................................... 505,216,868 467,846,991 Stockholders' Equity Common stock, $5.00 par value............................. $ 13,084,280 $ 12,997,885 2002 2001 Shares authorized.... 10,000,000 10,000,000 Shares outstanding... 2,616,856 2,599,577 Surplus................................................... 10,953,241 10,455,061 Undivided profits......................................... 30,983,438 27,340,908 Accumulated other comprehensive income (loss)............. 1,881,475 118,217 ------------ ------------ Total stockholders' equity............................ 56,902,434 50,912,071 ------------ ------------ Total liabilities and stockholders' equity............ $562,119,302 $518,759,062 ============ ============
1
- --------------------------------------------------------------------------------------------------------------------- Three Months Ended Nine Months Ended Consolidated Statements of Earnings September 30, September 30, 2002 2001 2002 2001 - --------------------------------------------------------------------------------------------------------------------- Interest Income Interest and fees on loans.................................... $ 6,933,875 $ 6,970,974 $ 20,357,364 $ 20,843,665 Interest on federal funds sold................................ 74,798 115,433 165,766 495,121 Interest on securities: Interest on United States Treasury securities (taxable)....... 17,666 20,829 64,791 67,770 Interest on obligations of other United States Government agencies (taxable)................. 984,643 1,028,384 3,022,350 2,902,726 Interest on obligations of states and political subdivisions (tax exempt)......................... 579,870 618,025 1,761,858 1,879,235 Interest on obligations of states and political subdivisions (taxable)............................ 18,792 19,349 57,118 58,790 Interest on trading account securities........................ - - - - Dividends and interest on all other securities................ 28,854 78,644 90,668 255,875 ----------- ----------- ------------ ------------ Total interest on securities............................ 1,629,825 1,765,231 4,996,785 5,164,396 ----------- ----------- ------------ ------------ Total interest income..................................... 8,638,498 8,851,638 25,519,915 26,503,182 Interest Expense Interest on savings deposits.................................. 407,896 618,560 1,234,453 2,340,952 Interest on time deposits..................................... 2,050,586 2,723,513 6,412,133 8,398,223 Interest on federal funds purchased and securities sold under agreement to repurchase.......................... 99,250 212,636 298,528 755,157 Interest on Federal Home Loan Bank advances................... 436,939 387,806 1,199,904 1,150,771 Interest on demand notes (note balances) issued to the United States Treasury and on other borrowed money.......... 7,913 15,997 23,208 59,332 ----------- ----------- ------------ ------------ Total interest expense.................................... 3,002,584 3,958,512 9,168,226 12,704,435 Net interest income........................................... 5,635,914 4,893,126 16,351,689 13,798,747 Provision for loan losses..................................... 600,000 400,000 1,300,000 800,000 ----------- ----------- ------------ ------------ Net interest income after provision for loan losses........... 5,035,914 4,493,126 15,051,689 12,998,747 Other Income Income from fiduciary activities.............................. 603,246 756,836 1,700,718 2,076,004 Service charges on deposit accounts........................... 721,276 685,942 2,150,334 1,906,123 Other service charges, commissions and fees................... 247,094 184,788 815,734 570,558 Other operating income........................................ 213,858 116,986 619,197 276,763 Security gains (losses)....................................... 2,391 - 11,789 - Trading account income........................................ - - - - ----------- ----------- ------------ ------------ Total other income........................................ 1,787,865 1,744,552 5,297,772 4,829,448 Other Expenses Salaries and employee benefits................................ 2,798,545 2,551,805 8,104,269 7,444,968 Occupancy expense of Bank premises............................ 284,399 284,065 853,692 831,054 Furniture and equipment expense............................... 408,042 404,201 1,228,697 1,225,704 Other operating expenses...................................... 1,047,734 999,880 3,271,035 2,963,961 ----------- ----------- ------------ ------------ Total other expenses...................................... 4,538,720 4,239,951 13,457,693 12,465,687 ----------- ----------- ------------ ------------ Income before taxes........................................... 2,285,059 1,997,727 6,891,768 5,362,508 Applicable income taxes....................................... 554,260 486,278 1,691,100 1,251,978 ----------- ----------- ------------ ------------ Net income.................................................... $ 1,730,799 $ 1,511,449 $ 5,200,668 $ 4,110,530 =========== =========== ============ ============ Per Share Based on weighted average number of common shares outstanding................................... 2,612,201 2,595,876 2,606,263 2,592,338 Basic Earnings per Share...................................... $ 0.66 $ 0.58 $ 2.00 $ 1.59 Diluted Earnings per Share.................................... $ 0.65 $ 0.58 $ 1.95 $ 1.57
2
- ----------------------------------------------------------------------------------------------- OLD POINT FINANCIAL CORPORATION Nine Months Ended Consolidated Statements of Cash Flows September 30, (Unaudited) 2002 2001 - ----------------------------------------------------------------------------------------------- CASH FLOWS FROM OPERATING ACTIVITIES Net income.................................................. $ 5,200,668 $ 4,110,530 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization............................. 1,029,344 1,077,465 Provision for loan losses................................. 1,300,000 800,000 (Gains) loss on sale of investment securities, net........ (11,789) - Net amortization & accretion of securities ............... 57,814 26,219 Net (increase) decrease in trading account................ - - Loss on disposal of bank premises and equipment........... 92,591 - (Increase) Decrease in other real estate owned............ (997,542) (555,000) (Increase) decrease in other assets (net of tax effect of FASB 115 adjustment).............. (6,688,925) (342,248) Increase (decrease) in other liabilities.................. 697,109 607,768 -------------- -------------- Net cash provided by operating activities............... 679,270 5,724,734 CASH FLOWS FROM INVESTING ACTIVITIES Purchases of securities .................................. (31,988,224) (36,153,730) Proceeds from maturities & calls of securities ........... 34,137,900 26,759,429 Proceeds from sales of available - for - sale securities.. 2,478,189 1,300,000 Proceeds from sales of held - to - maturity securities.... - - Loans made to customers................................... (187,072,518) (136,515,302) Principal payments received on loans...................... 160,025,797 117,654,186 Proceeds from sales of other real estate owned............ 1,019,430 460,000 Purchases of premises and equipment....................... (580,137) (633,951) (Increase) decrease in federal funds sold................. (15,867,562) (6,074,109) -------------- -------------- Net cash provided by (used in) investing activities..... (37,847,125) (33,203,477) CASH FLOWS FROM FINANCING ACTIVITIES Increase (decrease) in non-interest bearing deposits...... 8,490,294 2,829,463 Increase (decrease) in savings deposits................... 9,211,884 10,283,301 Proceeds from the sale of certificates of deposit......... 91,058,080 52,740,326 Payments for maturing certificates of deposit............. (79,090,751) (42,303,473) Increase (decrease) in federal funds purchased & repurchase agreements.................................... (3,993,649) 1,355,527 Increase (decrease) in Federal Home Loan Bank advances.... 5,000,000 - Increase (decrease) in other borrowed money............... 5,630,925 3,916,625 Proceeds from issuance of common stock.................... 329,772 98,342 Dividends paid............................................ (1,303,335) (1,192,502) -------------- -------------- Net cash provided by financing activities............... 35,333,220 27,727,609 Net increase (decrease) in cash and due from banks...... (1,834,635) 248,866 Cash and due from banks at beginning of period.......... 14,785,865 11,043,772 -------------- -------------- Cash and due from banks at end of period................ $ 12,951,230 $ 11,292,638 ============== ============== SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION Cash payments for: Interest................................................ $ 9,405,204 $ 12,907,040 Income taxes............................................ 1,990,000 1,250,000 SUPPLEMENTAL SCHEDULE OF NONCASH TRANSACTIONS Unrealized gain (loss) on investment securities, net of tax................................................. 2,129,243 1,490,611 Additional minimum liability related to pension.......... (365,985) - Transfer of property from Premises & Equipment to Other Real Estate Owned..................................... 515,000 -
See accompanying notes 3
- --------------------------------------------------------------------------------------------------------------------------------- OLD POINT FINANCIAL CORPORATION STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY Unaudited Accumulated Other Total Common Stock Par Capital Retained Comprehensive Stockholder's Shares Value Surplus Earnings Income(Loss) Equity - --------------------------------------------------------------------------------------------------------------------------------- FOR NINE MONTHS ENDED SEPTEMBER 30, 2002 Balance at beginning of period.............. 2,599,577 $ 12,997,885 $ 10,455,061 $ 27,340,908 $ 118,217 $ 50,912,071 Comprehensive Income Net income................................ - - - 5,200,668 - 5,200,668 Increase (decrease) in unrealized gain on investment securities - - - - 2,129,243 2,129,243 Minimum pension liability adjustment........ (365,985) (365,985) --------- ------------ ------------ ------------ ------------ ------------ Total Comprehensive Income 5,200,668 1,763,258 6,963,926 Sale of common stock........................ 17,279 86,395 498,180 (254,803) - 329,772 Cash dividends............... .............. - - - (1,303,335) - (1,303,335) --------- ------------ ------------ ------------ ------------ ------------ Balance at end of period.................... 2,616,856 $ 13,084,280 $ 10,953,241 $ 30,983,438 $ 1,881,475 $ 56,902,434 FOR NINE MONTHS ENDED SEPTEMBER 30, 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................................ - - - 4,110,530 - 4,110,530 Increase (decrease) in unrealized gain on investment securities - - - - 1,490,611 1,490,611 Minimum pension liability adjustment........ - - - - - - --------- ------------ ------------ ------------ ------------ ------------ Total Comprehensive Income 4,110,530 1,490,611 5,601,141 Sale of common stock........................ 5,336 26,680 89,324 (17,662) - 98,342 Cash dividends............... .............. - - - (1,192,502) - (1,192,502) --------- ------------ ------------ ------------ ------------ ------------ Balance at end of period.................... 2,595,876 $ 12,979,380 $ 10,377,625 $ 26,197,768 $ 1,449,693 $ 51,004,466
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 2001 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
- ------------------------------------------------------------------------------------- OLD POINT FINANCIAL CORPORATION Parent only Balance Sheets September 30, December 31, (Unaudited) 2002 2001 - ------------------------------------------------------------------------------------- Assets Cash in bank........................................... $ 185,884 $ 275,795 Investment Securities.................................. 2,215,000 1,215,000 Total Loans............................................ - - Investment in Subsidiaries............................. 54,443,092 49,407,931 Equipment.............................................. - - Other assets........................................... 58,458 13,345 ------------ ------------ Total Assets........................................... $ 56,902,434 $ 50,912,071 ============ ============ Liabilities and Stockholders' Equity Total Liabilities...................................... $ - $ - Stockholders' Equity................................... 56,902,434 50,912,071 ------------ ------------ Total Liabilities & Stockholders' Equity............... $ 56,902,434 $ 50,912,071 ============ ============
- ------------------------------------------------------------------------------------------------------------------- OLD POINT FINANCIAL CORPORATION Three Months Ended: Nine Months Ended: Parent only Income Statements September 30, September 30, (Unaudited) 2002 2001 2002 2001 - ------------------------------------------------------------------------------------------------------------------- Income Cash dividends from Subsidiary......................... $ 475,000 $ 425,000 $ 1,375,000 $ 1,275,000 Interest and fees on loans............................. - - - - Interest income from investment securities............. 26,015 28,062 71,393 88,398 Gains (losses) from sale of investment securities...... - - - - Other income........................................... 36,000 36,000 108,000 108,000 ------------ ------------ ------------ ------------ Total Income........................................... 537,015 489,062 1,554,393 1,471,398 Expenses Salaries and employee benefits......................... 65,986 57,550 202,738 178,153 Other expenses......................................... 27,136 26,470 74,590 99,646 ------------ ------------ ------------ ------------ Total Expenses......................................... 93,122 84,020 277,328 277,799 ------------ ------------ ------------ ------------ Income before taxes & undistributed net income of subsidiaries......................... 443,893 405,042 1,277,065 1,193,599 Income tax............................................. (16,740) (13,722) (51,700) (47,722) ------------ ------------ ------------ ------------ Net income before undistributed net income of subsidiaries........................... 460,633 418,764 1,328,765 1,241,321 Undistributed net income of subsidiaries............... 1,270,166 1,092,685 3,871,903 2,869,209 ------------ ------------ ------------ ------------ Net Income............................................. $ 1,730,799 $ 1,511,449 $ 5,200,668 $ 4,110,530 ============ ============ ============ ============
6
- ------------------------------------------------------------------------------------ OLD POINT FINANCIAL CORPORATION Nine Months Ended: Parent only Statements of Cash Flows September 30, (Unaudited) 2002 2001 - ------------------------------------------------------------------------------------ Cash Flows from Operating Activities: Net Income............................................. $ 5,200,668 $ 4,110,530 Adjustments to reconcile net income to net cash provided by operating activities: Equity in undistributed income of subsidiary....... (3,871,903) (2,869,209) Depreciation......................................... - - Gains(losses) on sale of securities [net].......... - - (Increase) Decrease in other assets................ (45,113) (77,129) Increase (decrease) in other liabilities........... - - ------------ ------------ Net cash provided by operating activities.............. 1,283,652 1,164,192 Cash flows from investing activities: Purchase of securities................................. - - Proceeds froms sales of available-for-sale securities.. - - (Increase)decrease in investment securities............ (1,000,000) (235,000) Investment in subsidiaries ............................ 600,000 - Sale of equipment...................................... - - Repayment of loans by customers........................ - - ------------ ------------ Net cash provided by investing activities.............. (400,000) (235,000) Cash flows from financing activities: Proceeds from issuance of common stock................. 329,772 98,342 Dividends paid......................................... (1,303,335) (1,192,502) ------------ ------------ Net cash provided by financing activities.............. (973,563) (1,094,160) Net increase (decrease) in cash & due from banks....... (89,911) (164,968) Cash & due from banks at beginning of period........... 275,795 225,339 ------------ ------------ Cash & due from banks at end of period................. $ 185,884 $ 60,371 ============ ============
7 Item 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Earnings Summary - ---------------- Net income for the third quarter of 2002 increased 14.51% to $1.73 million from $1.51 million for the comparable period in 2001. Basic earnings per share were $0.66 in the third quarter of 2002 compared with $0.58 in 2001. For the nine months ended September 30, 2002 net income increased 26.52% to $5.20 million from $4.11 million in 2001. Basic earnings per share were $2.00 for the first nine months of 2002 compared with $1.59 in 2001. Return on average assets was 1.25% for the third quarter of 2002 and 1.19% for the comparable period in 2001. Return on average equity was 12.30% for the third quarter of 2002 and 11.97% for the third quarter of 2001. For the nine months ended September 30, 2002 and 2001 return on average assets was 1.30% and 1.10% respectively. Return on average equity was 12.77% in 2002 and 11.17% in 2001. 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 $704 thousand, or 13.43%, for the third quarter of 2002 over 2001. Average earning assets increased 8.16% in the third quarter of 2002 from 2001. For the nine months ended September 30, 2002 net interest income on a fully tax equivalent basis increased $2.47 million, or 16.61%, over the comparable period in 2001. Comparing the first nine months of 2002 to 2001, average loans increased $30.18 million or 9.19% while investment securities increased $4.82 million or 3.88%. Average earning assets increased 7.14% and the net interest yield increased from 4.23% in 2001 to 4.61% in 2002. Interest expense decreased $956 thousand or 24.15% in the third quarter of 2002 from the third quarter of 2001. Interest bearing liabilities increased $24.57 million or 6.36 % in the third quarter of 2002 over the same period in 2001. The cost of funding those liabilities decreased 118 basis points from 2001. For the nine months ended September 30, 2002 interest expense decreased $3.54 million, or 27.83% over the same period in 2001. Page 9 shows an analysis of average earning assets, interest bearing liabilities and rates and yields. 8
- ---------------------------------------------------------------------------------------------------------- OLD POINT FINANCIAL CORPORATION NET INTEREST INCOME ANALYSIS For the quarter ended September 30, (Fully taxable equivalent basis) * 2002 2001 - ---------------------------------------------------------------------------------------------------------- Average Average Interest Rates Interest Rates Average Income/ Earned/ Average Income/ Earned/ Dollars in thousands Balance Expense Paid Balance Expense Paid - ---------------------------------------------------------------------------------------------------------- Loans (net of unearned income)** $370,199 $ 6,952 7.51% $335,114 $ 7,007 8.36% Investment securities: Taxable 79,066 1,066 5.39% 77,019 1,164 6.05% Tax-exempt 48,737 855 7.01% 51,624 914 7.08% -------- ------- -------- ------- Total investment securities 127,803 1,921 6.01% 128,643 2,078 6.46% Federal funds sold 18,025 75 1.66% 13,361 115 3.44% -------- ------- -------- ------- Total earning assets $516,027 $8,948 6.94% $477,118 $ 9,200 7.71% ======== ======= ======== ======= Time and savings deposits: Interest-bearing transaction accounts $ 7,635 $ 11 0.58% $ 6,664 $ 24 1.44% Money market deposit accounts 111,642 316 1.13% 102,212 485 1.90% Savings accounts 32,720 80 0.98% 29,193 110 1.51% Certificates of deposit, $100,000 or more 55,445 491 3.54% 50,363 675 5.36% Other certificates of deposit 147,300 1,559 4.23% 143,893 2,048 5.69% -------- ------- -------- ------- Total time and savings deposits 354,742 2,457 2.77% 332,325 3,342 4.02% Federal funds purchased and securities sold under agreement to repurchase 24,127 100 1.66% 26,937 212 3.15% Federal Home Loan Bank advances 29,785 437 5.87% 25,000 388 6.21% Other short term borrowings 2,151 8 1.49% 1,972 16 3.25% -------- ------- -------- ------- Total interest bearing liabilities. $410,805 3,002 2.92% $386,234 3,958 4.10% Net interest income/yield $ 5,946 4.61% $ 5,242 4.39% ======= ===== ======= ===== - ---------------------------------------------------------------------------------------------------------- For the nine months ended September 30, 2002 2001 - ---------------------------------------------------------------------------------------------------------- Average Average Interest Rates Interest Rates Average Income/ Earned/ Average Income/ Earned/ Dollars in thousands Balance Expense Paid Balance Expense Paid - ---------------------------------------------------------------------------------------------------------- Loans (net of unearned income)** $358,573 $20,411 7.59% $328,393 $20,924 8.50% Investment securities: Taxable 79,746 3,235 5.41% 71,898 3,286 6.09% Tax-exempt 49,313 2,670 7.22% 52,337 2,847 7.25% -------- ------- -------- ------- Total investment securities 129,059 5,905 6.10% 124,235 6,133 6.58% Federal funds sold 13,332 166 1.66% 14,957 495 4.41% -------- ------- -------- ------- Total earning assets $500,964 $26,482 7.05% $467,585 $27,552 7.86% ======== ======= ======== ======= Time and savings deposits: Interest-bearing transaction accounts $ 7,543 $ 34 0.60% $ 6,305 $ 82 1.73% Money market deposit accounts 109,084 966 1.18% 99,334 1,803 2.42% Savings accounts 31,592 234 0.99% 28,659 456 2.12% Certificates of deposit, $100,000 or more 54,884 1,532 3.72% 48,964 2,064 5.62% Other certificates of deposit 142,169 4,880 4.58% 143,124 6,334 5.90% -------- ------- -------- ------- Total time and savings deposits 345,272 7,646 2.95% 326,386 10,739 4.39% Federal funds purchased and securities sold under agreement to repurchase 24,182 299 1.65% 26,031 755 3.87% Federal Home Loan Bank advances 26,595 1,200 6.02% 25,000 1,151 6.14% Other short term borrowings 2,066 23 1.48% 1,953 59 4.03% -------- ------- -------- ------- Total interest bearing liabilities $398,115 9,168 3.07% $379,370 12,704 4.46% Net interest income/yield $17,314 4.61% $14,848 4.23% ======= ===== ======= =====
* 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 $1.30 million for the first nine months of 2002, up from $800 thousand in the comparable period in 2001. Loans charged off (net of recoveries) were $655 thousand compared with loans charged off (net of recoveries) of $756 thousand in the first nine months of 2001. On an annualized basis net loan charge-offs were 0.23% of total loans for the first three quarters of 2002 compared with 0.30% for the same period in 2001. On September 30, 2002 nonperforming assets totaled $2.11 million compared with $1.28 million on September 30, 2001. The September 2002 total consisted of $1.33 million in foreclosed real estate, $165 thousand in former branch sites now listed for sale, and $611 thousand in nonaccrual loans. The September 2001 total consisted of $680 thousand in foreclosed real estate, $165 thousand in a former branch site listed for sale and $437 thousand in nonaccrual loans. Loans still accruing interest but past due 90 days or more increased to $546 thousand as of September 30, 2002 compared with $214 thousand as of September 30, 2001. The allowance for loan losses on September 30, 2002 was $4.54 million compared with $3.69 million on September 30, 2001. It represented a multiple of 2.2 times nonperforming assets and 7.4 times nonperforming loans. The allowance for loan losses was 1.22% and 1.09% of loans on September 30, 2002 and 2001 respectively. Other Income - ------------ For the third quarter of 2002 other income increased $43 thousand, or 2.48%, and for the nine months ended September 30, 2002 other income increased $468 thousand or 9.70%. In both periods, the increase in income is attributed to increases in other service charges, commissions and fees and mortgage brokerage income. The increase in other income was lower than the previous year due to a decrease in income from fiduciary activities. Other Expenses - -------------- For the third quarter of 2002 other expenses increased $299 thousand or 7.05% over the third quarter of 2001. For the nine months ending September 2002 other expenses increased $992 thousand or 7.96% over the same period in 2001. For the nine months ended September 30, 2002, salaries and employee benefits increased $659 thousand or 8.86%. Occupancy expenses increased $23 thousand or 2.72%. Other operating expenses increased $307 thousand or 10.36% as a result of increases in other loan expense, loss on disposal of premises and equipment, employee development and data processing expenses. 10 Assets - ------ At September 30, 2002 total assets were $562.12 million, up 8.36% from $518.76 million at December 31, 2001. Total loans grew $26.39 million or 7.62%. Investment securities and federal funds sold increased by $14.42 million, or 10.23%, in 2002. Bank owned life insurance increased $5.95 million due to the purchase of policies in 2002. Total deposits increased $29.67 million, or 7.20% in 2002 and demand note balances to the United States Treasury increased $5.63 million from year-end 2001. Capital Ratios - -------------- The Company's capital position remains strong as evidenced by the regulatory capital measurements. At September 30, 2002 the Tier I capital ratio was 13.96%, the total capital ratio was 15.06% and the leverage ratio was 10.04%. These ratios were all well above the regulatory minimum levels of 4.00%, 8.00%, and 3.00%, respectively. Capital Resources - ----------------- During the third quarter, the Company sold a vacant branch site that was transferred to OREO in the first quarter of 2002. Land was purchased in Chesapeake for an additional branch location. The Company continues to expand the implementation of the new imaging system by moving forward with the use of imaged signature cards in 2002. 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 continued to experience moderate deposit growth in the third quarter of 2002. Loan growth for the first nine months of 2002 exceeded targeted projections. Management considers the liquidity of the Company to be adequate. 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 inflationary economy. Critical Accounting Policies - ---------------------------- The Company's consolidated financial statements and accompanying notes have been prepared in accordance with generally accepted accounting principles applied on a consistent basis. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and 11 Critical Accounting Policies (con't) - ---------------------------- assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. The Company continually evaluates the accounting policies and estimates it uses to prepare the consolidated financial statements. In general, management's estimates are based on historical experience, on information from third party professionals and on various other assumptions that are believed to be reasonable under the facts and circumstances. Actual results could differ from those estimates made by management. Allowance for Loan Losses - ------------------------- The allowance for loan losses is an estimate of the losses that may be sustained in our loan portfolio. The allowance is based on two basic principles of accounting. (1) Statement of Financial Accounting Standards (SFAS) No. 5 "Accounting for Contingencies", which requires that losses be accrued when they are probable of occurring and estimable and (2) SFAS No. 114, "Accounting by Creditors for Impairment of a Loan", which requires that losses be accrued based on the differences between that value of collateral, present value of future cash flows or values that are observable in the secondary market and the loan balance. In evaluating the adequacy of the allowance for loan losses, the Company has divided the loan portfolio into six pools of loans. Allocation percentages are applied to the loan pools utilizing the following factors: 1. economic trends and conditions 2. trends in volume and terms of loans 3. delinquency and non-accruals 4. lending policies 5. lending management and staff 6. concentrations of credit The Company also maintains a four-year loss experience history on each category of loan. Using the six factors listed above, management can modify the allocation from the four-year historical average. Changes in the financial condition of individual borrowers, in economic conditions, in historical loss experience and in the conditions of the various markets in which collateral may be sold all affect the required level of the allowance for loan losses and the associated provision for loan losses. 12 Deferred Loan Fees / Costs - -------------------------- As part of the lending process, the Company receives fees from borrowers or potential borrowers related to loans underwritten. All origination fees received in the origination of a loan that are not pass-through fees, and certain direct origination costs are deferred and amortized over the life of the loan. Other Real Estate Owned - ----------------------- The Company records Other Real Estate Owned on the financial statement at fair value. Fair value is typically determined based on appraisals by third parties, less estimated costs to sell. The Company monitors the fair value of Other Real Estate Owned and adjusts the carrying value on the financial statement accordingly. Income Taxes - ------------ The Company recognizes expense for federal income and state bank franchise taxes payable as well as deferred federal income taxes for estimated future tax effects of temporary differences between the tax basis of assets and liabilities and amounts reported in the consolidated financial statements. Income and franchise tax returns are subject to audit by the IRS and state taxing authorities. Income and franchise tax expense for current and prior periods is subject to adjustment based on the outcome of such audits. The Company believes it has adequately provided for all taxes payable. 13 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, 2002. There were $121 million more in liabilities than assets subject to repricing within three months. As of December 31, 2001, the Company had $125 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 $150.06 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 100 basis point drop in rates would cause approximately a 1.75% decrease in net income. The rate shock model reveals that a 100 basis point rise in rates would cause approximately a 1.06% increase in net income and that a 200 basis point rise in rates would cause approximately a 1.86% increase in net income at September 30, 2002. 14 Item 4. DISCLOSURE CONTROLS AND PROCEDURES Within the 90 day period prior to filing of this report, an evaluation was carried out under the supervision and with the participation of Old Point Financial Corporation's management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures (as defined in Rule [13a-14(c) /15d-14(c)] under the Securities Exchange Act of 1934). Based on their evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that the Company's disclosure controls and procedures are, to the best of their knowledge, effective to ensure that information required to be disclosed by Old Point Financial Corporation in reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms. Subsequent to the date of their evaluation, the Company did not make any significant changes in, nor take any corrective actions regarding its internal controls or other factors that could significantly affect these controls. 15 PART II - OTHER INFORMATION Item 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits 99.1 Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 from the Company's Chief Executive Officer 99.2 Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 from the Company's Chief Financial Officer (b) Two reports on Form 8-K were filed during the third quarter of 2002. September 30, 2002 a Form 8-K was filed announcing the resignation of Frank E. Continetti as President and CEO of Old Point Trust & Financial Services, N.A. October 9, 2002 a Form 8-K was filed to announce the election of Eugene M. Jordan, II to the Board of Directors of Old Point Trust & Financial Services, N.A. in advance of his appointment to the position of President and CEO. The Form 8-K also announced the declaration of a 50% stock dividend. 16 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 13, 2002 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 EX-99 3 ex99_1ceocertification.txt Exhibit 99.1 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of Old Point Financial Corporation (the "Company") on Form 10-Q for the period ending September 30, 2002 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Robert F. Shuford, Chief Executive Officer of the Company, hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes- Oxley Act of 2002, that: (1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of and for the periods covered in the Report. /s/Robert F. Shuford _______________________________ Robert F. Shuford President and Chief Executive Officer Date: November 13, 2002 I, Robert F. Shuford, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Old Point Financial Corporation; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent function): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: November 13, 2002 /s/Robert F. Shuford - -------------------------------------------- Robert F. Shuford President and Chief Executive Officer EX-99 4 ex99_2cfocertification.txt Exhibit 99.2 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of Old Point Financial Corporation (the "Company") on Form 10-Q for the period ending September 30, 2002 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Louis G. Morris, Chief Financial Officer of the Company, hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes- Oxley Act of 2002, that: (1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of and for the periods covered in the Report. /s/Louis G. Morris _______________________________ Louis G. Morris Executive Vice President and Chief Financial Officer Date: November 13, 2002 I, Louis G. Morris, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Old Point Financial Corporation; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent function): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: November 13, 2002 /s/Louis G. Morris - -------------------------------------------- Louis G. Morris Executive Vice President and Chief Financial Officer -----END PRIVACY-ENHANCED MESSAGE-----