-----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, EGHSUrI2Ip/HcDpj9a4rv7zVxgOuTGdkiHRRHfaLgaA2yruEkFhX+ctmmE0/Nbnt v1gkuu/8TnCqggyDJ0lNXw== 0000740971-03-000010.txt : 20030514 0000740971-03-000010.hdr.sgml : 20030514 20030514101538 ACCESSION NUMBER: 0000740971-03-000010 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20030331 FILED AS OF DATE: 20030514 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: 03697121 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 form10q033103.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 March 31, 2003 [ ] 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 Indicate by check mark whether the registrant is an accelerated filer (as defined by Rule 12b-2 of the Exchange Act) Yes X No __ State the number of shares outstanding of each of the issuer's classes of common stock as of April 30, 2002. Class Outstanding at March 31, 2003 ----- ----------------------------- Common Stock, $5.00 par value 3,944,070 shares OLD POINT FINANCIAL CORPORATION FORM 10-Q INDEX ----- PART I - FINANCIAL INFORMATION Page ---- Item 1. Financial Statements...................................... 1 Consolidated Balance Sheets March 31, 2003 and December 31, 2002........ 1 Consolidated Statement of Earnings Three months ended March 31, 2003 and 2002......... 2 Consolidated Statement of Cash Flows Three months ended March 31, 2003 and 2002........ 3 Consolidated Statements of Changes in Stockholders' Equity Three months ended March 31, 2003 and 2002......... 4 Notes to Consolidated Financial Statements................... 5 Parent Only Balance Sheets March 31, 2003 and December 31, 2002........ 7 Parent Only Statement of Earnings Three months ended March 31, 2003 and 2002.. 7 Parent Only Statement of Cash Flows Three months ended March 31, 2003 and 2002.. 8 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations..................... 9 Analysis of Changes in Net Interest Income.............. 10 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 March 31, December 31, Consolidated Balance Sheets 2003 2002 - ---------------------------------------------------------------------------------------- Assets Cash and due from banks................................... $ 15,273,832 $ 14,180,253 Interest bearing balances due from banks.................. 250,209 256,597 ------------ ------------ Total cash due from banks.............................. $ 15,524,041 $ 14,436,850 Investments: Securities available for sale, at market................ 136,474,622 128,487,826 Securities to be held to maturity....................... 21,815,439 27,515,549 Trading account securities................................ - - Federal funds sold........................................ 12,260,526 8,709,544 Loans, total ............................................. 385,689,181 377,961,364 Less reserve for loan losses.......................... 4,671,069 4,564,931 ----------- ----------- Net loans......................................... 381,018,112 373,396,433 Bank premises and equipment............................... 13,214,105 13,280,017 Other real estate owned................................... 1,409,184 830,091 Other assets.............................................. 10,135,698 9,966,279 ------------ ------------ Total assets......................................... $591,851,727 $576,622,589 ============ ============ Liabilities Noninterest-bearing deposits.............................. $ 98,376,640 $ 90,620,836 Savings deposits.......................................... 159,361,954 159,077,310 Time deposits............................................. 208,436,251 204,353,854 ------------ ------------ Total deposits......................................... 466,174,845 454,052,000 Federal funds purchased and securities sold under agreement to repurchase............................... 22,119,474 21,283,237 Interest-bearing demand notes issued to the United States Treasury and other liabilities for borrowed money...... 725,099 6,000,000 Federal Home Loan Bank.................................... 40,000,000 35,000,000 Other liabilities......................................... 2,975,776 2,171,878 ------------ ------------ Total liabilities...................................... 531,995,194 518,507,115 Stockholders' Equity Common stock, $5.00 par value............................. $ 19,720,350 $ 19,683,600 2003 2002 Shares authorized.... 10,000,000 10,000,000 Shares outstanding... 3,944,070 3,936,720 Surplus................................................... 11,330,816 11,165,496 Undivided profits......................................... 26,978,752 25,597,568 Accumulated other comprehensive income (loss)............. 1,826,615 1,668,810 ------------ ------------ Total stockholders' equity............................ 59,856,533 58,115,474 ------------ ------------ Total liabilities and stockholders' equity............ $591,851,727 $576,622,589 ============ ============
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- ---------------------------------------------------------------------------------------- Three Months Ended Consolidated Statements of Earnings March 31 2003 2002 - ---------------------------------------------------------------------------------------- Interest Income Interest and fees on loans................................ $ 6,686,479 $ 6,655,916 Interest on federal funds sold............................ 60,718 42,347 Interest on securities: Interest on United States Treasury securities (taxable)... 23,898 23,109 Interest on obligations of other United States Government agencies (taxable)............. 1,009,867 1,054,950 Interest on obligations of states and political subdivisions (tax exempt)..................... 567,331 595,590 Interest on obligations of states and political subdivisions (taxable)........................ 18,791 19,349 Interest on trading account securities.................... - - Dividends and interest on all other securities............ 27,402 31,610 ------------ ------------ Total interest on securities........................ 1,647,289 1,724,608 Trading account securities................................ - - ------------ ------------ Total interest income................................. 8,394,486 8,422,871 Interest Expense Interest on savings deposits.............................. 307,703 402,422 Interest on time deposits................................. 1,750,924 2,248,636 Interest on federal funds purchased and securities sold under agreement to repurchase...................... 63,157 103,213 Interest on Federal Home Loan Bank advances............... 493,118 379,375 379,375 Interest on demand notes (note balances) issued to the United States Treasury and on other borrowed money...... 5,438 10,306 ------------ ------------ Total interest expense................................ 2,620,340 3,143,952 Net interest income....................................... 5,774,146 5,278,919 Provision for loan losses................................. 300,000 300,000 ------------ ------------ Net interest income after provision for loan losses....... 5,474,146 4,978,919 Other Income Income from fiduciary activities.......................... 551,536 528,944 Service charges on deposit accounts....................... 713,915 697,620 Other service charges, commissions and fees............... 310,442 277,006 Other operating income.................................... 219,968 132,913 Security gains (losses)................................... 5,581 5,215 Trading account income.................................... - - ------------ ------------ Total other income.................................... 1,801,442 1,641,698 Other Expenses Salaries and employee benefits............................ 2,921,688 2,613,831 Occupancy expense of Bank premises........................ 305,602 299,096 Furniture and equipment expense........................... 408,880 406,274 Other operating expenses.................................. 1,030,390 1,071,612 ------------ ------------ Total other expenses.................................. 4,666,560 4,390,813 ------------ ------------ Income before taxes....................................... 2,609,028 2,229,804 Applicable income taxes .................................. 656,033 572,244 ------------ ------------ Net income................................................ $ 1,952,995 $ 1,657,560 ============ ============ Per Share Based on weighted average number of common shares outstanding............................... 3,941,222 3,903,020 Basic Earnings per Share $ 0.50 $ 0.42 Diluted Earnings per Share $ 0.48 $ 0.42
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- ---------------------------------------------------------------------------------------- OLD POINT FINANCIAL CORPORATION Three Months Ended Consolidated Statements of Cash Flows March 31, (Unaudited) 2003 2002 - ---------------------------------------------------------------------------------------- CASH FLOWS FROM OPERATING ACTIVITIES Net income................................................ $ 1,952,995 $ 1,657,560 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization........................... 331,106 351,103 Provision for loan losses............................... 300,000 300,000 (Gains) loss on sale of investment securities, net...... (5,581) (5,215) Net amortization & accretion of securities ............. 12,919 20,460 Net (increase) decrease in trading account.............. - - Loss on disposal of equipment........................... 215 90,669 (Increase) in other real estate owned................... (579,093) - (Increase) decrease in other assets (net of tax effect of FASB 115 adjustment)............ (250,712) (4,721,699) Increase (decrease) in other liabilities................ 803,897 916,462 ------------ ------------ Net cash provided by operating activities............. 2,565,746 (1,390,660) CASH FLOWS FROM INVESTING ACTIVITIES Purchases of securities ................................ (39,104,782) (2,584,766) Proceeds from maturities & calls of securities ......... 36,400,000 11,098,900 Proceeds from sales of available-for-sale securities.... 649,857 558,189 Proceeds from sales of held-to-maturity securities...... - - Loans made to customers................................. (58,277,795) (56,473,578) Principal payments received on loans.................... 50,356,116 52,782,327 Proceeds from sales of other real estate owned.......... - 158,229 Purchases of premises and equipment..................... (265,409) (50,284) (Increase) decrease in federal funds sold............... (3,550,982) (14,005,289) ------------ ------------ Net cash provided by (used in) investing activities... (13,792,995) (8,516,272) CASH FLOWS FROM FINANCING ACTIVITIES Increase (decrease) in non-interest bearing deposits.... 7,755,804 (375,284) 4,216,293 Increase (decrease) in savings deposits................. 284,644 5,643,489 Proceeds from the sale of certificates of deposit....... 23,573,141 14,243,620 Payments for maturing certificates of deposit........... (19,490,744) (12,658,153) Increase (decrease) in federal funds purchased & repurchase agreements.................................. 836,237 (5,522,560) Increase (decrease) in Federal Home Loan Bank advances.. 5,000,000 - Increase (decrease) in other borrowed money............. (5,274,901) 5,630,925 Proceeds from issuance of common stock.................. 103,296 54,650 Dividends paid.......................................... (473,037) (416,412) ------------ ------------ Net cash provided by financing activities............. 12,314,440 6,600,275 Net increase (decrease) in cash and due from banks.... 1,087,191 (3,306,657) Cash and due from banks at beginning of period........ 14,436,850 14,785,865 ------------ ------------ Cash and due from banks at end of period.............. $ 15,524,041 $ 11,479,208 ============ ============ SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION Cash payments for: Interest.............................................. $ 2,656,643 $ 3,198,292 Income taxes.......................................... - - SUPPLEMENTAL SCHEDULE OF NONCASH TRANSACTIONS Unrealized gain(loss) on investment securities, net of tax................................................ 157,805 (61,908) Additional minimum liability related to pension......... - - 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 THREE MONTHS ENDED MARCH 31, 2003 Balance at beginning of period............ 3,936,720 $19,683,600 $11,165,496 $25,597,568 $ 1,668,810 $58,115,474 Comprehensive Income Net income.............................. - - - 1,952,995 - 1,952,995 Increase (decrease) in unrealized gain on investment securities 157,805 157,805 Minimum pension liabilty adjustment...... - - - - - - --------- ----------- ----------- ----------- ----------- ----------- Total Comprehensive Income 1,952,995 157,805 2,110,800 Sale of common stock...................... 7,350 36,750 165,320 (98,774) - 103,296 Cash dividends............... ............ - - - (473,037) - (473,037) --------- ----------- ----------- ----------- ----------- ----------- Balance at end of period.................. 3,944,070 $19,720,350 $11,330,816 $26,978,752 $ 1,826,615 $59,856,533 FOR THREE MONTHS ENDED MARCH 31, 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.............................. - - - 1,657,560 - 1,657,560 Increase (decrease) in unrealized gain on investment securities - - - - (61,908) (61,908) Minimum pension liability adjustment.... - - - - - - --------- ----------- ----------- ----------- ----------- ----------- Total Comprehensive Income 1,657,560 (61,908) 1,595,652 Sale of common stock...................... 3,000 15,000 68,378 (28,728) - 54,650 Cash dividends............... ............ - - - (416,412) - (416,412) --------- ----------- ----------- ----------- ----------- ----------- Balance at end of period.................. 2,602,577 $13,012,885 $10,523,439 $28,553,328 $ 56,309 $52,145,961
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 2002 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. 4. At March 31, 2003, the Company had two stock option plans. The Company has elected to continue to apply the provisions of APB No. 25 and related interpretations in accounting for stock options and to continue to provide the pro forma disclosure requirements of SFAS No. 123, as amended by SFAS No. 148, "Accounting for Stock-Based Compensation - Transition and Disclosure", in the table below. Under APB No. 25, compensation cost for stock options is measured as the excess, if any, of the fair market value of the Company's common stock at the date of grant over the amount the employee or director must pay to acquire the stock. Because the Company's stock option plans provide for the issuance of stock options at a price of no less than the fair market value at the date of the grant, no compensation cost is required to be recognized for the Company's stock option plans. Had compensation costs for the stock option plans been determined based upon the fair value at the date of grant consistent with SFAS No. 123, net income and earnings per share would have been reduced to the pro forma amounts indicated in the following table on page 6. 5 (page) Old Point Financial Corporation Pro forma disclosure SFAS No. 123 as amended by SFAS No. 148 - --------------------------------------------------------------------- Three Months Ended March 31, 2003 2002 ---------- ---------- Net income: As reported $1,952,995 $1,657,560 Fair value-based expense, net of tax (157,000) (68,000) ---------- ---------- Pro forma $1,795,995 $1,589,560 ========== ========== Basic earnings per share: As reported $ 0.50 $ 0.42 Pro forma $ 0.46 $ 0.41 Diluted earnings per share: As reported $ 0.48 $ 0.42 Pro forma $ 0.44 $ 0.41 - --------------------------------------------------------------------- 6
- --------------------------------------------------------------------------------- OLD POINT FINANCIAL CORPORATION Parent only Balance Sheets March 31, December 31, (Unaudited) 2003 2002 - --------------------------------------------------------------------------------- Assets Cash in bank........................................ $ 261,791 $ 247,784 Investment Securities............................... 2,223,850 2,215,000 Total Loans......................................... - - Investment in Subsidiaries.......................... 57,264,927 55,637,412 Other assets........................................ 105,965 15,278 ----------- ----------- Total Assets........................................ $59,856,533 $58,115,474 =========== =========== Liabilities and Stockholders' Equity Total Liabilities................................... $ - $ - Stockholders' Equity................................ 59,856,533 58,115,474 ----------- ----------- Total Liabilities & Stockholders' Equity............ $59,856,533 $58,115,474 =========== ===========
- -------------------------------------------------------------------------------- OLD POINT FINANCIAL CORPORATION Three Months Ended: Parent only Income Statements March 31, (Unaudited) 2003 2002 - -------------------------------------------------------------------------------- Income Cash dividends from Subsidiaries.................... $ 500,000 $ 450,000 Interest and fees on loans.......................... - - Interest income from investment securities.......... 26,608 22,688 Gains (losses) from sale of investment securities... - - Other income........................................ 36,000 36,000 ----------- ----------- Total Income........................................ 562,608 508,688 Expenses Salaries and employee benefits...................... 75,042 68,975 Other expenses...................................... 30,353 23,712 ----------- ----------- Total Expenses...................................... 105,395 92,687 ----------- ----------- Income before taxes & undistributed net income of subsidiaries...................... 457,213 416,001 Income tax.......................................... (20,230) (17,756) ----------- ----------- Net income before undistributed net income of subsidiaries........................ 477,443 433,757 Undistributed net income of subsidiaries............ 1,475,552 1,223,803 ----------- ----------- Net Income.......................................... $ 1,952,995 $ 1,657,560 =========== ===========
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- --------------------------------------------------------------------------------- OLD POINT FINANCIAL CORPORATION Three Months Ended: Parent only Statements of Cash Flows March 31, (Unaudited) 2003 2002 - --------------------------------------------------------------------------------- Cash Flows from Operating Activities: Net Income.......................................... $ 1,952,995 $ 1,657,560 Adjustments to reconcile net income to net cash provided by operating activities: Equity in undistributed income of subsidiaries.. (1,475,552) (1,223,803) Depreciation...................................... - - Gains(losses) on sale of securities [net]....... - - (Increase) Decrease in other assets............. (93,695) (77,837) Increase (decrease) in other liabilities........ - - ----------- ----------- Net cash provided by operating activities........... 383,748 355,920 Cash flows from investing activities: (Increase)decrease in investment securities......... - - Payments for investment in subsidiaries - (200,000) Repayment of loans by customers..................... - - ----------- ----------- Net cash provided by investing activities........... - (200,000) Cash flows from financing activities: Proceeds from issuance of common stock.............. 103,296 54,650 Dividends paid...................................... (473,037) (416,412) ----------- ----------- Net cash provided by financing activities........... (369,741) (361,762) Net increase (decrease) in cash & due from banks.... 14,007 (205,842) Cash & due from banks at beginning of period........ 247,784 275,795 ----------- ----------- Cash & due from banks at end of period.............. $ 261,791 $ 69,953 =========== ===========
8 Item 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION ---------------------------------------------------------- AND RESULTS OF OPERATIONS ------------------------- Earnings Summary - ---------------- Net income for the first quarter of 2003 increased 17.82% to $1.95 million from $1.66 million for the comparable period in 2002. Basic earnings per share were $0.50 in the first quarter of 2003 compared with $0.42 in 2002. Return on average assets was 1.34% for the first quarter of 2003 and 1.27% for the comparable period in 2002. Return on average equity was 13.14% for the first quarter of 2003 and 12.62% for the first quarter of 2002. 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 $481 thousand, or 8.58%, for the first quarter of 2003 over the same period in 2002. The net interest yield, defined as the ratio of net interest income on a fully tax equivalent basis to total earning assets, decreased to 4.44% in 2003 from 4.55% in 2002. Tax equivalent interest income decreased $42 thousand, or 0.48%, in the first quarter of 2003 from the same period of 2002. Average earning assets increased $55.03 million, or 11.17% in the first quarter of 2003 compared to the first quarter of 2002. Comparing the first three months of 2003 to 2002, average loans increased $29.44 million or 8.43% while investment securities increased $14.64 million or 10.99%. Certificates of deposits increased $13.93 million or 7.21% while checking and savings accounts increased $17.93 million or 12.50%. Interest expense decreased $523 thousand or 16.64% in the first quarter of 2003 from the first quarter of 2002 while interest bearing liabilities increased $42.27 million or 10.85% in the first quarter of 2003 over the same period in 2002. The cost of funding those liabilities decreased 80 basis points from 2002. Page 10 shows an analysis of average earning assets, interest bearing liabilities and rates and yields. 9
- ----------------------------------------------------------------------------------------------------------------------- OLD POINT FINANCIAL CORPORATION NET INTEREST INCOME ANALYSIS For the quarter ended March 31, (Fully taxable equivalent basis)* 2003 2002 - ----------------------------------------------------------------------------------------------------------------------- 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)**................ $378,829 $ 6,706 7.08% $349,391 $ 6,674 7.64% Investment securities: Taxable....................................... 99,899 1,080 4.32% 83,162 1,129 5.43% Tax-exempt.................................... 47,912 859 7.17% 50,012 903 7.22% -------- --------- -------- --------- Total investment securities................. 147,811 1,939 5.25% 133,174 2,032 6.10% Federal funds sold.............................. 21,251 61 1.15% 10,296 42 1.63% -------- --------- -------- --------- Total earning assets.......................... $547,891 $ 8,706 6.36% $492,861 $ 8,748 7.10% Time and savings deposits: Interest-bearing transaction accounts......... $ 8,765 $ 10 0.46% $ 7,228 $ 10 0.55% Money market deposit accounts................. 118,031 223 0.76% 105,836 317 1.20% Savings accounts.............................. 34,525 75 0.87% 30,331 75 0.99% Certificates of deposit, $100,000 or more..... 56,931 447 3.14% 51,296 524 4.09% Other certificates of deposit................. 150,195 1,304 3.47% 141,902 1,725 4.86% -------- --------- -------- --------- Total time and savings deposits............. 368,447 2,059 2.24% 336,593 2,651 3.15% Federal funds purchased and securities sold under agreement to repurchase................. 23,000 63 1.10% 25,367 103 1.62% Federal Home Loan Bank advances 38,763 493 5.09% 25,000 379 6.06% Other short term borrowings..................... 1,795 5 1.11% 2,774 10 1.44% -------- --------- -------- --------- Total interest bearing liabilities............ $432,005 2,620 2.43% $389,734 3,143 3.23% Net interest income/yield....................... $ 6,086 4.44% $ 5,605 4.55% ========= ========= * 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
10 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 $300 thousand for the first three months of 2003 and 2002. Loans charged off (net of recoveries) were $194 thousand compared with loans charged off (net of recoveries) of $196 thousand in the first three months of 2002. On March 31, 2003 nonperforming assets totaled $1.41 million compared with $1.71 million on March 31, 2002. The March 2003 total consisted of $1.24 million in foreclosed real estate and $165 thousand in a former branch site now listed for sale. The March 2002 total consisted of $680 thousand in foreclosed real estate, $680 thousand in two former branch sites now listed for sale, and $345 thousand in nonaccrual loans. Loans still accruing interest but past due 90 days or more decreased to $396 thousand as of March 31, 2003 compared with $488 thousand as of March 31, 2002. The allowance for loan losses on March 31, 2003 was $4.67 million compared with $4.00 million on March 31, 2002. It represented a multiple of 3.32 times nonperforming assets. The allowance for loan losses was 1.21% of loans on March 31, 2003 compared to 1.14% at March 31, 2002. Other Income - ------------ For the first quarter of 2003 other income increased $160 thousand, or 9.73% over the same period in 2002. Other Service Charges, Commissions and Fees increased $33 thousand or 12.07%. Bank Owned Life Insurance (BOLI) income was $100 thousand. Other Expenses - -------------- For the first quarter of 2003 other expenses increased $276 thousand or 6.28% over the same period in 2002. Salaries and employee benefits increased $308 thousand or 11.78%. Assets - ------ At March 31, 2003 total assets were $591.85 million, up 2.64% from $576.62 million at December 31, 2002. Total loans grew $7.73 million or 2.04%. Investment securities increased by $2.29 million, or 1.47%, in 2003. Federal funds sold increased $3.55 million or 40.77%. Total deposits increased $12.12 million, or 2.67% in 2003 and demand note balances to the United States Treasury decreased $5.28 million from year-end 2002. 11 Capital Ratios - -------------- The Company's capital position remains strong as evidenced by the regulatory capital measurements. At March 31, 2003 the Tier I capital ratio was 13.98%, the total capital ratio was 15.12% and the leverage ratio was 9.81%. 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 in the 3rd quarter of 2002 for an additional branch location in Chesapeake. Ground breaking for the new branch began in April 2003. The Company continues to expand the implementation of the new imaging system by working towards the availability of imaged checks on the web in 2003. The Company believes that it has adequate internal and external resources available to fund its capital expenditure requirements. Liquidity - --------- Liquidity is the ability of the Company to meet present and future obligations to depositors and borrowers. The Company experienced deposit growth that was slightly less than targeted projections in the first quarter of 2003 while loan growth exceeded projections. The Company has maintained liquidity as reflected in the large balance in federal funds sold as of March 31, 2003. The Company continues to monitor and seek investment opportunities in an environment of relatively unchanged interest rates. Effects of Inflation - -------------------- Management believes that the key to achieving satisfactory performance is its ability to maintain or improve its net interest margin and to generate additional fee income. The Company's policy of investing in and funding with interest sensitive assets and liabilities is intended to reduce the risks inherent in a volatile economy. 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 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. 12 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. Deferred Loan Fees. 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. 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 March 31, 2003. There were $99 million more in liabilities than assets subject to repricing within three months. As of December 31, 2002 the Company had $109 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 $159.36 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 2.88% increase in net income. The model indicates a 300 basis point rise in rates would cause approximately a 3.94% increase in net income at March 31, 2003. 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) No reports on Form 8-K were filed during the first quarter of 2003. 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 May 12, 2003 By: /s/Robert F Shuford ------------------ Robert F. Shuford President and Chief Executive Officer By: /s/Laurie D. Grabow ------------------- Laurie D. Grabow Senior Vice President and CFO 17 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 March 31, 2003 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: May 12, 2003 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: May 12, 2003 /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 March 31, 2003 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Laurie D. Grabow, 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/Laurie D. Grabow _______________________________ Laurie D. Grabow Senior Vice President and Chief Financial Officer Date: May 12, 2003 I, Laurie D. Grabow, 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: May 12, 2003 /s/Laurie D. Grbow - -------------------------------------------- Laurie D. Grabow Senior Vice President and Chief Financial Officer -----END PRIVACY-ENHANCED MESSAGE-----