-----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, FK96UIdMEoGiE3qsnEilPlC7WZhXt88lr4fsJzeohDIDaEiRjDr58Mm40xgNk4ZF gxMPqI9QsDcZSqiVYgeq4g== 0000740971-03-000039.txt : 20031107 0000740971-03-000039.hdr.sgml : 20031107 20031107153456 ACCESSION NUMBER: 0000740971-03-000039 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20030930 FILED AS OF DATE: 20031107 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: 03985081 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 form10q093003.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, 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 No X State the number of shares outstanding of each of the issuer's classes of common stock as of October 31, 2003. Class Outstanding at October 31, 2003 ----- ------------------------------- Common Stock, $5.00 par value 3,973,769 shares OLD POINT FINANCIAL CORPORATION FORM 10-Q INDEX ----- PART I - FINANCIAL INFORMATION Page ---- Item 1. Financial Statements...............................................1 Consolidated Balance Sheets September 30, 2003 and December 31, 2002....................1 Consolidated Statement of Earnings Three months ended September 30, 2003 and 2002..............2 Nine months ended September 30, 2003 and 2002...............2 Consolidated Statement of Cash Flows Nine months ended September 30, 2003 and 2002...............3 Consolidated Statements of Changes in Stockholders' Equity Nine months ended September 30, 2003 and 2002...............4 Notes to Consolidated Financial Statements.........................5 Parent Only Balance Sheets September 30, 2003 and December 31, 2002.............7 Parent Only Statement of Earnings Three months ended September 30, 2003 and 2002.......7 Nine months ended September 30, 2003 and 2002........7 Parent Only Statement of Cash Flows Nine months ended September 30, 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........15 Item 4. Disclosure Controls and Procedures................................16 PART II - OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K..................................17 (i)
- ---------------------------------------------------------------------------------------- Unaudited September 30, December 31, Consolidated Balance Sheets 2003 2002 - ---------------------------------------------------------------------------------------- Assets Cash and due from banks................................... $ 14,132,757 $ 14,180,253 Interest bearing balances due from banks.................. 250,472 256,597 ------------ ------------ Total cash due from banks.............................. $ 14,383,229 $ 14,436,850 Investments: Securities available for sale, at market................ 152,786,403 128,487,826 Securities to be held to maturity....................... 12,714,710 27,515,549 Trading account securities................................ - - Federal funds sold........................................ 3,699,181 8,709,544 Loans, total ............................................. 390,795,812 377,961,364 Less reserve for loan losses.......................... 4,860,425 4,564,931 ------------ ------------ Net loans......................................... 385,935,387 373,396,433 Bank premises and equipment............................... 13,585,049 13,280,017 Other real estate owned................................... 190,500 830,091 Other assets.............................................. 12,761,666 9,966,279 ------------ ------------ Total assets......................................... $596,056,125 $576,622,589 ============ ============ Liabilities Noninterest-bearing deposits.............................. $ 98,836,492 $ 90,620,836 Savings deposits.......................................... 167,479,818 159,077,310 Time deposits............................................. 202,481,134 204,353,854 ------------ ------------ Total deposits......................................... 468,797,444 454,052,000 Federal funds purchased and securities sold under agreement to repurchase............................... 22,106,818 21,283,237 Interest-bearing demand notes issued to the United States Treasury and other liabilities for borrowed money...... 569,447 6,000,000 Federal Home Loan Bank.................................... 40,000,000 35,000,000 Other liabilities......................................... 3,242,471 2,171,878 ------------ ------------ Total liabilities...................................... 534,716,180 518,507,115 Stockholders' Equity Common stock, $5.00 par value............................. $ 19,852,465 $ 19,683,600 2003 2002 Shares authorized.... 10,000,000 10,000,000 Shares outstanding... 3,970,493 3,936,720 Surplus................................................... 12,261,284 11,165,496 Undivided profits......................................... 29,021,743 25,597,568 Accumulated other comprehensive income (loss)............. 204,453 1,668,810 ------------ ------------ Total stockholders' equity............................ 61,339,945 58,115,474 ------------ ------------ Total liabilities and stockholders' equity............ $596,056,125 $576,622,589 ============ ============
1
- -------------------------------------------------------------------------------------------------------------------- Three Months Ended Nine Months Ended Consolidated Statements of Earnings September 30, September 30, 2003 2002 2003 2002 - -------------------------------------------------------------------------------------------------------------------- Interest Income Interest and fees on loans.................................... $ 6,547,209 $ 6,933,875 $ 19,979,839 $ 20,357,364 Interest on federal funds sold................................ 24,425 74,798 117,848 165,766 Interest on securities: Interest on United States Treasury securities (taxable)....... 13,519 17,666 58,388 64,791 Interest on obligations of other United States Government agencies (taxable)................. 987,056 984,643 2,978,896 3,022,350 Interest on obligations of states and political subdivisions (tax exempt)......................... 537,870 579,870 1,658,179 1,761,858 Interest on obligations of states and political subdivisions (taxable)............................ 21,933 18,792 59,385 57,118 Interest on trading account securities........................ - - - - Dividends and interest on all other securities................ 33,165 28,854 95,478 90,668 ----------- ----------- ------------ ----------- Total interest on securities............................ 1,593,543 1,629,825 4,850,326 4,996,785 ----------- ----------- ------------ ----------- Total interest income..................................... 8,165,177 8,638,498 24,948,013 25,519,915 Interest Expense Interest on savings deposits.................................. 235,266 407,896 819,939 1,234,453 Interest on time deposits..................................... 1,513,570 2,050,586 4,914,355 6,412,133 Interest on federal funds purchased and securities sold under agreement to repurchase.......................... 50,956 99,250 170,084 298,528 Interest on Federal Home Loan Bank advances................... 512,548 436,939 1,511,854 1,199,904 Interest on demand notes (note balances) issued to the United States Treasury and on other borrowed money.......... 3,584 7,913 11,930 23,208 ----------- ----------- ------------ ----------- Total interest expense.................................... 2,315,924 3,002,584 7,428,162 9,168,226 Net interest income........................................... 5,849,253 5,635,914 17,519,851 16,351,689 Provision for loan losses..................................... 300,000 600,000 900,000 1,300,000 ----------- ----------- ------------ ----------- Net interest income after provision for loan losses........... 5,549,253 5,035,914 16,619,851 15,051,689 Other Income Income from fiduciary activities.............................. 603,711 603,246 1,672,692 1,700,718 Service charges on deposit accounts........................... 742,910 721,276 2,187,228 2,150,334 Other service charges, commissions and fees................... 274,086 247,094 950,476 815,734 Other operating income........................................ 284,603 213,858 777,213 619,197 Security gains (losses)....................................... 15,429 2,391 44,518 11,789 Trading account income........................................ - - - - ----------- ----------- ------------ ----------- Total other income........................................ 1,920,739 1,787,865 5,632,127 5,297,772 Other Expenses Salaries and employee benefits................................ 3,058,429 2,798,545 8,962,417 8,104,269 Occupancy expense of Bank premises............................ 309,969 284,399 920,077 853,692 Furniture and equipment expense............................... 407,510 408,042 1,228,858 1,228,697 Other operating expenses...................................... 1,106,008 1,047,734 3,363,035 3,271,035 ----------- ----------- ------------ ----------- Total other expenses...................................... 4,881,916 4,538,720 14,474,387 13,457,693 ----------- ----------- ------------ ----------- Income before taxes........................................... 2,588,076 2,285,059 7,777,591 6,891,768 Applicable income taxes....................................... 623,990 554,260 1,920,038 1,691,100 ----------- ----------- ------------ ----------- Net income.................................................... $ 1,964,086 $ 1,730,799 $ 5,857,553 $ 5,200,668 =========== =========== ============ =========== Per Share Based on weighted average number of common shares outstanding................................... 3,967,134 3,918,256 3,954,717 3,909,348 Basic Earnings per Share...................................... $ 0.50 $ 0.44 $ 1.48 $ 1.33 Diluted Earnings per Share.................................... $ 0.48 $ 0.43 $ 1.44 $ 1.30
2
- ----------------------------------------------------------------------------------------------- OLD POINT FINANCIAL CORPORATION Nine Months Ended Consolidated Statements of Cash Flows September 30, (Unaudited) 2003 2002 - ----------------------------------------------------------------------------------------------- CASH FLOWS FROM OPERATING ACTIVITIES Net income.................................................. $ 5,857,553 $ 5,200,668 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization............................. 995,645 1,029,344 Provision for loan losses................................. 900,000 1,300,000 (Gains) loss on sale of investment securities, net........ (44,518) (11,789) Net amortization & accretion of securities ............... 33,885 57,814 Net (increase) decrease in trading account................ - - Loss on disposal of equipment............................. 2,398 92,591 (Increase) decrease in other real estate owned............ (509,501) (997,542) (Increase) decrease in other assets (net of tax effect of FASB 115 adjustment).............. (2,360,788) (6,688,925) Increase (decrease) in other liabilities.................. 449,870 697,109 -------------- -------------- Net cash provided by operating activities............... 5,324,544 679,270 CASH FLOWS FROM INVESTING ACTIVITIES Purchases of securities .................................. (110,790,608) (31,988,224) Proceeds from maturities & calls of securities ........... 97,627,550 34,137,900 Proceeds from sales of available - for - sale securities.. 2,397,720 2,478,189 Proceeds from sales of held - to - maturity securities.... - - Loans made to customers................................... (197,573,104) (187,072,518) Principal payments received on loans...................... 184,134,150 160,025,797 Proceeds from sales of other real estate owned............ 1,149,092 1,019,430 Purchases of premises and equipment....................... (1,303,075) (580,137) (Increase) decrease in federal funds sold................. 5,010,363 (15,867,562) -------------- -------------- Net cash provided by (used in) investing activities..... (19,347,912) (37,847,125) CASH FLOWS FROM FINANCING ACTIVITIES Increase (decrease) in non-interest bearing deposits...... 8,215,656 8,490,294 Increase (decrease) in savings deposits................... 8,402,508 9,211,884 Proceeds from the sale of certificates of deposit......... 60,462,744 91,058,080 Payments for maturing certificates of deposit............. (62,335,464) (79,090,751) Increase (decrease) in federal funds purchased & repurchase agreements.................................... 823,581 (3,993,649) Increase (decrease) in Federal Home Loan Bank advances.... 5,000,000 5,000,000 Increase (decrease) in other borrowed money............... (5,430,553) 5,630,925 Proceeds from issuance of common stock.................... 375,184 329,772 Dividends paid............................................ (1,543,909) (1,303,335) -------------- -------------- Net cash provided by financing activities............... 13,969,747 35,333,220 Net increase (decrease) in cash and due from banks...... (53,620) (1,834,635) Cash and due from banks at beginning of period.......... 14,436,850 14,785,865 -------------- -------------- Cash and due from banks at end of period................ $ 14,383,230 $ 12,951,230 ============== ============== SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION Cash payments for: Interest................................................ $ 7,568,603 $ 9,405,204 Income taxes............................................ 1,920,000 1,990,000 SUPPLEMENTAL SCHEDULE OF NONCASH TRANSACTIONS Unrealized gain (loss) on investment securities, net of tax................................................. (843,634) 2,129,243 Additional minimum liability related to pension.......... (620,723) (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, 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................................ - - - 5,857,553 - 5,857,553 Increase (decrease) in unrealized gain on investment securities - - - - (843,634) (843,634) Minimum pension liability adjustment........ (620,723) (620,723) --------- ------------ ------------ ------------ ------------ ------------ Total Comprehensive Income 5,857,553 (1,464,357) 4,393,196 Sale of common stock........................ 33,773 168,865 1,095,788 (889,469) - 375,184 Cash dividends............... .............. - - - (1,543,909) - (1,543,909) --------- ------------ ------------ ------------ ------------ ------------ Balance at end of period.................... 3,970,493 $ 19,852,465 $ 12,261,284 $ 29,021,743 $ 204,453 $ 61,339,945 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
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 September 30, 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
Old Point Financial Corporation Pro forma disclosure SFAS No. 123 as amended by SFAS No. 148 - ---------------------------------------------------------------------- Nine Months Ended September 30, 2003 2002 ---- ---- Net income: As reported $5,857,553 $5,200,668 Fair value-based expense, net of tax (305,250) (204,000) ---------- ---------- Pro forma $5,552,303 $4,996,668 ========== ========== Basic earnings per share: As reported $ 1.48 $ 1.33 Pro forma $ 1.40 $ 1.28 Diluted earnings per share: As reported $ 1.44 $ 1.30 Pro forma $ 1.36 $ 1.25
6
- ------------------------------------------------------------------------------------- OLD POINT FINANCIAL CORPORATION Parent only Balance Sheets September 30, December 31, (Unaudited) 2003 2002 - ------------------------------------------------------------------------------------- Assets Cash in bank........................................... $ 450,654 $ 247,784 Investment Securities.................................. 2,201,050 2,115,000 Total Loans............................................ - - Investment in Subsidiaries............................. 58,520,349 55,637,412 Equipment.............................................. - - Other assets........................................... 167,892 115,278 ------------ ------------ Total Assets........................................... $ 61,339,945 $ 58,115,474 ============ ============ Liabilities and Stockholders' Equity Total Liabilities...................................... $ - $ - Stockholders' Equity................................... 61,339,945 58,115,474 ------------ ------------ Total Liabilities & Stockholders' Equity............... $ 61,339,945 $ 58,115,474 ============ ============
- ------------------------------------------------------------------------------------------------------------------- OLD POINT FINANCIAL CORPORATION Three Months Ended: Nine Months Ended: Parent only Income Statements September 30, September 30, (Unaudited) 2003 2002 2003 2002 - ------------------------------------------------------------------------------------------------------------------- Income Cash dividends from Subsidiary......................... $ 600,000 $ 475,000 $ 1,600,000 $ 1,375,000 Interest and fees on loans............................. - - - - Interest income from investment securities............. 26,039 26,015 77,861 71,393 Gains (losses) from sale of investment securities...... - - - - Other income........................................... 36,000 36,000 108,000 108,000 ------------ ------------ ------------ ------------ Total Income........................................... 662,039 537,015 1,785,861 1,554,393 Expenses Salaries and employee benefits......................... 72,449 65,986 219,778 202,738 Other expenses......................................... 32,008 27,136 100,975 74,590 ------------ ------------ ------------ ------------ Total Expenses......................................... 104,457 93,122 320,753 277,328 ------------ ------------ ------------ ------------ Income before taxes & undistributed net income of subsidiaries......................... 557,582 443,893 1,465,108 1,277,065 Income tax............................................. (20,110) (16,740) (62,925) (51,700) ------------ ------------ ------------ ------------ Net income before undistributed net income of subsidiaries........................... 577,692 460,633 1,528,033 1,328,765 Undistributed net income of subsidiaries............... 1,386,394 1,270,166 4,329,520 3,871,903 ------------ ------------ ------------ ------------ Net Income............................................. $ 1,964,086 $ 1,730,799 $ 5,857,553 $ 5,200,668 ============ ============ ============ ============
7
- ------------------------------------------------------------------------------------ OLD POINT FINANCIAL CORPORATION Nine Months Ended: Parent only Statements of Cash Flows September 30, (Unaudited) 2003 2002 - ------------------------------------------------------------------------------------ Cash Flows from Operating Activities: Net Income............................................. $ 5,857,553 $ 5,200,668 Adjustments to reconcile net income to net cash provided by operating activities: Equity in undistributed income of subsidiary....... (4,329,520) (3,871,903) Depreciation......................................... - - Gains(losses) on sale of securities [net].......... - - (Increase) decrease in other assets................ (56,437) (45,113) Increase (decrease) in other liabilities........... 620,723 - ------------ ------------ Net cash provided by operating activities.............. 2,092,319 1,283,652 Cash flows from investing activities: (Increase)decrease in investment securities............ (100,000) (1,000,000) Investment in subsidiaries ............................ (620,723) 600,000 Sale of equipment...................................... - - Repayment of loans by customers........................ - - ------------ ------------ Net cash provided by investing activities.............. (720,723) (400,000) Cash flows from financing activities: Proceeds from issuance of common stock................. 375,183 329,772 Dividends paid......................................... (1,543,909) (1,303,335) ------------ ------------ Net cash provided by financing activities.............. (1,168,726) (973,563) Net increase (decrease) in cash & due from banks....... 202,870 (89,911) Cash & due from banks at beginning of period........... 247,784 275,795 ------------ ------------ Cash & due from banks at end of period................. $ 450,654 $ 185,884 ============ ============
8 Item 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Earnings Summary - ---------------- Net income for the third quarter of 2003 increased 13.48% to $1.96 million from $1.73 million for the comparable period in 2002. Basic earnings per share were $0.50 in the third quarter of 2003 compared with $0.44 in 2002. For the nine months ended September 30, 2003 net income increased 12.63% to $5.86 million from $5.20 million in 2002. Basic earnings per share were $1.48 for the first nine months of 2003 compared with $1.33 in 2002. Return on average assets was 1.31% for the third quarter of 2003 and 1.25% for the comparable period in 2002. Return on average equity was 12.90% for the third quarter of 2003 and 12.30% for the third quarter of 2002. For the nine months ended September 30, 2003 and 2002 return on average assets was 1.32% and 1.30% respectively. Return on average equity was 12.88% in 2003 and 12.77% in 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 $209 thousand, or 3.54%, for the third quarter of 2003 over 2002. Average earning assets increased 8.19% in the third quarter of 2003 from 2002. For the nine months ended September 30, 2003 net interest income on a fully tax equivalent basis increased $1.11 million, or 6.45%, over the comparable period in 2002. Comparing the first nine months of 2003 to 2002, average loans increased $26.44 million or 7.37% while investment securities increased $23.05 million or 17.86%. Average earning assets increased 10.10% and the net interest yield decreased from 4.59% in 2002 to 4.43% in 2003. Interest expense decreased $685 thousand or 22.82% in the third quarter of 2003 from the third quarter of 2002. Interest bearing liabilities increased $24.02 million or 5.85% in the third quarter of 2003 over the same period in 2002. The cost of funding those liabilities decreased 79 basis points from 2002. For the nine months ended September 30, 2003 interest expense decreased $1.74 million, or 18.98% over the same period in 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 September 30, (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)** $388,392 $ 6,566 6.76% $370,199 $ 6,952 7.51% Investment securities: Taxable 113,898 1,025 3.60% 79,066 1,024 5.18% Tax-exempt 45,427 815 7.18% 48,737 855 7.01% -------- ------- -------- ------- Total investment securities 159,325 1,840 4.62% 127,803 1,879 5.88% Federal funds sold 10,595 24 0.91% 18,025 75 1.66% -------- ------- -------- ------- Total earning assets $558,312 $ 8,430 6.04% $516,027 $ 8,906 6.90% ======== ======= ======== ======= Time and savings deposits: Interest-bearing transaction accounts $ 9,693 7 0.29% $ 7,635 $ 11 0.58% Money market deposit accounts 119,329 181 0.61% 111,642 316 1.13% Savings accounts 36,972 47 0.51% 32,720 80 0.98% Certificates of deposit, $100,000 or more 58,756 380 2.59% 55,445 491 3.54% Other certificates of deposit 146,277 1,134 3.10% 147,300 1,559 4.23% -------- ------- -------- ------- Total time and savings deposits 371,027 1,749 1.89% 354,742 2,457 2.77% Federal funds purchased and securities sold under agreement to repurchase 22,018 51 0.93% 24,127 100 1.66% Federal Home Loan Bank advances 40,278 513 5.09% 29,785 437 5.87% Other short term borrowings 1,498 4 1.07% 2,151 8 1.49% -------- ------- -------- ------- Total interest bearing liabilities. $434,821 2,317 2.13% $410,805 3,002 2.92% Net interest income/yield $ 6,113 4.38% $ 5,904 4.58% ======= ===== ======= ===== - ---------------------------------------------------------------------------------------------------------- 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)** $385,013 $20,039 6.94% $358,573 $20,411 7.59% Investment securities: Taxable 105,416 3,103 3.92% 79,746 3,154 5.27% Tax-exempt 46,692 2,512 7.17% 49,313 2,670 7.22% -------- ------- -------- ------- Total investment securities 152,108 5,615 4.92% 129,059 5,824 6.02% Federal funds sold 14,448 118 1.09% 13,332 166 1.66% -------- ------- -------- ------- Total earning assets $551,569 $25,772 6.23% $500,964 $26,401 7.03% ======== ======= ======== ======= Time and savings deposits: Interest-bearing transaction accounts $ 9,451 $ 27 0.38% $ 7,543 $ 34 0.60% Money market deposit accounts 118,060 637 0.72% 109,084 966 1.18% Savings accounts 35,755 156 0.58% 31,592 234 0.99% Certificates of deposit, $100,000 or more 58,005 1,254 2.88% 54,884 1,532 3.72% Other certificates of deposit 148,675 3,660 3.28% 142,169 4,880 4.58% -------- ------- -------- ------- Total time and savings deposits 369,946 5,734 2.07% 345,272 7,646 2.95% Federal funds purchased and securities sold under agreement to repurchase 21,570 170 1.05% 24,182 299 1.65% Federal Home Loan Bank advances 39,680 1,512 5.08% 26,595 1,200 6.02% Other short term borrowings 1,566 12 1.02% 2,066 23 1.48% -------- ------- -------- ------- Total interest bearing liabilities $432,762 $ 7,428 2.29% $398,115 $ 9,168 3.07% Net interest income/yield $18,344 4.43% $17,233 4.59% ======= ===== ======= =====
* 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 $900 thousand for the first nine months of 2003, down from $1.30 million in the comparable period in 2002. Loans charged off (net of recoveries) were $605 thousand compared with loans charged off (net of recoveries) of $655 thousand in the first nine months of 2002. On an annualized basis net loan charge-offs were 0.21% of total loans for the first nine months of 2003 compared with 0.23% for the same period in 2002. On September 30, 2003 nonperforming assets totaled $453 thousand compared with $2.11 million on September 30, 2002. The September 2003 total consisted of $25 thousand in foreclosed real estate, $165 thousand in a former branch site now listed for sale, and $263 thousand in nonaccrual loans. The September 2002 total consisted of $1.33 million in foreclosed real estate, $165 thousand in a former branch site listed for sale and $611 thousand in nonaccrual loans. Loans still accruing interest but past due 90 days or more increased to $1.01 million as of September 30, 2003 compared with $546 thousand as of September 30, 2002. The allowance for loan losses on September 30, 2003 was $4.86 million compared with $4.54 million on September 30, 2002. It represented a multiple of 10.72 times nonperforming assets and 18.49 times nonperforming loans. The allowance for loan losses was 1.24% and 1.22% of loans on September 30, 2003 and 2002 respectively. Other Income - ------------ For the third quarter of 2003 other income increased $133 thousand, or 7.43%, and for the nine months ended September 30, 2003 other income increased $334 thousand or 6.31%. In both periods, the increase in income is attributed to increases in other service charges, commissions and fees, mortgage brokerage income and bank owned life insurance income. Other Expenses - -------------- For the third quarter of 2003 other expenses increased $343 thousand or 7.56% over the third quarter of 2002. For the nine months ending September 2003 other expenses increased $1.02 million or 7.55% over the same period in 2002. For the nine months ended September 30, 2003, salaries and employee benefits increased $858 thousand or 10.59%. Occupancy expenses increased $66 thousand or 7.78%. Assets - ------ At September 30, 2003 total assets were $596.06 million, up 3.37% from $576.62 million at December 31, 2002. Total loans grew $12.83 million or 3.40%. Investment securities and federal funds sold increased by $4.49 million, or 2.72%, in 2003. Bank owned life insurance increased $1.46 million due to the purchase of policies in 2003. Total deposits increased $14.75 million, or 3.25% in 2003. Advances from the FHLB increased $5.00 million, or 14.29% in 2003. Securities sold under agreement to repurchase increased $824 thousand, or 3.87% in 2003. 11 Capital Ratios - -------------- The Company's capital position remains strong as evidenced by the regulatory capital measurements. At September 30, 2003 the Tier I capital ratio was 14.38%, the total capital ratio was 15.55% and the leverage ratio was 9.97%. 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 third quarter of 2002 for an additional branch location in Chesapeake. Ground breaking for the new branch began in April 2003. The branch opened in October 2003. The Company purchased a vacant building in October 2003. The building will be renovated and used as office space for bank personnel. The renovations are expected to be completed in the later portion of the 2nd quarter of 2004. 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 and loan growth that was slightly less than targeted projections in the first nine months of 2003. The Company continues to monitor and seek investment opportunities in the current rate environment. 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 / 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. 13 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. 14 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, 2003. There were $114 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 $167.48 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 2.35% decrease in net income. The rate shock model reveals that a 100 basis point rise in rates would cause approximately a 3.40% increase in net income and that a 200 basis point rise in rates would cause approximately a 4.98% increase in net income at September 30, 2003. 15 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. 16 PART II - OTHER INFORMATION Item 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits 31.1 Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 from the Company's Chief Executive Officer 31.2 Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 from the Company's Chief Financial Officer 32.1 Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 from the Company's Chief Executive Officer 32.2 Certification 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 2003. August 14, 2003, a Form 8-K, which included two press releases, both dated August 13, 2003. The first press release announced the election of James Reade Chisman to the Board of Directors of Old Point National Bank of Phoebus. The second press release announced the declaration of a cash dividend in the amount of $0.15 per share of common stock. July 15, 2003, a Form 8-K, which included a press release, dated July 10, 2003 announcing earnings and other financial results for the second quarter of 2003. 17 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 7, 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 EX-31 3 ex31-1ceo.txt Exhibit 31.1 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 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 officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15 (e) and 15d-15(e)) for the registrant and have: a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, 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 report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and c) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record , process, summarize and report financial information; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: November 7, 2003 /s/Robert F. Shuford - -------------------------------------------- Robert F. Shuford President and Chief Executive Officer EX-31 4 ex31-2cfo.txt Exhibit 31.2 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 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 officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15 (e) and 15d-15 (e)) for the registrant and have: a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, 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 report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and c) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record , process, summarize and report financial information; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: November 7, 2003 /s/Laurie D. Grabow - -------------------------------------------- Laurie D. Grabow Senior Vice President and Chief Financial Officer EX-32 5 ex32-1ceo.txt Exhibit 32.1 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, 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: November 7, 2003 EX-32 6 ex32-2cfo.txt Exhibit 32.2 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, 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: November 7, 2003 -----END PRIVACY-ENHANCED MESSAGE-----