Item 1. Description of Business
General
Old Point Financial Corporation (the "Company") was incorporated under the laws of Virginia on February 16, 1984, for the purpose of acquiring all the outstanding common stock of The Old Point National Bank of Phoebus (the "Bank"), in connection with the reorganization of the Bank into a one bank holding company structure. At the annual meeting of the stockholders on March 27, 1984, the proposed reorganization was approved by the requisite stockholder vote. At the effective date of the reorganization on October 1, 1984, the Bank merged into a newly formed national bank as a wholly owned subsidiary of the Company, with each outstanding share of common stock of the Bank being converted into five shares of common stock of the Company.
The Company completed a spin-off of its trust department as of April 1, 1999. The newly formed organization is chartered as Old Point Trust and Financial Services, N.A. ("Trust"). Trust is a wholly owned subsidiary of the Company. The Company does not engage in any activities other than acting as a holding company for the common stock of the Bank and Trust. The principal business of the Company is conducted through its subsidiaries which continue to conduct business in substantially the same manner and from the same offices.
The Bank is a national banking association founded in 1922. The Bank has fifteen offices in the cities of Hampton, Newport News, Norfolk and Chesapeake, as well as James City and York County, Virginia, and provides a full range of banking and related financial services, including checking, savings, certificates of deposit, and other depository services, commercial, industrial, residential real estate and consumer loan services, safekeeping services.
As of December 31, 2002, the Company had assets of $576.6 million, loans of $378.0 million, deposits of $454.1 million, and stockholders' equity of $58.1 million. At year end, the Company and its subsidiaries had a total of 252 employees, 26 of whom were part-time.
The Company's trade area is Hampton Roads, which includes Williamsburg, Poquoson, Newport News, Hampton, Chesapeake, Norfolk, Virginia Beach, Portsmouth and Suffolk. The area also includes the Isle of Wight, James City, Gloucester and Mathews counties. According to the 2000 Hampton Roads Statistical Digest, there are more than 1.6 million people in the area with 30% of all jobs linked to the military. The service industry, which employed approximately 194,000 in 1999, is the biggest provider of jobs in Hampton Roads.
The banking industry is highly competitive in the Hampton Roads area. There are approximately twenty commercial and savings banks conducting business in the area. Six of these are major statewide banking organizations.
The Bank encounters competition for deposits and loans from banks, saving and loan associations, and credit unions in the area in which it operates. In addition, the Bank must compete for deposits in some instances with nationally marketed money market funds, brokerage firms and on-line or internet banks.
The Company and its subsidiaries are subject to regulation and examination by the Federal Reserve Board ("the Board"), the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corporation ("the FDIC").
As a bank holding company within the meaning of the Bank Holding
Company Act of 1956, the Company is subject to the ongoing regulation, supervision, and examination by the Federal Reserve Board (the "Board"). The Company is required to file with the Board periodic and annual reports and other information concerning its own business operations and those of its subsidiaries. In addition, prior Board approval must be obtained before the Company can acquire (i) ownership or control of any voting shares of another bank if, after such acquisition, it would control more than 5% of such shares, or (ii) all or substantially all of the assets of another bank or merge or consolidate with another bank holding company. A bank holding company is prohibited under the Bank Holding Company Act, with limited exceptions, from engaging in activities other than those of banking or of managing or controlling banks or furnishing services to its subsidiaries.
Statistical Information
The following statistical information is furnished pursuant to the requirements of Guide 3 (Statistical Disclosure by Bank Holding Companies) promulgated under the Securities Act of 1933.
I. Distribution of Assets, Liabilities and Shareholders' Equity; Interest Rates and Interest Differential
The following table presents the distribution of assets, liabilities, and shareholders' equity by major categories with related average yields/rates. In these balance sheets, nonaccrual loans are included in the daily average loans outstanding. The following table sets forth a summary of changes in interest earned and paid attributable to changes in volume and changes in yields/rates.
*Computed on a fully taxable equivalent basis using a 34% rate
The following table sets forth a summary of changes in interest earned and paid attributable to changes in volume and changes in yields/rates.
The Company was liability sensitive as of December 31, 2002 There were $109 million more in liabilities than assets subject to repricing within three months. This generally indicates that net interest income should improve if interest rates fall since liabilities will reprice faster than assets.
It should be noted, however, that savings deposits; which consist of interest bearing transactions accounts, money market accounts, 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.
II. Investment Portfolio
Note 2 of the Notes to Financial Statements found in Item 8. Financial Statements and Supplementary Data of this Report on Form 10K presents the book and market value of investment securities on the dates indicated.
The following table shows, by type and maturity, the book value and weighted average yields of investment securities at December 31, 2002.
Yields are calculated on a fully tax equivalent basis using a 34% rate.
At December 31, 2002, the book value of other marketable equity securities with no stated maturity totaled $3.1 million with an weighted average yield of 3.66%. These securities consisted of Federal Home Loan Bank stock of $1.8 million yielding 5.17%, Federal Reserve stock of $169 thousand yielding 6.00%, money market fund of $1.0 million yielding 1.26% and other securities of $150 thousand. The book value of other marketable securities with no stated maturity totaled $3.2 million, yielding 4.66%; and $5.7 million, yielding 6.37%; at December 31, 2001, and 2000 respectively.
III. Loan Portfolio
The following table shows a breakdown of total loans by type at December 31 for years 1998 through 2002:
Based on Standard Industry Code, there are no categories of loans which exceed 10% of total loans other than the categories disclosed in the preceding table.
The maturity distribution and rate sensitivity of certain categories of the Bank's loan portfolio at December 31, 2002 is presented below:
The following table presents information concerning the aggregate amount of nonaccrual, past due and restructured loans as of December 31 for the years 1998 through 2002.
Loans are placed in nonaccrual status if principal or interest has been in default for a period of 90 days or more unless the obligation is both well secured and in the process of collection. A debt is "well secured" if it is secured (i) by collateral in the form of liens on or pledges of real or personal property, including securities, that have a realizable value sufficient to discharge the debt in full or (ii) by the guaranty of a financially responsible party. A debt is "in the process of collection" if collection of the debt is proceeding in due course either through legal action, including judgment enforcement procedures, or, in appropriate circumstances, through collection efforts not involving legal action which are reasonably expected to result in repayment of the debt or in its restoration to a current status.
Potential problem loans consist of loans that, because of potential credit problems of the borrowers, have caused management to have serious doubts as to the ability of such borrowers to comply with the loan repayment terms. At December 31, 2002 such problem loans, not included in Table VII, amounted to approximately $3.3 million. There was one relationship in excess of $500 thousand.
IV. Summary of Loan Loss Experience
The determination of the balance of the Allowance for Loan Losses is based upon a review and analysis of the loan portfolio and reflects an amount which, in management's judgment, is adequate to provide for possible future losses. Management's review includes monthly analysis of past due and nonaccrual loans and detailed periodic loan by loan analyses.
The principal factors considered by management in determining the adequacy of the allowance are the growth and composition of the loan portfolio, historical loss experience, the level of nonperforming loans, economic conditions, the value and adequacy of collateral, and the current level of the allowance.
The following table shows an analysis of the Allowance for Loan Losses for the years 1998 through 2002.
The following table shows the amount of the Allowance for Loan Losses allocated to each category at December 31 for the years 1998 through 2002.
V. Deposits
The following table shows the average balances and average rates paid on deposits for the years ended December 31, 2002, 2001 and 2000.
The following table shows certificates of deposit in amounts of $100,000 or more as of December 31, 2002, 2001, and 2000 by time remaining until maturity.
TABLE XI CERTIFICATE OF DEPOSIT $100,000 & MORE - -------------------------------------------------------- Dollars in thousands 2002 2001 2000 Maturing in - --------------------------------------------------------
3 months or less $ 12,527 $ 8,445 $ 7,634 3 through 6 months 10,080 13,397 5,443 6 through 12 months 11,047 11,427 14,635 over 12 months 19,791 12,535 12,665 -------- -------- -------- $ 53,445 $ 45,804 $ 40,377
VI. Return on Equity and Assets
The return on average shareholders' equity and assets, the dividend pay out ratio, and the average equity to average assets ratio for the past three years are presented below.
2002 2001 2000 ------ ------ ------ Return on average assets 1.30% 1.14% 1.12% Return on average equity 12.80% 11.48% 11.87% Dividend payout ratio 25.19% 28.17% 29.23% Average equity to average assets 10.14% 9.90% 9.41%
VII. Short Term Borrowings
The Bank periodically borrowed funds through federal funds from its correspondent banks, through the use of a demand note to the United States Treasury (Treasury Tax and Loan Deposits), and through securities sold under agreements to repurchase. The borrowings matured daily and were based on daily cash flow requirements. The borrowed amounts (in thousands) and their corresponding rates during 2002, 2001, and 2000 are presented in the following table.
Item 2.
Item 2. Description of Property The Bank owns the Main Office, five office buildings, and nine branches. All of the above properties are owned directly and free of any encumbrances. The land at the Fort Monroe branch is leased by the Bank under an agreement expiring in October 2011. The remaining four branches are leased from unrelated parties under leases with renewal options which expire anywhere from 10-15 years.
For more information concerning the commitments under current leasing agreements, see Note 10. Lease Commitments of the Notes to Financial Statements found in Item 8. Financial Statements and Supplementary Data of this Report on Form 10K. Additional information on Other Real Estate Owned can be found in Note 6. Other Real Estate Owned of the Notes to Financial Statements found in Item 8. Financial Statements and Supplementary Data of this Report on Form 10K.
Item 3.
Item 3. Legal Proceedings The Company is not a party to any material pending legal proceedings before any court, administrative agency, or other tribunal.
Item 4.
Item 4. Submission of Matters to a Vote of Security Holders
There were no matters submitted to a vote of security holders during the quarter ended December 31, 2002.
Part II
Item 5.
Item 5. Market for Common Equity And Related Stockholder Matters
Beginning in 2000 the common stock of Old Point Financial Corporation was quoted on the Nasdaq SmallCap under the symbol "OPOF". The approximate number of shareholders of record as of December 31, 2002 was 1,354. The range of high and low prices and dividends per share of the Company's common stock for each quarter during 2002 and 2001 is presented in Part I. Item 7. of this Annual Report on Form 10-K. Additional information related to stockholder matters can be found in Note 15. Regulatory Matters of the Notes to Financial Statements found in Item 8. Financial Statements and Supplementary Data of this Report on Form 10K.
Item 6.
Item 6. Selected Financial Data
The following table summarizes the Company's performance for the past five years.
Item 7.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
The following discussion is intended to assist readers in understanding and evaluating the consolidated results of operations and financial condition of the Company. This discussion should be read in conjunction with the financial statements and other financial information contained elsewhere in this report. The analysis attempts to identify trends and material changes which occurred during the period presented.
EARNINGS SUMMARY Net income was $7.05 million, or $1.80 per share in 2002 compared to $5.71 million, or $1.47 per share in 2001 and $5.13 million, or $1.32 per share in 2000. Return on average assets was 1.30% in 2002, 1.14% in 2001 and 1.12% in 2000. Return on average equity was 12.80% in 2002, 11.48% in 2001 and 11.87% in 2000. For the past five years return on average assets has averaged 1.18% and return on average equity has averaged 12.00%. Selected Financial Highlights summarizes the Company's performance for the past five years.
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 tax equivalent basis, was $23.43 million in 2002, up $3.09 million, or 15% from $20.34 million in 2001 which was up $1.74 million, or 9% from $18.60 million in 2000. Net interest income is affected by variations in interest rates and the volume and mix of earning assets and interest- bearing liabilities. The net interest yield increased to 4.57% in 2002 from 4.28% in 2001, which was down from 4.30% in 2000.
Tax equivalent interest income decreased $1.10 million, or 3%, in 2002. Average earning assets grew $37.05 million, or 8%. Total average loans increased $30.13 million, or 9%, while average investment securities increased $5.26 million, or 4%. The yield on earning assets decreased in 2002 by seventy-seven basis points primarily due to declining interest rates.
Interest expense decreased $4.20 million or 26%, in 2002 while interest bearing liabilities increased 6% in 2002. The cost of funding liabilities decreased one hundred twenty-seven basis points. The market experienced one rate reduction by the Federal Reserve in 2002. The asset pricing did not experience as large of a reduction in rates as did the liability pricing.
PROVISION/ALLOWANCE FOR LOAN LOSSES 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 loan portfolio. The provision increased to $1.70 million in 2002 and was $1.20 million in 2001 and $625 thousand in 2000. The increase was due to an increase in the net charge offs from 2002 as detailed in the next paragraph.
Loans charged off during 2002 totaled $1.41 million compared to $1.46 million in 2001 and $752 thousand in 2000. Recoveries amounted to $383 thousand in 2002, $504 thousand in 2001 and $665 thousand in 2000.
PROVISION/ALLOWANCE FOR LOAN LOSSES (cont)
The Company's net loans charged off to year-end loans were 0.27% in 2002, 0.28% in 2001, and 0.03% in 2000. The allowance for loan losses, as a percentage of year-end loans, was 1.21% in 2002, 1.12% in 2001, and 1.14% in 2000.
As of December 31, 2002, nonperforming assets were $1.14 million, down from $1.35 million at year-end 2001. Nonperforming assets consist of loans in nonaccrual status and other real estate. The 2002 total consisted of other real estate of $830 thousand and $314 thousand in nonaccrual loans. The other real estate consists of $165 thousand in commercial property originally acquired as a potential branch site and now held for sale and $665 thousand in foreclosed properties. Nonaccrual loans consisted of $53 thousand in real estate loans and $261 thousand in commercial loans. Loans still accruing interest but past due 90 days or more increased to $608 thousand as of December 31, 2002 compared to $450 thousand as of December 31, 2001.
The allowance for loan losses is analyzed for adequacy on a quarterly basis to determine the required amount of provision for loan losses. A loan-by-loan review is conducted on all significant classified commercial and mortgage loans. Inherent losses on these individual loans are determined and an allocation of the allowance is provided. Smaller nonclassified commercial and mortgage loans and all consumer loans are grouped by homogeneous pools with an allocation assigned to each pool based on an analysis of historical loss and delinquency experience, trends, economic conditions, underwriting standards, and other factors.
OTHER INCOME Other income increased $600 thousand, or 9% in 2002 from 2001 compared to an increase of $857 thousand, or 15% in 2001 from 2000. The growth in other income is attributed to higher mortgage brokerage income and Bank Owned Life Insurance income. In 2002 there was an increase in mortgage brokerage income of $158 thousand over 2001 due to increases in the volume of mortgages originated and sold. In 2002, the Company purchased Bank Owned Life Insurance (BOLI) on certain officers and generated $332 thousand in revenue.
OTHER EXPENSES Other expenses increased $1.44 million or 9% in 2002 over 2001 after increasing 8% in 2001 from 2000. Salary expense increased by 10% as a result of normal yearly salary increases and the addition of several new management positions within the Company. Other operating expenses increased $390 thousand or 10%. Foreclosed property expense increased $93 thousand over 2001. Repossessed asset expense increased $99 thousand over 2001. Data processing expenses increased $59 thousand over 2001 due to continued technological advances.
ASSETS At December 31, 2002, the Company had total assets of $576.6 million, up 11% from $518.8 million at December 31, 2001. Average assets in 2002 were $543.2 million compared to $502.0 million in 2001. The growth in assets in 2002 was due to the increase in investments, which were up 15% and federal funds sold, which were up 74% in 2002.
LOANS Total loans as of December 31, 2002 were $378.0 million, up 9% from $346.5 million at December 31, 2001. The Company realized significant growth in the real estate category of loans. Footnote 3 of the financial statements details the loan volume by category for the past two years.
INVESTMENT SECURITIES At December 31, 2002 total investment securities were $156.0 million, up 15% from $136.0 million on December 31, 2001. The goal of the Company is to provide maximum return on the investment portfolio within the framework of its asset/liability objectives. These objectives include managing interest sensitivity, liquidity and pledging requirements.
DEPOSITS At December 31, 2002, total deposits amounted to $454.1 million, up 10% from $412.3 million on December 31, 2001. Non-interest bearing deposits increased $10.6 million, or 13%, at year-end 2002 over 2001. Savings deposits increased $18.2 million, or 13%, in 2002 over 2001. Certificates of Deposit increased $12.9 million or 7% in 2002 over 2001.
STOCKHOLDERS' EQUITY Total stockholders' equity as of December 31, 2002 was $58.1 million, up 14% from $50.9 million on December 31, 2001. The Company is required to maintain minimum amounts of capital under banking regulations. Under the regulations, Total Capital is composed of core capital (Tier 1) and supplemental capital (Tier 2). Tier 1 capital consists of common stockholders' equity less goodwill. Tier 2 capital consists of certain qualifying debt and a qualifying portion of the allowance for loan losses. The following is a summary of the Company's capital ratios for 2002, 2001 and 2000.
- ------------------------------------------------------- 2002 2002 2001 2000 Regulatory Requirements - ------------------------------------------------------- Tier 1 4.00% 13.91% 13.97% 13.77% Total Capital 8.00% 15.12% 15.05% 14.85% Tier 1 Leverage 3.00% 9.79% 9.77% 9.71% - -------------------------------------------------------
Year-end book value was $14.76 in 2002 and $13.06 in 2001. Cash dividends were $1.8 million, or $.453 per share in 2002 and $1.6 million, or $.413 per share in 2001. The common stock of the Company has not been extensively traded. The table below shows the high and low closing prices for each quarter of 2002 and 2001. The stock is quoted on the Nasdaq Small Cap under the symbol "OPOF" and the prices below are based on trade information. There were 1354 stockholders of the Company as of December 31, 2002. This stockholder count does not include stockholders who hold their stock in a nominee registration. The following is a summary of the dividends paid and market price on Old Point Financial Corporation common stock for 2002 and 2001.
- ---------------------------------------------------------------------- 2002 2001 - ---------------------------------------------------------------------- Market Value Market Value Dividend High Low Dividend High Low - ---------------------------------------------------------------------- 1st Quarter $ 0.106 $19.88 $18.07 $ 0.10 $15.04 $11.333 2nd Quarter $ 0.107 $22.73 $20.00 $ 0.10 $15.066 $13.333 3rd Quarter $ 0.12 $22.87 $20.80 $ 0.106 $17.333 $14.566 4th Quarter $ 0.12 $24.54 $21.37 $ 0.107 $19.333 $16.166 - ----------------------------------------------------------------------
LIQUIDITY Liquidity is the ability of the Company to meet present and future obligations through the acquisition of additional liabilities or sale of existing assets. Management considers the liquidity of the Company to be adequate. Sufficient assets are maintained on a short-term basis to meet the liquidity demands anticipated by Management. In addition, secondary sources are available through the use of borrowed funds if the need should arise.
EFFECTS OF INFLATION Management believes that the key to achieving satisfactory performance in an inflationary environment is its ability to maintain or improve its net interest margin and to generate additional fee income. The Company's policy of investing in and funding with interest-sensitive assets and liabilities is intended to reduce the risks inherent in a volatile inflationary economy.
Item 8.
Item 8. Financial Statements and Supplementary Data
The consolidated financial statements and related footnotes of the company are presented below followed by the financial statements of the parent.
The following are the summarized financial statements of the Company.
Independent Auditors Report To the Board of Directors Old Point Financial Corporation Hampton, Virginia
We have audited the accompanying consolidated balance sheets of Old Point Financial Corporation and subsidiaries as of December 31, 2002 and 2001, and the related consolidated statements of income, cash flows and changes in stockholder's equity for each of the years in the three-year period ended December 31, 2002. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above, present fairly, in all material respects, the consolidated financial position of Old Point Financial Corporation and subsidiaries as of December 31, 2002 and 2001, and the consolidated results of their operations and cash flows for each of the years in the three-year period ended December 31, 2002, in conformity with accounting principles generally accepted in the United States of America.
Eggleston Smith P.C.
February 13, 2003 Newport News
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1.SIGNIFICANT ACCOUNTING POLICIES - --------------------------------------
The accounting and reporting policies of Old Point Financial Corporation and its subsidiaries conform to generally accepted accounting principles and to general practice within the banking industry. The following is a summary of significant accounting and reporting policies:
PRINCIPLES OF CONSOLIDATION: The consolidated financial statements include the accounts of Old Point Financial Corporation ("the Company") and its subsidiaries The Old Point National Bank of Phoebus ("the Bank") and Old Point Trust & Financial Services N.A. ("Trust"). All significant intercompany balances and transactions have been eliminated in consolidation.
NATURE OF BUSINESS: Old Point Financial Corporation is a two-bank holding company that conducts substantially all of its operations through its subsidiaries, The Old Point National Bank of Phoebus and Old Point Trust and Financial Services, N.A. The Bank services individual and commercial customers, the majority of which are in Hampton Roads. The Bank has fifteen branch offices. The Bank offers a full range of deposit and loan products to its retail and commercial customers. Substantially all of the Bank's deposits are interest bearing. The majority of the Bank's loan portfolio is secured by real estate. Trust offers a full range of services for individuals and businesses. Products and services include retirement planning, estate planning, financial planning, trust accounts, tax services, and investment management services.
USE OF ESTIMATES: The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions. The amounts recorded in the financial statements may be affected by those estimates and assumptions. Actual results may vary from those estimates.
The Company uses estimates primarily in developing its allowance for loan losses, in computing deferred tax assets, in determining the estimated useful lives of premises and equipment, and in the valuation of other real estate owned.
INVESTMENT SECURITIES: Statement of Financial Accounting Standards No. 115, "Accounting for Certain Investments in Debt and Equity Securities" (SFAS 115), addresses the accounting and reporting for investments in equity securities that have readily determinable fair values and for all investments in debt securities. Those investments are to be classified in three categories and accounted for as follows:
Held-to-maturity - Debt securities for which the Corporation has the positive intent and ability to hold to maturity are classified as held-to-maturity securities and reported at cost, adjusted for premiums and discounts that are recognized in interest income using the interest method over the period to maturity.
Trading - Debt and equity securities that are bought and held principally for the purpose of selling them in the near term are classified as trading account securities and recorded at their fair values. Unrealized gains and losses on trading account securities are included immediately in income.
Available-for-sale - Debt and equity securities not classified as either held-to-maturity securities or trading account securities are classified as available-for-sale securities and recorded at fair value, with unrealized gains and losses reported as a component of comprehensive income. Gains and losses on the sale of available-for-sale
securities are determined using the specific identification method. Premiums and discounts are recognized in interest income using the interest method over the period to maturity.
INTEREST ON LOANS: Interest is accrued daily on the outstanding loan balances. Accrual of interest is discontinued on a loan when management believes, after considering collection efforts and other factors, that the borrower's financial condition is such that collection of interest is doubtful.
LOAN ORIGINATION FEES AND COSTS: Loan origination fees and certain direct origination costs are capitalized and recognized as an adjustment of the yield on the related loan.
ALLOWANCE FOR LOAN LOSSES: The allowance for loan losses is generated by direct charges against income and is available to absorb loan losses. The allowance is based upon management's periodic evaluation of changes in the overall credit worthiness of the loan portfolio, economic conditions in general, and the effect of these conditions upon the financial status of specific borrowers and other factors.
The Bank is subject to regulation by the Office of the Comptroller of the Currency. They may require that the Bank adjust its allowance for loan losses upon request.
OTHER REAL ESTATE OWNED: Other real estate owned is carried at the lower of cost or estimated fair value and consists of foreclosed real property and other property held for sale. The estimated fair value is reviewed periodically by management and any write-downs are charged against current earnings.
PREMISES AND EQUIPMENT: Premises and equipment are stated at cost less accumulated depreciation and amortization. Depreciation and amortization are calculated on both straight-line and accelerated methods and are charged to expense over the estimated useful lives of the related assets. Costs of maintenance and repairs are charged to expense as incurred.
INCOME TAXES: Income taxes are provided based upon income reported in the statements of income (after exclusion of non-taxable income such as interest on state and municipal securities). The income tax effect resulting from timing differences between financial statement pre-tax income and taxable income is deferred to future periods.
PENSION PLAN: The Company has a non-contributory defined benefit pension plan covering substantially all of its employees. Benefits are based on years of service and average earnings during the highest average sixty-month period during the final one hundred and twenty months of employment.
The Company's policy is to fund the maximum amount of contributions allowed for tax purposes. The Bank accrues an amount equal to its actuarially computed obligation under the plan.
The net periodic pension expense includes a service cost component, interest on the projected benefit obligation, return on plan assets and the effect of deferring and amortizing certain actuarial gains and losses and the unrecognized net transition asset over fifteen years.
TRUST ASSETS AND INCOME: Assets held by Trust are not included in the financial statements, because such items are not assets of the Company. In accordance with industry practice, trust service income is recognized primarily on the cash basis. Reporting such income on the accrual basis would not materially effect net income.
Advertising Expense Advertising expenses are expensed as incurred.
RECLASSIFICATIONS: Certain amounts in the financial statements have been reclassified to conform with classifications adopted in the current year.
NOTE 2, Investment Securities - -----------------------------
At December 31, 2002, the investment securities portfolio is composed of securities classified as held-to-maturity and available-for-sale, in conjunction with SFAS 115. Investment securities held-to-maturity are carried at cost, adjusted for amortization of premiums and accretions of discounts, and investment securities available-for-sale are carried at market value.
NOTE 2, Investment Securities (Continued) - -----------------------------------------
Investment securities carried at $55.8 million and $51.8 million at December 31, 2002 and 2001, respectively, were pledged to secure public deposits and securities sold under agreements to repurchase and for other purposes required or permitted by law.
The amortized cost and approximate market values of investment securities at December 31, 2002 by contractual maturity are shown below. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.
The proceeds from the sale and maturities of investment securities, and the related realized gains and losses are shown below:
2002 2001 2000 (Dollars in Thousands) Proceeds from sales and maturities of investments............ $ 60,932 $ 39,022 $ 9,580 ======== ======== =========
Realized gains........................ $ 14 $ 102 $ 44 Realized losses....................... - 103 - -------- -------- --------- Net gains (losses).................. $ 14 $ (1) $ 44 ======== ======== =========
NOTE 3, Loans - -------------
At December 31, loans before allowance for loan losses consisted of:
2002 2001 (Dollars in Thousands)
Commercial and other............... $ 52,183 $ 51,608 Real estate - construction......... 29,822 27,056 Real estate - mortgage............. 204,946 177,237 Installment loans to individuals... 88,044 87,625 Tax exempt loans................... 2,966 2,957 -------- -------- Total........................... $377,961 $346,483 ======== ========
Information concerning loans which are contractually past due or in non-accrual status is as follows:
2002 2001 (Dollars in Thousands)
Contractually past due loans - past due 90 days or more and still accruing interest..... $ 608 $ 450 ======== ======== Loans which are in non-accrual status.......... $ 314 $ 351 ======== ========
The Bank has had, and may be expected to have in the future, banking transactions in the ordinary course of business with directors, executive officers, their immediate families, and companies in which they are principal owners (commonly referred to as related parties), on the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with others. The aggregate direct and indirect loans of these persons totaled $2.3 million and $1.8 million at December 31, 2002 and 2001, respectively. These totals do not include loans made in the ordinary course of business to other companies where a director or executive officer of the Bank was also a director or officer of such company but not a principal owner. None of the directors or executive officers had direct or indirect loans exceeding 10% of stockholders' equity at December 31, 2002.
2002 2001 ---- ---- (Dollars in thousands)
Balance, beginning of year..... $ 1,803 $ 2,989 Additions...................... 1,057 5 Reductions..................... (558) (1,191) ------- ------- Balance, end of year........... $ 2,302 $ 1,803 ======= =======
The bank does not account for any of its loans under the provisions of Statement of Financial Accounting Standards No. 114 or 118 related to impaired loans.
NOTE 4, Allowance for Loan Losses - ---------------------------------
Changes in the allowance for loan losses are as follows:
2002 2001 2000 (Dollars in Thousands)
Balance, beginning of year... $ 3,894 $ 3,649 $ 3,111 Recoveries................... 383 504 665 Provision for loan losses.... 1,700 1,200 625 Loans charged off............ (1,412) (1,459) (752) -------- -------- ------- Balance, end of year...... $ 4,565 $ 3,894 $ 3,649 ======== ======== ========
NOTE 5, Premises and Equipment - ------------------------------
At December 31, premises and equipment consisted of: 2002 2001 (Dollars in Thousands) Land.............................. $ 3,432 $ 3,496 Buildings......................... 10,992 11,335 Leasehold improvements............ 951 901 Furniture, fixtures and equipment. 9,781 9,919 ------- ------- Total cost...................... 25,156 25,651 Less accumulated.................. depreciation and amortization.... 11,876 11,231 ------- ------- Net book value.................. $13,280 $14,420 ======= =======
NOTE 6, Other Real Estate Owned - -------------------------------
Other real estate consisted of the following at December 31:
2002 2001 (Dollars in Thousands) Foreclosed real estate............ $ 665 $ 713 Property held for sale............ 165 290 ------- --------- Total........................... $ 830 $ 1,003 ======= =========
NOTE 7. Deposits - -----------------
The aggregate amount of certificates of deposits in denominations of $100,000 or more at December 31, 2002 and 2001 was $53,445,000 and $45,804,000, respectively.
At December 31, 2002, the scheduled maturities of certificates of deposits are as follows:
Year (Dollars in Thousands)
2003 $111,758 2004 62,539 2005 15,418 2006 3,401 Thereafter 11,238 -------- $204,354 =======
NOTE 8, Indebtedness - --------------------
The Bank's short-term borrowings include federal funds purchased, securities sold under repurchase agreements (including $1.1 million and $1.7 million to directors in 2002 and 2001, respectively) and United States Treasury Demand Notes. The federal funds purchased and securities sold under repurchase agreements are held under various maturities and interest rates. The United States Treasury Demand Notes are subject to call by the United States Treasury with interest paid monthly at the rate of 25 basis points (1/4%) below the federal funds rate.
NOTE 9, Stock Option Plan - -------------------------
The Company has stock option plans which reserve 312,740 shares of common stock for grants to key employees. The exercise price of each option equals the market price of the Company's common stock on the date of the grant and an option's maximum term is ten years. A summary of the exercisable incentive stock options is presented below:
At December 31, 2002, exercise prices on outstanding options ranged from $12.08 to $27.91 per share and the weighted average remaining contractual life was 6 years.
NOTE 9, Stock Option Plan (Continued) - -------------------------------------
The Company accounts for its stock option plans in accordance with APB Opinion No. 25, Accounting for Stock Issued to Employees, which does not allocate costs to stock options granted at current market values. The Company could, as an alternative, allocate costs to stock options using option pricing models, as provided in Statement of Financial Accounting Standards No. 123, Accounting for Stock-Based Compensation. Because of the limited number of options granted and the limited amount of trading activity in the Company's stock, management believes that stock options are best accounted for in accordance with APB Opinion No. 25. The following table illustrates the effect on net income and eaarnings per share if the Company had applied the fair value recognition provisions of FASB Statement 123, Accounting for Stock-Based Compensation, to stock-based employee compensation.
Year Ended December 31 2002 2001 2000
Net income, as reported.............. $ 7,051 $ 5,710 $ 5,133 Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards, net of related tax effects....................... (272) (200) (21) ------- ------- ------ Pro-forma net income................. $ 6,779 $ 5,510 $ 5,112
Earnings per share: Basic - as reported............... $ 1.80 $ 1.47 $ 1.32 ======= ======= ======= Basic - pro forma................. $ 1.73 $ 1.41 $ 1.32 ======= ======= ======= Diluted - as reported............. $ 1.77 $ 1.46 $ 1.32 ======= ======= ======= Diluted - pro forma............... $ 1.70 $ 1.41 $ 1.32 ======= ======= =======
Pro-forma amounts were computed using a 6% risk free interest rate over a 10 year term using an annual dividend rate of between 2.26% and 3.15% and a .01% volatility rate.
The pro-forma effect of the potential exercise of stock options on basic earnings per share would be to increase the number of weighted average number of outstanding shares by approximately 79,000 in 2002, 18,000 in 2001 and 1,000 in 2000.
In 2001, the Company had an Employee Stock Purchase Plan which reserved 44,970 shares of common stock for eligible employees. The purchase price was 95% of the lesser of (1) the common stock's fair market value at July 1 or (2) the common stock's fair market value at the following June 30. During 2001, 9,037 shares of common stock were purchased by employees.
NOTE 10, Income Taxes - ---------------------
The components of income tax expense are as follows:
2002 2001 2000 (Dollars in Thousands)
Currently payable.................... $ 2,515 $ 1,776 $ 1,302 Deferred............................. (259) (42) (95) ------- ------- ------- Reported tax expense................. $ 2,256 $ 1,734 $ 1,207 ======= ======= =======
The items that caused timing differences affecting deferred income taxes are as follows:
2002 2001 2000 (Dollars in Thousands)
Provision for loan losses............ $ (278) $ (108) $ (177) Pension plan expenses................ (21) (5) 37 Deferred loan fees, net.............. 12 10 7 Security gains and losses............ 5 (32) 15 Interest on certain non-accrual loans 3 57 16 Depreciation......................... 23 36 70 Foreclosed assets.................... (3) - (64) Other................................ - - 1 ------- ------ ------ Total $ (259) $ (42) $ (95) ======= ====== ======
A reconciliation of the "expected" Federal income tax expense on income before income taxes with the reported income tax expense follows:
2001 2000 1999 (Dollars in Thousands)
Expected tax expense (34%)........... $ 3,165 $ 2,531 $ 2,156 Interest expense on tax exempt assets 76 118 143 Tax exempt interest.................. (840) (912) (1,097) Disqualified incentive stock options. (40) - - Officer life......................... (114) (7) - Other, net........................... 9 4 5 ------- ------- ------- Reported tax expense................. $ 2,256 $ 1,734 $ 1,207 ======= ======= =======
NOTE 10, Income Taxes (Continued) - ---------------------------------
The components of the net deferred tax asset included in other assets are as follows at December 31:
2002 2001 (Dollars in Thousands)
Components of Deferred Tax Liability: Depreciation.......................... $ (331) $ (310) Accretion of discounts on securities.. (24) (19) Net unrealized (gain) on available-for-sale securities........ (1,231) (243) Deferred loan fees and costs.......... (153) (142) Pension............................... ( 85) (105) ------- ------- Deferred tax liability............... (1,824) (819)
Components of Deferred Tax Asset: Allowance for loan losses............ 1,379 1,102 Net unrealized loss on available-for-sale securities....... - - Interest on non-accrual loans........ 50 53 Deferred compensation................ - - Foreclosed assets.................... 67 64 Capital loss carry forward........... 42 42 Trust organizational cost............ 13 13 ------- ------- Deferred tax asset(liability), net.. $ (273) $ 455 ======= =======
NOTE 11, Lease Commitments - --------------------------
The Bank has noncancellable leases on premises and equipment expiring at various dates, including extensions to the year 2011. Certain leases provide for increased annual payments based on increases in real estate taxes and the Consumer Price Index.
The total approximate minimum rental commitment at December 31, 2002, under noncancellable leases is $1.8 million which is due as follows:
Year (Dollars in Thousands)
2003 $ 296 2004 297 2005 248 2006 250 2007 252 Remaining term of leases 440 ------- Total $ 1,783 =======
The aggregate rental expense of premises and equipment was $296 thousand, $287 thousand and $220 thousand for 2002, 2001 and 2000 respectively.
NOTE 12, Pension Plan - ---------------------
The following tables set forth the Pension Plan's changes in benefit obligation, plan assets, funded status, assumptions and the components of net periodic benefit cost recognized in the Bank's financial statements at December 31:
NOTE 13, Profit Sharing - -----------------------
The Bank has a defined contribution profit sharing and thrift plan covering substantially all of its employees. The Bank may make profit sharing contributions to the plan as determined by the Board of Directors. In addition, the Bank matches thrift contributions by employees fifty cents for each dollar contributed. Expenses related to the plan totaled $392 thousand, $350 thousand and $299 thousand in 2002, 2001 and 2000 respectively.
NOTE 14, Commitments and Contingencies - --------------------------------------
In the normal course of business, the Bank makes various commitments and incurs certain contingent liabilities. These commitments and contingencies represent off-balance sheet risk for the Bank. To meet the financing needs of its customers, the Bank makes lending commitments under commercial lines of credit, home equity loans and construction and development loans. The Bank also incurs contingent liabilities related to irrevocable letters of credit.
Off- balance sheet items at December 31 are as follows:
2002 2001 --------------------- (Dollars in Thousands) Commitments to extend credit: Home equity lines of credit....... $14,321 $11,931 Construction and development loans committed but not funded.. 25,894 18,101 Other lines of credit (principally commercial)......... 27,987 28,196 ------- ------- Total $68,202 $58,228 ======= =======
Irrevocable letters of credit...... $ 1,031 $ 2,539
Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The Bank evaluates each customer's credit worthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary by the Bank, upon extensions of credit is based on management's credit evaluation of the customer. Collateral held varies but may include accounts receivable, inventory, property, plant and equipment, and income-producing commercial properties.
Standby letters of credit and financial guarantees written are conditional commitments issued by the bank to guarantee the performance of a customer to a third party. Those guarantees are primarily issued to support private borrowing agreements. Most guarantees extend for less than two years and expire in decreasing amounts through 2004. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loans to customers. The Bank holds various collateral supporting those commitments for which collateral is deemed necessary.
NOTE 15, Fair Value of Financial Instruments - -------------------------------------------- The estimated fair value of the Bank's financial instruments at December 31 are as follows:
The above presentation of fair values is required by the Statement of Financial Accounting Standards No. 107 "Disclosures about Market Values of Financial Instruments". The fair values shown do not necessarily represent the amounts which would be received on sale or other disposition of the instrument.
The carrying amounts of cash and due from banks, federal funds sold, demand and savings deposits and securities sold under repurchase agreements represent items which do not present significant market risks, are payable on demand or are of such short duration that the market value approximates carrying value.
Investment securities are valued at the quoted market price for individual securities held.
The fair value of loans is estimated by discounting future cash flows using current rates at which similar loans would be made to borrowers.
Certificates of deposit are presented at estimated fair value using rates currently offered for deposits of similar remaining maturities.
Federal Home Loan Bank advances are presented at estimated fair value using rates currently offered for advances of similar remaining maturities.
NOTE 16, Regulatory Matters - ---------------------------
The Company is required to maintain minimum amounts of capital to "risk weighted" assets, as defined by the banking regulators. At December 31, 2002, the Company is required to have minimum Tier 1 and Total capital ratios of 4.00% and 8.00% respectively. The Company's actual ratios at that date were 13.91% and 15.12%. The Company's leverage ratio at December 31, 2002 was 9.79%.
The approval of the Comptroller of the Currency is required if the total of all dividends declared by a national bank in any calendar year exceeds the bank's net profits for that year combined with its retained net profits for the preceding two calendar years. Under this formula, the banking subsidiary can distribute as dividends to the Company in 2003, without approval of the Comptroller of the Currency, $8.8 million plus an additional amount equal to the Bank's retained net profits for 2002 up to the date of any dividend declaration.
OLD POINT FINANCIAL CORPORATION PARENT ONLY BALANCE SHEETS - --------------------------------------------------- As of December 31, Dollars in thousands 2002 2001 - ---------------------------------------------------
ASSETS Cash in bank $ 248 $ 276 Investment securities 2,215 1,215 Total Loans - - Investment in subsidiary 55,637 49,408 Other real estate owned - - Other assets 16 13 ------- ------- TOTAL ASSETS $58,116 $50,912 ======= =======
LIABILITIES AND STOCKHOLDERS EQUITY Notes payable - bank $ - $ - Other liabilities - - Total liabilities - - Stockholders' equity 58,116 50,912 ------- ------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $58,116 $50,912 ======= =======
Accounting Rule Changes - ----------------------- None.
Regulatory Requirements and Restrictions - ---------------------------------------- For the reserve maintenance period in effect at December 31, 2002, 2001 and 2000 the bank was required to maintain with the Federal Reserve Bank of Richmond an average daily balance totaling approximately $2.3 million, $581 thousand and $350 thousand respectively.
Item 9.
Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
None.
PART III
Item 10.
Item 10. Directors and Executive Officers of the Registrant
The twelve persons named below, all of whom currently serve as directors of the Company, will be nominated to serve as directors until the 2004 Annual Meeting, or until their successors have been duly elected and have qualified.
(1) Refers to the year in which the individual first became a director of the Bank. Dr. Richard F. Clark, Eugene M. Jordan, and Robert F. Shuford became directors of the Company upon consummation of the Bank's reorganization on October 1, 1984. All present directors of the Company are directors of the Bank. Dr. Richard F. Clark, Dr. Arthur D. Greene, Mr. John C. Ishon and Mr. Robert F. Shuford are directors of the Trust Company.
(2) For purposes of this table, beneficial ownership has been determined in accordance with the provisions of Rule 13d-3 of the Securities Exchange Act of 1934 under which, in general, a person is deemed to be the beneficial owner of a security if he or she has or shares the power to vote or direct the voting of the security or the power to dispose of or direct the disposition of the security, or if he or she has the right to acquire beneficial ownership of the security within sixty days.
(3) Includes shares held (i) by their close relatives or held jointly with their spouses, (ii) as custodian or trustee for the benefit of their children or others, or (iii) as attorney-in-fact subject to a general power of attorney - Dr. Clark, 300 shares; Mr. Evans, 975 shares; Mr. Goodson, 4,362 shares; Mrs. Grabow, 2 shares; Dr. Greene, 2,952 shares; Mr. Hansen, 1,144 shares; Mr. Harris, 638 shares, Mr. Ishon, 5,239 shares; Mr.Jordan, 6,000 shares; Mr. Morgan, 4,765 shares; Dr. Schappert, 119,715 shares; and Mr. Shuford, 113,385 shares.
(4) Includes shares that may be acquired within 60 days pursuant to the exercise of stock options granted under the 1989 and 1998 Old Point Stock Option Plans - Dr. Clark 4,500, Mr. Evans 4,500, Mr. Goodson 4,500, Dr. Greene 4,500, Mr. Hansen 3,000, Mr. Harris 4,500, Mr. Ishon 4,500, Mr. Jordan 4,500, Mr. Morgan 4,500, Mr. Morris 26,031, Dr. Schappert 4,500, and Mr. Shuford 39,941.
(5) Mr. Shuford is one of three directors of the VuBay Foundation, a charitable foundation organized under 501(c)(3) of the Internal Revenue Code of 1986, as amended. A majority of the Directors have the power to vote shares of Company common stock owned by the foundation. The foundation owned 290,376 shares of stock as of March 14, 2003. Mr. Shuford disclaims any beneficial ownership of these shares.
There are two family relationships among the directors and executive officers. Mr. Jordan is the father-in-law of Mr. Ishon. Mr. Shuford and Dr. Schappert are married to sisters. None of the directors serve as a director of any other company with a class of securities registered pursuant to Section 12 of the Securities Exchange Act of 1934.
The Company believes that its officers, directors and 10% beneficial owners during 2002 complied with all filing requirements under Section 16(a), with the exception of one late filing of Form 4 on behalf of Mr. Eugene M. Jordan, Sr. and two late filings of Form 4 on behalf of Mr. G. Royden Goodson, III.
In addition to the executive officers included in the preceding list of directors, the persons listed below are executive officers of the Company.
Name and (Age) Principal Occupation with the Registrant
Cary B. Epes (54) Senior Vice President/Credit Mr. Epes also serves as Executive Vice President and Chief Credit Officer for Old Point National Bank.
Margaret P. Causby (52) Senior Vice President/Administration Ms. Causby also serves as Executive Vice President and Chief Administrative Officer for Old Point National Bank.
Frank E. Continetti (43) Executive Vice President/Trust *resigned effective Mr. Continetti also serves as President October 4, 2002 and Chief Executive Officer for Old Point Trust & Financial Services, N.A.
Laurie D. Grabow (45) Senior Vice President/Finance Ms. Grabow also serves as Senior Vice President and Chief Financial Officer for Old Point National Bank.
Each of these executive officers owns less than 1% of the stock of the Company.
Item 11.
Item 11. Executive Compensation
Cash Compensation
The following table presents a three-year summary of all compensation paid or accrued by the Company and the Bank to the Company's Chief Executive Officer and each executive officer whose salary and bonus for 2002 exceeded $100,000. The table also presents the number and percentages of shares of the Company's common stock held by these executive officers, who are all executive officers of the Company.
(1) Salary includes directors' fees as follows: Mr. Shuford - 2002, $9,100, 2001, $8,600 and 2000, $6,800. Mr. Morris - 2002, $5,600, 2001, $5,600 and 2000, $4,800. Mr. Continetti - 2002, $2,750, 2001, $3,500 and 2000, $2,000.
(2) Bonus consideration for Mr. Shuford is paid in the year following the year in which the bonus is earned so that the Compensation Committee can evaluate year-end results. Bonus consideration for Mr. Morris, Mr. Epes, Mrs. Causby and Mr. Continetti is paid in the year in which it is earned.
(3) The amount of compensation in the form of perquisites or other personal benefits properly categorized in this column according to the disclosure rules adopted by the Securities and Exchange Commission did not exceed the lesser of either $50,000 or 10% of the total annual salary and bonus reported in each of the three years reported for Mr. Shuford, Mr. Morris, Mr. Epes, Mrs. Causby and Mr. Continetti, respectively.
(4) Mr. Shuford has received other compensation as follows:
(5) For purposes of this table, beneficial ownership has been determined in accordance with the provisions of Rule 13d-3 of the Securities Exchange Act of 1934 under which, in general, a person is deemed to be the beneficial owner of a security if he or she has or shares the power to vote or direct the voting of the security or the power to dispose of or direct the disposition of the security, or if he or she has the right to acquire beneficial ownership of the security within 60 days.
(6) Include shares held (1) by their joint relative or held jointly with their spouses, (2) as custodian or trustee for the benefit of their children or others, (3) as attorney-in- fact subject to a general power of attorney-Mr. Shuford, 113,385 shares.
(6) Include shares that may be acquired within 60 days pursuant to the exercise of stock options granted under the 1989 and 1998 Old Point Stock Option Plans-Mr. Shuford 31,941 shares, Mr. Morris 26,031 shares, Mr. Epes 21,345 shares and Mrs. Causby 22,095 shares.
Item 12.
Item 12. Security Ownership of certain Beneficial Owners and Management
Security ownership of certain beneficial owners and management is detailed in Part III, Item 10 of this Annual Report on Form 10-K.
Item 13.
Item 13. Certain Relationships and Related Transactions
Some of the Company's directors, executive officers, and members of their immediate families, and corporations, partnerships and other entities of which such persons are officers, directors, partners, trustees, executors or beneficiaries, are customers of the Bank. As of December 31, 2002 borrowing by all policy making officers and directors amounted to $2.3 million. This represented 4.0% of the total equity capital accounts of the Company as of December 31, 2002. All loans and commitments to lend included in such transactions were made in the ordinary course of business, upon substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with other persons and did not involve more than normal risk of collectibility or present other unfavorable features. It is the policy of the Bank to provide loans to officers who are not executive officers and to employees at more favorable rates than those prevailing at the time for comparable transactions with other persons. These loans do not involve more than the normal risk of collectibility or present other unfavorable features.
The law firm of Troutman Sanders Mays & Valentine L.L.P. serves as legal counsel to the Company. Jordan, Ishon & Jordan serve as legal counsel to the Bank and Trust Company until December 31, 2002, at which time the firm dissolved. Director Eugene M. Jordan was a member of the firm. During 2002, the firm received a retainer and fees totaling $42,781. Morgan Marrow Insurance of which John B. Morgan, II is President, provided insurance for which the Company paid $69,337 during 2002. Hampton Stationery, of whom John Cabot Ishon is President, Geddy, Harris, Franck & Hickman L.L.P. of which Stephen D. Harris is a partner, and Warwick Plumbing & Heating Corp. of which G. Royden Goodson, III is President provide products and services to the Company.
Item 14.
Item 14. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Our Chief Executive Officer and Chief Financial Officer have evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-14(c) and 15d-14(c) under the Securities Exchange Act of 1934, as amended) as of a date within 90 days prior to the filing date of this annual report (the "Evaluation Date"). Based on such evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of the Evaluation Date, our disclosure controls and procedures are effective in alerting them on a timely basis to material information relating to the Company required to be included in our reports filed or submitted under the Securities Exchange Act of 1934, as amended.
Changes in Internal Controls
Since the Evaluation Date, there have not been any significant changes in our internal controls or in other factors that could significantly affect such controls.
PART IV
Item 15.
Item 15. Exhibits, Financial Statement Schedules and Reports on Form 8
A.1 Financial Statements:
The following audited financial statements are included in Part II, Item 8, of this Annual Report on Form 10-K.
Consolidated Balance Sheets - December 31, 2002 and 2001 Consolidated Statements of Income Years Ended December 31, 2002, 2001 and 2000 Consolidated Statements of Changes in Stockholders' Equity Years Ended December 31, 2002, 2001 and 2000 Consolidated Statements of Cash Flows Years Ended December 31, 2002, 2001 and 2000 Notes to Financial Statements Auditor's Report
A.2 Financial Statement Schedules:
Schedule Location
Average Balance Sheets, Net Interest Income and Rates Part I, Item 1 Analysis of Change in Net Interest Income Part I, Item 1 Interest Sensitivity Analysis Part I, Item 1 Investment Security Maturities & Yields Part I, Item 1 Loans Part I, Item 1 Maturity Schedule of Selected Loans Part I, Item 1 Nonaccrual, Past Due and Restructured Loans Part I, Item 1 Analysis of the Allowance for Loan Losses Part I, Item 1 Allocation of the Allowance for Loan Losses Part I, Item 1 Deposits Part I, Item 1 Certificates of Deposit of $100,000 and more Part I, Item 1 Return on Average Equity Part I, Item 1 Short Term Borrowings Part I, Item 1 Selected Financial Data Part II, Item 6 Capital Ratios Part II, Item 7 Dividends Paid and Market Price of Common Stock Part II, Item 7 Investment Securities Part II, Item 8 Proceeds from sales and maturities of securities Part II, Item 8 Premises and Equipment Part II, Item 8 Other Real Estate Owned Part II, Item 8 Stock Option Plan Part II, Item 8 Components of Income Tax Expense Part II, Item 8 Reconciliation of Expected and Reported Income Tax Expense Part II, Item 8 Lease Commitments Part II, Item 8 Pension Plan Part II, Item 8 Commitments and Contingencies Part II, Item 8 Fair Value of Financial Instruments Part II, Item 8 Directors and Executive Officer Part III, Item 10 Executive Compensation Part III, Item 11
A.3 Exhibits:
3 Articles of Incorporation and Bylaws 4 Not Applicable 9 Not Applicable 10 Not Applicable 11 Not Applicable 12 Not Applicable 13 Not Applicable 18 Not Applicable 19 Not Applicable 21 Subsidiaries of the Registrant 23 Not Applicable 23 Consent of Independent Certified Public Accountants 24 Powers of Attorney 27 Not Applicable 28 Not Applicable 29 Not Applicable 99.1 Certification of Chief Executive Officer 99.2 Certification of Chief Financial Officer
B. Reports on Form 8-K:
A Current Report, Form 8-K was filed on October 9, 2002 regarding the Company's announcement of the election of Eugene M. Jordan, II to the Board of Directors of Old Point Trust & Financial Services, N.A. in advance of his appointment to the position of President and Chief Executive Officer.
A Current Report, Form 8-K was filed on October 9, 2002 regarding the Company's announcement of the declaration of a 50% stock dividend.
A Current Report, Form 8-K was filed on September 30, 2002 regarding the Company's announcement of the resignation of Frank E. Continetti, President and CEO of Old Point Trust & Financial Services, N.A.
INDEX OF EXHIBITS
Exhibit No.
3 Articles of Incorporation and Bylaws (incorporated by reference from our Annual Report on Form 10-K for the year ended 1998 (File No. 000-12896))
4 Not Applicable
9 Not Applicable
10 Not Applicable
11 Not Applicable
12 Not Applicable
13 Not Applicable
18 Not Applicable
19 Not Applicable
21 Subsidiaries of the Registrant
22 Not Applicable
23 Consent of Independent Certified Public Accountants
24 Powers of Attorney
27 Not Applicable
28 Not Applicable
29 Not Applicable
99.1 Certification of Chief Executive Officer
99.2 Certification of Chief Financial Officer
Signatures
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on the 27th day of March, 2003.
OLD POINT FINANCIAL CORPORATION
/s/Robert F. Shuford -------------------- Robert F. Shuford, President
Pursuant to the requirements of the Securities and Exchange Act of 1934, this report has been signed by the following persons on behalf of the registrant and in their capacities on the 27th day of March, 2003.
/s/Robert F. Shuford - -------------------- President and Director Robert F. Shuford Principal Executive Officer
/s/Laurie D. Grabow - ------------------- Senior Vice President Laurie D. Grabow Principal Financial & Accounting Officer
/s/Richard F. Clark - ------------------- Director Richard F. Clark
/s/Russell S. Evans, Jr. - ------------------------ Director Russell S. Evans, Jr.
/s/G. Royden Goodson, III - ------------------------- Director Royden G. Goodson, III
/s/Dr. Arthur D. Greene - ----------------------- Director Arthur D. Green
/s/Gerald E. Hansen - ------------------- Director Gerald E. Hansen
/s/Stephen D. Harris - -------------------- Director Stephen D. Harris
/s/John Cabot Ishon - ------------------- Director John Cabot Ishon
/s/Eugene M. Jordan - ------------------- Director Eugene M. Jordan
/s/Louis G. Morris - ------------------ Director Louis G. Morris
/s/John B. Morgan - ----------------- Director John B. Morgan
/s/Dr. H. Robert Schappert - -------------------------- Director Dr. H. Robert Schappert