U. S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
[X] Annual Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the fiscal year ended December 31, 2001
[ ] Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 (no fee required)
For the transition period from to
Commission File No. 0-12896
OLD POINT FINANCIAL CORPORATION
(Name of issuer 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)
(757) 722-7451
(Issuer's telephone number)
Securities registered pursuant to Section 12(b) of the Exchange Act:
None
Securities registered pursuant to Section 12(g) of the Exchange Act:
Common Stock ($5.00 par value)
(Title of class)
Check whether the issuer (1) filed all reports required to be
filed by Section 13 or 15(d) of the Exchange Act during the past 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
Check if there is no disclosure of delinquent filers in response
to Item 405 of Regulation S-B contained in this form, and no
disclosure will be contained, to the best of registrant's knowledge,
in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this Form
10-K. [X]
As of March 15, 2002 the aggregate market value of the 1,942,409
shares of common stock of Old Point Financial Corporation held by
nonaffiliates was approximately $53 million based upon the closing
price of the stock as of March 15, 2002. Number of shares outstanding
on March 15, 2002 was 2,602,577.
DOCUMENTS INCORPORATED BY REFERENCE
NONE
OLD POINT FINANCIAL CORPORATION
Form 10-K
INDEX
PART I..............................................................1
Item 1. Description of Business....................................1
General............................................................1
Statistical Information............................................2
Item 2. Description of Property...................................13
Item 3. Legal Proceedings.........................................13
Item 4. Submission of Matters to a Vote of Security Holders.......13
PART II............................................................13
Item 5. Market for Common Equity And Related Stockholder Matters..13
Item 6. Selected Financial Data...................................13
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations.......................15
Item 8. Financial Statements and Supplementary Data...............18
Item 9. Changes in and Disagreements With Accountants on
Accounting and Financial Disclosure.......................37
PART III...........................................................38
Item 10. Directors and Executive Officers of the Registrant........38
Item 11. Executive Compensation....................................41
Item 12. Security Ownership of Certain Beneficial Owners and
Management................................................43
Item 13. Certain Relationships and Related Transactions............44
PART IV............................................................45
Item 14. Exhibits, Financial Statement Schedules and Reports on
Form 8....................................................45
-I-
PART I
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, 2001, the Company had assets of $518.8 million,
loans of $346.5 million, deposits of $412.3 million, and stockholders'
equity of $50.9 million. At year end, the Company and its
subsidiaries had a total of 241 employees, 27 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
-1-
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.
Recent Legislation
The USA PATRIOT Act (Uniting and Strengthening America by Providing
Appropriate Tools Required to Intercept and Obstruct Terrorism) was
signed on October 26, 2001. It comprises ten titles aimed at
providing stronger surveillance powers, strengthening criminal laws
against terrorism, improving intelligence and combating money
laundering. Title III of the USA PATRIOT Act contains the provisions
that have the greatest impact on financial institutions. Title III
amends the Bank Secrecy Act and provides the Department of the
Treasury and federal agencies with enhanced authority to combat
international money laundering. Title III applies to all financial
institutions regardless of charter or size and expands the reach to
organizations not previously covered.
OFAC, the Office of Foreign Assets Control, is a division of the
Department of the Treasury. OFAC is responsible for helping to insure
that United States entities do not engage in transactions with
"enemies" of the United States, as defined by various Executive Orders
and Acts of Congress. Financial institutions, along with other
entities, are expected to comply with these regulations. Due to these
regulations, the Company has implemented additional OFAC filtering
solutions. The Company actively checks high-risk OFAC areas such as
new accounts, wire transfers and customer files. The Company performs
the checks utilizing software, which is updated each time a
modification is made to the lists provided by OFAC and other agencies
of Specially Designated Nationals and Blocked Persons.
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.
-2-
TABLE I
AVERAGE BALANCE SHEETS, NET INTEREST INCOME* AND RATES*
-----------------------------------------------------------------------------------------------------------------------------------
For the years ended December 31, 2001 2000 1999
-----------------------------------------------------------------------------------------------------------------------------------
Dollars in thousands Average Average Average
Interest Rates Interest Rates Interest Rates
Average Income/ Earned/ Average Income/ Earned/ Average Income/ Earned/
Balance Expense Paid Balance Expense Paid Balance Expense Paid
-----------------------------------------------------------------------------------------------------------------------------------
ASSETS
Loans $332,097 $ 27,765 8.36% $303,826 $ 26,625 8.76% $259,320 $ 21,794 8.40%
Investment securities:
Taxable 76,670 4,389 5.72% 71,148 4,383 6.16% 79,931 4,847 6.06%
Tax-exempt 52,031 3,773 7.25% 54,726 4,090 7.47% 55,936 4,090 7.31%
-------- -------- -------- -------- -------- --------
Total investment securities 128,701 8,162 6.34% 125,874 8,473 6.73% 135,867 8,937 6.58%
Federal funds sold 14,467 563 3.89% 3,099 211 6.81% 4,131 219 5.30%
-------- -------- -------- -------- --------- --------
Total earning assets 475,265 36,490 7.68% 432,799 35,309 8.16% 399,318 30,950 7.75%
Reserve for loan losses (3,646) (3,394) (2,886)
-------- -------- --------
471,619 429,405 396,432
Cash and due from banks 9,862 9,424 9,302
Bank premises and equipment 15,715 15,015 13,682
Other assets 4,838 5,759 4,265
-------- -------- --------
Total assets $502,034 $459,603 $423,681
======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Time and savings deposits:
Interest-bearing transaction accounts $ 6,559 $ 88 1.34% $ 4,617 $ 109 2.36% $ 3,971 $ 94 2.37%
Money market deposit accounts 100,577 2,159 2.15% 93,458 3,013 3.22% 94,885 2,937 3.10%
Savings accounts 28,864 536 1.86% 28,264 774 2.74% 27,923 765 2.74%
Certificates of deposit, $100,000 or more 49,072 2,672 5.45% 35,241 2,051 5.82% 31,089 1,708 5.49%
Other certificates of deposit 142,987 8,202 5.74% 136,792 7,863 5.75% 132,674 7,045 5.31%
-------- -------- -------- -------- -------- --------
Total time and savings deposits 328,059 13,657 4.16% 298,372 13,810 4.63% 290,542 12,549 4.32%
Federal funds purchased, securities sold
under agreement to repurchase & FHLB
advances 51,253 2,425 4.73% 48,922 2,769 5.66% 27,173 1,233 4.54%
Other short term borrowings 2,158 73 3.38% 1,982 127 6.41% 1,691 83 4.91%
-------- -------- -------- -------- -------- --------
Total interest bearing liabilities 381,470 16,155 4.23% 349,276 16,706 4.78% 319,406 13,865 4.34%
Demand deposits 68,516 65,169 61,503
Other liabilities 2,327 1,900 1,932
-------- -------- --------
Total liabilities 452,313 416,345 382,841
Stockholders' equity 49,721 43,258 40,840
-------- -------- --------
Total Liabilbities and Stockholders Equity $502,034 $459,603 $423,681
======== ======== ========
Net interest income/yield $ 20,335 4.28% $ 18,603 4.30% $ 17,085 4.28%
======== ======== ========
Total deposits $396,575 $363,541 $352,045
======== ======== ========
*Computed on a fully taxable equivalent basis using a 34% rate
-3-
The following table sets forth a summary of changes in interest earned and
paid attributable to changes in volume and changes in yields/rates.
TABLE II
ANALYSIS OF CHANGE IN NET INTEREST INCOME *
-----------------------------------------------------------------------------------------------------------------------------------
Year 2001 over 2000 Year 2000 over 1999 Year 1999 over 1998
Due to change in: Due to change in: Due to change in:
Net Net Net
Average Average Increase Average Average Increase Average Average Increase
Dollars in Thousands Volume Rate (Decrease) Volume Rate (Decrease) Volume Rate (Decrease)
------------------------------------------------------------------------------------------------------------------------------------
INCOME FROM EARNING ASSETS
Loans $ 2,477 $(1,337) $ 1,140 $ 3,740 $ 1,091 $ 4,831 $ 2,893 $(1,354) $ 1,539
Investment Securities:
Taxable 340 (334) 6 (533) 69 (464) (436) (2) (438)
Tax-exempt (201) (116) (317) (88) 88 - 1,679 (254) 1,425
------- ------- -------- ------- ------- -------- ------- ------- --------
Total investment securities 139 (450) (311) (621) 157 (464) 1,243 (256) 987
Federal funds sold 774 (422) 352 (55) 47 (8) (343) (10) (353)
-------- ------- --------- -------- -------- --------- ------- -------- --------
3,390 (2,209) 1,181 3,064 1,295 4,359 3,793 (1,620) 2,173
INTEREST EXPENSE
Interest bearing transaction accounts 46 (67) 21 15 - 15 (260) 8 (252)
Money market deposit accounts 230 (1,084) (854) (44) 120 76 774 (163) 611
Savings accounts 16 (254) (238) 9 - 9 47 - 47
Certificate of deposits, $100,000
or more 805 (184) 621 228 115 343 281 (35) 246
Other certificates of deposit 356 (17) 339 219 599 818 609 (304) 305
-------- -------- -------- -------- -------- --------- -------- -------- --------
Total time and savings deposits 1,453 (1,606) (153) 427 834 1,261 1,452 (495) 957
Federal funds purchased, securities
sold under agreement to repurchase
and FHLB advances 132 (476) (344) 987 549 1,536 255 (35) 220
Other short-term borrowings 11 (65) (54) 14 30 44 (5) (8) (13)
-------- -------- -------- -------- -------- --------- -------- -------- --------
Total expense for interest bearing
liabilities 1,596 (2,147) (551) 1,428 1,413 2,841 1,702 (538) 1,164
Change in Net Interest Income $ 1,794 $ (62) $ 1,732 $ 1,635 $ (117) $ 1,518 $ 2,093 $(1,084) $ 1,009
* Computed on a fully taxable equvilent basis using a 34% rate.
-4-
Interest Sensitivity
---------------------
The following table reflects the earlier of the maturity or repricing data for various assets and liabilities as of
December 31, 2001
TABLE III
INTEREST SENSITIVITY ANALYSIS
----------------------------------------------------------------------------------------------------------------
As of December 31, 2001 Within 4-12 1-5 Over 5
Dollars in thousands 3 Months Months Years Years Total
----------------------------------------------------------------------------------------------------------------
Uses of funds
Federal funds sold..................... $ 5,018 $ - $ - $ - $ 5,018
Taxable investments.................... 5,196 5,250 70,916 2,143 83,505
Tax-exempt investments................. 204 1,263 11,400 39,629 52,496
_________ _________ _________ ________ _________
Total investments..................... 10,418 6,513 82,316 41,772 141,019
Loans:
Commercial............................ 21,312 2,409 22,255 827 46,803
Tax-exempt............................ 394 - 179 2,384 2,957
Installment........................... 6,159 3,672 67,104 10,690 87,625
Real estate........................... 42,213 8,966 103,813 49,301 204,293
Other................................. 1,578 43 2,853 331 4,805
_________ _________ __________ ________ _________
Total loans............................ 71,656 15,090 196,204 63,533 346,483
_________ _________ __________ ________ _________
Total earning assets................... $ 82,074 $ 21,603 $ 278,520 $105,305 $ 487,502
Sources of funds
Interest checking deposits............. 9,376 - - - 9,376
Money market deposit accounts.......... 101,680 - - - 101,680
Regular savings accounts............... 29,792 - - - 29,792
Certificates of deposit
$100,000 or more...................... 9,856 24,714 11,234 - 45,804
Other time deposits.................... 27,477 75,382 42,799 15 145,673
Federal funds purchased, securities
sold under agreements to repurchase
& FHLB advances....................... 28,321 - 5,000 20,000 53,321
Other borrowed money................... 369 - - - 369
_________ _________ __________ ________ _________
Total interest bearing liabilities..... $ 206,871 $ 100,096 $ 59,033 $ 20,015 $ 386,015
Rate sensitivity GAP................... $(124,797) $ (78,493) $ 219,487 $ 85,290 $ 101,487
Cumulative GAP......................... $(124,797) $(203,290) $ 16,197 $101,487
-5-
The Company was liability sensitive as of December 31, 2001 There
were $125 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, 2001.
TABLE IV
INVESTMENT SECURITY MATURITIES & YIELDS
----------------------------------------------------------------------------------------------------
U.S.Govt/Agency State/Municipal Total
Book Weighted Book Weighted Book Weighted
Value Average Value Average Value Average
Dollars in Thousands Yield Yield Yield
----------------------------------------------------------------------------------------------------
December 31, 2001
Maturities:
Within 1 year $ 7,250 6.13% $ 1,452 7.61% $ 8,702 6.37%
After 1 year, but within 5 years 71,763 5.43% 9,960 7.24% 81,723 5.65%
After 5 years, but within 10 years 10,000 5.13% 27,258 6.82% 28,258 6.76%
After 10 years - 0.00% 13,371 6.40% 13,371 6.40%
TOTAL $80,013 5.49% $52,041 6.81% $132,054 6.01%
December 31, 2000 $63,238 6.03% $54,435 6.83% $117,673 6.40%
December 31, 1999 $66,062 6.02% $57,391 6.97% $123,452 6.46%
Yields are calculated on a fully tax equivalent basis using a 34% rate.
At December 31, 2001, the book value of other marketable equity
securities with no stated maturity totaled $3.2 million with an
weighted average yield of 4.66%. These securities consisted of
Federal Home Loan Bank stock of $1.7 million yielding 6.75%,
Federal Reserve stock of $169 thousand yielding 6.00%, money market
fund of $1.3 million yielding 1.95% and other securities of $50
thousand. The book value of other marketable securities with no
stated maturity totaled $5.7 million, yielding 6.37%; and $5.1
million, yielding 5.59%; at December 31, 2000, and 1999
respectively.
-6-
III. Loan Portfolio
The following table shows a breakdown of total loans by type at
December 31 for years 1997 through 2001:
TABLE V
LOANS
---------------------------------------------------------------------------------------
As of December 31, 2001 2000 1999 1998 1997
Dollars in thousands
---------------------------------------------------------------------------------------
Commercial and other $ 51,608 $ 62,181 $ 62,257 $ 53,793 $ 45,059
Real Estate Construction 27,056 15,219 11,461 5,418 3,836
Real Estate Mortgage 177,237 155,367 140,004 116,635 104,141
Tax Exempt 2,957 3,314 2,747 1,401 2,093
Installment Loans to Individuals 87,625 83,829 65,178 58,618 66,615
-------- -------- -------- -------- --------
Total $346,483 $319,910 $281,647 $235,865 $221,744
======== ======== ======== ======== ========
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, 2001 is
presented below:
TABLE VI
MATURITY SCHEDULE OF SELECTED LOANS
------------------------------------------------------------------------------------------
December 31, 2001 One year One through Over five
Dollars in thousands or less five years years Total
------------------------------------------------------------------------------------------
Commercial and other $ 25,342 $ 25,108 $ 1,158 $51,608
Real estate construction 19,260 7,796 - 27,056
--------- -------- -------- -------
Total $ 44,602 $ 32,904 $ 1,158 $78,664
Loans maturing after one year with:
Fixed interest rate $ 32,904 $ 1,158 $34,062
Variable interest rate $ - $ - $ -
-7-
The following table presents information concerning the aggregate
amount of nonaccrual, past due and restructured loans as of
December 31 for the years 1997 through 2001.
TABLE VII
NONACCRUAL, PAST DUE AND RESTRUCTURED LOANS
--------------------------------------------------------------------------------------
As of December 31, 2001 2000 1999 1998 1997
Dollars in thousands
--------------------------------------------------------------------------------------
Nonaccrual loans $ 351 $ 37 $ 514 $ 253 $ 660
Accruing loans past due
90 days or more 450 470 1,351 641 455
Restructured loans none none none none none
Interest income which would have been
recorded under original loan terms 41 25 49 52 205
Interest income recorded during the period 83 9 68 123 485
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, 2001 such problem loans,
not included in Table VII, amounted to approximately $2.0 million.
There were no relationships 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.
-8-
The following table shows an analysis of the Allowance for Loan
Losses for the years 1997 through 2001.
TABLE VIII
ANALYSIS OF THE ALLOWANCE FOR LOAN LOSSES
--------------------------------------------------------------------------------------------------------------
For the year ended December 31, 2001 2000 1999 1998 1997
Dollars in thousands
--------------------------------------------------------------------------------------------------------------
Balance at beginning of period $ 3,649 $ 3,111 $ 2,855 $ 2,671 $ 2,330
Charge Offs:
Commercial, financial and agricultural 680 266 138 296 84
Real estate construction - - - - -
Real estate mortgage 19 - 74 87 67
Installment Loans to individuals 724 486 581 564 717
Other loans 36 - - - -
--------- --------- --------- --------- ---------
Total charge offs 1,459 752 793 947 868
Recoveries:
Commercial, financial and agricultural 222 418 104 139 239
Real estate construction - - - - -
Real estate mortgage 21 3 1 25 1
Installment Loans to individuals 256 244 294 317 369
Other loans 5 - - - -
--------- --------- --------- --------- ---------
Total recoveries 504 665 399 481 609
Net charge offs 955 87 394 466 259
Additions charged to operations 1,200 625 650 650 600
--------- --------- --------- --------- ---------
Balance at end of period $ 3,894 $ 3,649 $ 3,111 $ 2,855 $ 2,671
Selected loan loss statistics
Loans (net of unearned income):
End of period $ 346,483 $ 319,910 $ 281,647 $ 235,865 $ 221,744
Daily average $ 332,097 $ 303,826 $ 259,320 $ 226,908 $ 210,934
Net charge offs to average total loans 0.29% 0.03% 0.15% 0.21% 0.12%
Provision for loan losses to average total loans 0.36% 0.21% 0.25% 0.29% 0.28%
Provision for loan losses to net charge offs 125.65% 718.39% 164.97% 139.48% 231.66%
Allowance for loan losses to period end loans 1.12% 1.14% 1.10% 1.21% 1.20%
Earnings to loan loss coverage* 9.05 80.06 16.97 14.64 23.67
* Income before taxes plus provision for loan losses, divided by net charge-offs.
-9-
The following table shows the amount of the Allowance for Loan Losses
allocated to each category at December 31 for the years 1997 through
2001.
TABLE IX
ALLOCATION OF THE ALLOWANCE FOR LOAN LOSSES
-----------------------------------------------------------------------------------------------------------------------------------
As of December 31, 2001 2000 1999 1998 1997
Percent Percent Percent Percent Percent
of loans of loans of loans of loans of loans
in Each in Each in Each in Each in Each
Category to Category to Category to Category to Category to
Amount Total Loans Amount Total Loans Amount Total Loans Amount Total Loans Amount Total Loans
-----------------------------------------------------------------------------------------------------------------------------------
Commercial and other $ 667 15.75% $ 742 20.47% $ 828 23.08% $ 656 27.92% $ 575 21.26%
Real Estate Construction 119 7.81% 49 4.76% 40 4.07% 17 2.30% 14 1.73%
Real Estate Mortgage 791 51.15% 212 48.57% 195 49.71% 203 44.64% 240 46.97%
Consumer 921 25.29% 519 26.20% 414 23.14% 370 25.14% 412 30.04%
Unallocated 1,396 - 2,127 - 1,634 - 1,609 - 1,430 -
------ ------- ------ ------- ------ ------- ------ ------- ------ -------
Total $3,849 100.00% $3,649 100.00% $3,111 100.00% $2,855 100.00% $2,671 100.00%
V. Deposits
The following table shows the average balances and average rates paid on
deposits for the years ended December 31, 2001, 2000 and 1999.
TABLE X
DEPOSITS
---------------------------------------------------------------------------------------------------
For the year ended December 31, 2001 2000 1999
Average Average Average Average Average Average
Dollars in thousands Balance Rate Balance Rate Balance Rate
---------------------------------------------------------------------------------------------------
Interest bearing transaction accounts $ 6,559 1.34% 4,617 2.36% $ 3,971 2.37%
Money market deposit accounts 100,577 2.15% 93,458 3.22% 94,885 3.10%
Savings accounts 28,864 1.86% 28,264 2.74% 27,923 2.74%
Certificate of deposit, $100,000 or more 49,072 5.45% 35,241 5.82% 31,089 5.49%
Other certificate of deposit 142,987 5.74% 136,792 5.75% 132,674 5.31%
--------- -------- --------
Total interest bearing deposits 328,059 4.16% 298,372 4.63% 290,542 4.32%
Non-interest bearing demand deposits 68,516 65,169 61,503
--------- -------- --------
Total deposits $ 396,575 $363,541 $352,045
========= ======== ========
-10-
The following table shows certificates of deposit in amounts of
$100,000 or more as of December 31, 2001, 2000, and 1999 by time
remaining until maturity.
TABLE XI
CERTIFICATE OF DEPOSIT $100,000 & MORE
--------------------------------------------------------
Dollars in thousands 2001 2000 1999
Maturing in
--------------------------------------------------------
3 months or less $ 8,445 7,634 $ 6,457
3 through 6 months 13,397 5,443 4,485
6 through 12 months 11,427 14,635 11,958
over 12 months 12,535 12,665 11,132
-------- -------- --------
$ 45,804 $ 40,377 $ 34,032
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.
2001 2000 1999
------ ------ ------
Return on average assets 1.14% 1.12% 1.14%
Return on average equity 11.48% 11.87% 11.81%
Dividend payout ratio 28.17% 29.23% 28.89%
Average equity to average assets 9.90% 9.41% 9.64%
-11-
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
2001, 2000, and 1999 are presented in the following table.
TABLE XII
SHORT TERM BORROWINGS
-----------------------------------------------------------------------------------------
2001 2000 1999
Dollars in thousands Balance Rate Balance Rate Balance Rate
-----------------------------------------------------------------------------------------
Balance at December 31,
Federal funds purchased $ - - $ 2,400 5.00%
Securities sold under agreement
to repurchase 28,321 1.67% 27,038 5.20% 20,441 4.38%
U. S. treasury demand notes
and other borrowed money 369 1.50% 2,089 6.25% 3,317 5.25%
-------- -------- --------
Total $ 28,690 $ 29,127 $ 26,158
Average daily balance outstanding:
Federal funds purchased $ 1 2.49% 1,495 6.46% $ 792 5.07%
Securities sold under agreement
to repurchase 26,252 3.38% 24,511 5.10% 20,794 4.42%
U. S. treasury demand notes
and other borrowed money 2,158 3.38% 1,982 6.41% 1,691 4.79%
-------- -------- --------
Total $ 28,411 4.65% $ 27,988 5.67% $ 23,277 4.55%
The maximum amount outstanding
at any month end:
Federal funds purchased $ - $ 10,000 $ 2,550
Securities sold under agreement
to repurchase $ 28,546 $ 28,530 $ 22,013
U. S. treasury demand notes
and other borrowed money $ 6,165 $ 6,397 $ 4,014
-12-
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. Legal Proceedings
The Company is not a party to any material pending legal proceedings
before any court, administrative agency, or other tribunal.
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, 2001.
Part II
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, 2001
was 1,409. The range of high and low prices and dividends per share
of the Company's common stock for each quarter during 2001 and 2000 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.
-13-
Item 6. Selected Financial Data
The following table summarizes the Company's performance for the past
five years.
TABLE XIII
SELECTED FINANCIAL HIGHLIGHTS
------------------------------------------------------------------------------------------------------------------------------
Years Ended December 31, 2001 2000 1999 1998 1997
------------------------------------------------------------------------------------------------------------------------------
(Dollars in Thousands except per share data)
RESULTS OF OPERATIONS
Interest income...................................... $ 35,108 $ 33,644 $ 29,483 $ 27,805 $ 25,242
Interest expense..................................... 16,156 16,707 13,862 12,700 10,681
--------- --------- --------- --------- ---------
Net interest income.................................. 18,952 16,937 15,621 15,105 14,561
Provision for loan loss.............................. 625 650 650 600 600
--------- --------- --------- --------- ---------
Net interest income after provision for loan loss... 17,752 16,312 14,971 14,455 13,961
Gains (losses) on sales of investment securities..... (1) 44 (54) - (1)
Noninterest income................................... 6,543 5,641 5,440 4,911 4,275
Noninterest expenses................................. 16,850 15,657 14,320 13,193 12,704
--------- --------- --------- --------- ---------
Income before taxes.................................. 7,444 6,340 6,037 6,173 5,531
Income taxes ........................................ 1,734 1,207 1,215 1,537 1,441
--------- --------- --------- --------- ---------
Net income........................................... $ 5,710 $ 5,133 $ 4,822 $ 4,636 $ 4,090
FINANCIAL CONDITION
Total assets......................................... $ 518,759 $ 477,096 $ 436,294 $ 404,118 $ 348,671
Total deposits....................................... 412,303 374,779 360,918 343,413 287,100
Total loans.......................................... 346,483 319,910 281,647 235,865 221,744
Stockholders' equity................................. 50,912 46,497 40,814 40,013 36,332
Average assets....................................... 502,035 459,603 423,681 380,756 332,155
Average equity....................................... 49,721 43,258 40,840 38,526 34,418
PERTINENT RATIOS
Return on average assets............................. 1.14% 1.12% 1.14% 1.22% 1.23%
Return on average equity............................. 11.48% 11.87% 11.81% 12.03% 11.88%
Dividends paid as a percent of net income............ 28.17% 29.23% 28.89% 26.62% 25.68%
Average equity as a percent of average assets........ 9.90% 9.41% 9.64% 10.12% 10.36%
PER SHARE DATA
Basic EPS............................................ $ 2.20 $ 1.98 $ 1.87 $ 1.80 $ 1.60
Cash dividends declared.............................. 0.62 0.58 0.54 0.48 0.41
Book value........................................... 19.58 17.95 15.80 15.54 14.16
GROWTH RATES
Year end assets...................................... 8.73% 9.35% 7.96% 15.90% 10.22%
Year end deposits.................................... 10.01% 3.84% 5.10% 19.61% 8.95%
Year end loans....................................... 8.31% 13.59% 19.41% 6.37% 11.66%
Year end equity...................................... 9.50% 13.92% 2.00% 10.13% 12.14%
Average assets....................................... 9.23% 8.48% 11.27% 14.63% 6.12%
Average equity....................................... 14.94% 5.92% 6.01% 11.94% 9.85%
Net income........................................... 11.24% 6.45% 4.01% 13.35% 18.72%
Cash dividends declared.............................. 6.90% 7.41% 12.50% 17.07% 17.14%
Book value........................................... 9.11% 13.60% 1.69% 9.74% 11.31%
-14-
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 $5.71 million, or $2.20 per share in 2001
compared to $5.13 million, or $1.98 per share in 2000 and
$4.82 million, or $1.87 per share in 1999. Return on
average assets was 1.14% in 2001, 1.12% in 2000 and 1.14% in
1999. Return on average equity was 11.48% in 2001, 11.87%
in 2000 and 11.81% in 1999. For the past five years return
on average assets has averaged 1.17% and return on average
equity has averaged 11.81%. 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 $20.34 million in 2001, up $1.73
million, or 9% from $18.60 million in 2000 which was up
$1.51 million, or 9% from $17.09 million in 1999. 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 decreased to
4.28% in 2001 from 4.30% in 2000, which was up from 4.28% in
1999.
Tax equivalent interest income increased $1.18 million,
or 3%, in 2001. Average earning assets grew $42.47 million,
or 10%. Total average loans increased $28.27 million, or
9%, while average investment securities increased $2.83
million, or 2%. The yield on earning assets decreased in
2001 by forty-eight basis points primarily due to declining
interest rates.
Interest expense decreased $551 thousand or 3%, in 2001
while interest bearing liabilities increased 9% in 2001.
The cost of funding liabilities decreased fifty-five basis
points. The market experienced eleven rate reductions by
the Federal Reserve in 2001. 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 $1.20 million in 2001
and was $625 thousand in 2000 and $650 thousand in 1999.
The increase was due to an increase in the net charge offs
from 2001 as detailed in the next paragraph.
Loans charged off during 2001 totaled $1.46 million
compared to $752 thousand in 2000 and $793 thousand in 1999.
Recoveries amounted to $504 thousand in 2001, $665 thousand
in 2000 and $399 thousand in 1999.
-15-
The Company's net loans charged off to year-end loans were
0.28 % in 2001, 0.03% in 2000, and 0.14% in 1999. The
allowance for loan losses, as a percentage of year-end
loans, was 1.12% in 2001, 1.14% in 2000, and 1.10% in 1999.
As of December 31, 2001, nonperforming assets were $1.35
million, up from $787 thousand at year-end 2000.
Nonperforming assets consist of loans in nonaccrual status
and other real estate. The 2001 total consisted of other
real estate of $1.0 million and $351 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 $838 thousand in
foreclosed properties. Nonaccrual loans consisted of $229
thousand in real estate loans, $64 thousand in commercial
loans and $58 thousand in consumer loans. Loans still
accruing interest but past due 90 days or more decreased to
$450 thousand as of December 31, 2001 compared to $470
thousand as of December 31, 2000.
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 $857 thousand, or 15% in 2001 from
2000 compared to an increase of $299 thousand, or 6% in 2000
from 1999. Continuing the trend from 2000 the growth in
other income is attributed to higher trust income and
service charges on deposit accounts. In 2001 there was an
increase in mortgage brokerage income of $192 thousand over
2000 due to increases in volume. The increase in service
charge income is attributed to a modified fee structure that
was implemented mid-year.
OTHER EXPENSES
Other expenses increased $1.19 million or 8% in 2001 over
2000 after increasing 9% in 2000 from 1999. Salary expense
increased by 8% as a result of normal yearly salary
increases, a full year of additional salaries related to
opening a new branch and increased commissions paid to Trust
personnel. The increase of $129 thousand in equipment
expense is a result of a full year's cost of equipment for a
new branch and expenses related to the new proof imaging
system. Other operating expenses increased $238 thousand or
6%. Postage and Stationery/Supplies showed an increase in
2001 due to double mailing of statements during the
conversion to image statements and also a result of Graham-
Leach-Bliley Act privacy disclosure mailings sent to all
customers. Courier costs increased as a result of servicing
the new branch which opened in Norfolk. Ongoing technology
advances and capital stock tax increases resulting from
growth also played a role in the increase in other operating
expenses.
ASSETS
At December 31, 2001, the Company had total assets of
$518.8 million, up 9% from $477.1 million at December 31,
2000. Average assets in 2001 were $502.0 million compared
to $459.6 million in 2000. The growth in assets in 2001 was
due to the increase in investments, which were up 10% and
loans, which were up 8% in 2001.
-16-
LOANS
Total loans as of December 31, 2001 were $346.5 million,
up 8% from $319.9 million at December 31, 2000. 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, 2001 total investment securities were
$136.0 million, up 10% from $123.3 million on December 31,
2000. 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, 2001, total deposits amounted to $412.3
million, up 10% from $374.8 million on December 31, 2000.
Non-interest bearing deposits increased $14.9 million, or
23%, at year-end 2001 over 2000. Savings deposits increased
$13.2
million, or 10%, in 2001 over 2000. Certificates of
Deposit increased $9.4 million or 5% in 2001 over 2000.
STOCKHOLDERS' EQUITY
Total stockholders' equity as of December 31, 2001 was
$50.9 million, up 9% from $46.5 million on December 31,
2000. 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
2001, 2000 and 1999.
-------------------------------------------------------
2001 2001 2000 1999
Regulatory
Requirements
-------------------------------------------------------
Tier 1 4.00% 13.97% 13.77% 14.19%
Total Capital 8.00% 15.05% 14.85% 15.23%
Tier 1 Leverage 3.00% 9.77% 9.71% 10.08%
Year-end book value was $19.58 in 2001 and $17.95 in
2000. Cash dividends were $1.6 million, or $.62 per share
in 2001 and $1.5 million, or $.58 per share in 2000. 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 2001 and 2000. The stock is quoted on the
Nasdaq Small Cap under the symbol "OPOF" and the prices
below are based on trade information. There were 1409
stockholders of the Company as of December 31, 2001. 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 2001 and 2000.
-17-
-------------------------------------------------------------------
2001 2000
-------------------------------------------------------------------
Market Value Market Value
Dividend High Low Dividend High Low
-------------------------------------------------------------------
1st Quarter $ 0.15 $22.56 $17.00 $ 0.14 $20.50 $15.50
2nd Quarter $ 0.15 $22.60 $20.00 $ 0.14 $20.00 $18.81
3rd Quarter $ 0.16 $26.00 $21.85 $ 0.15 $20.50 $17.50
4th Quarter $ 0.16 $29.00 $24.25 $ 0.15 $19.00 $15.50
-------------------------------------------------------------------
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. 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.
-18-
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, 2001 and 2000, 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, 2001. 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, 2001 and
2000, and the consolidated results of their operations and
cash flows for each of the years in the three-year period
ended December 31, 2001, in conformity with accounting
principles generally accepted in the United States of
America.
Eggleston Smith P.C.
January 16, 2002
Newport News
-19-
CONSOLIDATED BALANCE SHEETS
-------------------------------------------------------------------------------------
December 31, 2001 2000
-------------------------------------------------------------------------------------
(Dollars in Thousands)
ASSETS
Cash and due from banks................................... $ 14,786 11,044
Investments:
Securities available-for-sale, at market................ 97,918 77,096
Securities to be held-to-maturity
(Market value $39,622 in 2001 and $46,083 in 2000)..... 38,083 46,241
Federal funds sold........................................ 5,018 5,397
Loans, total.............................................. 346,483 319,910
Less - allowance for loan losses.......................... 3,894 3,649
---------- ----------
Net loans............................................... 342,589 316,261
Premises and equipment.................................... 14,420 15,059
Other real estate owned................................... 1,003 750
Other assets.............................................. 4,942 5,248
---------- ----------
Total assets........................................... $ 518,759 $ 477,096
========== ==========
LIABILITIES
Non interest-bearing deposits............................. $ 79,978 $ 65,056
Savings deposits.......................................... 140,848 127,660
Certificates of Deposit................................... 191,477 182,063
---------- ----------
Total deposits......................................... 412,303 374,779
Federal funds purchased and securities sold under
repurchase agreements................................... 28,321 27,038
Federal Home Loan Bank advances........................... 25,000 25,000
Interest bearing demand notes issued to the United
States Treasury and other liabilities for borrowed money 369 2,089
Other liabilities......................................... 1,854 1,693
---------- ----------
Total Liabilities...................................... 467,847 430,599
STOCKHOLDERS' EQUITY
Common stock, $5 par value, 10,000,000 shares authorized
Issued 2,599,577 in 2001 and 2,590,540 in 2000............ 12,998 12,953
Capital surplus........................................... 10,455 10,288
Retained earnings......................................... 27,341 23,297
Accumulated other comprehensive income (loss)............. 118 (41)
---------- ----------
Total stockholders' equity............................. 50,912 46,497
---------- ----------
Total liabilities and stockholders' equity............. $ 518,759 $ 477,096
========== ==========
See Notes to Consolidated Financial Statements
-20-
CONSOLIDATED STATEMENTS OF INCOME
----------------------------------------------------------------------------------------
Years Ended December 31, 2001 2000 1999
----------------------------------------------------------------------------------------
Dollars in Thousands except per share amounts)
INTEREST INCOME
Interest and fees on loans.................................. $27,666 $26,351 $21,718
Interest on investment securities
Taxable................................................... 4,389 4,383 4,846
Exempt from income tax.................................... 2,490 2,699 2,700
------- ------- -------
6,879 7,082 7,546
Interest on trading account securities...................... - - -
Interest on federal funds sold.............................. 563 211 219
------- ------- -------
Total interest income................................... 35,108 33,644 29,483
INTEREST EXPENSE
Interest on savings deposits................................ 2,783 3,897 3,796
Interest on Certificates of Deposit......................... 10,874 9,914 8,752
Interest on federal funds purchased and securities
sold under repurchase agreements........................... 887 1,344 960
Interest on Federal Home Loan Bank advances................. 1,539 1,425 273
Interest on demand notes issued to the United
States Treasury and other liabilities for borrowed money... 73 127 81
------- ------- -------
Total interest expense................................... 16,156 16,707 13,862
------- ------- -------
Net interest income......................................... 18,952 16,937 15,621
Provision for loan losses................................... 1,200 625 650
------- ------- -------
Net interest income after provision for loan losses..... 17,752 16,312 14,971
OTHER INCOME
Income from fiduciary activities............................ 2,738 2,460 2,306
Service charges on deposit accounts......................... 2,640 2,255 2,177
Other service charges, commissions and fees................. 746 726 691
Security gains (losses), net................................ (1) 44 (54)
Income from trading account................................. - - -
Other operating income...................................... 419 200 266
------- ------- -------
Total other income....................................... 6,542 5,685 5,386
OTHER EXPENSE
Salaries and employee benefits.............................. 10,115 9,336 8,677
Occupancy expense........................................... 1,102 1,054 967
Equipment expense........................................... 1,620 1,492 1,294
Other operating expense..................................... 4,013 3,775 3,382
------- ------- -------
Total other expenses..................................... 16,850 15,657 14,320
------- ------- -------
Income before income taxes.................................. 7,444 6,340 6,037
Income taxes................................................ 1,734 1,207 1,215
------- ------- -------
Net income.................................................. $ 5,710 $ 5,133 $ 4,822
======= ======= =======
Basic Earnings per Share
Average shares outstanding (in thousands)................... 2,594 2,587 2,579
Net income per share of common stock........................ $ 2.20 $ 1.98 $ 1.87
Diluted Earnings per Share
Average shares outstanding (in thousands)................... 2,612 2,588 2,588
Net income per share of common stock........................ $ 2.19 $ 1.98 $ 1.86
See Notes to Consolidated Financial Statements
-21-
Consolidated Statements of Cash Flows
----------------------------------------------------------------------------------------------------
Years Ended December 31, 2001 2000 1999
----------------------------------------------------------------------------------------------------
Dollars in Thousands
CASH FLOWS FROM OPERATING ACTIVITIES
Net income................................................... $ 5,710 $ 5,133 $ 4,822
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization.............................. 1,431 1,311 1,166
Provision for loan losses.................................. 1,200 625 650
(Gains) losses on sale of investment securities, net....... 1 (44) 54
Net amortization and accretion of securities............... 45 65 83
Net (increase) decrease in trading account................. - - -
Loss on disposal of equipment.............................. 4 41 78
(Increase) decrease in other real estate owned.............. (17) (396) (216)
(Increase) decrease in other assets
(net of tax effect of FASB 115 adjustment)............... 42 (785) 182
Increase (decrease) in other liabilities................... (193) 289 188
--------- --------- ---------
Net cash provided by operating activities................ 6,239 7,007 5,428
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of investment securities ........................ (50,955) (3,041) (26,529)
Proceeds from maturities and calls of securities .......... 32,099 2,295 31,315
Proceeds from sales of available - for - sale securities .. 6,923 7,285 1,346
Proceeds from sales of held - to - maturity securities..... - - -
Loans made to customers.................................... (124,190) (109,388) (121,045)
Principal payments received on loans....................... 96,661 71,038 74,869
Purchases of premises and equipment........................ (795) (2,087) (3,516)
Proceeds from sales of premises and equipment.............. - - -
Additions to other real estate owened...................... (713) - -
Proceeds from sales of other real estate owned............. 477 - 346
(Increase) decrease in federal funds sold.................. 379 (5,156) 6,337
--------- --------- ---------
Net cash provided by (used in) investing activities...... (40,114) (39,054) (36,877)
CASH FLOWS FROM FINANCING ACTIVITIES
Increase (decrease) in non-interest bearing deposits....... 14,922 2,050 (2,330)
Increase (decrease) in savings deposits.................... 13,188 (1,103) 7,081
Proceeds from the sale of Certificates of Deposit.......... 67,117 72,263 56,054
Payments for maturing Certificates of Deposit.............. (57,703) (59,347) (43,300)
Increase (decrease) in federal funds purchased and
repurchase agreements..................................... 1,283 4,197 3,712
Increase (decrease) in Federal Home Loan Bank advances..... - 18,000 7,000
Increase (decrease) in interest bearing
demand notes and other borrowed money..................... (1,720) (1,229) 2,969
Proceeds from issuance of common stock..................... 154 129 166
Dividends paid............................................. (1,608) (1,501) (1,393)
--------- --------- ---------
Net cash provided by financing activities................ 35,633 33,459 29,959
Net increase (decrease) in cash and due from banks....... 3,742 644 89
Cash and due from banks at beginning of period.......... 11,044 10,400 10,311
--------- --------- ---------
Cash and due from banks at end of period................. $ 14,786 $ 11,044 $ 10,400
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash payments for:
Interest................................................. $ 16,406 $ 16,382 $ 13,702
Income taxes............................................. 1,775 1,475 1,150
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING TRANSACTIONS
Unrealized gain (loss) on investment
securities, net of tax................................... $ 513 $ 1,922 $ (2,794)
Additional minimum liability related to pension............ $ (354) $ - $ -
See Notes to Consolidated Financial Statements.
-22-
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
-----------------------------------------------------------------------------------------------------------------------------
Accumulated
Common Other Total
Stock Capital Retained Comprehensive Stockholders'
(Par Value) Surplus Earnings Income (Loss) Equity
----------------------------------------------------------------------------------------------------------------------
(Dollars in Thousands)
YEAR ENDED DECEMBER 31, 1999
Balance, beginning of year........... $ 12,877 $ 10,020 $16,285 $ 831 $ 40,013
Comprehensive income
Net income......................... - - 4,822 - 4,822
(Decrease) increase in unrealized
gain on investment securities..... - - - (2,794) (2,794)
-------- -------- ------- ---------- ----------
Total comprehensive income........... - - 4,822 (2,794) 2,028
Sale of stock........................ 39 166 (39) - 166
Cash dividends paid.................. - - (1,393) - (1,393)
-------- -------- ------- ---------- ----------
Balance, end of year................. $ 12,916 $ 10,186 $19,675 $ (1,963) $ 40,814
======== ======== ======= ========== ==========
YEAR ENDED DECEMBER 31, 2000
Balance, beginning of year........... $ 12,916 $ 10,186 $19,675 $ (1,963) $ 40,814
Comprehensive income
Net income......................... - - 5,133 - 5,133
(Decrease) increase in unrealized
gain on investment securities..... - - - 1,922 1,922
-------- -------- ------- ---------- ----------
Total comprehensive income........... - - 5,133 1,922 7,055
Sale of stock........................ 37 102 (10) - 129
Cash dividends paid.................. - - (1,501) - (1,501)
-------- -------- ------- ---------- ----------
Balance, end of year................. $ 12,953 $ 10,288 $23,297 $ (41) $ 46,497
======== ======== ======= ========== ==========
YEAR ENDED DECEMBER 31, 2001
Balance, beginning of year........... $ 12,953 $ 10,288 $23,297 $ (41) $ 46,497
Comprehensive income
Net income......................... - - 5,710 - 5,710
(Decrease) increase in unrealized
gain on investment securities..... - - - 513 513
Minimum pension liability adjustment - - - (354) (354)
-------- -------- ------- ---------- ----------
Total comprehensive income........... - - 5,710 159 5,869
Sale of stock........................ 45 167 (58) - 154
Cash dividends paid.................. - - (1,608) - (1,608)
-------- -------- ------- ---------- ----------
Balance, end of year................. $ 12,998 $ 10,455 $27,341 $ 118 $ 50,912
======== ======== ======= ========== ==========
See Notes to Consolidated Financial Statements
-23-
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
-24-
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.
-25-
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.
-26-
NOTE 2, Investment Securities
-----------------------------
At December 31, 2001, 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.
The amortized cost and fair value of investment securities held-to-maturity at December 31, 2001 and 2000, were:
----------------------------------------------------------------------------------------------------------------
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
(Dollars in Thousands)
December 31, 2001:
United States Treasury securities.... $ 424 $ 6 $ - $ 430
Obligations of other United
States Government Agencies......... $ 36,444 $ 1,487 $ - $ 37,931
Obligations of state and political
subdivisions....................... 1,215 46 - 1,261
-------- ------- ------- --------
$ 38,083 $ 1,539 $ - $ 39,622
======== ======= ======= ========
December 31, 2000:
United States Treasury securities... $ 499 $ 6 $ - $ 505
Obligations of other United
States Government Agencies......... 44,437 - $ 246 44,191
Obligations of state and political
subdivisions....................... 1,305 82 - 1,387
-------- ------- ------- --------
$ 46,241 $ 88 $ (246) $ 46,083
======== ======= ======= ========
The amortized cost and fair values of investment securities available-for-sale at December 31, 2001 were:
---------------------------------------------------------------------------------------------------------
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
(Dollars in Thousands)
United States Treasury securities.... $ 1,027 $ 62 $ - $ 1,089
Obligations of other United States
Government agencies................. 42,118 487 (307) 42,298
Obligations of state and political
subdivisions....................... 50,827 970 (462) 51,335
Money Market investment.............. 1,312 - - 1,312
Federal Home Loan Bank Stock......... 1,700 - - 1,700
Federal Reserve Bank stock........... 169 - - 169
Other marketable equity securities... 50 - (35) 15
-------- ------- ------- --------
Total................................ $ 97,203 $ 1,519 $ (804) $ 97,918
======== ======= ======= ========
The amortized cost and fair values of investment securities available-for-sale at December 31, 2000 were:
---------------------------------------------------------------------------------------------------------
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
(Dollars in Thousands)
United States Treasury securities.... $ 1,036 $ 32 $ - $ 1,068
Obligations of other United States
Government agencies................. 17,266 60 (104) 17,222
Obligations of state and political
subdivisions....................... 53,130 656 (543) 53,243
Adjustable Rate Mortgage Fund........ 3,807 - (133) 3,674
Federal Home Loan Bank Stock......... 1,700 - - 1,700
Federal Reserve Bank stock........... 169 - - 169
Other marketable equity securities... 50 - (30) 20
-------- ------- ------- --------
Total................................ $ 77,158 $ 748 $ (810) $ 77,096
======== ======= ======= ========
-27-
NOTE 2, Investment Securities (Continued)
-----------------------------------------
Investment securities carried at $51.8 million and $57.3 million at
December 31, 2001 and 2000, 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, 2001 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.
December 31, 2001
Available-For-Sale Held-To-Maturity
------------------ ----------------
Amortized Market Amortized Market
Cost Value Cost Value
(Dollars in Thousands)
Due in one year or less.................... $ 1,452 $ 1,466 $ 7,250 $ 7,445
Due after one year through five years...... 52,105 52,699 29,618 30,916
Due after five years through ten years..... 28,259 28,742 - -
Due after ten years........................ 12,156 11,815 1,215 1,261
-------- -------- --------- --------
Total debt securities.................... 93,972 94,722 38,083 39,622
Other securities without stated maturities. 3,231 3,196 - -
-------- -------- --------- --------
Total investment securities $ 97,203 $ 97,918 $ 38,083 $ 39,622
======== ======== ========= ========
The proceeds from the sale and maturities of investment securities, and the
related realized gains and losses are shown below:
2001 2000 1999
(Dollars in Thousands)
Proceeds from sales and
maturities of investments............ $ 39,022 $ 9,580 $ 32,661
======== ======== =========
Realized gains........................ $ 102 $ 44 $ -
Realized losses....................... 103 - 54
-------- -------- ---------
Net gains (losses).................. $ (1) $ 44 $ (54)
======== ======== =========
-28-
NOTE 3, Loans
-------------
At December 31, loans before allowance for loan losses consisted of:
2001 2000
(Dollars in Thousands)
Commercial and other............... $ 51,608 $ 62,181
Real estate - construction......... 27,056 15,219
Real estate - mortgage............. 177,237 155,367
Installment loans to individuals... 87,625 83,829
Tax exempt loans................... 2,957 3,314
-------- --------
Total........................... $346,483 $319,910
======== ========
Information concerning loans which are contractually past due or in non-accrual
status is as follows:
2001 2000
(Dollars in Thousands)
Contractually past due loans -
past due 90 days or more and
still accruing interest..... $ 450 $ 470
======== ========
Loans which are in
non-accrual status.......... $ 351 $ 37
======== ========
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 $2.0 million and $3.0 million
at December 31, 2001 and 2000, 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, 2001.
2001 2000
---- ----
(Dollars in thousands)
Balance, beginning of year..... $ 2,989 $ 1,980
Additions...................... 5 1,263
Reductions..................... (1,191) (254)
------- -------
Balance, end of year........... $ 1,803 $ 2,989
======= =======
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:
2001 2000 1999
(Dollars in Thousands)
Balance, beginning of year... $ 3,649 $ 3,111 $ 2,855
Recoveries................... 504 665 399
Provision for loan losses.... 1,200 625 650
Loans charged off............ (1,459) (752) (793)
-------- -------- -------
Balance, end of year...... $ 3,894 $ 3,649 $ 3,111
======== ======== =======
-29-
NOTE 5, Premises and Equipment
------------------------------
At December 31, premises and equipment consisted of:
2001 2000
(Dollars in Thousands)
Land.............................. $ 3,496 $ 3,453
Buildings......................... 11,335 11,419
Leasehold improvements............ 901 805
Furniture, fixtures and equipment. 9,919 10,144
------- ---------
Total cost...................... 25,651 25,821
Less accumulated..................
depreciation and amortization.... 11,231 10,762
------- ---------
Net book value.................. $14,420 $ 15,059
======= =========
NOTE 6, Other Real Estate Owned
-------------------------------
Other real estate consisted of the following at December 31:
2001 2000
(Dollars in Thousands)
Foreclosed real estate............ $ 713 $ 460
Property held for sale............ 290 290
------- ---------
Total........................... $ 1,003 $ 750
======= =========
NOTE 7. Deposits
-----------------
The aggregate amount of certificates of deposits in denominations of $100,000
or more at December 31, 2001 and 2000 was $45,804,000 and $40,377,000,
respectively.
At December 31, 2001, the scheduled maturities of certificates of deposits
are as follows:
Year (Dollars in Thousands)
2001 $ -
2002 128,487
2003 43,600
2004 10,628
2005 5,509
Thereafter 3,253
--------
$191,477
=======
NOTE 8, Indebtedness
--------------------
The Bank's short-term borrowings include federal funds purchased, securities
sold under repurchase agreements (including $1.7 million and $1.6 million
to directors in 2001 and 2000, 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 242,348 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:
Outstanding Granted Exercised Expired Outstanding
Beginning During During During At End
of Year the Year the Year the Year of Year
1999
----
Shares............................ 143,634 - (3,620) (2,040) 137,974
Weighted average exercisable price $ 29.33 $ - $ 18.48 $ 30.94 $ 29.60
2000
----
Shares............................ 137,974 57,000 (2,220) (10,870) 181,884
Weighted average exercisable price $ 29.60 $ 18.40 $ 18.75 $ 36.29 $ 25.82
2001
----
Shares............................ 181,884 68,244 (5,280) (2,500) 242,348
Weighted average exercisable price $ 25.82 $ 24.20 $ 18.51 $ 24.20 $ 25.54
At December 31, 2001, exercise prices on outstanding options ranged from
$18.13 to $41.86 per share and the weighted average remaining contractual
life was 7 years.
-30-
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. However,
had the stock options been accounted for in accordance with SFAS No. 123,
pro-forma amounts for net earnings and earnings per share would have been
as follows for each of the years ending December 31:
2001 2000 1999
Pro-forma net income (in thousands).. $ 5,510 $5,112 $4,793
======= ====== ======
Pro-forma earnings per share......... $ 2.11 $ 1.98 $ 1.85
======= ====== ======
Pro-forma amounts were computed using a 6% risk free interest rate over a
10 year term using an annual dividend rate of between 1.29% 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 18,000 in 2001, 1,000 in
2000 and 9,000 in 1999.
The Company also has an Employee Stock Purchase Plan which reserves
44,970 shares of common stock for eligible employees. The purchase
price is 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:
2001 2000 1999
(Dollars in Thousands)
Currently payable.................... $ 1,776 $1,302 $1,213
Deferred............................. (42) (95) 2
------- ------ ------
Reported tax expense................. $ 1,734 $1,207 $1,215
======= ====== ======
The items that caused timing differences affecting deferred income taxes are
as follows:
2001 2000 1999
(Dollars in Thousands)
Provision for loan losses............ $ (108) $ (177) $ (108)
Pension plan expenses................ (5) 37 34
Deferred loan fees, net.............. 10 7 27
Security gains and losses............ (32) 15 (6)
Interest on certain non-accrual loans 57 16 22
Depreciation......................... 36 70 38
Foreclosed assets.................... - (64) -
Other................................ - 1 (5)
------- ------ ------
Total $ (42) $ (95) $ 2
======= ====== ======
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%)........... $ 2,531 $2,156 $2,053
Interest expense on tax exempt assets 118 143 128
Tax exempt interest.................. (912) (1,097) (967)
Disqualified incentive stock options. - - (14)
Other, net........................... (3) 5 15
------- ------ ------
Reported tax expense................. $ 1,734 $1,207 $1,215
======= ====== ======
-31-
NOTE 10, Income Taxes (Continued)
---------------------------------
The components of the net deferred tax asset included in other assets are
as follows at December 31:
2001 2000
(Dollars in Thousands)
Components of Deferred Tax Liability:
Depreciation.......................... $ (310) $ (287)
Accretion of discounts on securities.. (19) (16)
Net unrealized (gain) on
available-for-sale securities........ (243) -
Deferred loan fees and costs.......... (142) (132)
Pension............................... (105) (110)
------- ------
Deferred tax liability............... (819) (545)
Components of Deferred Tax Asset:
Allowance for loan losses............ 1,102 993
Net unrealized loss on
available-for-sale securities....... - 21
Interest on non-accrual loans........ 53 110
Deferred compensation................ - -
Foreclosed assets.................... 64 64
Capital loss carry forward........... 42 7
Trust organizational cost............ 13 -
------- ------
Deferred tax asset, net............. $ 455 $ 650
======= ======
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, 2000,
under noncancellable leases is $1.3 million which is due as follows:
Year (Dollars in Thousands)
2002 $ 293
2003 199
2004 302
2005 120
2006 52
Remaining term of leases 229
-------
Total $ 1,195
=======
The aggregate rental expense of premises and equipment was $287 thousand,
$220 thousand and $219 thousand for 2001, 2000 and 1999 respectively.
-32-
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:
Pension Benefits
2001 2000
-----------------------
(Dollars in Thousands)
Change in benefit obligation
Benefit obligation at beginning of year......... $ 3,230 $ 2,711
Service cost.................................... 214 173
Interest cost................................... 240 215
Actuarial change................................ - 349
Benefits paid................................... (151) (218)
-------- --------
Benefit obligation at end of year............... $ 3,533 $ 3,230
======== ========
Change in plan assets
Fair value of plan assets at beginning of year.. $ 2,559 $ 2,726
Actual return on plan assets.................... (153) (225)
Employer contribution........................... 287 276
Benefits paid .................................. (151) (218)
-------- --------
Fair value of plan assets at end of year........ $ 2,542 $ 2,559
======== ========
Funded Status................................... $ (991) $ (671)
Unrecognized prior service cost................. 15 22
Unrecognized transition obligation.............. - (12)
Unrecognized actuarial gains (loss)............. 1,286 984
-------- --------
Prepaid (accrued) benefit cost.................. $ 310 $ 323
======== ========
Amounts recognized in the statement of
financial position consist of:
Prepaid benefit cost............................ $ 310 $ 323
Accrued benefit liability....................... (376) -
Intangible asset................................ 22 -
Accumulated other comprehensive income.......... 354 -
-------- --------
$ 310 $ 323
======== ========
Weighted-average assumptions as of December 31:
2001 2000
--------------------
Discount rate................................... 7.50% 7.50%
Expected return on plan assets.................. 8.00% 8.00%
Rate of compensation increase................... 4.50% 4.50%
2001 2000 1999
-----------------------------------
Components of net periodic benefit cost (Dollars in Thousands)
Service Cost.................................... $ 214 $ 173 $ 158
Interest cost................................... 240 215 216
Expected return on plan assets.................. (203) (216) (224)
Amortization of prior service cost.............. 7 7 7
Amortization of transition obligation........... (12) (13) (12)
Amortization of unrecognized loss............... 55 - -
-------- -------- -------
Net periodic benefit cost....................... $ 301 $ 166 $ 145
======== ======== =======
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 $280
thousand, $232 thousand and $ 246 thousand in 2001, 2000 and 1999
respectively.
-33-
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:
2001 2000
---------------------
(Dollars in Thousands)
Commitments to extend credit:
Home equity lines of credit....... $11,931 $11,422
Construction and development
loans committed but not funded.. 18,101 7,625
Other lines of credit
(principally commercial)......... 28,196 44,603
------- -------
Total $58,228 $63,650
======= =======
Irrevocable letters of credit...... $ 2,539 $ 781
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 2003. 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.
-34-
NOTE 15, Fair Value of Financial Instruments
--------------------------------------------
The estimated fair value of the Bank's financial instruments at December 31
are as follows:
2001 2000
Carrying Fair Carrying Fair
Amount Value Amount Value
(Dollars in Thousands) (Dollars in Thousands)
Cash and due from banks................... $ 14,786 $ 14,786 $ 11,044 $ 11,044
Investment securities, held-to-maturity... 38,083 39,622 46,241 46,083
Investment securities, available-for-sale. 97,918 97,918 77,096 77,096
Federal funds sold........................ 5,018 5,018 5,397 5,397
Loans, net of allowances for loan losses.. 342,589 348,683 316,261 312,721
Deposits:
Non-interest bearing deposits............ 79,978 79,978 65,056 65,056
Savings deposits......................... 140,848 140,848 127,660 127,660
Certificates of Deposit.................. 191,477 195,302 182,063 182,489
Securities sold under repurchase
agreement and federal funds purchased.... 28,321 28,321 27,038 27,038
Federal Home Loan Bank Advances........... 25,000 29,147 25,000 24,897
Interest bearing U.S. Treasury demand
notes and other liabilities
for borrowed money....................... 369 369 2,089 2,089
Commitments to extend credit.............. 58,228 58,228 63,650 63,650
Irrevocable letters of credit............. 2,539 2,539 781 781
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,
2001, 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 13.97% and 15.05%. The Company's leverage ratio at
December 31, 2001 was 9.77%.
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 2002, without
approval of the Comptroller of the Currency, $7.0 million plus an additional
amount equal to the Bank's retained net profits for 2002 up to the date of
any dividend declaration.
-35-
OLD POINT FINANCIAL CORPORATION
PARENT ONLY
BALANCE SHEETS
---------------------------------------------------
As of December 31,
Dollars in thousands 2001 2000
---------------------------------------------------
ASSETS
Cash in bank $ 276 $ 225
Investment securities 1,215 1,305
Total Loans - -
Investment in subsidiary 49,408 44,954
Other real estate owned - -
Other assets 13 13
------- -------
TOTAL ASSETS $50,912 $46,497
======= =======
LIABILITIES AND
STOCKHOLDERS EQUITY
Notes payable - bank $ - $ -
Other liabilities - -
Total liabilities - -
Stockholders' equity 50,912 46,497
------- -------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $50,912 $46,497
======= =======
OLD POINT FINANCIAL CORPORATION
PARENT ONLY
INCOME STATEMENTS
-------------------------------------------------------------------
For the year ended December 31,
Dollars in thousands 2001 2000 1999
-------------------------------------------------------------------
INCOME
Cash dividends from subsidiary $1,700 $1,650 $1,985
Interest and Fees on Loans - - -
Interest income from
investment securities 113 123 27
Securities gains (losses) - - (54)
Other income 144 144 76
------ ------ ------
TOTAL INCOME 1,957 1,917 2,034
EXPENSES
Interest on borrowed money - - -
Other expenses 373 400 47
------ ------ ------
TOTAL EXPENSES 373 400 47
Income before taxes and undistributed
net income of subsidiary 1,584 1,517 1,987
Income tax (66) (74) (7)
------ ------ ------
Net income before undistributed
net income of subsidiary 1,650 1,591 1,994
Undistributed net income of subsidia 4,060 3,542 2,755
------ ------- ------
NET INCOME $5,710 $ 5,133 $4,749
-36-
OLD POINT FINANCIAL CORPORATION
PARENT ONLY
STATEMENT OF CASH FLOWS
-------------------------------------------------------------------------------------------------------
For the year ending December 31, 2001 2000 1999
Dollars in thousands
-------------------------------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (Loss) $ 5,710 $ 5,133 $ 4,749
Adjustments to Reconcile Net Income to Net Cash Provided by
operating activities:
Equity in undistributed (earnings) losses of subsidiaries (4,060) (3,543) (2,755)
(Gain) or Loss on sales of assets - - 54
Increase (decrease) in other assets - 12 (25)
Increase (decrease) in other liabilities - - -
-------- ------- -------
Net cash provided (used) by operating activities 1,650 1,602 2,023
CASH FLOWS FROM INVESTING ACTIVITIES
Maturity/call of investment securities 90 100 (1,500)
Sales of available-for-sale securities - - 1,441
Payments for investments in and advances to subsidiaries (235) (165) (1,020)
Sale or repayment of investments in and advances to subsidiaries - - 50
(Purchase)/Sale of Premises and Equipment - - -
Loans to customers - - -
-------- ------- -------
Net cash provided (used) by investing activities (145) (65) (1,029)
CASH FLOWS FROM FINANCING ACTIVITIES
Increase (decrease) in borrowed money - - -
Proceeds from issuance of common stock 154 129 165
Dividends paid (1,608) (1,501) (1,393)
Other, net - - -
-------- ------- -------
Net cash provided (used) by financing activities (1,454) (1,372) (1,228)
Net increase in cash and due from banks 51 165 (234)
Cash and due from banks at beginning of period 225 60 294
-------- ------- -------
Cash and due from banks at end of period $ 276 $ 225 $ 60
Accounting Rule Changes
-----------------------
None.
Regulatory Requirements and Restrictions
----------------------------------------
For the reserve maintenance period in effect at December 31, 2001,
2000 and 1999 the bank was required to maintain with the Federal
Reserve Bank of Richmond an average daily balance totaling
approximately $581 thousand, $350 thousand and $350 thousand
respectively.
Item 9. Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure
None.
-37-
PART III
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 2003 Annual Meeting, or until their
successors have been duly elected and have qualified.
Amount and Nature of
Principal Beneficial Ownership
Director Occupation For as of March 15, 2002
Name (Age) Since (1) Past Five Years (Percent of Class)(2)(3)
---------------------------------------------------------------------------------------------------------
Dr. Richard F. Clark (69) 1981 Pathologist (retired) 65,369 (4)
Sentara Hampton General Hospital (2.5%)
Russell Smith Evans Jr. (59) 1993 Assistant Treasurer and 4,650 (4)
Corporate Fleet Manager *
Ferguson Enterprises
G. Royden Goodson, III (46) 1994 President 8,873 (4)
Warwick Plumbing & Heating Corp. *
Dr. Arthur D. Greene (57) 1994 Surgeon - Partner 5,319 (4)
Tidewater Orthopaedic Associates *
Gerald E. Hansen (60) 2000 President 4,840
Chesapeake Insurance Services, Inc. *
Stephen D. Harris (60) 1988 Attorney-at-Law - Partner 11,690 (4)
Geddy, Harris, Franck & Hickman, L.L.P. *
John Cabot Ishon (55) 1989 President 18,788 (4)
Hampton Stationery *
Eugene M. Jordan (78) 1964 Attorney-at-Law 21,000 (4)
Jordan, Ishon & Jordan, P.C.
John B. Morgan, II (55) 1994 President 5,385 (4)
Morgan Marrow Insurance *
Louis G. Morris (47) 2000 President & CEO 28,900 (4)
Old Point National Bank (1.1%)
Dr. H. Robert Schappert (63) 1996 Veterinarian - Owner 91,740 (4)
Beechmont Veterinary Hospital (3.5%)
Robert F. Shuford (64) 1965 Chairman of the Board,
President & CEO 356,058 (4)(5)
Old Point Financial Corporation (13.5%)
Chairman of the Board
Old Point National Bank
*Represents less than 1.0% of the total outstanding shares.
-38-
(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, 200 shares;
Mr. Evans, 650 shares; Dr. Greene, 1,968 shares; Mr. Hansen,
628 shares; Mr. Harris, 417 shares, Mr. Ishon, 7,488 shares; Mr.
Jordan, 5,000 shares; Mr. Morgan, 2,985 shares; Dr. Schappert,
81,370 shares; and Mr. Shuford, 75,590 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 2,000, Mr. Evans 2,000,
Mr. Goodson 2,000, Dr. Greene 2,000, Mr. Hansen 1,000, Mr. Harris
2,000, Mr. Ishon 2,000, Mr. Jordan 2,000, Mr. Morgan 2,000,
Mr. Morris 13,610, Dr. Schappert 2,000, and Mr. Shuford 28,958.
(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 193,584 shares of
stock as of March 15, 20021. 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.
There were no delinquent Securities and Exchange Commission Form
4 filings during 2001.
-39-
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 (53) Senior Vice President/Credit
Mr. Epes also serves as Executive Vice
President and Chief Credit Officer for
Old Point National Bank.
Margaret P. Causby (51) Senior Vice President/Administration
Ms. Causby also serves as Executive Vice
President and Chief Administrative
Officer for Old Point National Bank.
Frank E. Continetti (42) Executive Vice President/Trust
Mr. Continetti also serves as President
and Chief Executive Officer for Old
Point Trust & Financial Services, N.A.
Laurie D. Grabow (44) 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.
-40-
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 2000 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.
SUMMARY COMPENSATION TABLE
Annual Compensation
Amount of
Nature of
Beneficial
Ownership as of
March 15, 2002
Name and Principal All Other (Percent of
Position Year Salary(1) Bonus(2) Compensation(3) Class)(4)(5)(6)
-----------------------------------------------------------------------------------------
Robert F. Shuford, 2001 $158,600 $33,000 $16,006 356,058
Chairman, President 2000 $156,800 $27,000 $15,519 (13.5%)
& CEO ( Company) 1999 $153,500 $27,000 $17,556
Louis G. Morris 2001 $130,600 $27,500 $10,729 28,900
President & CEO 2000 $129,800 $22,500 $10,241 (1.1%)
(Bank) 1999 $100,267 $18,048 $ 9,220
Cary B. Epes 2001 $107,000 $23,540 $ 9,329 15,635
EVP/CCO (Bank) 2000 $107,000 $19,260 $ 8,948 *
1999 $ 99,267 $17,868 $ 9,340
Margaret P. Causby 2001 $106,000 $23,320 $ 9,532 15,665
EVP/CAO (Bank) 2000 $106,000 $19,080 $ 8,863 *
1999 $ 97,947 $17,630 $ 9,004
Frank E.Continetti 2001 $103,333 $11,160 $ 9,112 6,256
President & CEO 2000 $102,000 $15,000 $ 8,511 *
OPT&FS, NA 1999 $ 83,409 $10,759 $ 7,724
-41-
(1) Salary includes directors' fees as follows: Mr. Shuford -
2001, $8,600, 2000, $6,800 and 1999, $3,900. Mr. Morris -
2001, $5,600 and 2000, $4,800. Mr. Continetti - 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) Mr. Shuford has received other compensation as follows:
2001 2000 1999
------ ------ ------
Deferred Profit Sharing $ 4,119 $ 3,896 $ 4,532
Cash Profit Sharing 3,823 3,559 4,210
401(k) Matching Plan 4,500 4,500 4,488
Group Term Insurance 3,564 3,564 4,326
-------- ------- -------
Total $16,006 $15,519 $17,556
Mr. Morris has received other compensation as follows:
2001 2000 1999
------- ------- -------
Deferred Profit Sharing $ 3,433 $ 3,247 $ 3,037
Cash Profit Sharing 3,186 2,966 2,821
401(k) Matching Plan 3,750 3,750 3,008
Group Term Insurance 360 278 354
------- ------- -------
Total $10,729 $10,241 $ 9,220
Mr. Epes has received other compensation as follows:
2001 2000 1999
------- ------- -------
Deferred Profit Sharing $ 2,939 $ 2,779 $ 3,007
Cash Profit Sharing 2,727 2,539 2,793
401(k) Matching Plan 3,210 3,210 2,978
Group Term Insurance 453 420 562
------- ------- -------
Total $ 9,329 $ 8,948 $ 9,340
-42-
Mrs. Causby has received other compensation as follows:
2001 2000 1999
------ ------ ------
Deferred Profit Sharing $ 2,911 $ 2,753 $ 2,967
Cash Profit Sharing 2,701 2,516 2,756
401(k) Matching Plan 3,180 3,180 2,938
Group Term Insurance 740 414 343
------- ------- -------
Total $ 9,532 $ 8,863 $ 9,004
Mr. Continetti has received other compensation as follows:
2001 2000 1999
------ ------ ------
Deferred Profit Sharing $ 2,838 $ 2,598 $ 2,527
Cash Profit Sharing 2,634 2,373 2,347
401(k) Matching Plan 3,100 3,000 2,502
Group Term Insurance 540 540 348
------- ------- -------
Total $ 9,112 $ 8,511 $ 7,724
(4) 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.
(5) 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,
75,590 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 28,958 shares,
Mr. Morris 13,610 shares, Mr. Epes 13,730 shares, Mrs. Causby
13,830 shares and Mr. Continetti, 5,700 shares.
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.
-43-
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, 2001 borrowing by all policy making officers and
directors amounted to $2.0 million. This represented 3.5% of the
total equity capital accounts of the Company as of December 31, 2001.
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. Mr. Eugene
M. Jordan is a member of the firm. During 2001, the firm
received a retainer and fees totaling $50,588. Morgan Marrow
Insurance of which John B. Morgan, II is President, provided
insurance for which the Company paid $232,228 during 2001. The
2001 amount paid includes $179,207 in three premiums for coverage
through 2003. 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.
-44-
PART IV
Item 14. 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, 2001 and 2000
Consolidated Statements of Income
Years Ended December 31, 2001, 2000 and 1999
Consolidated Statements of Changes in Stockholders' Equity
Years Ended December 31, 2001, 2000 and 1999
Consolidated Statements of Cash Flows
Years Ended December 31, 2001, 2000 and 1999
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
-45-
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
B. Reports on Form 8-K:
No reports on Form 8-K were filed during 2001.
-46-
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
23 Not Applicable
23 Consent of Independent Certified
Public Accountants
24 Powers of Attorney
27 Not Applicable
28 Not Applicable
29 Not Applicable
-47-
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 28th day of March, 2002.
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 28th day of
March, 2002.
/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
-48-