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, 1998
[ ] 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 (I.R.S. Employer Identification No.)
of incorporation or organization)
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 16, 1999 there were 2,576,244 shares of common stock
outstanding and the aggregate market value of common stock of Old
Point Financial Corporation held by nonaffiliates was approximately
$57,855,999 based upon the weighted average price per share for the
last 5 trading days.
DOCUMENTS INCORPORATED BY REFERENCE
NONE
<PAGE>
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
Condition and Results of Operations.........................15
Item 8. Financial Statements and Supplementary Data................19
Item 9. Changes in and Disagreements With Accountants on
and Financial Disclosure Accounting.......................35
PART III. .........................................................36
Item 10. Directors and Executive Officers of the Registrant........36
Item 11. Executive Compensation....................................38
Item 12. Security Ownership of Certain Beneficial Owners and
Management................................................40
Item 13. Certain Relationships and Related Transactions............40
PART IV. ..........................................................41
Item 14. Exhibits, Financial Statement Schedules and Reports
on Form 8.................................................41
-I-
<PAGE>
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 has no other subsidiaries and does not engage in any
activities other than acting as a holding company for the common stock
of the Bank. The principal business of the Company is conducted
through the Bank, which continues to conduct its business in
substantially the same manner and from the same offices as it had done
before the effective date of the reorganization. The Bank, therefore,
accounts for substantially all of the consolidated assets and revenues
of the Company.
The Bank is a national banking association founded in 1922. The Bank
has thirteen offices 1in the cities of Hampton and Newport News, and
in 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 and trust and estate services.
As of December 31, 1998, the Company had assets of $404.1 million,
loans of $235.9 million, deposits of $343.4 million, and stockholders'
equity of $40.0 million. At year end, the Company and the Bank had a
total of 223 employees, 34 of whom were part-time.
Based on 1990 census figures, the population of the Bank's trade area,
which includes Hampton, Newport News, Williamsburg, and James City and
York County was approximately 394,000. This area's economy is heavily
influenced by the two largest employers; military installations and
shipbuilding and ship repair. These industries are impacted by
reductions in defense spending and personnel. Some of our customers
are either employed at the various military installations or at the
shipyard, or they derive some or all of their business from these two
major employers. There are numerous military installations in the
area including Fort Monroe, Langley Air Force Base, and Fort Eustis.
The consolidation of the Tactical Air Command and the Strategic Air
Command into the Air Combat Command at Langley has somewhat mitigated
the reduction in military employment in the area. The largest private
employer on the Peninsula is the Newport News Shipbuilding and Drydock
Company, which currently employees approximately 16,000 2people.
The banking industry is highly competitive in the Hampton/Newport
News/Williamsburg area. There are approximately twelve commercial
and savings banks actively engaged in business in the area in which
the Bank operates, including six major statewide banking
organizations.
The Bank encounters competition for deposits and loans from banks,
savings and loan associations and credit unions in the communities in
which it operates. In addition, the Bank must compete for deposits in
some instances with the money market mutual funds which are marketed
nationally.
The Bank is subject to regulation and examination by the Office of the
Comptroller of the Currency, the Federal Reserve Board (the "Board"),
and the Federal Deposit Insurance Corporation (the "FDIC").
1
<PAGE>
As a bank holding company within the meaning of the Bank Holding
Company Act of 1956, the Company is subject to the ongoing regulation,
supervision, and examination by the Federal Reserve Board (the
"Board"). The Company is required to file with the Board periodic and
annual reports and other information concerning its own business
operations and those of its subsidiaries. In addition, prior Board
approval must be obtained before the Company can acquire (i) ownership
or control of any voting shares of another bank if, after such
acquisition, it would control more than 5% of such shares, or (ii) all
or substantially all of the assets of another bank or merge or
consolidate with another bank holding company. A bank holding company
is prohibited under the Bank Holding Company Act, with limited
exceptions, from engaging in activities other than those of banking or
of managing or controlling banks or furnishing services to its
subsidiaries.
Statistical Information
The following statistical information is furnished pursuant to the
requirements of Guide 3 (Statistical Disclosure by Bank Holding
Companies) promulgated under the Securities Act of 1933.
I. Distribution of Assets, Liabilities and Shareholders' Equity;
Interest Rates and Interest Differential
The following table presents the distribution of assets, liabilities,
and shareholders' equity by major categories with related average
yields/rates. In these balance sheets, nonaccrual loans are included
in the daily average loans outstanding. The following table sets forth
a summary of changes in interest earned and paid attributable to
changes in volume and changes in yields/rates.
2
<PAGE>
<TABLE>
TABLE I
AVERAGE BALANCE SHEETS, NET INTEREST INCOME* AND RATES*
For the years ended December 31,
Dollars in thousands
<CAPTION> 1998 1997 1996
--------------------------------------------------------------------------------------
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
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Loans $226,908 $20,255 8.93% $210,934 $19,288 9.14% $192,940 $17,681 9.16%
Investment securities:
Taxable 87,112 5,285 6.07% 72,064 4,473 6.21% 78,734 4,736 6.02%
Tax-exempt 34,317 2,665 7.77% 24,129 1,954 8.10% 15,194 1,292 8.50%
-------------------- ------------------- -------------------
Total investment securities 121,429 7,950 6.55% 96,193 6,427 6.68% 93,928 6,028 6.42%
Federal funds sold 10,305 572 5.55% 4,981 276 5.54% 3,981 208 5.22%
-------------------- ------------------- -------------------
Total earning assets 358,642 28,777 8.02% 312,108 25,991 8.33% 290,849 23,917 8.22%
Reserve for loan losses (2,628) (2,366) (2,240)
--------- --------- ---------
356,014 309,742 288,609
Cash and due from banks 8,933 8,753 9,805
Bank premises and equipment 11,931 10,036 9,724
Other assets 3,878 3,624 4,874
--------- --------- ---------
Total assets $380,756 $332,155 $313,012
========= ========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Time and savings deposits:
Interest-bearing transaction accounts $ 15,929 $346 2.17% $ 24,376 $ 537 2.20% $ 50,041 $ 1,210 2.42%
Money market deposit accounts 71,199 $ 2,326 3.27% 49,302 1,528 3.10% 21,212 789 3.72%
Savings accounts 26,211 718 2.74% 25,822 708 2.74% 26,354 722 2.74%
Certificates of deposit,
$100,000 or more 26,084 1,462 5.60% 19,122 1,135 5.94% 17,026 940 5.52%
Other certificates of deposit 121,676 6,740 5.54% 108,665 5,813 5.35% 103,029 5,642 5.48%
------------------- ------------------ ------------------
Total time and savings deposits 261,099 11,592 4.44% 227,287 9,721 4.28% 217,662 9,303 4.27%
Federal funds purchased and securities
sold under agreement to repurchase 21,713 1,013 4.67% 17,767 861 4.85% 14,688 706 4.81%
Other short term borrowings 1,776 96 5.41% 1,857 99 5.33% 1,599 84 5.25%
-------------------- ------------------- -------------------
Total interest bearing liabilities 284,588 12,701 4.46% 246,911 10,681 4.33% 233,949 10,093 4.31%
Demand deposits 56,001 49,432 46,198
Other liabilities 1,641 1,394 1,532
--------- --------- ---------
Total liabilities 342,230 297,737 281,679
Stockholders' equity 38,526 34,418 31,333
--------- --------- ---------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $380,756 $332,155 $313,012
======== ======== ========
Net interest income/yield $16,076 4.48% $15,310 4.91% $13,824 4.75%
======= ======= =======
Total deposits $317,100 $276,719 $263,860
======== ======== ========
* Computed on a fully taxable equivalent basis using a 34% rate
</TABLE>
3
<PAGE>
<TABLE>
The following table sets forth a summary of changes in interest earned and
paid attributable to changes in volume and changes in yields/rates.
<CAPTION>
TABLE II
ANALYSIS OF CHANGE IN NET INTEREST INCOME *
- ---------------------------------------------------------------------------------------------------------------------------------
Year 1998 over 1997 Year 1997 over 1996 Year 1996 over 1995
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
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Loans $1,461 $ (494) $ 967 $ 1,649 $ (42) $ 1,607 $ 1,105 $ $355 $ 1,460
Investment Securities:
Taxable 934 (122) 812 (401) 138 (263) 19 27 46
Tax-exempt 825 (114) 711 760 (98) 662 652 (119) 533
------- -------- --------- --------- ------- --------- -------- -------- ---------
Total investment securities 1,759 (236) 1,523 359 40 399 671 (92) 579
Federal funds sold 295 1 296 52 16 68 (39) (17) (56)
------- -------- --------- --------- ------- --------- -------- -------- ---------
3,515 (729) 2,786 2,060 14 2,074 1,737 246 1,983
INTEREST EXPENSE
Interest bearing transaction accounts (186) (5) (191) (621) (52) (673) 19 (112) (93)
Money market deposit accounts 679 119 798 1,045 (306) 739 73 (49) 24
Savings accounts 11 (1) 10 (15) 1 (14) (7) (1) (8)
Certificate of deposits, $100,000
or more 413 (86) 327 116 79 195 178 2 180
Other certificates of deposit 696 231 927 309 (138) 171 304 48 352
------- -------- --------- --------- ------- --------- -------- -------- ----------
Total time and savings deposits 1,613 258 1,871 834 (416) 418 567 (112) 455
Federal funds purchased and securities
sold under agreement to repurchase 191 (39) 152 148 7 155 176 (43) 133
Other short-term borrowings (4) 1 (3) 14 1 15 (22) (4) (26)
------- -------- --------- --------- ------- --------- -------- -------- ----------
Total expense for interest bearing
liabilities 1,800 220 2,020 996 (408) 588 721 (159) 562
Change in Net Interest Income $1,714 $ (948) $ 766 $ 1,064 $ 422 $ 1,486 $ 1,016 $ 405 $ 1,421
* Computed on a fully taxable equvilent basis using a 34% rate.
</TABLE>
4
<PAGE>
<TABLE>
Interest Sensitivity
The following table reflects the earlier of the maturity or repricing data for various assets
and liabilities as of Decmber 31, 1998.
- ----------------------------------------------------------------------------------------------------------
TABLE III
INTEREST SENSITIVITY ANALYSIS
- ----------------------------------------------------------------------------------------------------------
<CAPTION>
As of December 31, 1998 Within 4-12 1-5 Over 5
Dollars in thousands 3 Months Months Years Years Total
Uses of funds
<S> <C> <C> <C> <C> <C>
Federal funds sold 6,578 -- -- -- 6,578
Taxable investments 9,421 3,544 51,916 22,849 87,730
Tax-exempt investments 0 0 1,678 48,079 49,757
-------- -------- ------- ------ -------
Total investments 15,999 3,544 53,594 70,928 144,065
Loans:
Commercial 18,927 2,946 38,567 3,883 64,323
Tax-exempt 825 37 270 270 1,402
Installment 2,918 3,392 49,254 3,053 58,617
Real estate 21,641 7,778 59,739 21,546 110,704
Other 819 -- 0 0 819
-------- -------- ------- ------ -------
Total loans 45,130 14,153 147,830 28,752 235,865
-------- -------- ------- ------ -------
Total earning assets 61,129 17,697 201,424 99,680 379,930
Sources of funds
Interest checking deposits 4,387 -- -- -- 4,387
Money market deposit accounts 90,954 -- -- -- 90,954
Regular savings accounts 26,341 -- -- -- 26,341
Certificates of deposit
$100,000 or more 5,939 11,814 10,452 -- 28,205
Other time deposits 32,029 50,726 45,435 -- 128,190
Federal funds purchased and
securities sold under
agreements to repurchase 19,128 -- -- -- 19,128
Other borrowed money 333 -- 15 -- 348
------- -------- ------- ------ -------
Total interest bearing liabilities 179,111 62,540 55,902 0 297,553
Rate sensitivity GAP (117,982) (44,843) 145,522 99,680 82,377
Cumulative GAP (117,982) (162,825) (17,303) 82,377
</TABLE>
5
<PAGE>
The Company was liability sensitive as of December 31, 1998. There
were $118.0 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, 1998.
<TABLE>
TABLE IV
INVESTMENT SECURITY MATURITIES & YIELDS
<CAPTION>
------------------------------------------------------------------------------------------------------
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
------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
December 31, 1998
Maturities:
Within 1 year $ 7,526 5.43% $ 0 0.00% $ 7,526 5.43%
After 1 year, but within 5 years 51,445 6.20% 1,600 9.60% 53,045 6.30%
After 5 years, but within 10 years 23,084 6.14% 19,354 8.24% 42,438 7.10%
After 10 years 0 0.00% 27,641 7.91% 27,641 7.91%
TOTAL $82,055 6.11% $48,595 8.10% $130,650 6.85%
December 31, 1997 $62,126 6.33% $27,843 8.18% $89,969 6.90%
December 31, 1996 $69,528 6.06% $20,015 8.17% $89,541 6.53%
</TABLE>
Yields are calculated on a fully tax equivalent basis using a 34%
rate.
At December 31, 1998, the book value of other marketable equity
securities with no stated maturity totaled $5.58 million with an
weighted average yield of 5.45%. These securities consisted of an
adjustable rate mortgage fund of $4.4 million yielding 5.01%,
Federal Home Loan Bank stock of $1.0 million yielding 7.50%,
Federal Reserve stock of $85 thousand yielding 6.00% and other
securities of $50 thousand. The book value of other marketable
securities with no stated maturity totaled $5.48 million, yielding
6.13%; and $5.44 million, yielding 5.89%; at December 31, 1997, and
1996 respectively.
6
<PAGE>
III. Loan Portfolio
The following table shows a breakdown of total loans by type at
December 31 for years 1994 through 1998:
<TABLE>
TABLE V
LOANS
<CAPTION>
- -------------------------------------------------------------------------------
As of December 31, 1998 1997 1996 1995 1994
Dollars in thousands
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Commercial and other $ 65,143 $ 45,059 $ 28,944 $ 20,636 $ 17,806
Real Estate Construction 5,418 3,836 5,213 4,093 1,991
Real Estate Mortgage 105,285 104,141 104,230 109,469 105,703
Tax Exempt 1,401 2,093 2,464 3,003 4,754
Installment Loans to
Individuals 58,618 66,615 57,733 52,154 43,487
----------------------------------------------------
Total $235,865 $221,744 $198,584 $189,355 $173,741
====================================================
</TABLE>
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, 1998 is
presented below:
<TABLE>
TABLE VI
MATURITY SCHEDULE OF SELECTED LOANS
<CAPTION>
- ---------------------------------------------------------------------------------------
December 31, 1998 One year One through Over five
Dollars in thousands or less five years years Total
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Commercial and other $19,680 $41,441 $4,022 $65,143
Real estate construction 5,010 408 0 5,418
------- ------- ------ -------
Total $24,690 $41,849 $4,022 70,561
Loans maturing after
one year with:
Fixed interest rate $37,115 $3,782 $40,897
Variable interest rate $4,734 $240 $4,974
</TABLE>
7
<PAGE>
The following table presents information concerning the aggregate
amount of nonaccrual, past due and restructured loans as of
December 31 for the years 1994 through 1998.
<TABLE>
TABLE VII
NONACCRUAL, PAST DUE AND RESTRUCTURED LOANS
<CAPTION>
- -----------------------------------------------------------------------------
As of December 31, 1998 1997 1996 1995 1994
Dollars in thousands
- -----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Nonaccrual loans $253 $660 $1,550 $2,447 $2,955
Accruing loans past due
90 days or more 641 455 1,342 248 837
Restructured loans none none none none none
Interest income which would have been
recorded under original loan terms 52 205 163 350 470
Interest income recorded during
the period 123 485 222 131 188
</TABLE>
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, 1998 such problem loans,
not included in Table VII, amounted to approximately $1.2 million.
The potential problem loans included one relationships in excess of
$500 thousand. The potential problem loans are generally secured
by residential and commercial real estate with appraised values
exceeding the principal balance of the loan.
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
<PAGE>
The following table shows an analysis of the Allowance for Loan
Losses for the years 1994 through 1998.
<TABLE>
TABLE VIII
ANALYSIS OF THE ALLOWANCE FOR LOAN LOSSES
<CAPTION>
- ---------------------------------------------------------------------------------------------
For the year ended December 31, 1998 1997 1996 1995 1994
Dollars in thousands
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance at beginning of period $ 2,671 $ 2,330 $ 2,251 $ 2,647 $ 2,692
Charge Offs:
Commercial, financial and agricultural 296 84 98 1,210 147
Real estate construction 0 0 0 0 0
Real estate mortgage 87 67 2 135 316
Installment Loans to individuals 564 717 825 375 148
----------------------------------------------------
Total charge offs 947 868 925 1,720 611
Recoveries:
Commercial, financial and agricultural 139 239 87 296 431
Real estate construction 0 0 0 0 0
Real estate mortgage 25 1 14 44 19
Installment Loans to individuals 317 369 303 159 91
----------------------------------------------------
Total recoveries 481 609 404 499 541
Net charge offs 466 259 521 1,221 70
Additions charged to operations 650 600 600 825 25
----------------------------------------------------
Balance at end of period $ 2,855 $ 2,671 $ 2,330 $ 2,251 $ 2,647
Selected loan loss statistics
Loans (net of unearned income):
End of period $235,865 $221,744 $198,584 $189,355 $173,741
Daily average $226,908 $210,934 $192,940 $180,638 $160,204
Net charge offs to average total loans 0.21% 0.12% 0.27% 0.68% 0.04%
Provision for loan losses to average
total loans 0.29% 0.28% 0.31% 0.46% 0.02%
Provision for loan losses to net
charge offs 139.48% 231.66% 115.16% 67.57% 35.71%
Allowance for loan losses to period
end loans 1.21% 1.20% 1.17% 1.19% 1.51%
Earnings to loan loss coverage* 14.64 23.67 10.28 3.25 56.21
* Income before taxes plus provision for loan losses, divided by net charge-offs.
</TABLE>
9
<PAGE>
The following table shows the amount of the Allowance for Loan Losses
allocated to each category at December 31 for the years 1994 through
1998.
<TABLE>
- ----------------------------------------------------------------------------------------------------------------------------
TABLE IX
ALLOCATION OF THE ALLOWANCE FOR LOAN LOSSES
- ----------------------------------------------------------------------------------------------------------------------------
<CAPTION>
As of December 31,
1998 1997 1996 1995 1994
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
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Commercial and other $ 656 27.92% $ 575 21.26% $ 835 15.85% $ 843 12.57% $1,417 12.98%
Real Estate
Construction 17 2.30% 14 1.73% 23 2.62% 18 2.18% 20 1.15%
Real Estate Mortgage 203 44.64% 240 46.97% 322 52.49% 370 58.21% 739 60.84%
Consumer 370 25.14% 412 30.04% 391 29.04% 247 27.04% 135 25.03%
Unallocated 1,609 0 1,430 0 759 0 773 0 381 0
--------------- --------------- --------------- --------------- ---------------
Total $2,855 100.00% $2,671 100.00% $2,330 100.00% $2,251 100.00% $2,647 100.00%
</TABLE>
10
<PAGE>
V. Deposits
The following table shows the average balances and average rates paid on
deposits for the years ended December 31, 1996, 1997, and 1998.
<TABLE>
TABLE X
DEPOSITS
<CAPTION>
--------------------------------------------------------------------------------------
For the year ended December 31, 1998 1997 1996
Average Average Average Average Average Average
Dollars in thousands Balance Rate Balance Rate Balance Rate
--------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Interest bearing transaction <C>
accounts $ 15,929 2.17% $ 24,376 2.20% $ 50,041 2.42%
Money market deposit accounts 71,199 3.27% 49,302 3.10% 21,212 3.72%
Savings accounts 26,211 2.74% 25,822 2.74% 26,354 2.74%
Certificate of deposit, $100,000 26,084 5.60% 19,122 5.94% 17,026 5.52%
Other certificate of deposit 121,676 5.54% 108,665 5.35% 103,029 5.48%
----------------- ----------------- -----------------
Total interest bearing deposits 261,099 4.44% 227,287 4.28% 217,662 4.27%
Non-interest bearing demand
deposits 56,001 49,432 46,198
----------------- ----------------- -----------------
Total deposits $317,100 $276,719 $263,860
</TABLE>
10
<PAGE>
The following table shows certificates of deposit in amounts of
$100,000 or more as of December 31, 1998, 1997, and 1996 by time
remaining until maturity.
<TABLE>
TABLE XI
CERTIFICATE OF DEPOSIT $100,000 & MORE
<CAPTION>
- ---------------------------------------------------------
Dollars in thousands 1998 1997 1996
Maturing in
- ---------------------------------------------------------
<S> <C> <C> <C>
3 months or less $ 3,592 $ 5,449 $ 3,089
3 through 6 months 6,353 3,087 3,550
6 through 12 months 7,345 5,843 3,774
over 12 months 10,915 9,467 7,013
------- ------- -------
$28,205 $23,846 $17,426
</TABLE>
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.
1998 1997 1996
Return on average assets 1.22% 1.23% 1.10%
Return on average equity 12.03% 11.88% 10.99%
Dividend payout ratio 26.62% 25.68% 25.88%
Average equity to average assets 10.15% 10.36% 10.01%
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
1998, 1997, and 1996 are presented in the following table.
11
<PAGE>
<TABLE>
TABLE XII
SHORT TERM BORROWINGS
<CAPTION>
- ----------------------------------------------------------------------------------
1998 1997 1996
Dollars in thousands Balance Rate Balance Rate Balance Rate
- ----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31,
Federal funds purchased $ 0 $ 0 $ 2,000 6.28%
Securities sold under
agreement to repurchase 19,128 4.25% 20,165 4.81% 15,135 4.58%
U. S. treasury demand notes
and other borrowed money 348 4.89% 4,025 5.27% 2,301 5.03%
------- ------- -------
Total $19,476 $24,190 $19,436
Average daily
balance outstanding:
Federal funds purchased $ 13 5.86% $ 271 5.54% $ 575 5.23%
Securities sold under
agreement to repurchase 21,700 4.66% 17,496 4.84% 14,413 4.76%
U. S. treasury demand notes
and other borrowed money 1,776 5.35% 1,857 5.33% 1,599 5.23%
------- ------- -------
Total $23,489 4.72% $19,624 4.89% $16,587 4.85%
The maximum amount outstanding
at any month end:
Federal funds purchased $ 0 $ 0 $ 2,700
Securities sold under
agreement to repurchase $26,094 $23,121 $16,046
U. S. treasury demand notes
and other borrowed money $ 4,024 $ 4,033 $ 4,052
</TABLE>
12
<PAGE>
Item 2. Description of Property
The Bank owns the Main Office, three office buildings4, and seven
branches5. 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 three
branches are 6leased from unrelated parties under leases with renewal
options which expire anywhere from 10-15 years. The Company is
building a branch in Norge VA and expects to be open in the third
quarter of 1999.
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, 1998.
Part II
Item 5. Market for Common Equity And Related Stockholder Matters
Beginning in 1998 the common stock of Old Point Financial Corporation
was quoted on the OTC Bulletin Board under the symbol "OPOF". The
approximate number of shareholders of record as of December 31, 1998
was 1,480. The range of high and low prices and dividends per share
of the Company's common stock for each quarter during 1998 and 1997 is
presented in Part I. Item 7. of this Annual Report on Form 10-K.
Additional information related to stockholder matters can be found in
Note 15. Regulatory Matters of the Notes to Financial Statements
found in Item 8. Financial Statements and Supplementary Data of this
Report on Form 10K.
Item 6. Selected Financial Data
The following table summarizes the Company's performance for the past
five years.
13
<PAGE>
<TABLE>
TABLE XIII
SELECTED FINANCIAL HIGHLIGHTS
<CAPTION>
- ---------------------------------------------------------------------------------------------------
Years Ended December 31, 1998 1997 1996 1995 1994
- ---------------------------------------------------------------------------------------------------
(Dollars in Thousands except per share data)
RESULTS OF OPERATIONS
<S> <C> <C> <C> <C> <C>
Interest income.......................... $ 27,805 $ 25,242 $ 23,377 $ 21,534 $ 19,234
Interest expense......................... 12,700 10,681 10,093 9,531 7,625
--------------------------------------------------
Net interest income...................... 15,105 14,561 13,284 12,003 11,609
Provision for loan loss.................. 650 600 600 825 25
--------------------------------------------------
Net interest income after provision
for loss................................ 14,455 13,961 12,684 11,178 11,584
Gains (losses) on sales of
investment securities................... 0 (1) 2 9 407
Noninterest income....................... 4,911 4,275 4,134 3,836 3,755
Noninterest expenses..................... 13,193 12,704 12,066 11,884 11,837
---------------------------------------------------
Income before taxes...................... 6,173 5,531 4,754 3,139 3,909
Income taxes ............................ 1,537 1,441 1,309 797 1,136
----------------------------------------------------
Net income............................... $ 4,636 $ 4,090 $ 3,445 $ 2,342 $ 2,773
FINANCIAL CONDITION
Total assets............................. $404,118 $348,671 $316,345 $304,266 $277,680
Total deposits........................... 343,413 287,100 263,519 256,535 235,599
Total loans.............................. 235,865 221,744 198,584 189,355 174,881
Stockholders' equity..................... 40,013 36,332 32,400 30,328 26,222
Average assets........................... 380,756 332,155 313,012 291,174 278,398
Average equity........................... 38,526 34,418 31,333 29,022 26,694
PERTINENT RATIOS
Return on average assets................. 1.22% 1.23% 1.10% 0.80% 1.00%
Return on average equity................. 12.03% 11.88% 10.99% 8.07% 10.39%
Dividends paid as a percent of net income 26.62% 25.68% 25.88% 33.17% 25.03%
Average equity as a percent of
average asssets......................... 10.12% 10.36% 10.01% 9.97% 9.59%
PER SHARE DATA
Basic EPS................................ $1.80 $1.60 $1.35 $0.92 $1.10
Cash dividends declared.................. 0.48 0.41 0.35 0.305 0.275
Book value............................... 15.54 14.16 12.72 11.91 10.37
GROWTH RATES
Year end assets.......................... 15.90% 10.22% 3.97% 9.57% 3.33%
Year end deposits........................ 19.61% 8.95% 2.72% 8.89% 1.77%
Year end loans........................... 6.37% 11.66% 4.87% 8.28% 8.08%
Year end equity.......................... 10.13% 12.14% 6.83% 15.66% 8.39%
Average assets........................... 14.63% 6.12% 7.50% 4.59% 3.53%
Average equity........................... 11.94% 9.85% 7.96% 8.72% 11.90%
Net income............................... 13.35% 18.72% 47.10% -15.54% 59.55%
Cash dividends declared.................. 17.07% 17.14% 14.75% 10.91% 37.50%
Book value............................... 9.74% 11.30% 6.83% 14.78% 6.54%
</TABLE>
14
<PAGE>
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 $4.64 million, or $1.80 per share in 1998 compared to
$4.09 million, or $1.60 per share in 1997 and $3.45 million, or $1.35
per share in 1996. Return on average assets was 1.22% in 1998, 1.23%
in 1997 and 1.10% in 1996. Return on average equity was 12.03% in
1998, 11.88% in 1997 and 10.99% in 1996. For the past five years
return on average assets has averaged 1.07% and return on average
equity has averaged 10.67%. 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 $16.08
million in 1998, up $766 thousand, or 5% from $15.30 million in 1997
which was up $1.49 million, or 11% from $13.82 million in 1996. 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 4.48% in 1998 from 4.91% in 1997
which was up from 4.75% in 1996.
Tax equivalent interest income increased $2.79 million, or 11%,
in 1998. Average earning assets grew $46.53 million, or 15%. Total
average loans increased $15.97 million, or 8%, while average
investment securities increased $25.24 million, or 26%. The yield on
earning assets decreased in 1998 by thirty-one basis points primarily
due to lower interest rates. The prime rate which is a major
influence on rates, declined seventy-five basis points in 1998.
Interest expense increased $2.02 million or 19%, in 1998.
Interest bearing liabilities increased 15% in 1998. The cost of
funding liabilities increased thirteen basis points due to an increase
in money market accounts and certificates of deposits paying a higher
interest rate. The bank offered these attractively priced products to
gain market share in 1998.
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 $650 thousand in 1998 from $600 thousand in 1997 and
1996.
Loans charged off during 1998 totaled $947 thousand compared to
$868 thousand in 1997 and $925 thousand in 1996, while recoveries
amounted to $481 thousand in 1998, $609 thousand in 1997 and $404
thousand in 1996. During 1996 a large portion of the loans charged
off were in the indirect dealer installment portfolio. These higher
charge offs were due in large part to an increase in personal
bankruptcies. As a result of these losses the underwriting standards
were raised for indirect dealer loans. The composition of installment
loans has shifted from 60% in dealer loans in 1996 to 51% in 1997 to
46% in 1998. Indirect dealer loans charged off net of recoveries were
reduced by $186 thousand, or 44%, in 1997 from 1996, and $132
thousand, or 55%, in 1998 from 1997. In addition, there was a
commercial loan charged off due to bankruptcy as well as deficiencies
on foreclosed real estate recorded during 1998.
15
<PAGE>
The Company's net loans charged off to year-end loans were 0.20% in
1998, 0.12% in 1997, and 0.26% in 1996. The allowance for loan
losses, as a percentage of year-end loans, was 1.21% in 1998, 1.20% in
1997, and 1.17% in 1996.
As of December 31, 1998, nonperforming assets were $737 thousand,
down from $1.43 million at year-end 1997 which was down from $1.90
million at year-end 1996. Nonperforming assets consist of loans in
nonaccrual status and other real estate. The 1998 total consisted of
other real estate of $484 thousand and $253 thousand in nonaccrual
loans. The other real estate consisted of $354 thousand in a
commercial property originally acquired as a potential branch site and
now held for sale and $130 thousand in foreclosed real estate.
Nonaccrual loans consisted of $101 thousand in commercial loans and
$152 thousand in mortgage loans. The Company has aggressively dealt
with these credits and specific action plans have been developed for
each of these classified loans to address any deficiencies. Loans
still accruing interest but past due 90 days or more increased to $641
thousand as of December 31, 1998 compared to $455 thousand as of
December 31, 1997, which decreased from $1.34 million as of December
31, 1996.
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 $637 thousand, or 15% in 1998 from 1997
compared to an increase of $138 thousand, or 3% in 1997 from 1996.
The 1998 increase was due to higher Trust Services fees and service
charges on deposit accounts. The bank experienced excellent growth in
transaction deposit accounts in 1998. The 1997 increase was due
primarily to Trust Services fees and other service charge income.
OTHER EXPENSES
Other expenses increased $489 thousand or 4% in 1998 over 1997 after
increasing 5% in 1997 from 1996. Due to a one-time insurance rebate
in 1998 salaries and employee benefits increased by only $127 thousand
or 2% in 1998. Occupancy expense increased $94 thousand, or 11% in
1998 primarily due to costs associated with the opening of a new
office building in Newport News VA which is home to Trust and
Financial Services and a Commercial Loan office. Equipment expense
increased $75 thousand or 7% due to higher depreciation expense on new
computer systems and related service contracts and equipment repairs.
Other operating expenses increased $193 thousand or 6%. Expenses
contributing to the increase were marketing and customer development
costs which helped provide for the loan and deposit growth. Due to
the extensive loan growth, loan expenses associated with originating
those loans increased sharply in 1998.
ASSETS
At December 31, 1998, the Company had total assets of $404.1
million, up 16% from $348.7 million at December 31, 1997. Average
assets in 1998 were $380.8 million compared to $332.2 million in 1997.
The growth in assets in 1998 was due to the increase in deposits which
were up 20% in 1998. These deposits funded an increase of 42% in
investment securities.
The Company has purchased a branch site in Norge, VA. The Company is
building a new branch of approximately 2,500 square feet. The branch
will provide full service banking including consumer and business
services.
16
<PAGE>
LOANS
Total loans as of December 31, 1998 were $235.9 million, up 6% from
$221.7 million at December 31, 1997. Commercial loans as well as real
estate construction loans accounted for the growth in the loan
portfolio growing 45% and 41%, respectively. Installment loans to
individuals decreased from 1997 due primarily to a reduction in the
indirect dealer loan portfolio. Footnote 3 of the financial
statements details the loan volume by category for the past two years.
INVESTMENT SECURITIES
At December 31, 1998 total investment securities were $137.5
million, up 42% from $96.5 million on December 31, 1997. 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, 1998, total deposits amounted to $343.4 million, up
20% from $287.1 million on December 31, 1997. Non-interest bearing
deposits increased $13.0 million, or 25%, in 1998 over 1997. Savings
deposits increased $21.7 million, or 22%, in 1998 over 1997.
Certificates of Deposit increased $21.6 million or 16% in 1998 over
1997.
STOCKHOLDERS' EQUITY
Total stockholders' equity as of December 31, 1998 was $40.0
million, up 10% from $36.3 million on December 31, 1997. 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 1998, 1997 and 1996.
1998 1998 1997 1996
Regulatory
Requirements
Tier 1 4.00% 14.89% 15.06% 15.63%
Total Capital 8.00% 15.98% 16.19% 16.76%
Tier 1 Leverage 3.00% 10.26% 10.32% 10.21%
Year-end book value was $15.54 in 1998 and $14.16 in 1997. Cash
dividends were $1.2 million, or $.48 per share in 1998 and $1.0
million, or $.41 per share in 1997. The common stock of the Company
has not been extensively traded. The table below shows the high and
low prices for each quarter of 1998 and 1997. During 1997 the stock
was not listed on an exchange and was not quoted by NASDQ. Bid and
ask prices were not available and the trading of stock was limited.
The 1997 prices were based on a limited number of transactions known
to Management in 1997. Beginning in 1998 the stock was quoted on the
OTC Bulletin Board under the symbol "OPOF" and the prices below are
based on trades through the OTC Bulletin Board. There were 1480
stockholders of the Company as of December 31, 1998. 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 1998
and 1997.
17
<PAGE>
1998 1997
Market Value Market Value
Dividend High Low Dividend High Low
1st Quarter $0.11 $39.00 $25.50 $0.10 $20.75 $20.75
2nd Quarter $0.11 $44.00 $37.00 $0.10 $21.00 $20.75
3rd Quarter $0.13 $43.00 $38.00 $0.10 $21.25 $20.75
4th Quarter $0.13 $40.50 $30.00 $0.11 $25.00 $21.00
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.
Year 2000
The "Year 2000" problem relates to the fact that many computer
programs use two digits to define a year and assume that the century
is 1900. Therefore, these programs will not recognize the turn of the
century. The Company has a five-step plan to identify, correct,
upgrade and test all of its hardware and software. The five phases of
the plan are awareness, assessment, renovation, validation, and
implementation. This plan conforms to the standard established by the
Federal Financial Institutions Examination Council (FFIEC). The
Company is on schedule to meet the regulatory deadlines established by
the FFIEC. A Year 2000 project team has been assembled which meets on
a monthly basis to monitor progress and address any new issues that
might arise. The Company has identified and cataloged all of its
hardware and software. Software and hardware that is not Year 2000
compliant has been identified and is being upgraded and/or replaced.
Additionally, the Company's major vendors and customers are being
contacted to determine their Year 2000 efforts. These vendors and
customers have indicated that they are Year 2000 compliant or are on
schedule to become compliant.
The Company is dependent on public utility companies to supply
electricity, gas, water, sewage, and telecommunications. These
utility companies have provided Old Point with some information
regarding their status in becoming Year 2000 compliant. The Year 2000
project team continues to monitor their progress. The Company has
reviewed its non-information technology hardware and has determined
that there are no material systems that have imbedded microchips which
would be affected by the Year 2000 date problem.
The worst case scenario for Year 2000 would be a systemic failure of
electric power and communications between our branch offices, main
office, and third party providers of services such as ATM's and
electronic transactions. Old Point is developing a plan to provide a
process that will enable the Company to stabilize operations at
minimum acceptable levels. This business resumption contingency plan
entails the manual processing of transactions that impact customer
accounts. The Company has installed a diesel generator at the Main
Office location to provide electricity in the event of a power
failure. A minimal level of service to our customers can be maintained
at the Main Office until the power is restored.
18
<PAGE>
The Company purchased its core application software which processes
loans, deposits and general ledger from Fiserv. Fiserv performed
extensive testing of its software and has stated that it is Year 2000
compliant under their test conditions. The Company has successfully
tested the core applications for Year 2000 compliance. In addition,
other software that interfaces with the core application is also being
tested. This testing is expected to be complete by the first quarter
of 1999. The Company continues to upgrade other hardware and software
as needed. The Company plans to complete the five phases of its Year
2000 plan for existing hardware and software by June 30, 1999. Any
hardware or software purchased subsequently will also be tested for
Year 2000 compliance.
The Office of the Comptroller of the Currency (OCC) is responsible for
examining the Bank for compliance to the regulatory standard. In
addition, the internal audit department has completed an audit
verifying and validating the processes the Company uses to test the
applications.
Operating and capital budgets incorporate projected expenditures
necessary to ensure that all systems are Year 2000 compliant. Through
December 31, 1998 the Company has spent approximately $550 thousand in
capital expenditures to upgrade its computer hardware and software to
be Year 2000 compliant. In addition, the Company has spent
approximately $125 thousand in operating expenses to test its software
applications and hardware for Year 2000 compliance. An additional
$250 thousand in capital expenditures is budgeted for the remainder of
1999 for Year 2000 hardware and software upgrades as well as another
$75 thousand for operating expenses to complete the testing for Year
2000 compliance. At this time management does not believe that Year
2000 related expenditures will have an adverse material effect on the
Company.
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.
19
<PAGE>
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 subsidiary as of December
31, 1998 and 1997, and the related consolidated statements of
income, cash flows and changes in stockholders' equity for each
of the years in the three-year period ended December 31, 1998.
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 generally accepted
auditing standards. 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 subsidiary as of December 31, 1998 and 1997,
and the consolidated results of their operations and cash flows
for each of the years in the three-year period ended December
31, 1998, in conformity with generally accepted accounting
principles.
/s/Eggleston Smith P.C.
Eggleston Smith P.C.
January 15, 1999
Newport News, Virginia
20
<PAGE>
<TABLE>
CONSOLIDATED BALANCE SHEETS
<CAPTION>
- -----------------------------------------------------------------------------------------
December 31, 1998 1997
- -----------------------------------------------------------------------------------------
(Dollars in Thousands)
<S>
ASSETS <C> <C>
Cash and due from banks $ 10,311 $ 12,208
Investments:
Securities available-for-sale, at market 82,568 67,546
Securities to be held-to-maturity
(Market value $55,424 in 1998 and $29,096 in 1997) 54,919 28,980
Federal funds sold 6,578 6,977
Loans, total 235,865 221,744
Less - allowance for loan losses 2,855 2,671
-------- --------
Net loans 233,010 219,073
Premises and equipment 12,052 9,742
Other real estate owned 484 774
Other assets 4,196 3,371
-------- --------
Total assets $404,118 $348,671
======== ========
LIABILITIES
Non interest-bearing deposits $ 65,336 $ 52,360
Savings deposits 121,682 99,991
Certificates of deposit 156,395 134,749
-------- --------
Total deposits 343,413 287,100
Federal funds purchased and securities sold under
repurchase agreements 19,128 20,165
Interest bearing demand notes issued to the United
States Treasury and other liabilities for borrowed money 348 4,025
Other liabilities 1,216 1,049
-------- --------
Total Liabilities 364,105 312,339
STOCKHOLDERS' EQUITY
Common stock, $5 par value, 6,000,000 shares authorized
Issued 2,575,444 in 1998 and 2,566,172 in 1997 12,877 12,831
Capital surplus 10,020 9,693
Retained earnings 16,285 13,098
Accumulated other comprehensive income 831 710
-------- --------
Total stockholders' equity 40,013 36,332
-------- --------
Total liabilities and stockholders' equity $404,118 $348,671
======== ========
See Notes to Consolidated Financial Statements
</TABLE>
21
<PAGE>
<TABLE>
CONSOLIDATED STATEMENTS OF INCOME
<CAPTION>
- -----------------------------------------------------------------------------------------------------
Years Ended December 31, 1998 1997 1996
- -----------------------------------------------------------------------------------------------------
(Dollars in Thousands except per share amounts)
<S> <C> <C> <C>
INTEREST INCOME
Interest and fees on loans $ 20,190 $ 19,203 $ 17,580
Interest on investment securities
Taxable 5,284 4,473 4,736
Exempt from income tax 1,759 1,290 853
--------- --------- ---------
7,043 5,763 5,589
Interest on trading account securities 0 0 0
Interest on federal funds sold 572 276 208
--------- --------- ---------
Total interest income 27,805 25,242 23,377
INTEREST EXPENSE
Interest on savings deposits 3,390 2,773 2,721
Interest on certificates of deposit 8,201 6,948 6,582
Interest on federal funds purchased and securities
sold under repurchase agreements 1,013 861 706
Interest on demand notes issued to the United
States Treasury and other liabilities for
borrowed money 96 99 84
--------- --------- ---------
Total interest expense 12,700 10,681 10,093
--------- --------- ---------
Net interest income 15,105 14,561 13,284
Provision for loan losses 650 600 600
--------- --------- ---------
Net interest income after provision for loan losses 14,455 13,961 12,684
OTHER INCOME
Income from fiduciary activities 1,930 1,750 1,667
Service charges on deposit accounts 1,986 1,723 1,887
Other service charges, commissions and fees 642 573 360
Security gains (losses), net 0 (1) 2
Income from trading account 0 0 0
Other operating income 353 229 220
--------- --------- ---------
Total other income 4,911 4,274 4,136
OTHER EXPENSE
Salaries and employee benefits 7,797 7,670 7,406
Occupancy expense 940 846 768
Equipment expense 1,169 1,094 1,029
Other operating expense 3,287 3,094 2,863
--------- --------- ---------
Total other expenses 13,193 12,704 12,066
--------- --------- ---------
Income before income taxes 6,173 5,531 4,754
Income taxes 1,537 1,441 1,309
--------- --------- ---------
Net income $ 4,636 $ 4,090 $ 3,445
========= ========= =========
Basic Earnings per Share
Average shares outstanding (in thousands) 2,571 2,561 2,547
Net income per share of common stock $1.80 $1.60 $1.35
Diluted Earnings per Share
Average shares outstanding (in thousands) 2,595 2,575 2,563
Net income per share of common stock $1.79 $1.59 $1.34
See Notes to Consolidated Financial Statements
</TABLE>
22
<PAGE>
<TABLE>
Consolidated Statements of Cash Flows
<CAPTION>
-----------------------------------------------------------------------------------------------------
Years Ended December 31, 1998 1997 1996
-----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income................................................. $ 4,636 $ 4,090 $ 3,445
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization............................ 990 941 883
Provision for loan losses................................ 650 600 600
(Gains) losses on sale of investment securities, net..... 0 1 (2)
Net amortization & accretion of securities............... 169 368 679
Net (increase) decrease in trading account............... 0 0 0
Loss on sale of equipment................................ 0 0 110
(Increase) decrease in other real estate owned............ (297) (613) 152
(Increase) decrease in other assets
(net of tax effect of FASB 115 adjustment)............. (887) 16 357
Increase (decrease) in other liabilities................. 167 59 (117)
--------- --------- ---------
Net cash provided by operating activities.............. 5,428 5,462 6,107
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of investment securities ...................... (77,059) (31,001) (30,015)
Proceeds from maturities & calls of securities .......... 36,111 23,949 24,171
Proceeds from sales of available - for - sale securities 0 6,218 2,003
Proceeds from sales of held - to - maturity securities 0 0 0
Loans made to customers.................................. (147,183) (123,513) (105,807)
Principal payments received on loans..................... 132,596 100,094 96,057
Purchases of premises and equipment...................... (3,303) (1,304) (2,113)
Proceeds from sales of premises and equipment............ 4 23 20
Proceeds from sales of other real estate owned........... 587 193 448
(Increase) decrease in federal funds sold................ 399 (6,416) (48)
--------- --------- ---------
Net cash provided by (used in) investing activities.... (57,848) (31,757) (15,284)
CASH FLOWS FROM FINANCING ACTIVITIES
Increase (decrease) in non-interest bearing deposits..... 12,976 4,826 4,632
Increase (decrease) in savings deposits.................. 21,691 3,794 391
Proceeds from the sale of certificates of deposit........ 57,762 59,771 43,478
Payments for maturing certificates of deposit............ (36,116) (44,810) (41,517)
Increase (decrease) in federal funds purchased &
repurchase agreements................................... (1,037) 3,030 1,399
Increase (decrease) in interest bearing
demand notes and other borrowed money................... (3,677) 1,724 1,741
Proceeds from issuance of common stock................... 158 230 0
Dividends paid........................................... (1,234) (1,050) (891)
--------- --------- ---------
Net cash provided by financing activities.............. 50,523 27,515 9,233
Net increase (decrease) in cash and due from banks..... (1,897) 1,220 56
Cash and due from banks at beginning of period......... 12,208 10,988 10,932
--------- --------- ---------
Cash and due from banks at end of period............... $ 10,311 $ 12,208 $ 10,988
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash payments for:
Interest............................................... $ 12,533 $ 10,587 $ 10,126
Income taxes........................................... 1,600 1,475 1,275
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING TRANSACTIONS
Unrealized gain (loss) on investment
securities, net of tax................................. $ 121 $ 662 ($482)
See Notes to Consolidated Financial Statements.
</TABLE>
23
<PAGE>
<TABLE>
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
<CAPTION>
----------------------------------------------------------------------------------------------------------
Accumulated
Common Other Total
Stock Capital Retained Comprehensive Stockholders'
(Par Value) Surplus Earnings Income(Loss) Equity
----------------------------------------------------------------------------------------------------------
(Dollars in Thousands)
YEAR ENDED DECEMBER 31, 1996
<S> <C> <C> <C> <C> <C>
Balance, beginning of year $ 6,368 $ 9,345 $14,085 $ 530 $30,328
Comprehensive income
Net income 0 0 3,445 0 3,445
(Decrease) Increase in unrealized gain
on investment securities 0 0 0 (482) (482)
------- ------- ------- ------- -------
Total Comprehensive income 0 0 3,445 (482) 2,963
Sale of stock 0 0 0 0 0
Cash dividends paid 0 0 (891) 0 (891)
------- ------- ------- ------- -------
Balance, end of year $ 6,368 $ 9,345 $16,639 $ 48 $32,400
======= ======= ======= ======= =======
YEAR ENDED DECEMBER 31, 1997
Balance, beginning of year $ 6,368 $ 9,345 $16,639 $ 48 $32,400
Comprehensive income
Net income 0 0 4,090 0 4,090
(Decrease) Increase in unrealized gain
on investment securities 0 0 0 662 662
------- ------- ------- ------- -------
Total Comprehensive income 0 0 4,090 662 4,752
Sale of stock 48 348 (166) 0 230
Stock dividend declared on common stock 6,415 0 (6,415) 0 0
Cash dividends paid 0 0 (1,050) 0 (1,050)
------- ------- ------- ------- -------
Balance, end of year $12,831 $ 9,693 $13,098 $ 710 $36,332
======= ======= ======= ======= =======
YEAR ENDED DECEMBER 31, 1998
Balance, beginning of year $12,831 $ 9,693 $13,098 $ 710 $36,332
Comprehensive income
Net income 0 0 4,636 0 4,636
(Decrease) Increase in unrealized gain
on investment securities 0 0 0 121 121
------- ------- ------- ------- -------
Total Comprehensive income 0 0 4,636 121 4,757
Sale of stock 46 327 (215) 0 158
Cash dividends paid 0 0 (1,234) 0 (1,234)
-------- ------- ------- ------- -------
Balance, end of year $12,877 $10,020 $16,285 $ 831 $40,013
======== ======= ======= ======= =======
See Notes to Consolidated Financial Statements
</TABLE>
24
<PAGE>
NOTE 2, Investment Securities
At December 31, 1998, 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, 1998 and 1997, were:
--------------------------------------------------------------------------
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
(Dollars in Thousands)
Obligations of other United
States Government Agencies
as of December 31, 1998 $54,919 $505 $0 $55,424
======= ==== ==== =======
Obligations of other United
States Government Agencies
as of December 31, 1997 $28,980 $128 ($12) $29,096
======= ==== ==== =======
The amortized cost and fair values of investment securities
available-for-sale at December 31, 1998 were:
--------------------------------------------------------------------------
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
(Dollars in Thousands)
United States Treasury securities $ 7,526 $ 30 $ 0 $ 7,556
Obligations of other United States
Government agencies 19,611 261 (24) 19,848
Obligations of state and political
subdivisions 48,596 1,395 (235) 49,756
Adjustable Rate Mortgage Fund 4,400 0 (161) 4,239
Federal Home Loan Bank Stock 1,042 0 0 1,042
Federal Reserve Bank stock 85 0 0 85
Other marketable equity securities 50 0 (8) 42
------- ------ ------ -------
Total $81,310 $1,686 ($428) $82,568
======= ====== ====== =======
The amortized cost and fair values of investment securities
available-for-sale at December 31, 1997 were:
-----------------------------------------------------------------------------
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
(Dollars in Thousands)
United States Treasury Securities $22,189 $ 93 ($63) $22,219
Obligations of other United States
Government agencies 10,957 121 (28) 11,050
Obligations of State and Political
subdivisions 27,844 1,052 0 28,896
Adjustable Rate Mortgage Fund 4,400 0 (99) 4,301
Federal Home Loan Bank Stock 945 0 0 945
Federal Reserve Bank stock 85 0 0 85
Other marketable equity Securities 50 0 0 50
------- ------ ----- -------
Total $66,470 $1,266 ($190) $67,546
======= ====== ===== =======
25
<PAGE>
NOTE 2, Investment Securities (Continued)
Investment securities carried at $37.8 million and $36.4 million at
December 31, 1998 and 1997, 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, 1998 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.
<TABLE>
<CAPTION>
December 31, 1998
Available-For-Sale Held-To-Maturity
------------------ ----------------
Amortized Market Amortized Market
Cost Value Cost Value
(Dollars in Thousands)
<S> <C> <C> <C> <C>
Due in one year or less $ 7,526 $ 7,556 $ 0 $ 0
Due after one year through five years 16,287 16,530 36,483 36,813
Due after five years through ten years 24,002 24,804 18,436 18,611
Due after ten years 27,917 28,270 0 0
------- ------- ------- -------
Total debt securities 75,732 77,160 54,919 55,424
Other securities without stated maturities 5,578 5,408 0 0
------- ------- ------- -------
Total investment securities $81,310 $82,568 $54,919 $55,424
======= ======= ======= =======
</TABLE>
The proceeds from the sale and maturities of investment securities,
and the related realized gains and losses are shown below:
1998 1997 1996
----- ---- -----
(Dollars in Thousands)
Proceeds from sales and
maturities of investments $36,111 $30,167 $26,174
======= ======= =======
Realized gains $ 0 $ 3 $ 2
Realized losses 0 4 0
------- ------- -------
Net gains (losses) $ 0 $ (1) $ 2
======= ======= =======
26
<PAGE>
NOTE 3, Loans
At December 31, loans before allowance for loan losses consisted of:
1998 1997
---- ----
(Dollars in Thousands)
Commercial and other $ 65,143 $ 45,059
Real estate - construction 5,418 3,836
Real estate - mortgage 105,285 104,141
Installment loans to individuals 58,618 66,615
Tax exempt loans 1,401 2,093
-------- --------
Total $235,865 $221,744
======== ========
Information concerning loans which are contractually past due
or in non-accrual status is as follows:
1998 1997
---- ----
(Dollars in Thousands)
Contractually past due loans -
past due 90 days or more and
still accruing interest $641 $455
==== ====
Loans which are in
non-accrual status $253 $660
==== ====
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
aggrgate direct and indirect loans of these persons totaled $1.8
million and $1.9 million at December 31, 1998 and 1997, 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, 1998.
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:
1998 1997 1996
---- ---- ----
(Dollars in Thousands)
Balance, beginning of year $2,671 $2,330 $2,251
Recoveries 481 609 404
Provision for loan losses 650 600 600
Loans charged off (947) (868) (925)
------ ------ ------
Balance, end of year $2,855 $2,671 $2,330
====== ====== ======
27
<PAGE>
NOTE 5, Premises and Equipment
At December 31, premises and equipment consisted of:
1998 1997
---- ----
(Dollars in Thousands)
Land $ 2,458 $ 2,133
Buildings 9,879 7,806
Leasehold improvements 882 855
Furniture, fixtures and equipment 9,925 9,051
------- -------
Total cost 23,144 19,845
Less accumulated
depreciation and amortization 11,092 10,103
------- -------
Net book value $12,052 $ 9,742
======= =======
NOTE 6, Other Real Estate Owned
Other real estate consisted of the following at December 31:
1998 1997
---- ----
(Dollars in Thousands)
Foreclosed real estate $130 $420
Property held for sale 354 354
---- ----
Total $484 $774
==== ====
NOTE 7, Indebtedness
The Bank's short-term borrowings include federal funds purchased,
securities sold under repurchase agreements (including $1.4 million
to directors in 1998 and $4.0 million in 1997) 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 8, Stock Option Plan
The Company has stock option plans which reserve 143,634 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:
<TABLE>
<CAPTION>
Outstanding Granted Exercised Expired Outstanding
Beginning During During During At End
of Year the Year the Year the Year of Year
------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1996
Shares 64,474 28,772 (500) (400) 92,346
Weighted average exercisable price $16.41 $18.75 $18.13 $18.13 $17.13
<CAPTION>
<S> <C> <C> <C> <C> <C>
1997
Shares 92,346 25,754 (22,280) (11,286) 84,534
Weighted average exercisable price $17.13 $20.75 $13.12 $18.60 $19.09
<CAPTION>
<S> <C> <C> <C> <C> <C>
1998
Shares 84,534 64,500 (5,400) 0 143,634
Weighted average exercisable price $19.09 $41.86 $18.54 $ 0 $29.33
</TABLE>
At December 31, 1998, exercise prices on outstanding options ranged from
$18.13 to $41.86 per share and the weighted average remaining contractual
life was 8 years.
28
<PAGE>
NOTE 8, 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:
1998 1997 1996
---- ----- ----
Pro-forma net income (in thousands) $4,565 $4,041 $3,401
------ ------ ------
Pro-forma earnings per share $1.76 $1.57 $1.33
----- ----- -----
Pro-forma amounts were computed using a 6% risk free interest rate over
a 10 year term using an annual dividend rate of between 1.33% and 1.74%
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 24,000 in 1998, 14,000
in 1997, and 16,000 in 1996.
The Company also has an Employee Stock Purchase Plan which reserves 66,260
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 1998, 4,780 shares of common stock were purchased by employees.
NOTE 9, Income Taxes
The components of income tax expense are as follows:
1998 1997 1996
---- ----- -----
(Dollars in Thousands)
Currently payable $1,564 $1,458 $1,214
Deferred (27) (17) 95
------ ------ ------
Reported tax expense $1,537 $1,441 $1,309
------ ------ ------
The items that caused timing differences affecting deferred income
taxes are as follows:
1998 1997 1996
---- ---- ----
(Dollars in Thousands)
Provision for loan losses $ (156) $ (186) $ (8)
Pension plan expenses 46 17 32
Deferred loan fees, net (22) 24 21
Security gains and losses 0 (4) (7)
Interest on certain
non-accrual loans 68 95 8
Depreciation 31 37 46
Other 6 0 3
------ ----- ------
Total $ (27) $ (17) $ 95
===== ===== ======
A reconciliation of the "expected" Federal income tax expense on income
before income taxes with the reported income tax expense follows:
1998 1997 1996
---- ---- ----
(Dollars in Thousands)
Expected tax expense (34%) $2,099 $1,880 $1,616
Interest expense on tax
exempt assets 82 57 38
Tax exempt interest (640) (494) (352)
Disqualified incentive
stock options (10) (2) 0
Other, net 6 0 7
------ ------ ------
Reported tax expense $1,537 $1,441 $1,309
====== ====== ======
29
<PAGE>
NOTE 9, Income Taxes (Continued)
The components of the net deferred tax asset included in other assets
are as follows at December 31:
1998 1997
--------------------
(Dollars in Thousands)
Components of Deferred Tax Liability:
Depreciation $ (179) $ (147)
Accretion of discounts on securities (9) (9)
Net unrealized (gain) on
available-for-sale securities (428) (366)
Deferred loan fees and costs (70) (91)
Pension (38) 0
------ -----
Deferred tax liability (724) (613)
Components of Deferred Tax Asset:
Allowance for loan losses 709 552
Net unrealized loss on
available-for-sale securities 0 0
Interest on non-accrual loans 147 216
Deferred compensation 5 8
Pension 0 8
------ ------
Deferred tax asset, net $ 137 $ 171
====== ======
NOTE 10, 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, 1998,
under noncancellable leases is $922 thousand which is due as follows:
Year (Dollars in Thousands)
------
1999 $170
2000 109
2001 109
2002 108
2003 68
Remaining term of leases 358
------
Total $922
======
The aggregate rental expense of premises and equipment was
$220 thousand, $208 thousand and $191 thousand for 1998,
1997, and 1996 respectively.
30
<PAGE>
NOTE 11, 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
1998 1997
---- ----
(Dollars in Thousands)
Change in benefit obligation
Benefit obligation at beginning of year $2,445 $2,261
Service cost 148 142
Interest cost 193 179
Actuarial gain 0 32
Benefits paid (151) (169)
------ ---------
Benefit obligation at end of year $2,635 $2,445
====== =========
Change in plan assets
Fair value of plan assets at beginning of year $2,341 $2,003
Actual return on plan assets 329 302
Employer contribution 288 206
Benefits paid (151) (169)
----- ---------
Fair value of plan assets at end of year $2,807 $2,342
====== =========
Funded status $(172) $103
Unrecognized prior service cost (36) (43)
Unrecognized transition obligation 38 50
Unrecognized actuarial gains (loss) 55 (88)
----- ---------
Prepaid (accrued) benefit cost $(115) $22
===== =========
Weighted-average assumptions as of
December 31:
1998 1997
---- ----
Discount rate 8.00% 8.00%
Expected return on plan assets 8.00% 8.00%
Rate of compensation increase 5.00% 5.00%
1998 1997 1996
---- ----- ----
Components of net periodic benefit cost (Dollars in Thousands)
Service Cost $148 $141 $146
Interest cost 193 179 168
Expected return on plan assets (185) (158) (131)
Amortization of prior service cost 7 6 17
Amortization of transition obligation (12) (12) (12)
---- ---- ----
Net periodic benefit cost $151 $156 $188
NOTE 12, 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
$283 thousand and $ 258 thousand in 1998 and 1997 respectively.
31
<PAGE>
NOTE 13, 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:
1998 1997
(Dollars in Thousands)
--------------------------------------------------------------
Commitments to extend credit:
Home equity lines of credit $10,463 $ 9,748
Construction and development
loans committed but not funded 9,168 7,124
Other lines of credit
(principally commercial) 32,514 19,556
------- -------
Total $52,145 $36,428
======= =======
Irrevocable letters of credit $646 $822
==== ====
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 1999. 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.
32
<PAGE>
NOTE 14, Fair Value of Financial Instruments
The estimated fair value of the Bank's financial instruments at
December 31 are as follows:
<TABLE>
<CAPTION>
1998 1997
---- ----
Carrying Fair Carrying Fair
Amount Value Amount Value
(Dollars in Thousands) (Dollars in Thousands)
<S> <C> <C> <C> <C>
Cash and due from banks $ 10,311 $ 10,311 $ 12,208 $ 12,208
Investment securities, held-to-maturity 54,919 55,424 28,980 29,096
Investment securities, available-for-sale 82,568 82,568 67,546 67,546
Federal funds sold 6,578 6,578 6,977 6,977
Loans, net of allowances for loan losses 233,010 234,072 219,073 217,913
Deposits:
Non-interest bearing deposits 65,336 65,336 52,360 52,360
Savings deposits 121,682 121,682 99,991 99,991
Certificates of Deposit 156,395 157,322 134,749 134,330
Securities sold under repurchase
agreement and federal funds purchased 19,128 19,128 20,165 20,165
Interest bearing U.S. Treasury demand
notes and other liabilities
for borrowed money 348 348 4,025 4,025
Commitments to extend credit 52,145 52,145 36,428 36,428
Irrevocable letters of credit 646 646 822 822
</TABLE>
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.
NOTE 15, 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, 1998, 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 14.89% and 15.98%.
The Company's leverage ratio at December 31, 1998 was 10.26%.
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 1999, without
approval of the Comptroller of the Currency, $6.3 million plus an
additional amount equal to the Bank's retained net profits for 1999 up
to the date of any dividend declaration.
33
<PAGE>
OLD POINT FINANCIAL CORPORATION
PARENT ONLY
BALANCE SHEETS
--------------------------------------------
As of December 31,
Dollars in thousands 1998 1997
--------------------------------------------
ASSETS
Cash in bank $ 294 $ 289
Investment securities 2,107 1,877
Total Loans 0 0
Investment in subsidiary 37,598 34,171
Other real estate owned 0 0
Other assets 14 8
------- -------
TOTAL ASSETS $40,013 $36,345
======= =======
LIABILITIES AND
STOCKHOLDERS EQUITY
Notes payable - bank $ 0 $ 0
Other liabilities 0 13
------- -------
Total liabilities 0 13
Stockholders' equity 40,013 36,332
------- ------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $40,013 $36,345
======= =======
OLD POINT FINANCIAL CORPORATION
PARENT ONLY
INCOME STATEMENTS
-------------------------------------------------------------------
For the year ended December 31,
Dollars in thousands 1998 1997 1996
-------------------------------------------------------------------
INCOME
Cash dividends from subsidiary $1,300 $1,000 $1,000
Interest and Fees on Loans 0 1 4
Interest income from
investment securities 106 105 94
Other income 0 0 0
----------------------------
TOTAL INCOME 1,406 1,106 1,098
EXPENSES
Interest on borrowed money 0 0 0
Other expenses 41 50 251
----------------------------
TOTAL EXPENSES 41 50 251
Income before taxes and undistributed
net income of subsidiary 1365 1056 847
Income tax 22 19 (52)
----------------------------
Net income before undistributed
net income of subsidiary 1,343 1,037 899
Undistributed net income of subsidiary 3,293 3,053 2,546
----------------------------
NET INCOME $4,636 $4,090 $3,445
34
<PAGE>
<TABLE>
OLD POINT FINANCIAL CORPORATION
PARENT ONLY
STATEMENT OF CASH FLOWS
<CAPTION>
-------------------------------------------------------------------------------------------
For the year ending December 31, 1998 1997 1996
Dollars in thousands
-------------------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C> <C>
Net income (Loss) $4,636 $4,090 $3,445
Adjustments to Reconcile Net Income to Net Cash Provided by
operating activities:
Equity in undistributed (earnings) losses of subsidiaries (3,293) (3,053) (2,546)
Market write-down on other real estate owned 0 0 0
Increase (decrease) in other assets 0 53 12
Increase (decrease) in other liabilities (12) 11 0
---------------------------
Net cash provided (used) by operating activities 1,331 1,101 911
CASH FLOWS FROM INVESTING ACTIVITIES
(Purchase)/Sales of Investments (250) (200) 0
Sale or repayment of investments in and
advances to subsidiaries 0 0 0
(Purchase)/Sale of Premises and Equipment 0 16 0
Loans to customers 0 48 2
---------------------------
Net cash provided (used) by investing activities (250) (136) 2
CASH FLOWS FROM FINANCING ACTIVITIES
Increase (decrease) in borrowed money 0 0 0
Proceeds from issuance of common stock 158 231 0
Dividends paid (1,234) (1,050) (892)
Other, net 0 0 0
---------------------------
Net cash provided (used) by financing activities (1,076) (819) (892)
Net increase in cash and due from banks 5 146 21
Cash and due from banks at beginning of period 289 143 122
---------------------------
Cash and due from banks at end of period $ 294 $ 289 $ 143
</TABLE>
Accounting Rule Changes
None.
Regulatory Requirements and Restrictions
For the reserve maintenance period in effect at December 31, 1998,
1997 and 1996 the bank was required to maintain with the Federal
Reserve Bank of Richmond an average daily balance totaling
approximately $350 thousand, $400 thousand and $5.7 million
respectively.
Item 9. Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure
None.
35
<PAGE>
PART III
Item 10. Directors and Executive Officers of the Registrant
The eleven persons named below, all of whom currently serve
as directors of the Company, will be nominated to serve as
directors until the 2000 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 17, 1998
Name and (Age) Since (1) Past Five Years (Percent of Class) (2)(3)
Dr. Richard F. Clark (66) 1981 Pathologist(retired) 62,533
Sentara Hampton General Hospital 2.4%
Gertrude S. Dixon (85) 1981 Real Estate Management 190,779
and Ownership 7.4%
Russell Smith Evans Jr. (56) 1993 Assistant Treasurer and 1,650 *
Corporate Fleet Manager
Ferguson Enterprises
G. Royden Goodson, III (43) 1994 President 4,862 *
Warwick Plumbing & Heating Corp.
Dr. Arthur D. Greene (54) 1994 Surgeon - Partner 3,914 *
Tidewater Orthopaedic Associates
Stephen D. Harris (57) 1988 Attorney-at-Law -Partner 9,000 *
Geddy, Harris & Geddy
John Cabot Ishon (52) 1989 President 12,780 *
Hampton Stationery
Eugene M. Jordan (75) 1964 Attorney-at-Law 28,000
Cumming, Hatchett & Jordan, P.C. 1.1%
John B. Morgan, II (52) 1994 President 2,600 *
Morgan-Marrow Insurance
Dr. H. Robert Schappert (60) 1996 Veterinarian - Owner 89,740
Beechmont Veterinary Hospital 3.5%
Robert F. Shuford (61) 1965 Chairman of the Board, 154,510(4)
President & CEO Old Point 5.9%
Financial Corporation
Chairman of the Board,
President & CEO Old
Point National Bank
*Represents less than 1.0% of the total outstanding shares.
36
<PAGE>
(1) Refers to the year in which the individual first became a
director of the Bank. Dr. Richard F. Clark, Gertrude S. Dixon,
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.
(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. Harris, 400 shares, Mr. Ishon,
3,480 shares; Mr. Jordan, 14,000 shares; Mr. Morgan, 2,200 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 Old Point Stock
Option Plan - Mr. Shuford 21,794.
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 Form 4 filings during 1998.
In addition to the executive officer included in the preceding list of
directors, the persons listed below were executive officers of the
Company or its subsidiary as of December 31, 1998.
Executive Principal
Officer Occupation For
Name and (Age) Since (1) Past Five Years
Louis G. Morris (44) 1988 Senior Vice President and Treasurer
Old Point Financial Corporation
Cary B. Epes (50) 1993 Senior Vice President
Old Point Financial Corporation
W. Rodney Rosser (58) 1989 Senior Vice President and Secretary
Old Point Financial Corporation
Margaret P. Causby (48) 1992 Senior Vice President
Old Point Financial Corporation
Each of these executive officers owns less than 1% of the stock of the
Company.
(1) Cary B. Epes was Vice President and Commercial Account Manager at
Crestar Bank. All other executive officers served in virtually the same
capacity with the Company and/or the Bank prior to appointment as an
executive officer.
37
<PAGE>
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 1998 exceeded $100,000.
SUMMARY COMPENSATION TABLE
Annual Compensation
Name
and
Principal All Other
Position Year Salary(1) Bonus(2) Compensation(3)(4)
Robert F. Shuford 1998 $151,200 $34,560 $17,765
Chairman, President 1997 $148,500 $26,000 $16,092
& CEO 1996 $147,900 $10,000 $10,857
W. Rodney Rosser 1998 $ 93,267 $21,600 $10,099
EVP & Trust Officer 1997 $ 86,100 $14,400 $ 8,499
& Secretary 1996 $ 85,500 $ 8,000 $ 6,136
Louis G. Morris 1998 $ 90,247 $21,600 $ 9,051
EVP/CFO 1997 $ 83,000 $14,400 $ 7,636
1996 $ 83,000 $ 8,000 $ 5,262
Cary B. Epes 1998 $ 89,167 $21,600 $ 9,440
EVP/CCO 1997 $ 82,000 $14,400 $ 7,708
1996 $ 82,000 $ 7,500 $ 5,359
Margaret P. Causby 1998 $ 88,167 $21,600 $ 9,035
EVP 1997 $ 78,483 $14,400 $ 7,372
1996 $ 73,387 $ 8,000 $ 4,756
(1) Salary includes directors' fees as follows: Mr. Shuford -
1998, $4,200, 1997, $4,500, and 1996, $3,900.
(2) Bonus consideration for Mr. Shuford is paid in January of each year
following the year in which earned so that year end results could be
evaluated by the Compensation Committee. Bonus consideration for Mr.
Rosser, Mr. Morris, Mr. Epes and Mrs. Causby is paid in the year in which
earned.
38
<PAGE>
(3) Mr. Shuford has received other compensation as follows:
1998 1997 1996
------ ------ ------
Deferred Profit Sharing $ 5,090 $ 4,342 $ 4,395
Cash Profit Sharing 4,811 4,088 0
401(k) Matching Plan 4,410 4,320 4,320
Group Term Insurance 3,454 3,342 2,142
------ ------ ------
Total $17,765 $16,092 $10,857
(4) Mr. Rosser has received other compensation as follows:
1998 1997 1996
------ ------ ------
Deferred Profit Sharing $ 3,156 $ 2,532 $ 2,564
Cash Profit Sharing 2,984 2,385 0
401(k) Matching Plan 2,735 2,520 2,510
Group Term Insurance 1,224 1,062 1,062
------ ------ ------
Total $10,099 $ 8,499 $ 6,136
Mr. Morris has received other compensation as follows:
1998 1997 1996
------ ------ ------
Deferred Profit Sharing $ 3,122 $ 2,551 $ 2,533
Cash Profit Sharing 2,951 2,356 0
401(k) Matching Plan 2,705 2,490 2,490
Group Term Insurance 273 239 239
------ ------ ------
Total $ 9,051 $ 7,636 $ 5,262
Mr. Epes has received other compensation as follows:
1998 1997 1996
------ ------ ------
Deferred Profit Sharing $ 3,087 $ 2,520 $ 2,502
Cash Profit Sharing 2,918 2,328 0
401(k) Matching Plan 2,675 2,460 2,460
Group Term Insurance 760 400 397
------ ------ ------
Total $ 9,440 $ 7,708 $ 5,359
Mrs. Causby has received other compensation as follows:
1998 1997 1996
------ ------ ------
Deferred Profit Sharing $ 3,053 $ 2,408 $ 2,228
Cash Profit Sharing 2,885 2,224 0
401(k) Matching Plan 2,645 2,350 2,190
Group Term Insurance 452 390 338
------ ------ ------
Total $ 9,035 $ 7,372 $ 4,756
39
<PAGE>
Item 12. Security Ownership of Certain Beneficial Owners and Management
Security ownership of certain beneficial owners and management is
detailed in Part III, Item 10. of this Annual Report on Form 10-K.
Item 13. Certain Relationships and Related Transactions
Some of the Company 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, 1998, borrowing by all policy making officers and
directors amounted to $1.8 million. This amount represented 4.5% of
the total equity capital accounts of the Company as of December 31,
1998. 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 Bank expects to have in the future similar banking
transactions with directors, officers, principal stockholders and
their associates.
The law firm of Cumming, Hatchett and Jordan, P.C. serves as
legal counsel to the Bank. Mr. Eugene M. Jordan is a member of the
firm. During 1998, the firm received from the Bank a retainer and
fees totaling $76,223. Morgan Marrow Company of which John B.
Morgan, II is President, provided insurance for which the Bank paid
$268,610 during 1998. The 1998 amount paid includes $218,042 in three
year prepaid premiums for coverage through May 2001. Hampton
Stationery, of which John Cabot Ishon is the owner provided office
furniture and supplies for which the bank paid $104,216. Geddy, Harris
& Geddy, of which Stephen D. Harris is a partner, and Warwick
Plumbing & Heating Corp. of which G. Royden Goodson, III is President
provided products and services to the Bank during 1998.
40
<PAGE>
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, 1998 and 1997
Consolidated Statements of Income
Years Ended December 31, 1998, 1997 and 1996
Consolidated Statements of Changes in Stockholders' Equity
Years Ended December 31, 1998, 1997 and 1996
Consolidated Statements of Cash Flows
Years Ended December 31, 1998, 1997 and 1996
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 Securities 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
Lease Commitments Part I, Item 1
Other Real Estate Owned 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
Proceeds from sales and maturities of securities Part II, Item 8
Premises and Equipment 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
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
41
<PAGE>
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
22 Subsidiaries of the Registrant
23 Not Applicable
24 Consent of Independent Certified Public Accountants
25 Powers of Attorney
27 Financial Data Schedule
28 Not Applicable
29 Not Applicable
B. Reports on Form 8-K:
No reports on form 8-K were filed during the fourth quarter of 1998.
42
<PAGE>
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 26th day of March, 1999.
OLD POINT FINANCIAL CORPORATION
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 26th day of
March, 1999.
/s/Robert F. Shuford President and Director
Robert F. Shuford Principal Executive Officer
/s/ Louis G. Morris Senior Vice President and Treasurer
Louis G. Morris Principal Financial & Accounting Officer
/s/Richard F. Clark * Director
/s/Gertrude S. Dixon * Director
/s/Russell S. Evans, Jr. * Director
/s/G. Royden Goodson, III Director
/s/Dr. Arthur D. Greene Director
/s/Steven D. Harris * Director
/s/John Cabot Ishon * Director
/s/Eugene M. Jordan * Director
/s/John B. Morgan * Director
/s/Dr. H. Robert Schappert * Director
EXHIBIT 22. SUBSIDIARIES OF THE REGISTRANT
The Old Point National Bank of Phoebus, a wholly-owned subsidiary of
the Corporation, is a national banking association subject to
regulation by the Comptroller of the Currency, the Federal Deposit
Insurance Corporation, and the Federal Reserve System.
54
EXHIBIT 24. CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
EGGLESTON SMITH P.C.
CERTIFIED PUBLIC ACCOUNTANTS AND CONSULTANTS
CONSENT OF INDEPENDENT AUDITORS
Board of Directors
Old Point Financial Corporation
We consent to the incorporation by reference in this Annual
Reports on Form 10-K of our report dated January 15, 1999, relating
to the consolidated financial statements of Old Point Financial
Corporation as of December 31, 1998, 1997, and 1996, and for each
of the three-year period ended December 31, 1998.
EGGLESTON SMITH P.C.
/s/ EGGLESTON SMITH P.C.
Newport News, Virginia
March 26, 1999
55
EXHIBIT 25. POWERS OF ATTORNEY
Old Point Financial Corporation
Power of Attorney
I, Russell S. Evans, Jr., do hereby constitute and appoint Robert
F. Shuford and Eugene M. Jordan, my true and lawful attorney-in-fact,
any of whom acting singly is hereby authorized for me and in my name
and on my behalf as a director and/or officer of Old Point Financial
Corporation (the "Corporation"), to act and to execute any and all
instruments as such attorneys or attorney deem necessary or advisable
to enable the Corporation to comply with the Securities Exchange Act
of 1934, as amended ("Act"), and any rules, regulations, policies or
requirements of the Securities Exchange Commission (the "Commission")
in respect thereof in connection with the preparation and filing by
the Corporation with the Commission of its Annual Report on Form 10-K
for the year ended December 31, 1998 and any and all amendments to
such Report, together with such other supplements, statements,
instruments and documents as such attorneys or attorney deem necessary
or appropriate.
I do hereby ratify and confirm all my said attorneys or attorney
shall do or cause to be done by virtue hereof.
WITNESS my execution hereof this 12th day of January, 1999.
/s/Russell S. Evans, Jr. (SEAL)
56
<PAGE>
Old Point Financial Corporation
Power of Attorney
I, Dr. Richard F. Clark, do hereby constitute and appoint Robert
F. Shuford and Eugene M. Jordan, my true and lawful attorney-in-fact,
any of whom acting singly is hereby authorized for me and in my name
and on my behalf as a director and/or officer of Old Point Financial
Corporation (the "Corporation"), to act and to execute any and all
instruments as such attorneys or attorney deem necessary or advisable
to enable the Corporation to comply with the Securities Exchange Act
of 1934, as amended ("Act"), and any rules, regulations, policies or
requirements of the Securities Exchange Commission (the "Commission")
in respect thereof in connection with the preparation and filing by
the Corporation with the Commission of its Annual Report on Form 10-K
for the year ended December 31, 1998 and any and all amendments to
such Report, together with such other supplements, statements,
instruments and documents as such attorneys or attorney deem necessary
or appropriate.
I do hereby ratify and confirm all my said attorneys or attorney
shall do or cause to be done by virtue hereof.
WITNESS my execution hereof this 12th day of January, 1999.
/s/ Dr. Richard F. Clark (SEAL)
57
<PAGE>
Old Point Financial Corporation
Power of Attorney
I, Gertrude S. Dixon, do hereby constitute and appoint Robert F.
Shuford and Eugene M. Jordan, my true and lawful attorney-in-fact, any
of whom acting singly is hereby authorized for me and in my name and
on my behalf as a director and/or officer of Old Point Financial
Corporation (the "Corporation"), to act and to execute any and all
instruments as such attorneys or attorney deem necessary or advisable
to enable the Corporation to comply with the Securities Exchange Act
of 1934, as amended ("Act"), and any rules, regulations, policies or
requirements of the Securities Exchange Commission (the "Commission")
in respect thereof in connection with the preparation and filing by
the Corporation with the Commission of its Annual Report on Form 10-K
for the year ended December 31, 1998 and any and all amendments to
such Report, together with such other supplements, statements,
instruments and documents as such attorneys or attorney deem necessary
or appropriate.
I do hereby ratify and confirm all my said attorneys or attorney
shall do or cause to be done by virtue hereof.
WITNESS my execution hereof this 12th day of January, 1999.
/s/ Gertrude S. Dixon (SEAL)
58
<PAGE>
Old Point Financial Corporation
Power of Attorney
I, Stephen D. Harris, do hereby constitute and appoint Robert F.
Shuford and Eugene M. Jordan, my true and lawful attorney-in-fact, any
of whom acting singly is hereby authorized for me and in my name and
on my behalf as a director and/or officer of Old Point Financial
Corporation (the "Corporation"), to act and to execute any and all
instruments as such attorneys or attorney deem necessary or advisable
to enable the Corporation to comply with the Securities Exchange Act
of 1934, as amended ("Act"), and any rules, regulations, policies or
requirements of the Securities Exchange Commission (the "Commission")
in respect thereof in connection with the preparation and filing by
the Corporation with the Commission of its Annual Report on Form 10-K
for the year ended December 31, 1998 and any and all amendments to
such Report, together with such other supplements, statements,
instruments and documents as such attorneys or attorney deem necessary
or appropriate.
I do hereby ratify and confirm all my said attorneys or attorney
shall do or cause to be done by virtue hereof.
WITNESS my execution hereof this 12th day of January, 1999.
/s/ Stephen D. Harris (SEAL)
59
<PAGE>
Old Point Financial Corporation
Power of Attorney
I, John Cabot Ishon, do hereby constitute and appoint Robert F.
Shuford and Eugene M. Jordan, my true and lawful attorney-in-fact, any
of whom acting singly is hereby authorized for me and in my name and
on my behalf as a director and/or officer of Old Point Financial
Corporation (the "Corporation"), to act and to execute any and all
instruments as such attorneys or attorney deem necessary or advisable
to enable the Corporation to comply with the Securities Exchange Act
of 1934, as amended ("Act"), and any rules, regulations, policies or
requirements of the Securities Exchange Commission (the "Commission")
in respect thereof in connection with the preparation and filing by
the Corporation with the Commission of its Annual Report on Form 10-K
for the year ended December 31, 1998 and any and all amendments to
such Report, together with such other supplements, statements,
instruments and documents as such attorneys or attorney deem necessary
or appropriate.
I do hereby ratify and confirm all my said attorneys or attorney
shall do or cause to be done by virtue hereof.
WITNESS my execution hereof this 12th day of January, 1999.
/s/ John Cabot Ishon (SEAL)
60
<PAGE>
Old Point Financial Corporation
Power of Attorney
I, Eugene M. Jordan, do hereby constitute and appoint Robert F.
Shuford and Eugene M. Jordan, my true and lawful attorney-in-fact, any
of whom acting singly is hereby authorized for me and in my name and
on my behalf as a director and/or officer of Old Point Financial
Corporation (the "Corporation"), to act and to execute any and all
instruments as such attorneys or attorney deem necessary or advisable
to enable the Corporation to comply with the Securities Exchange Act
of 1934, as amended ("Act"), and any rules, regulations, policies or
requirements of the Securities Exchange Commission (the "Commission")
in respect thereof in connection with the preparation and filing by
the Corporation with the Commission of its Annual Report on Form 10-K
for the year ended December 31, 1998 and any and all amendments to
such Report, together with such other supplements, statements,
instruments and documents as such attorneys or attorney deem necessary
or appropriate.
I do hereby ratify and confirm all my said attorneys or attorney
shall do or cause to be done by virtue hereof.
WITNESS my execution hereof this 12th day of January, 1999.
/s/ Eugene M. Jordan (SEAL)
61
<PAGE>
Old Point Financial Corporation
Power of Attorney
I, Robert F. Shuford, do hereby constitute and appoint Robert F.
Shuford and Eugene M. Jordan, my true and lawful attorney-in-fact, any
of whom acting singly is hereby authorized for me and in my name and
on my behalf as a director and/or officer of Old Point Financial
Corporation (the "Corporation"), to act and to execute any and all
instruments as such attorneys or attorney deem necessary or advisable
to enable the Corporation to comply with the Securities Exchange Act
of 1934, as amended ("Act"), and any rules, regulations, policies or
requirements of the Securities Exchange Commission (the "Commission")
in respect thereof in connection with the preparation and filing by
the Corporation with the Commission of its Annual Report on Form 10-K
for the year ended December 31, 1998 and any and all amendments to
such Report, together with such other supplements, statements,
instruments and documents as such attorneys or attorney deem necessary
or appropriate.
I do hereby ratify and confirm all my said attorneys or attorney
shall do or cause to be done by virtue hereof.
WITNESS my execution hereof this 12th day of January, 1999.
/s/ Robert F. Shuford (SEAL)
62
<PAGE>
Old Point Financial Corporation
Power of Attorney
I, Dr. Arthur D. Greene, do hereby constitute and appoint Robert
F. Shuford and Eugene M. Jordan, my true and lawful attorney-in-fact,
any of whom acting singly is hereby authorized for me and in my name
and on my behalf as a director and/or officer of Old Point Financial
Corporation (the "Corporation"), to act and to execute any and all
instruments as such attorneys or attorney deem necessary or advisable
to enable the Corporation to comply with the Securities Exchange Act
of 1934, as amended ("Act"), and any rules, regulations, policies or
requirements of the Securities Exchange Commission (the "Commission")
in respect thereof in connection with the preparation and filing by
the Corporation with the Commission of its Annual Report on Form 10-K
for the year ended December 31, 1998 and any and all amendments to
such Report, together with such other supplements, statements,
instruments and documents as such attorneys or attorney deem necessary
or appropriate.
I do hereby ratify and confirm all my said attorneys or attorney
shall do or cause to be done by virtue hereof.
WITNESS my execution hereof this 12th day of January, 1999.
/s/ Dr. Arthur D. Greene (SEAL) 63
<PAGE>
Old Point Financial Corporation
Power of Attorney
I, John B. Morgan, II, do hereby constitute and appoint Robert F.
Shuford and Eugene M. Jordan, my true and lawful attorney-in-fact, any
of whom acting singly is hereby authorized for me and in my name and
on my behalf as a director and/or officer of Old Point Financial
Corporation (the "Corporation"), to act and to execute any and all
instruments as such attorneys or attorney deem necessary or advisable
to enable the Corporation to comply with the Securities Exchange Act
of 1934, as amended ("Act"), and any rules, regulations, policies or
requirements of the Securities Exchange Commission (the "Commission")
in respect thereof in connection with the preparation and filing by
the Corporation with the Commission of its Annual Report on Form 10-K
for the year ended December 31, 1998 and any and all amendments to
such Report, together with such other supplements, statements,
instruments and documents as such attorneys or attorney deem necessary
or appropriate.
I do hereby ratify and confirm all my said attorneys or attorney
shall do or cause to be done by virtue hereof.
WITNESS my execution hereof this 12th day of January, 1999.
/s/ John B. Morgan, II (SEAL)
64
<PAGE>
Old Point Financial Corporation
Power of Attorney
I, G. Royden Goodson, III, do hereby constitute and appoint
Robert F. Shuford and Eugene M. Jordan, my true and lawful attorney-in-
fact, any of whom acting singly is hereby authorized for me and in my
name and on my behalf as a director and/or officer of Old Point
Financial Corporation (the "Corporation"), to act and to execute any
and all instruments as such attorneys or attorney deem necessary or
advisable to enable the Corporation to comply with the Securities
Exchange Act of 1934, as amended ("Act"), and any rules, regulations,
policies or requirements of the Securities Exchange Commission (the
"Commission") in respect thereof in connection with the preparation
and filing by the Corporation with the Commission of its Annual Report
on Form 10-K for the year ended December 31, 1998 and any and all
amendments to such Report, together with such other supplements,
statements, instruments and documents as such attorneys or attorney
deem necessary or appropriate.
I do hereby ratify and confirm all my said attorneys or attorney
shall do or cause to be done by virtue hereof.
WITNESS my execution hereof this 12th day of January, 1999.
/s/ G. Royden Goodson, III (SEAL)
65
<PAGE>
Old Point Financial Corporation
Power of Attorney
I, Dr. H. Robert Schappert, do hereby constitute and appoint
Robert F. Shuford and Eugene M. Jordan, my true and lawful attorney-in-
fact, any of whom acting singly is hereby authorized for me and in my
name and on my behalf as a director and/or officer of Old Point
Financial Corporation (the "Corporation"), to act and to execute any
and all instruments as such attorneys or attorney deem necessary or
advisable to enable the Corporation to comply with the Securities
Exchange Act of 1934, as amended ("Act"), and any rules, regulations,
policies or requirements of the Securities Exchange Commission (the
"Commission") in respect thereof in connection with the preparation
and filing by the Corporation with the Commission of its Annual Report
on Form 10-K for the year ended December 31, 1998 and any and all
amendments to such Report, together with such other supplements,
statements, instruments and documents as such attorneys or attorney
deem necessary or appropriate.
I do hereby ratify and confirm all my said attorneys or attorney
shall do or cause to be done by virtue hereof.
WITNESS my execution hereof this 12th day of January, 1999.
/s/ Dr. H. Robert Schappert (SEAL)
66
EXHIBIT 3. ARTICLES OF INCORPORATION AND BYLAWS
AMENDED: 04.25.95
(ART. III-A - ENTIRETY)
ARTICLES OF INCORPORATION
OLD POINT FINANCIAL CORPORATION
I. Name
The name of the Corporation is Old Point Financial Corporation.
II. Purpose
The purpose for which the Corporation is organized is to act as a
bank holding company and to transact any and all lawful business, not
required to be specifically stated in the Articles of Incorporation,
for which corporations may be incorporated under the Virginia Stock
Corporation Act.
III. Capital Stock
A. General Authorization. The Corporation shall have authority to
issue 6,000,000 shares of Common Stock, par value $5.00 per
share.
B. No Preemptive Rights. Shareholders shall have no preemptive
rights to acquire any unissued shares of the Corporation.
C. Cumulative Voting. At all elections of directors of the
Corporation, each holder of Common Stock shall be entitled to
cast as many votes as shall equal the number of votes which he
would be entitled to cast for the election of directors with
respect to his shares of Common Stock multiplied by the number of
directors to be elected, and he may cast all such votes for a
single director or may distribute them among as many candidates
as he may see fit.
IV. Certain Business Combinations
A. Higher Vote for Certain Business Combinations. The affirmative
vote of the holders of not less than 75% of the outstanding
shares of Common Stock of the Corporation shall be required for
the approval or authorization of a Business Combination (as
hereinafter defined). The foregoing shall not apply to a Business
Combination, and such Business Combination shall require only
such approval as is required by law, if it shall have been
approved by the affirmative vote of at least 80% of the entire
Board of Directors.
B. Certain Definitions. For purposes of this Article IV:
1.A "Business Combination" shall mean (i) any merger or
consolidation of the Corporation of a subsidiary with or into,
or the exchange of shares of Common Stock of the Corporation
for cash or property of, an Acquiring Person, (ii) any sale,
lease, exchange or other disposition of all or substantially
all of the assets of the Corporation or a subsidiary to or
with an Acquiring Person, (iii) any reclassification of
securities (including any reverse stock split),
recapitalization or other transaction that would have the
effect of increasing the voting power of an Acquiring Person,
or (iv) any plan or proposal for the liquidation or
dissolution of the Corporation proposed by or on behalf of an
Acquiring Person.
2.An "Acquiring Person" shall mean any individual, firm,
corporation, trust or any other entity which: (i)
beneficially owns, together with its affiliates and associated
persons, 5% or more of the outstanding shares of Common Stock
of the Corporation; or (ii) though owning less than 5% of such
shares, proposes or undertakes to obtain control or exercise a
controlling influence over the Corporation as determined by
the Board of Directors.
44
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C. Amendment or Repeal. The provisions of this Article shall not be
amended or repealed, nor shall any provision of these Articles of
Incorporation be adopted that is inconsistent with this Article,
unless such action shall have been approved by the affirmative
vote of either: (i) the holders of at least 75% of the
outstanding shares of Common Stock; or (ii) 80% of the entire
Board of Directors and the holders of the requisite number of
shares required under Virginia law for the amendment of articles
of incorporation.
D. Certain Determinations by the Board of Directors. When
evaluating a proposed Business Combination, the Board of
Directors of the Corporation shall, in connection with the
exercise of its judgment in determining what is in the best
interests of the Corporation and its stockholders, give due
consideration not only to price or other consideration being
offered, but also to all other relevant factors, including,
without limitation, (i) the financial and managerial resources
and future prospects of the Acquiring Person, (ii) the possible
effects on the business, employees, customers and creditors of
the Corporation and its subsidiaries. In evaluating any proposed
Business Combination, the Board of Directors shall be deemed to
be performing their duly authorized duties and acting in good
faith and in the best interests of the Corporation and its
stockholders.
Any determination made in good faith by the Board of Directors,
on the basis of information at the time available to it, whether
(i) an individual, firm, corporation or other entity is an
Acquiring Person, (ii) the number of shares of Common Stock
beneficially owned, directly or indirectly, by such person is
more than 5% of the outstanding shares, or (iii) any individual,
firm, corporation or other entity is an "affiliate" or
"associated person" of an Acquiring Person, shall be conclusive
and binding for all purposes of this Article IV.
V. Directors
The number of directors shall be fixed by the Bylaws. Absent any
Bylaw fixing the number of directors, that number shall be 25.
VI. Indemnification and Limit on Liability
A. To the full extent permitted by the Virginia Stock Corporation
Act, as it exists on the date hereof or may hereafter be amended,
each director and officer shall be indemnified by the Corporation
against liabilities, fines, penalties and claims imposed upon or
asserted against him (including amounts paid in settlement) by
reason of having been such director or officer, whether or not
then continuing so to be, and against all expenses (including
counsel fees) reasonably incurred by him in connection therewith,
except in relation to matters as to which he shall have been
finally adjudged liable by reason of his willful misconduct or a
knowing violation of criminal law in the performance of his duty
as such director or officer. The right of indemnification hereby
provided shall not be exclusive of any other rights to which any
director may be entitled.
B. To the full extent that the Virginia Stock Corporation Act, as it
exists on the date hereof or may hereafter be amended, permits
the limitation or elimination of the liability of directors or
officers, a director or officer of the Corporation shall not be
liable to the Corporation or its stockholders for monetary
damages.
C. The Board of Directors is hereby empowered, by a majority vote of
a quorum of disinterested directors, to indemnify or contract in
advance to indemnify any person not specified in subsection (A)
of this Article against liabilities, fines, penalties and claims
imposed upon or asserted against him (including amounts paid in
settlement) by reason of having been an employee, agent or
consultant of the Corporation, whether or not then continuing so
to be, and against all expenses (including counsel fees)
reasonably incurred by him in connection therewith, to the same
extent as if such person were specified as one to whom
indemnification is granted in subsection (a) of this Article.
45
<PAGE>
D. Every reference in this Article to director, officer, employee,
agent or consultant shall include (i) every director, officer,
employee, agent or consultant of the Corporation or any
consultant of the Corporation or any corporation the majority of
the voting stock of which is owned directly or indirectly by the
Corporation, (ii) every former director, officer, employee, agent
or consultant of the Corporation, (iii) every person who may have
served at the request of or on behalf of the Corporation as a
director, officer, employee, agent, consultant or trustee of
another corporation, partnership, joint venture, trust or other
entity, and (iv) in all of such cases, his executors and
administrators.
E. The provisions of this Article VI shall be applicable from and
after its adoption even though some or all of the underlying
conduct or events relating to such a proceeding may have occurred
before such adoption. No amendment, modification or repeal of
this Article VI shall diminish the rights provided hereunder to
any person arising from conduct or events occurring before the
adoption of such amendment, modification or repeal.
F. In the event there has been a change in the composition of a
majority of the Board of Directors after the date of the alleged
act or omission with respect to which indemnification is claimed,
any determination as to indemnification and advancement of
expenses with respect to any claim for indemnification made
pursuant to subsection (A) of this Article VI shall be made by
special legal counsel agreed upon by the Board of Directors and
the proposed indemnitee are unable to agree upon such special
legal counsel, the Board of Directors and the proposed indemnitee
each shall select a nominee, and the nominee shall select such
special legal counsel.
08.11.92
BYLAWS
OF
OLD POINT FINANCIAL CORPORATION
ARTICLE I.
STOCKHOLDERS
AMENDED: 08/11/92
1.1 Annual Meeting. The annual meeting of the stockholders of
the Corporation for the election of directors and for the transaction
of such other business authorized or required to be transacted by the
stockholders shall be held in Hampton, Virginia, at the main office of
the Old Point National Bank, or at any other convenient place
authorized by the Board of Directors, on the fourth Tuesday in April
of each year, but if no election of directors is held on that day, it
may be held on a subsequent date designated by the Board of Directors
or stockholders in accordance with law.
1.2 Special Meetings. Special meetings of the stockholders for
any purpose or purposes shall be held whenever called by the Chairman
of the Board, or by the President if there is no Chairman of the
Board, or by the Board of Directors or by the holders of not less than
one-tenth of all the shares entitled to vote at the meeting.
1.3 Notice of Meetings. Notice of the annual or any special
meeting shall be mailed at least ten days, and not more than fifty
days, prior to the date of the meeting to each registered stockholder
at his address as the same appears on the books of the Corporation. If
the meeting shall be called to act on an amendment to the Articles of
Incorporation or on a plan of merger, consolidation or exchange, or on
a reduction of stated capital, or upon a proposed sale of all or
substantially all of the assets of the Corporation, notice shall be
given not less than twenty-five nor more than fifty days before the
date of the meeting, and such notice shall be accompanied by a copy of
the proposed amendment or plan of merger, consolidation, or exchange,
or the proposed plan for reduction of capital.
46
<PAGE>
1.4 Quorum. At any meeting of the stockholders the holders of a
majority of the shares issued and outstanding, having voting power
(which shall not include any treasury stock held by the Corporation),
being present in person or represented by proxy, shall be a quorum for
all purposes, including the election of directors.
1.5 Voting. At all meetings of the stockholders, stockholders
shall be entitled to vote, either in person or by proxy duly appointed
by an instrument in writing, subscribed by such stockholder or by his
authorized attorney; at all meetings such stockholder shall have one
vote for each share of stock entitled under the provisions of the
charter to voting rights which may be registered in his name upon the
books of the Corporation on the day preceding that on which the
transfer books may be closed by order of the Board of Directors.
Treasury stock held by the Corporation shall not be entitled to vote.
ARTICLE II
BOARD OF DIRECTORS
2.1 Number. The business and affairs of the Corporation shall
be managed and controlled by a Board of Directors which shall consist
of not less than five nor more than twenty-five shareholders, the
exact number within such minimum and maximum limits to be fixed and
determined from time to time by the Board of Directors or by
resolution of the shareholders at any meeting thereof. A director may
be removed at any time with or without cause by a vote of the
stockholders.
2.2 Term of Office. Each director shall serve for the term of
one year and until his successor shall have been duly chosen and
qualified.
2.3 Vacancies. Any vacancy occurring in the Board of Directors,
including a vacancy resulting from an increase of not more than two in
number of directors, may be filled by the affirmative vote of a
majority of the remaining directors though less than a quorum of the
Board of Directors.
2.4 Stockholder Nominations of Directors. Subject to the rights
of holders of any class or series of stock having a preference over
the Common Stock as to dividends or upon liquidation, nominations for
the election of Directors shall be made by the Board of Directors or a
committee appointed by the Board of Directors or by any stockholder
entitled to vote in the election of Directors generally. However, any
stockholder entitled to vote in the election of Directors generally
may nominate one or more persons for election as Directors at a
meeting only if written notice of such stockholder's intent to make
such nomination or nominations has been given, either by personal
delivery or by United States mail, postage prepaid, to the President
of the Corporation not less than 14 days nor more than 50 days in
advance of such meeting, provided, however, that if less than 21 days'
notice of the meeting is given to stockholders, such nomination shall
be mailed or delivered to the President of the Holding Company not
later than the close of business on the seventh day following the day
on which the notice of the meeting was mailed. Each such notice shall
set forth (a) the name and address of the stockholder who intends to
make the nomination and of the person or persons to be nominated; (b)
a representation that the stockholder is a holder of record of stock
of the Corporation entitled to vote at such meeting and intends to
appear in person or by proxy at the meeting to nominate the person or
persons specified in the notice; (c) a description of all arrangements
or understandings between the stockholder and each nominee and any
other person or persons (naming such person or persons) pursuant to
which the nomination or nominations are to be made by the stockholder;
(d) the principal occupation of each nominee; (e) the total number of
shares that to the knowledge of the notifying stockholder will be
voted for each of the nominees; and (f) the consent of each nominee to
serve as a Director of the Corporation if so elected. The Chairman of
the meeting may refuse to acknowledge the nomination of any person not
made in compliance with the foregoing procedure.
47
<PAGE>
ARTICLE III
DIRECTORS' MEETINGS
3.1 Regular Meetings. Regular meetings of the Board of
Directors shall be held annually, immediately following each annual
meeting of stockholders, for the purpose of electing officers and
carrying on such other business as may properly come before such
meeting, and, if necessary, immediately following each special meeting
of stockholders to consider and act upon any matter which may properly
come before such meeting. Any such meeting shall be held at the place
where the stockholders' meeting was held. The Board of Directors may
also adopt a schedule of additional meetings which shall be considered
regular meetings, and such meetings shall be held at the time and
place, within or without the Commonwealth of Virginia, as the Chairman
or, in his absence, the President shall designate.
3.2 Special Meetings. Special meetings of the Board of
Directors shall be held on the call of the Chairman, the President,
any three members of the Board of Directors or a majority of the Board
of Directors at the principal office of the Corporation or at such
other place as shall be designated.
3.3 Telephone Meetings. The Board of Directors may participate
in a meeting by means of conference telephone or similar
communications equipment whereby all persons participating in the
meeting can hear each other, and participation by such means shall
constitute presence in person at such meeting. When such a meeting is
conducted by means of conference telephone or similar communications
equipment, a written record shall be made of the action taken at such
meeting.
3.4 Notice of Meetings. No notice need be given of regular
meetings of the Board of Directors.
Notice of special meetings of the Board of Directors shall be
mailed to each director at least three (3) days, or telegraphed at
least two (2) days prior to the date of the meeting and must set forth
the purpose for which the meeting is called.
3.5 Quorum; Required Vote. A majority of the directors shall
constitute a quorum for the transaction of business by the Board of
Directors. The act of the majority of the directors present at a
meeting at which a quorum is present shall be the act of the Board of
Directors unless the act of a greater number is required by law or
these Bylaws.
3.6 Waiver of Notice. Notwithstanding any other provisions of
law, the Articles of Incorporation or these Bylaws, whenever notice of
any meeting for any purpose is required to be given to any director a
waiver thereof in writing, signed by the person entitled to said
notice, whether before or after the time stated therein, shall be the
equivalent to the giving of such notice.
A director who attends a meeting shall be deemed to have had
timely and proper notice of the meeting unless he attends for the
express purpose of objecting to the transaction of any business
because the meeting is not lawfully called or convened.
3.7 Actions by Directors Without Meeting. Any action required
to be taken at a meeting of the directors, or any action which may be
taken at a meeting of the directors, may be taken without a meeting if
a consent in writing, setting forth the action, shall be signed either
before or after such action by all of the directors. Such consent
shall have the same force and effect as a unanimous vote.
48
<PAGE>
ARTICLE IV
COMMITTEES OF DIRECTORS
4.1 Executive Committee. The Board of Directors, by resolution
adopted by a majority of the number of directors fixed by these
Bylaws, may designate four or more directors to constitute an
Executive Committee. A majority of the members of the Executive
Committee shall constitute a quorum. The Executive Committee shall
meet on the call of any of its members. Notice of any such meeting
shall be given by mail, telephone, telegraph or other means by the
close of business on the day before such meeting is to be held. The
Executive Committee shall have and may exercise all of the authority
of the Board of Directors except to approve (i) an amendment of the
Articles of Incorporation; (ii) a plan of merger or consolidation;
(iii) a plan of exchange under which the Corporation would be
acquired; (iv) the sale, lease or exchange, or the mortgage or pledge
for a consideration other than money, of all, or substantially all,
the property and assets of the Corporation otherwise than in the usual
and regular course of its business; (v) the voluntary dissolution of
the Corporation; (vi) revocation of voluntary dissolution proceedings;
(vii) any employee benefit plan involving the issuance of common
stock; (viii) the compensation paid to a member of the Executive
Committee; or (ix) an amendment of these Bylaws.
4.2 Audit Committee. The Board of Directors may appoint an
Audit Committee consisting of not less than three directors, none of
whom shall be officers, which Committee shall regularly review the
adequacy of internal financial controls, review with the Corporation's
independent public accountants the annual audit and other financial
statements, and recommend the selection of the Corporation's
independent public accountants.
The Audit Committee of the Board of Directors of The Old Point
National Bank may also serve as the Audit Committee for the Board of
Directors of the Corporation.
4.3 Other Committees. The Board of Directors may designate such
other committees with limited authority as it may deem advisable.
4.4 Telephone Meetings. Committees may participate in meetings
by means of conference telephone or similar communications equipment
whereby all persons participating in the meeting can hear each other,
and participation by such means shall constitute presence in person at
such meeting. When such meeting is conducted by means of a conference
telephone or similar communications equipment, a written record shall
be made of the action taken at such meeting.
4.5 Actions by Committees Without Meetings. Any action which
may be taken at a committee meeting, may be taken without a meeting if
a consent in writing, setting forth the action, shall be signed either
before or after such action by all of the members of the committee.
Such consent shall have the same force and effect as an unanimous
vote.
4.6 Committee Rules. Unless the Board of Directors otherwise
provides, each committee designated by the Board of Directors may
adopt, amend and repeal rules for the conduct of its business. In the
absence of direction by the Board of Directors or a provision in the
rules of such committee to the contrary, a majority of the entire
authorized number of members of such committee shall constitute a
quorum for the transaction of business, the vote of a majority of the
members present at a meeting at the time of such vote if a quorum is
then present shall be the act of such committee. Except to the extent
that these Bylaws contain provisions to the contrary, in other
respects each committee shall conduct its business in the same manner
as the Board of Directors is required to conduct its business.
49
<PAGE>
ARTICLE V
OFFICERS AND EMPLOYEES
5.1 Chairman of the Board. The Board of Directors may appoint
one of its members to be Chairman of the Board to serve at the
pleasure of the Board. He shall preside at all meetings of the Board
of Directors. The Chairman of the Board shall supervise the carrying
out of the policies adopted or approved by the Board. He shall have
general executive powers, as well as the specific powers conferred by
these Bylaws. He shall also have and may exercise such further powers
and duties as from time to time may be conferred upon or assigned to
him by the Board of Directors.
5.2 President. The Board of Directors shall appoint one of its
members to be President of the Corporation. In the absence of the
Chairman, he shall preside at any meeting of the Board. The President
shall have general executive powers and shall have and may exercise
any and all other powers and duties pertaining by law, regulation, or
practice, to the Office of President or imposed by these Bylaws. He
shall also have and may exercise such further powers and duties as
from time to time may be conferred upon or assigned to him by the
Board of Directors.
5.3 Vice President. The Board of Directors may appoint one or
more Vice Presidents. Each Vice President shall have such powers and
duties as may be assigned to him by the Board of Directors. One Vice
President shall be designated by the Board of Directors, in the
absence of the President, to perform all the duties of the President.
5.4 Secretary. The Board of Directors shall appoint a Secretary
or other designated officer who shall be Secretary of the Board and of
the Corporation, and shall keep accurate minutes of all meetings. He
shall attend to the giving of all notices required by these Bylaws to
be given. He shall be custodian of the corporate seal, records,
documents and papers of the Corporation. He shall provide for the
keeping of proper records of all transactions of the Corporation. He
shall have and may exercise any and all other powers and duties
pertaining by law, regulation or practice, to the Office of Secretary
or imposed by these Bylaws. He shall also perform such other duties as
may be assigned to him, from time to time, by the Board of Directors.
5.5 Other Officers. The Board of Directors may appoint such
other officers as from time to time may appear to the Board of
Directors to be required or desirable to transact the business of the
Corporation. Such officers shall respectively exercise such powers and
perform such duties as to pertain to their several offices, or as may
be conferred upon, or assigned to, them by the Board of Directors, the
Chairman of the Board, or the President.
5.6 Clerks and Agents. The Board of Directors may appoint, from
time to time, such clerks, agents and employees as it may deem
advisable for the prompt and orderly transaction of the business of
the Corporation, define their duties, fix the salaries to be paid to
them and dismiss them. Subject to the authority of the Board of
Directors, the President, or any other officer of the Corporation
authorized by him, may appoint and dismiss all or any clerks, agents
and employees and prescribe their duties and the conditions of their
employment, and from time to time fix their compensation.
5.7 Tenure of Office. The President shall hold his office for
the current year for which the Board of which he shall be a member was
elected, unless he shall resign, become disqualified, or be removed;
and any vacancy occurring in the Office of President shall be filled
promptly by the Board of Directors.
50
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ARTICLE VI
CERTIFICATES OF STOCK
6.1 Form and Issuance. Certificates of stock shall be in such
form as may be approved by the Board of Directors and shall be signed
by the President or any Vice President and the Secretary or an
Assistant Secretary or the Treasurer or an Assistant Treasurer, and
may (but need not) be sealed with the seal of Corporation or a
facsimile thereof. Any such signature may be a facsimile.
6.2 Lost, Stolen or Destroyed Stock Certificates; Issuances of
New Certificates. The Corporation may issue a new certificate of
stock in the place of any certificate theretofore issued by it,
alleged to have been lost, stolen or destroyed, and the Corporation
may require the owner of the lost, stolen or destroyed certificate, or
his legal representative, to give the Corporation a bond sufficient to
indemnify it against any claim that may be made against it on account
of the alleged loss, theft or destruction of any such certificate or
the issuance of such new certificate.
6.3 Transfer. The Board of Directors shall have power and
authority to make all such rules and regulations as they may deem
expedient concerning the issue, registration and transfer of
certificates of stock and may appoint transfer agents or clerks and
registrars thereof. Unless otherwise provided, transfers of shares of
stock by the Corporation shall be made upon its books by surrender of
the certificates for the shares transferred accompanied by an
assignment in writing by the holder and may be accomplished either by
the holder in person or by a duly authorized attorney-in-fact.
6.4 Recognition of Other Stock Certificates. The Corporation
will recognize as its own common stock certificates those stock
certificates representing shares of common stock of The Old Point
National Bank of Phoebus, which certificates have not been heretofore
exchanged for certificates representing shares of common stock of the
Corporation.
ARTICLE VII
AMENDMENTS
7.1 New Bylaws and Alterations. These Bylaws may be amended or
repealed and new Bylaws may be made at any regular or special meeting
of the Board of Directors by the vote of a majority thereof. However,
Bylaws made by the Board of Directors may be repealed or changed and
new Bylaws may be made by the stockholders and the stockholders may
prescribe that any Bylaw made by them shall not be altered, amended or
repealed by the directors.
ARTICLE VIII
CORPORATE SEAL
8.1 The President, any Vice President, the Secretary or any
Assistant Secretary, or other officer thereunto designated by the
Board of Directors, shall have the authority to affix the corporate
seal to any document requiring such seal, and to attest the same. Such
seal shall be substantially in the following form:
ARTICLE IX
MISCELLANEOUS PROVISIONS
9.1 Fiscal Year. The fiscal year of the Corporation shall be
the calendar year.
9.2 Execution of Instruments. All agreements, indentures,
mortgages, deeds, conveyances, transfers, certificates, declarations,
receipts, discharges, releases, satisfactions, settlements, petitions,
schedules, accounts, affidavits, bonds, undertakings, proxies and
other instruments or documents may be signed, executed, acknowledged,
verified, delivered or accepted in behalf of the Corporation by the
Chairman of the Board, or the President, or any Vice President, or the
Secretary. Any such instruments may also be executed, acknowledged,
verified, delivered or accepted in behalf of the Corporation in such
other manner and by such other officers as the Board of Directors may
from time to time direct. The provisions of this Section 9.2 are
supplementary to any other provision of these Bylaws.
51
<PAGE>
9.3 Records. The Articles of Incorporation, the Bylaws and the
proceedings of all meetings of the shareholders, the Board of
Directors, standing committees of the Board, shall be recorded in
appropriate minute books provided for the purpose. The minutes of each
meeting shall be signed by the Secretary or other officer appointed to
act as Secretary of the meeting.
ARTICLE X
EMERGENCY BYLAWS
10.1 Effect.
The provision of this Article X shall be effective during any
emergency resulting from an attack on the United States or any nuclear
or atomic disaster (hereinafter called an "Emergency").
10.2 Board of Directors.
During an emergency, the director or directors in attendance at
the meeting shall constitute a quorum. A meeting of the Board of
Directors may be called by any director or officer of the Corporation.
Notice of any meeting during an emergency may be given only to such of
the directors as it may be feasible to reach at the time and by such
means as may be feasible at the time, including publication or radio.
If no director is present, the three most senior officers of the
Corporation, as hereinafter defined, present shall be deemed directors
for the purpose of such meeting and shall have all of the authority of
the Board of Directors. As used in this Article, officers shall take
seniority as follows:
President
Executive Vice President (if the Board of Directors has elected such
an officer)
Senior Vice President (if the Board of Directors has elected such
an officer)
First Vice President (if the Board of Directors has elected
such an officer)
Vice President (if the Board of Directors has elected such an
officer)
Treasurer
Assistant Vice President (if the Board of Directors has elected such
an officer)
Assistant Treasurer (if the Board of Directors has elected such
an officer)
Secretary
52
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Within each officer class, officers shall take seniority on the
basis of length of service in such office or, in the event of
equality, length of service as an officer of the Corporation.
10.3 Executive Authority.
The Board of Directors shall provide lines of succession of
executive authority which, until altered by the Board of Directors
either before or during an emergency, shall be effective during an
emergency.
10.4 Operations.
It shall be the duty of the senior officer present at each office
of the Corporation during an emergency when communication with the
President is impractical, and he is hereby authorized, to take such
action as he shall think necessary or desirable to protect the assets
of the Corporation and provide service to its customers.
10.5 Indemnity.
No officer, director or employee acting in accordance with this
Article shall be liable except for willful misconduct.
53
<PAGE>
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