10-Q 1 uwhr-10q_20160930.htm 10-Q uwhr-10q_20160930.htm

 

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2016

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                      to                     .

COMMISSION FILE NUMBER 000-22062

 

UWHARRIE CAPITAL CORP

(Exact name of registrant as specified in its charter)

 

 

NORTH CAROLINA

 

56-1814206

(State or Other Jurisdiction of

Incorporation or Organization)

 

(I.R.S. Employer

Identification No.)

 

 

 

132 NORTH FIRST STREET

ALBEMARLE, NORTH CAROLINA

 

28001

(Address of Principal Executive Offices)

 

(Zip Code)

Registrant’s Telephone number, including area code: (704) 983-6181

N/A

(Former name, former address and former fiscal year, if changed since last report)

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.      Yes      No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes      No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

 

Accelerated filer

 

 

 

 

 

 

 

 

Non-accelerated filer

 

☐ (Do not check if a smaller reporting company.)

 

Smaller reporting company

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).      Yes      No

Indicate the number of shares outstanding of each of the issuer’s classes of common stock as of the latest practicable date: 6,925,408 shares of common stock outstanding as of October 26, 2016.

 

 

 

 


 

Table of Contents

 

 

 

 

 

Page No.

 

 

 

 

 

Part I.

 

FINANCIAL INFORMATION

 

 

 

 

 

 

 

Item 1 -

 

Financial Statements (Unaudited)

 

 

 

 

 

 

 

 

 

Consolidated Balance Sheets September 30, 2016 and December 31, 2015

 

3

 

 

 

 

 

 

 

Consolidated Statements of Income for the Three and Nine Months Ended September 30, 2016 and 2015

 

4

 

 

 

 

 

 

 

Consolidated Statements of Comprehensive Income for the Three and Nine Months Ended September 30, 2016 and 2015

 

5

 

 

 

 

 

 

 

Consolidated Statements of Changes in Shareholders’ Equity for the Nine Months Ended September 30, 2016

 

6

 

 

 

 

 

 

 

Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2016 and 2015

 

7

 

 

 

 

 

 

 

Notes to Consolidated Financial Statements

 

8

 

 

 

 

 

Item 2 -

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

27

 

 

 

 

 

Item 3 -

 

Quantitative and Qualitative Disclosures about Market Risk

 

34

 

 

 

 

 

Item 4 -

 

Controls and Procedures

 

34

 

 

 

 

 

Part II.

 

OTHER INFORMATION

 

 

 

 

 

 

 

Item 1 -

 

Legal Proceedings

 

34

 

 

 

 

 

Item 1A -

 

Risk Factors

 

34

 

 

 

 

 

Item 2 -

 

Unregistered Sales of Equity Securities and Use of Proceeds

 

35

 

 

 

 

 

Item 3 -

 

Defaults Upon Senior Securities

 

35

 

 

 

 

 

Item 4 -

 

Mine Safety Disclosures

 

35

 

 

 

 

 

Item 5 -

 

Other Information

 

35

 

 

 

 

 

Item 6 -

 

Exhibits

 

36

 

 

 

 

 

 

 

Exhibit Index

 

38

 

-2-


 

Uwharrie Capital Corp and Subsidiaries

Consolidated Balance Sheets

 

Part I. Financial Information

Item 1

Financial Statements

 

 

 

September 30,

2016

(Unaudited)

 

 

December 31,

2015*

 

 

 

(dollars in thousands)

 

ASSETS

 

 

 

 

 

 

 

 

Cash and due from banks

 

$

7,400

 

 

$

7,038

 

Interest-earning deposits with banks

 

 

49,187

 

 

 

61,895

 

Securities available for sale, at fair value

 

 

100,513

 

 

 

89,258

 

Securities held to maturity, at amortized cost (fair value $12,289 and $11,242, respectively)

 

 

12,023

 

 

 

11,242

 

Loans held for sale

 

 

2,538

 

 

 

5,922

 

Loans:

 

 

 

 

 

 

 

 

Loans held for investment

 

 

344,542

 

 

 

320,132

 

Less allowance for loan losses

 

 

(2,849

)

 

 

(2,884

)

Net loans held for investment

 

 

341,693

 

 

 

317,248

 

Premises and equipment, net

 

 

14,224

 

 

 

14,666

 

Interest receivable

 

 

1,520

 

 

 

1,564

 

Restricted stock

 

 

1,052

 

 

 

1,040

 

Bank owned life insurance

 

 

6,861

 

 

 

6,762

 

Other real estate owned

 

 

4,435

 

 

 

4,994

 

Prepaid assets

 

 

1,007

 

 

 

764

 

Other assets

 

 

9,759

 

 

 

9,809

 

Total assets

 

$

552,212

 

 

$

532,202

 

 

 

 

 

 

 

 

 

 

LIABILITIES

 

 

 

 

 

 

 

 

Deposits:

 

 

 

 

 

 

 

 

Demand noninterest-bearing

 

$

104,877

 

 

$

92,524

 

Interest checking and money market accounts

 

 

274,591

 

 

 

252,345

 

Savings deposits

 

 

41,865

 

 

 

40,436

 

Time deposits, $250,000 and over

 

 

7,337

 

 

 

8,148

 

Other time deposits

 

 

60,385

 

 

 

74,280

 

Total deposits

 

 

489,055

 

 

 

467,733

 

Short-term borrowed funds

 

 

1,786

 

 

 

5,758

 

Long-term debt

 

 

9,537

 

 

 

9,547

 

Interest payable

 

 

150

 

 

 

168

 

Other liabilities

 

 

6,884

 

 

 

5,682

 

Total liabilities

 

 

507,412

 

 

 

488,888

 

 

 

 

 

 

 

 

 

 

Off balance sheet items, commitments and contingencies (Note 9)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

SHAREHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

Common stock, $1.25 par value: 20,000,000 shares authorized; shares issued and

   outstanding 6,925,408 and 6,983,017

 

 

8,657

 

 

 

8,729

 

Common stock distributable

 

 

173

 

 

 

 

 

Additional paid-in capital

 

 

12,571

 

 

 

12,308

 

Undivided profits

 

 

12,586

 

 

 

11,893

 

Accumulated other comprehensive income (loss)

 

 

197

 

 

 

(212

)

Total Uwharrie Capital shareholders’ equity

 

 

34,184

 

 

 

32,718

 

Noncontrolling interest

 

 

10,616

 

 

 

10,596

 

Total shareholders’ equity

 

 

44,800

 

 

 

43,314

 

Total liabilities and shareholders’ equity

 

$

552,212

 

 

$

532,202

 

 

(*)

Derived from audited consolidated financial statements

See accompanying notes  

 

 

-3-


 

Uwharrie Capital Corp and Subsidiaries

Consolidated Statements of Income (Unaudited)

 

 

 

 

Three Months Ended

September 30,

 

 

Nine Months Ended

September 30,

 

 

 

2016

 

 

2015

 

 

2016

 

 

2015

 

 

 

(in thousands, except share and per share data)

 

Interest Income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans, including fees

 

$

4,025

 

 

$

3,936

 

 

$

11,820

 

 

$

11,784

 

Investment securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

US Treasury

 

 

11

 

 

 

33

 

 

 

34

 

 

 

184

 

US Government agencies and corporations

 

 

313

 

 

 

331

 

 

 

939

 

 

 

991

 

State and political subdivisions

 

 

125

 

 

 

121

 

 

 

375

 

 

 

290

 

Interest-earning deposits with banks and federal funds sold

 

 

78

 

 

 

47

 

 

 

236

 

 

 

126

 

Total interest income

 

 

4,552

 

 

 

4,468

 

 

 

13,404

 

 

 

13,375

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest Expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest checking and money market accounts

 

 

82

 

 

 

69

 

 

 

229

 

 

 

207

 

Savings deposits

 

 

12

 

 

 

12

 

 

 

35

 

 

 

33

 

Time deposits, $250,000 and over

 

 

14

 

 

 

25

 

 

 

44

 

 

 

49

 

Other time deposits

 

 

59

 

 

 

176

 

 

 

255

 

 

 

586

 

Short-term borrowed funds

 

 

3

 

 

 

17

 

 

 

32

 

 

 

44

 

Long-term debt

 

 

139

 

 

 

139

 

 

 

412

 

 

 

411

 

Total interest expense

 

 

309

 

 

 

438

 

 

 

1,007

 

 

 

1,330

 

Net interest income

 

 

4,243

 

 

 

4,030

 

 

 

12,397

 

 

 

12,045

 

Provision for (recovery of) loan losses

 

 

240

 

 

 

(323

)

 

 

70

 

 

 

(620

)

Net interest income after provision (recovery of) for loan losses

 

 

4,003

 

 

 

4,353

 

 

 

12,327

 

 

 

12,665

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Noninterest Income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Service charges on deposit accounts

 

 

309

 

 

 

338

 

 

 

904

 

 

 

979

 

Other service fees and commissions

 

 

1,055

 

 

 

1,040

 

 

 

3,330

 

 

 

3,055

 

Gain/(loss) on sale of securities (includes reclassification of $2,000

   $0, $544,000 and $502,000 from accumulated other

   comprehensive income)

 

 

2

 

 

 

 

 

 

544

 

 

 

502

 

Gain (loss) on fixed assets and other assets

 

 

(1

)

 

 

5

 

 

 

(3

)

 

 

 

Income from mortgage loan sales

 

 

1,111

 

 

 

706

 

 

 

2,769

 

 

 

1,699

 

Other income

 

 

117

 

 

 

161

 

 

 

389

 

 

 

309

 

Total noninterest income

 

 

2,593

 

 

 

2,250

 

 

 

7,933

 

 

 

6,544

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Noninterest Expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Salaries and employee benefits

 

 

3,626

 

 

 

3,460

 

 

 

10,792

 

 

 

9,778

 

Net occupancy expense

 

 

327

 

 

 

272

 

 

 

850

 

 

 

824

 

Equipment expense

 

 

159

 

 

 

184

 

 

 

488

 

 

 

524

 

Data processing costs

 

 

161

 

 

 

194

 

 

 

529

 

 

 

553

 

Office supplies and printing

 

 

34

 

 

 

58

 

 

 

117

 

 

 

160

 

Foreclosed real estate expense

 

 

29

 

 

 

144

 

 

 

204

 

 

 

418

 

Professional fees and services

 

 

171

 

 

 

173

 

 

 

541

 

 

 

457

 

Marketing and donations

 

 

224

 

 

 

221

 

 

 

651

 

 

 

592

 

Electronic banking expense

 

 

303

 

 

 

265

 

 

 

884

 

 

 

775

 

Software amortization and maintenance

 

 

174

 

 

 

142

 

 

 

508

 

 

 

426

 

FDIC insurance

 

 

86

 

 

 

85

 

 

 

257

 

 

 

284

 

Other noninterest expense

 

 

534

 

 

 

621

 

 

 

1,934

 

 

 

1,761

 

Total noninterest expense

 

 

5,828

 

 

 

5,819

 

 

 

17,755

 

 

 

16,552

 

Income before income taxes

 

 

768

 

 

 

784

 

 

 

2,505

 

 

 

2,657

 

Income taxes (includes reclassification $1,000, $0, $210,000 and

   $194,000 from accumulated other comprehensive income)

 

 

228

 

 

 

223

 

 

 

745

 

 

 

799

 

Net income

 

$

540

 

 

$

561

 

 

$

1,760

 

 

$

1,858

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consolidated net income

 

$

540

 

 

$

561

 

 

$

1,760

 

 

$

1,858

 

Less: net income attributable to noncontrolling Interest

 

 

(149

)

 

 

(149

)

 

 

(444

)

 

 

(442

)

Net income attributable to Uwharrie Capital Corp

 

 

391

 

 

 

412

 

 

 

1,316

 

 

 

1,416

 

Dividends – preferred stock

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss) available to common shareholders

 

$

391

 

 

$

412

 

 

$

1,316

 

 

$

1,416

 

Net income (loss) per common share

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.06

 

 

$

0.06

 

 

$

0.19

 

 

$

0.20

 

Diluted

 

$

0.06

 

 

$

0.06

 

 

$

0.19

 

 

$

0.20

 

Weighted average shares outstanding

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

7,095,112

 

 

 

7,174,221

 

 

 

7,111,733

 

 

 

7,212,308

 

Diluted

 

 

7,095,112

 

 

 

7,174,221

 

 

 

7,111,733

 

 

 

7,212,308

 

 

See accompanying notes  

 

 

-4-


 

Uwharrie Capital Corp and Subsidiaries

Consolidated Statements of Comprehensive Income (Unaudited)

 

 

 

 

Three Months Ended

September 30,

 

 

Nine Months Ended

September 30,

 

 

 

2016

 

 

2015

 

 

2016

 

 

2015

 

 

 

(in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Income

 

$

540

 

 

$

561

 

 

$

1,760

 

 

$

1,858

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized gain (loss) on available for sale securities

 

 

(268

)

 

 

555

 

 

 

1,165

 

 

 

493

 

Related tax effect

 

 

90

 

 

 

(188

)

 

 

(422

)

 

 

(191

)

Reclassification of (gain) loss recognized in net income

 

 

(2

)

 

 

 

 

 

(544

)

 

 

(502

)

Related tax effect

 

 

1

 

 

 

 

 

 

210

 

 

 

194

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total other comprehensive income (loss)

 

 

(179

)

 

 

367

 

 

 

409

 

 

 

(6

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Comprehensive income

 

 

361

 

 

 

928

 

 

 

2,169

 

 

 

1,852

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Less: Comprehensive income attributable to noncontrolling

   interest

 

 

(149

)

 

 

(149

)

 

 

(444

)

 

 

(442

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Comprehensive income (loss) attributable to Uwharrie Capital

 

$

212

 

 

$

779

 

 

$

1,725

 

 

$

1,410

 

 

See accompanying notes

 

 

-5-


 

Uwharrie Capital Corp and Subsidiaries

Consolidated Statement of Changes in Shareholders’ Equity (Unaudited)

 

 

 

 

Number

Common

Shares

Issued

 

 

Common

Stock

 

 

Common Stock

Dividend

Distributable

 

 

Additional

Paid-in

Capital

 

 

Undivided

Profits

 

 

Accumulated

Other

Comprehensive

Income (Loss)

 

 

Non

Controlling

Interest

 

 

Total

 

 

 

(dollars in thousands, except share data)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, December 31, 2015

 

 

6,983,017

 

 

$

8,729

 

 

$

 

 

$

12,308

 

 

$

11,893

 

 

$

(212

)

 

$

10,596

 

 

$

43,314

 

Net Income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,316

 

 

 

 

 

 

444

 

 

 

1,760

 

2% stock dividend declaration

 

 

 

 

 

 

 

 

173

 

 

 

450

 

 

 

(623

)

 

 

 

 

 

 

 

 

 

 

 

 

Repurchase of common stock

 

 

(57,609

)

 

 

(72

)

 

 

 

 

 

(187

)

 

 

 

 

 

 

 

 

 

 

 

(259

)

Other comprehensive Income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

409

 

 

 

 

 

 

409

 

Record preferred stock dividend Series B

   (noncontrolling interest)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(313

)

 

 

(313

)

Record preferred stock dividend Series C

   (noncontrolling interest)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(111

)

 

 

(111

)

Balance, September 30, 2016

 

 

6,925,408

 

 

$

8,657

 

 

$

173

 

 

$

12,571

 

 

$

12,586

 

 

$

197

 

 

$

10,616

 

 

$

44,800

 

 

See accompanying notes

 

 

-6-


 

Uwharrie Capital Corp and Subsidiaries

Consolidated Statements of Cash Flows (Unaudited)

 

 

 

 

Nine Months Ended

September 30,

 

 

 

2016

 

 

2015

 

 

 

(dollars in thousands)

 

Cash flows from operating activities

 

 

 

 

 

 

 

 

Net income

 

$

1,760

 

 

$

1,858

 

Adjustments to reconcile net income to net cash

 

 

 

 

 

 

 

 

Provided (used) by operating activities:

 

 

 

 

 

 

 

 

Depreciation

 

 

615

 

 

 

690

 

Net amortization of security premiums/discounts AFS

 

 

745

 

 

 

767

 

Net amortization of security premiums/discounts HTM

 

 

103

 

 

 

102

 

Net amortization of mortgage servicing rights

 

 

756

 

 

 

513

 

Impairment of foreclosed real estate

 

 

15

 

 

 

217

 

Provision/ (recovery) of loan losses

 

 

70

 

 

 

(620

)

Net realized gain on sales / calls available for sales securities

 

 

(544

)

 

 

(502

)

Income from mortgage loan sales

 

 

(2,769

)

 

 

(1,699

)

Proceeds from sales of loans held for sale

 

 

88,222

 

 

 

48,436

 

Origination of loans held for sale

 

 

(82,825

)

 

 

(45,008

)

(Gain)/ loss on sale of premises, equipment & other assets

 

 

3

 

 

 

 

Increase in cash surrender value of life insurance

 

 

(98

)

 

 

(88

)

(Gain) on sales of foreclosed real estate

 

 

(20

)

 

 

(114

)

Net change in interest receivable

 

 

44

 

 

 

281

 

Net change in other assets

 

 

(256

)

 

 

(582

)

Net change in interest payable

 

 

(18

)

 

 

(4

)

Net change in other liabilities

 

 

1,202

 

 

 

1,077

 

Net cash provided by operating activities

 

 

7,005

 

 

 

5,324

 

 

 

 

 

 

 

 

 

 

Cash flows from investing activities

 

 

 

 

 

 

 

 

Proceeds from sales, maturities and calls of securities available for sale

 

 

28,763

 

 

 

40,533

 

Proceeds from sales, maturities and calls of securities held to maturity

 

 

143

 

 

 

154

 

Purchase of securities available for sale

 

 

(39,597

)

 

 

(24,910

)

Purchase of securities held to maturity

 

 

(1,027

)

 

 

(6,034

)

Net (increase) in loans

 

 

(24,515

)

 

 

(13,923

)

Proceeds from sales of premise, equipment and other assets

 

 

150

 

 

 

 

Purchase of premises and equipment

 

 

(324

)

 

 

(584

)

Proceeds from sales of foreclosed real estate

 

 

880

 

 

 

1,623

 

Investment in other assets

 

 

(468

)

 

 

(409

)

Net change in restricted stock

 

 

(12

)

 

 

(2

)

Net cash used by investing activities

 

 

(36,007

)

 

 

(3,552

)

 

 

 

 

 

 

 

 

 

Cash flows from financing activities

 

 

 

 

 

 

 

 

Net decrease in deposit accounts

 

 

21,322

 

 

 

5,914

 

Net increase (decrease) in short-term borrowed funds

 

 

(3,972

)

 

 

547

 

Net decrease in long-term debt

 

 

(10