10-Q 1 uwhr-10q_20170630.htm 10-Q uwhr-10q_20170630.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 June 30, 2017

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, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth 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

 

Emerging growth company

 

☐ 

 

 

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

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: 6,979,244 shares of common stock outstanding as of August 7, 2017.

 

 


 

 

Table of Contents

 

 

 

 

 

Page No.

 

 

 

 

 

Part I.

 

FINANCIAL INFORMATION

 

 

 

 

 

 

 

Item 1 -

 

Financial Statements (Unaudited)

 

 

 

 

 

 

 

 

 

Consolidated Balance Sheets June 30, 2017 and December 31, 2016

 

3

 

 

 

 

 

 

 

Consolidated Statements of Income for the Three and Six Months Ended June 30, 2017 and 2016

 

4

 

 

 

 

 

 

 

Consolidated Statements of Comprehensive Income for the Three and Six Months Ended June 30, 2017 and 2016

 

5

 

 

 

 

 

 

 

Consolidated Statements of Changes in Shareholders’ Equity for the Six Months Ended June 30, 2017

 

6

 

 

 

 

 

 

 

Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2017 and 2016

 

7

 

 

 

 

 

 

 

Notes to Consolidated Financial Statements

 

8

 

 

 

 

 

Item 2 -

 

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

 

28

 

 

 

 

 

Item 3 -

 

Quantitative and Qualitative Disclosures about Market Risk

 

34

 

 

 

 

 

Item 4 -

 

Controls and Procedures

 

34

 

 

 

 

 

Part II.

 

OTHER INFORMATION

 

 

 

 

 

 

 

Item 1 -

 

Legal Proceedings

 

35

 

 

 

 

 

Item 1A -

 

Risk Factors

 

35

 

 

 

 

 

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

 

36

 

 

 

 

 

Item 6 -

 

Exhibits

 

37

 

 

 

 

 

 

 

Signatures

 

38

 

 

 

Exhibit Index

 

39

 

 

 

 

 

 

 

 

 

 

 

-2-


 

Uwharrie Capital Corp and Subsidiaries

Consolidated Balance Sheets

 

Part I. Financial Information

Item 1

Financial Statements

 

 

 

June 30, 2017 (Unaudited)

 

 

December 31, 2016*

 

 

 

(dollars in thousands)

 

ASSETS

 

 

 

 

 

 

 

 

Cash and due from banks

 

$

8,368

 

 

$

9,422

 

Interest-earning deposits with banks

 

 

68,539

 

 

 

36,546

 

Securities available for sale, at fair value

 

 

102,209

 

 

 

105,899

 

Securities held to maturity, at amortized cost (fair value $11,863 and $11,934, respectively)

 

 

11,780

 

 

 

11,990

 

Loans held for sale

 

 

3,112

 

 

 

5,823

 

Loans:

 

 

 

 

 

 

 

 

Loans held for investment

 

 

353,179

 

 

 

341,829

 

Less allowance for loan losses

 

 

(2,551

)

 

 

(2,707

)

Net loans held for investment

 

 

350,628

 

 

 

339,122

 

Premises and equipment, net

 

 

14,051

 

 

 

14,173

 

Interest receivable

 

 

1,603

 

 

 

1,629

 

Restricted stock

 

 

1,068

 

 

 

1,052

 

Bank owned life insurance

 

 

8,481

 

 

 

6,897

 

Other real estate owned

 

 

2,801

 

 

 

4,176

 

Prepaid assets

 

 

1,359

 

 

 

826

 

Other assets

 

 

11,598

 

 

 

10,675

 

Total assets

 

$

585,597

 

 

$

548,230

 

 

 

 

 

 

 

 

 

 

LIABILITIES

 

 

 

 

 

 

 

 

Deposits:

 

 

 

 

 

 

 

 

Demand noninterest-bearing

 

$

122,003

 

 

$

103,138

 

Interest checking and money market accounts

 

 

285,731

 

 

 

272,968

 

Savings deposits

 

 

45,428

 

 

 

42,452

 

Time deposits, $250,000 and over

 

 

11,490

 

 

 

7,472

 

Other time deposits

 

 

57,468

 

 

 

59,689

 

Total deposits

 

 

522,120

 

 

 

485,719

 

Short-term borrowed funds

 

 

1,454

 

 

 

2,674

 

Junior subordinated debt

 

 

9,534

 

 

 

9,534

 

Interest payable

 

 

149

 

 

 

151

 

Other liabilities

 

 

7,656

 

 

 

6,627

 

Total liabilities

 

 

540,913

 

 

 

504,705

 

 

 

 

 

 

 

 

 

 

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 6,979,244 and 7,050,315

 

 

8,724

 

 

 

8,813

 

Additional paid-in capital

 

 

12,263

 

 

 

12,540

 

Undivided profits

 

 

13,822

 

 

 

12,867

 

Accumulated other comprehensive loss

 

 

(761

)

 

 

(1,318

)

Total Uwharrie Capital shareholders’ equity

 

 

34,048

 

 

 

32,902

 

Noncontrolling interest

 

 

10,636

 

 

 

10,623

 

Total shareholders’ equity

 

 

44,684

 

 

 

43,525

 

Total liabilities and shareholders’ equity

 

$

585,597

 

 

$

548,230

 

 

(*)

Derived from audited consolidated financial statements

See accompanying notes  

 

 

-3-


 

Uwharrie Capital Corp and Subsidiaries

Consolidated Statements of Income (Unaudited)

 

 

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

 

 

2017

 

 

2016

 

 

2017

 

 

2016

 

 

 

(in thousands, except share and per share data)

 

Interest Income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans, including fees

 

$

4,132

 

 

$

3,897

 

 

$

8,122

 

 

$

7,795

 

Investment securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

US Treasury

 

 

12

 

 

 

12

 

 

 

23

 

 

 

23

 

US Government agencies and corporations

 

 

378

 

 

 

223

 

 

 

753

 

 

 

539

 

State and political subdivisions

 

 

117

 

 

 

214

 

 

 

240

 

 

 

337

 

Interest-earning deposits with banks and federal funds sold

 

 

158

 

 

 

70

 

 

 

262

 

 

 

158

 

Total interest income

 

 

4,797

 

 

 

4,416

 

 

 

9,400

 

 

 

8,852

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest Expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest checking and money market accounts

 

 

98

 

 

 

75

 

 

 

182

 

 

 

147

 

Savings deposits

 

 

13

 

 

 

12

 

 

 

25

 

 

 

23

 

Time deposits, $250,000 and over

 

 

19

 

 

 

12

 

 

 

30

 

 

 

30

 

Other time deposits

 

 

45

 

 

 

83

 

 

 

92

 

 

 

196

 

Short-term borrowed funds

 

 

6

 

 

 

8

 

 

 

13

 

 

 

29

 

Long-term debt

 

 

137

 

 

 

137

 

 

 

272

 

 

 

273

 

Total interest expense

 

 

318

 

 

 

327

 

 

 

614

 

 

 

698

 

Net interest income

 

 

4,479

 

 

 

4,089

 

 

 

8,786

 

 

 

8,154

 

Provision for (recovery of) loan losses

 

 

(114

)

 

 

(112

)

 

 

(173

)

 

 

(170

)

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

 

 

4,593

 

 

 

4,201

 

 

 

8,959

 

 

 

8,324

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Noninterest Income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Service charges on deposit accounts

 

 

286

 

 

 

289

 

 

 

575

 

 

 

595

 

Other service fees and commissions

 

 

1,006

 

 

 

1,147

 

 

 

2,203

 

 

 

2,275

 

Gain (loss) on sale of securities (includes reclassification of $0, $337,000, $0 and $542,000 from accumulated other comprehensive income)

 

 

 

 

 

337

 

 

 

 

 

 

542

 

Gain (loss) on fixed assets and other assets

 

 

 

 

 

(2

)

 

 

 

 

 

(2

)

Income from mortgage loan sales

 

 

878

 

 

 

958

 

 

 

1,749

 

 

 

1,658

 

Other income

 

 

66

 

 

 

130

 

 

 

352

 

 

 

272

 

Total noninterest income

 

 

2,236

 

 

 

2,859

 

 

 

4,879

 

 

 

5,340

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Noninterest Expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Salaries and employee benefits

 

 

3,642

 

 

 

3,603

 

 

 

7,340

 

 

 

7,166

 

Net occupancy expense

 

 

307

 

 

 

266

 

 

 

611

 

 

 

523

 

Equipment expense

 

 

148

 

 

 

160

 

 

 

300

 

 

 

329

 

Data processing costs

 

 

178

 

 

 

188

 

 

 

360

 

 

 

368

 

Office supplies and printing

 

 

37

 

 

 

41

 

 

 

62

 

 

 

83

 

Foreclosed real estate expense

 

 

176

 

 

 

98

 

 

 

264

 

 

 

175

 

Professional fees and services

 

 

171

 

 

 

178

 

 

 

347

 

 

 

370

 

Marketing and donations

 

 

228

 

 

 

226

 

 

 

486

 

 

 

427

 

Electronic banking expense

 

 

279

 

 

 

270

 

 

 

604

 

 

 

581

 

Software amortization and maintenance

 

 

190

 

 

 

179

 

 

 

371

 

 

 

334

 

FDIC insurance

 

 

46

 

 

 

85

 

 

 

91

 

 

 

171

 

Other noninterest expense

 

 

482

 

 

 

712

 

 

 

1,183

 

 

 

1,400

 

Total noninterest expense

 

 

5,884

 

 

 

6,006

 

 

 

12,019

 

 

 

11,927

 

Income before income taxes

 

 

945

 

 

 

1,054

 

 

 

1,819

 

 

 

1,737

 

Income taxes (includes reclassification of $0, $130,000, $0

and $209,000 from accumulated other comprehensive income)

 

 

313

 

 

 

344

 

 

 

570

 

 

 

517

 

Net income

 

$

632

 

 

$

710

 

 

$

1,249

 

 

$

1,220

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Less: net income attributable to noncontrolling Interest

 

 

(148

)

 

 

(148

)

 

 

(294

)

 

 

(295

)

Net income attributable to Uwharrie Capital Corp

 

 

484

 

 

 

562

 

 

 

955

 

 

 

925

 

Dividends – preferred stock

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss) available to common shareholders

 

$

484

 

 

$

562

 

 

$

955

 

 

$

925

 

Net income (loss) per common share

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.07

 

 

$

0.08

 

 

$

0.14

 

 

$

0.13

 

Diluted

 

$

0.07

 

 

$

0.08

 

 

$

0.14

 

 

$

0.13

 

Weighted average shares outstanding

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

7,001,216

 

 

 

7,117,490

 

 

 

7,023,032

 

 

 

7,120,083

 

Diluted

 

 

7,001,541

 

 

 

7,117,490

 

 

 

7,023,513

 

 

 

7,120,083

 

 

 

See accompanying notes  

 

 

-4-


 

Uwharrie Capital Corp and Subsidiaries

Consolidated Statements of Comprehensive Income (Unaudited)

 

 

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

 

 

2017

 

 

2016

 

 

2017

 

 

2016

 

 

 

(in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Income

 

$

632

 

 

$

710

 

 

$

1,249

 

 

$

1,220

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized gain on available for sale securities

 

 

467

 

 

 

485

 

 

 

844

 

 

 

1,433

 

Related tax effect

 

 

(159

)

 

 

(180

)

 

 

(287

)

 

 

(512

)

Reclassification of gain recognized in net income

 

 

 

 

 

(337

)

 

 

 

 

 

(542

)

Related tax effect

 

 

 

 

 

130

 

 

 

 

 

 

209

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total other comprehensive income

 

 

308

 

 

 

98

 

 

 

557

 

 

 

588

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Comprehensive income

 

 

940

 

 

 

808

 

 

 

1,806

 

 

 

1,808

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Less: Comprehensive income attributable to noncontrolling

   interest

 

 

(148

)

 

 

(148

)

 

 

(294

)

 

 

(295

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Comprehensive income attributable to Uwharrie Capital

 

$

792

 

 

$

660

 

 

$

1,512

 

 

$

1,513

 

 

See accompanying notes

 

 

-5-


 

Uwharrie Capital Corp and Subsidiaries

Consolidated Statement of Changes in Shareholders’ Equity (Unaudited)

 

 

 

 

Number of

Common

Shares

Issued

 

 

Common

Stock

 

 

Additional

Paid-in

Capital

 

 

Undivided

Profits

 

 

Accumulated

Other

Comprehensive

Income (Loss)

 

 

Non

Controlling

Interest

 

 

Total

 

 

 

(dollars in thousands, except share data)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, December 31, 2016

 

 

7,050,315

 

 

$

8,813

 

 

$

12,540

 

 

$

12,867

 

 

$

(1,318

)

 

$

10,623

 

 

$

43,525

 

Net Income

 

 

 

 

 

 

 

 

 

 

 

955

 

 

 

 

 

 

294

 

 

 

1,249

 

Repurchase of common stock

 

 

(71,071

)

 

 

(89

)

 

 

(277

)

 

 

 

 

 

 

 

 

 

 

 

(366

)

Other comprehensive Income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

557

 

 

 

 

 

 

557

 

Record preferred stock dividend Series B

   (noncontrolling interest)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(207

)

 

 

(207

)

Record preferred stock dividend Series C

   (noncontrolling interest)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(74

)

 

 

(74

)

Balance, June 30, 2017

 

 

6,979,244

 

 

$

8,724

 

 

$

12,263

 

 

$

13,822

 

 

$

(761

)

 

$

10,636

 

 

$

44,684

 

 

See accompanying notes

 

 

-6-


 

Uwharrie Capital Corp and Subsidiaries

Consolidated Statements of Cash Flows (Unaudited)

 

 

 

 

Six Months Ended June 30,

 

 

 

2017

 

 

2016

 

 

 

(dollars in thousands)

 

Cash flows from operating activities

 

 

 

 

 

 

 

 

Net income

 

$

1,249

 

 

$

1,220

 

Adjustments to reconcile net income to net cash

 

 

 

 

 

 

 

 

Provided (used) by operating activities:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

426

 

 

 

443

 

Recovery of loan losses

 

 

(173

)

 

 

(170

)

Gain on sale of securities available for sale

 

 

 

 

 

(542

)

(Gain) loss on sale of OREO

 

 

35

 

 

 

(34

)

Net amortization of premium on investment securities AFS

 

 

453

 

 

 

493

 

Net amortization of premium on investment securities HTM

 

 

72

 

 

 

68

 

Net amortization of mortgage servicing rights

 

 

374

 

 

 

366

 

OREO write downs

 

 

78

 

 

 

34

 

Net change in:

 

 

 

 

 

 

 

 

Originations and purchases of mortgage loans for sale

 

 

(47,656

)

 

 

(49,617

)

Proceeds from sales of mortgage loans for sale

 

 

49,993

 

 

 

53,269

 

Accrued interest receivable

 

 

26

 

 

 

91

 

Prepaid Assets

 

 

(533

)

 

 

(490

)

Cash surrender value of life insurance

 

 

(60

)

 

 

(58

)

Miscellaneous other assets

 

 

(1,196

)

 

 

(634

)

Accrued interest payable

 

 

(2

)

 

 

(15

)

Miscellaneous other liabilities

 

 

1,029

 

 

 

1,084

 

Net cash provided by operating activities

 

 

4,115

 

 

 

5,508

 

 

 

 

 

 

 

 

 

 

Cash flows from investing activities

 

 

 

 

 

 

 

 

Proceeds from sales of investment securities available for sale

 

 

 

 

 

20,225

 

Proceeds from maturities, calls & paydowns of investment securities held to maturity

 

 

138

 

 

 

56

 

Proceeds from maturities, calls & paydowns of investment securities available for sale

 

 

4,081

 

 

 

6,541

 

Purchase of investment securities held to maturity

 

 

 

 

 

(1,027

)

Purchase of investment securities available for sale

 

 

 

 

 

(29,591

)

Purchase of life insurance investment

 

 

(1,525

)

 

 

 

Net change in restricted stock

 

 

(15

)

 

 

(12

)

Net decrease (increase) in loans

 

 

(11,581

)

 

 

(10,171

)

Purchase of premises and equipment

 

 

(304

)

 

 

(254

)

Proceeds from sale of OREO

 

 

1,510

 

 

 

755

 

Net cash provided by (used by) investing activities

 

 

(7,696

)

 

 

(13,478

)

 

 

 

 

 

 

 

 

 

Cash flows from financing activities

 

 

 

 

 

 

 

 

Net increase (decrease) in deposit accounts

 

 

36,401

 

 

 

(5,664

)

Net increase (decrease) in federal funds purchased and other short-term borrowings

 

 

(714

)

 

 

(3,827

)

Repayment of other borrowings

 

 

(506

)

 

 

(7

)

Common stock repurchases

 

 

(367

)

 

 

(49

)

Dividends paid on preferred stock

 

 

(294

)

 

 

(295

)

Net cash provided by (used by) financing activities

 

 

34,520

 

 

 

(9,842

)

Increase (decrease) in cash and cash equivalents

 

 

30,939

 

 

 

(17,812

)

Cash and cash equivalents, beginning of period

 

 

45,968

 

 

 

68,933

 

Cash and cash equivalents, end of period

 

$

76,907

 

 

$

51,121

 

 

 

 

 

 

 

 

 

 

Supplemental Disclosures of Cash Flow Information

 

 

 

 

 

 

 

 

Interest paid

 

$

616

 

 

$

713

 

Income taxes paid