10-Q 1 uwhr-10q_20170930.htm 10-Q uwhr-10q_20170930.htm

1

 

 

 

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, 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 November 6, 2017.

 

 


 

 

Table of Contents

 

 

 

 

 

Page No.

 

 

 

 

 

Part I.

 

FINANCIAL INFORMATION

 

 

 

 

 

 

 

Item 1 -

 

Financial Statements (Unaudited)

 

 

 

 

 

 

 

 

 

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

 

3

 

 

 

 

 

 

 

Consolidated Statements of Income for the Three and Nine Months Ended September 30, 2017 and 2016

 

4

 

 

 

 

 

 

 

Consolidated Statements of Comprehensive Income for the Three and Nine Months Ended September 30, 2017 and 2016

 

5

 

 

 

 

 

 

 

Consolidated Statements of Changes in Shareholders’ Equity for the Nine Months Ended September 30, 2017

 

6

 

 

 

 

 

 

 

Consolidated Statements of Cash Flows for the Nine Months Ended September 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

 

27

 

 

 

 

 

Item 3 -

 

Quantitative and Qualitative Disclosures About Market Risk

 

33

 

 

 

 

 

Item 4 -

 

Controls and Procedures

 

33

 

 

 

 

 

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

 

34

 

 

 

 

 

Item 3 -

 

Defaults Upon Senior Securities

 

34

 

 

 

 

 

Item 4 -

 

Mine Safety Disclosures

 

34

 

 

 

 

 

Item 5 -

 

Other Information

 

35

 

 

 

 

 

Item 6 -

 

Exhibits

 

36

 

 

 

 

 

 

 

Signatures

 

37

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

-2-


 

Uwharrie Capital Corp and Subsidiaries

Consolidated Balance Sheets

 

Part I. Financial Information

Item 1.

Financial Statements.

 

 

 

September 30, 2017 (Unaudited)

 

 

December 31, 2016*

 

 

 

(dollars in thousands)

 

ASSETS

 

 

 

 

 

 

 

 

Cash and due from banks

 

$

6,826

 

 

$

9,422

 

Interest-earning deposits with banks

 

 

85,757

 

 

 

36,546

 

Securities available for sale, at fair value

 

 

97,717

 

 

 

105,899

 

Securities held to maturity, at amortized cost (fair value $11,575 and $11,934, respectively)

 

 

11,493

 

 

 

11,990

 

Loans held for sale

 

 

2,725

 

 

 

5,823

 

Loans:

 

 

 

 

 

 

 

 

Loans held for investment

 

 

349,919

 

 

 

341,829

 

Less allowance for loan losses

 

 

(2,448

)

 

 

(2,707

)

Net loans held for investment

 

 

347,471

 

 

 

339,122

 

Premises and equipment, net

 

 

14,302

 

 

 

14,173

 

Interest receivable

 

 

1,516

 

 

 

1,629

 

Restricted stock

 

 

1,068

 

 

 

1,052

 

Bank owned life insurance

 

 

8,514

 

 

 

6,897

 

Other real estate owned

 

 

2,681

 

 

 

4,176

 

Prepaid assets

 

 

1,000

 

 

 

826

 

Other assets

 

 

10,882

 

 

 

10,675

 

Total assets

 

$

591,952

 

 

$

548,230

 

 

 

 

 

 

 

 

 

 

LIABILITIES

 

 

 

 

 

 

 

 

Deposits:

 

 

 

 

 

 

 

 

Demand noninterest-bearing

 

$

118,459

 

 

$

103,138

 

Interest checking and money market accounts

 

 

295,330

 

 

 

272,968

 

Savings deposits

 

 

45,075

 

 

 

42,452

 

Time deposits, $250,000 and over

 

 

10,408

 

 

 

7,472

 

Other time deposits

 

 

57,981

 

 

 

59,689

 

Total deposits

 

 

527,253

 

 

 

485,719

 

Short-term borrowed funds

 

 

1,788

 

 

 

2,674

 

Junior subordinated debt

 

 

9,534

 

 

 

9,534

 

Interest payable

 

 

151

 

 

 

151

 

Other liabilities

 

 

8,066

 

 

 

6,627

 

Total liabilities

 

 

546,792

 

 

 

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 6,978,263 and 7,050,315

 

 

8,723

 

 

 

8,813

 

Additional paid-in capital

 

 

12,258

 

 

 

12,540

 

Undivided profits

 

 

14,262

 

 

 

12,867

 

Accumulated other comprehensive loss

 

 

(726

)

 

 

(1,318

)

Total Uwharrie Capital Corp shareholders’ equity

 

 

34,517

 

 

 

32,902

 

Noncontrolling interest

 

 

10,643

 

 

 

10,623

 

Total shareholders’ equity

 

 

45,160

 

 

 

43,525

 

Total liabilities and shareholders’ equity

 

$

591,952

 

 

$

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 September 30,

 

 

Nine Months Ended September 30,

 

 

 

2017

 

 

2016

 

 

2017

 

 

2016

 

 

 

(in thousands, except share and per share data)

 

Interest Income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans, including fees

 

$

4,214

 

 

$

4,025

 

 

$

12,336

 

 

$

11,820

 

Investment securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

US Treasury

 

 

5

 

 

 

11

 

 

 

28

 

 

 

34

 

US Government agencies and corporations

 

 

369

 

 

 

313

 

 

 

1,122

 

 

 

939

 

State and political subdivisions

 

 

121

 

 

 

125

 

 

 

361

 

 

 

375

 

Interest-earning deposits with banks and federal funds sold

 

 

258

 

 

 

78

 

 

 

520

 

 

 

236

 

Total interest income

 

 

4,967

 

 

 

4,552

 

 

 

14,367

 

 

 

13,404

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest Expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest checking and money market accounts

 

 

113

 

 

 

82

 

 

 

295

 

 

 

229

 

Savings deposits

 

 

12

 

 

 

12

 

 

 

37

 

 

 

35

 

Time deposits, $250,000 and over

 

 

16

 

 

 

14

 

 

 

46

 

 

 

44

 

Other time deposits

 

 

51

 

 

 

59

 

 

 

143

 

 

 

255

 

Short-term borrowed funds

 

 

1

 

 

 

3

 

 

 

14

 

 

 

32

 

Long-term debt

 

 

138

 

 

 

139

 

 

 

410

 

 

 

412

 

Total interest expense

 

 

331

 

 

 

309

 

 

 

945

 

 

 

1,007

 

Net interest income

 

 

4,636

 

 

 

4,243

 

 

 

13,422

 

 

 

12,397

 

Provision for (recovery of) loan losses

 

 

(136

)

 

 

240

 

 

 

(309

)

 

 

70

 

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

 

 

4,772

 

 

 

4,003

 

 

 

13,731

 

 

 

12,327

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Noninterest Income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Service charges on deposit accounts

 

 

299

 

 

 

309

 

 

 

874

 

 

 

904

 

Other service fees and commissions

 

 

1,003

 

 

 

1,055

 

 

 

3,206

 

 

 

3,330

 

Gain (loss) on sale of securities (includes reclassification of ($14,000), $2,000, ($14,000) and $544,000 from accumulated other comprehensive income)

 

 

(12

)

 

 

2

 

 

 

(12

)

 

 

544

 

Gain (loss) on fixed assets and other assets

 

 

3

 

 

 

(1

)

 

 

3

 

 

 

(3

)

Income from mortgage loan sales

 

 

790

 

 

 

1,111

 

 

 

2,539

 

 

 

2,769

 

Other income

 

 

215

 

 

 

117

 

 

 

567

 

 

 

389

 

Total noninterest income

 

 

2,298

 

 

 

2,593

 

 

 

7,177

 

 

 

7,933

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Noninterest Expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Salaries and employee benefits

 

 

3,647

 

 

 

3,626

 

 

 

10,987

 

 

 

10,792

 

Net occupancy expense

 

 

327

 

 

 

327

 

 

 

938

 

 

 

850

 

Equipment expense

 

 

151

 

 

 

159

 

 

 

451

 

 

 

488

 

Data processing costs

 

 

429

 

 

 

161

 

 

 

789

 

 

 

529

 

Office supplies and printing

 

 

27

 

 

 

34

 

 

 

89

 

 

 

117

 

Foreclosed real estate expense

 

 

48

 

 

 

29

 

 

 

312

 

 

 

204

 

Professional fees and services

 

 

223

 

 

 

171

 

 

 

570

 

 

 

541

 

Marketing and donations

 

 

251

 

 

 

224

 

 

 

737

 

 

 

651

 

Electronic banking expense

 

 

317

 

 

 

303

 

 

 

921

 

 

 

884

 

Software amortization and maintenance

 

 

198

 

 

 

174

 

 

 

569

 

 

 

508

 

FDIC insurance

 

 

76

 

 

 

86

 

 

 

167

 

 

 

257

 

Other noninterest expense

 

 

529

 

 

 

534

 

 

 

1,712

 

 

 

1,934

 

Total noninterest expense

 

 

6,223

 

 

 

5,828

 

 

 

18,242

 

 

 

17,755

 

Income before income taxes

 

 

847

 

 

 

768

 

 

 

2,666

 

 

 

2,505

 

Income taxes (includes reclassification of ($5,000), $1,000, ($5,000)

and $210,000 from accumulated other comprehensive income)

 

 

259

 

 

 

228

 

 

 

829

 

 

 

745

 

Net income

 

$

588

 

 

$

540

 

 

$

1,837

 

 

$

1,760

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Less: net income attributable to noncontrolling interest

 

 

(148

)

 

 

(149

)

 

 

(442

)

 

 

(444

)

Net income attributable to Uwharrie Capital Corp

 

 

440

 

 

 

391

 

 

 

1,395

 

 

 

1,316

 

Dividends – preferred stock

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss) available to common shareholders

 

$

440

 

 

$

391

 

 

$

1,395

 

 

$

1,316

 

Net income (loss) per common share

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.06

 

 

$

0.06

 

 

$

0.20

 

 

$

0.19

 

Diluted

 

$

0.06

 

 

$

0.06

 

 

$

0.20

 

 

$

0.19

 

Weighted average shares outstanding

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

6,979,137

 

 

 

7,095,112

 

 

 

7,008,240

 

 

 

7,111,733

 

Diluted

 

 

6,979,985

 

 

 

7,095,112

 

 

 

7,008,845

 

 

 

7,111,733

 

 

 

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,

 

 

 

2017

 

 

2016

 

 

2017

 

 

2016

 

 

 

(in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Income

 

$

588

 

 

$

540

 

 

$

1,837

 

 

$

1,760

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized gain on available for sale securities

 

 

40

 

 

 

(268

)

 

 

884

 

 

 

1,165

 

Related tax effect

 

 

(14

)

 

 

90

 

 

 

(301

)

 

 

(422

)

Reclassification of (gain) losses recognized in net income

 

 

14

 

 

 

(2

)

 

 

14

 

 

 

(544

)

Related tax effect

 

 

(5

)

 

 

1

 

 

 

(5

)

 

 

210

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total other comprehensive income

 

 

35

 

 

 

(179

)

 

 

592

 

 

 

409

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Comprehensive income

 

 

623

 

 

 

361

 

 

 

2,429

 

 

 

2,169

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Less: Comprehensive income attributable to noncontrolling

   interest

 

 

(148

)

 

 

(149

)

 

 

(442

)

 

 

(444

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Comprehensive income attributable to Uwharrie Capital Corp

 

$

475

 

 

$

212

 

 

$

1,987

 

 

$

1,725

 

 

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

 

 

 

 

 

 

 

 

 

 

 

1,395

 

 

 

 

 

 

442

 

 

 

1,837

 

Repurchase of common stock

 

 

(72,052

)

 

 

(90

)

 

 

(282

)

 

 

 

 

 

 

 

 

 

 

 

(372

)

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

592

 

 

 

 

 

 

592

 

Record preferred stock dividend Series B

   (noncontrolling interest)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(311

)

 

 

(311

)

Record preferred stock dividend Series C

   (noncontrolling interest)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(111

)

 

 

(111

)

Balance, September 30, 2017

 

 

6,978,263

 

 

$

8,723

 

 

$

12,258

 

 

$

14,262

 

 

$

(726

)

 

$

10,643

 

 

$

45,160

 

 

See accompanying notes

 

 

-6-


 

Uwharrie Capital Corp and Subsidiaries

Consolidated Statements of Cash Flows (Unaudited)

 

 

 

 

Nine Months Ended September 30,

 

 

 

2017

 

 

2016

 

 

 

(dollars in thousands)

 

Cash flows from operating activities

 

 

 

 

 

 

 

 

Net income

 

$

1,837

 

 

$

1,760

 

Adjustments to reconcile net income to net cash

 

 

 

 

 

 

 

 

Provided (used) by operating activities:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

636

 

 

 

615

 

Provision/ (recovery) of loan losses

 

 

(309

)

 

 

70

 

(Gain) loss on sale of securities available for sale

 

 

12

 

 

 

(544

)

(Gain) loss on sale of OREO

 

 

31

 

 

 

(20

)

Net amortization of premium on investment securities AFS

 

 

665

 

 

 

745

 

Net amortization of premium on investment securities HTM

 

 

112

 

 

 

103

 

Net amortization of mortgage servicing rights

 

 

557

 

 

 

756

 

OREO write downs

 

 

92

 

 

 

15

 

Net change in:

 

 

 

 

 

 

 

 

Originations and purchases of mortgage loans for sale

 

 

(70,968

)

 

 

(82,825

)

Proceeds from sales of mortgage loans for sale

 

 

73,509

 

 

 

85,453

 

Accrued interest receivable

 

 

113

 

 

 

44

 

Prepaid assets

 

 

(174

)

 

 

(490

)

Cash surrender value of life insurance

 

 

(92

)

 

 

(98

)

Miscellaneous other assets

 

 

(493

)

 

 

(231

)

Accrued interest payable

 

 

 

 

 

(18

)

Miscellaneous other liabilities

 

 

1,439

 

 

 

1,202

 

Net cash provided by operating activities

 

 

6,967

 

 

 

6,537

 

 

 

 

 

 

 

 

 

 

Cash flows from investing activities

 

 

 

 

 

 

 

 

Proceeds from sales of investment securities available for sale

 

 

8,918

 

 

 

23,095

 

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

 

 

385

 

 

 

143

 

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

 

 

5,823

 

 

 

5,668

 

Purchase of investment securities held to maturity

 

 

 

 

 

(1,027

)

Purchase of investment securities available for sale

 

 

(6,338

)

 

 

(39,597

)

Purchase of life insurance investment

 

 

(1,525

)

 

 

 

Net change in restricted stock

 

 

(16

)

 

 

(12

)

Net increase in loans

 

 

(8,401

)

 

 

(24,515

)

Proceeds from sales of premises, equipment, and other assets

 

 

 

 

 

150

 

Purchase of premises and equipment

 

 

(765

)

 

 

(324

)

Proceeds from sale of OREO

 

 

1,733

 

 

 

880

 

Net cash used by investing activities

 

 

(186

)

 

 

(35,539

)

 

 

 

 

 

 

 

 

 

Cash flows from financing activities

 

 

 

 

 

 

 

 

Net increase in deposit accounts

 

 

41,534

 

 

 

21,322

 

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

 

 

(380

)

 

 

(3,972

)

Repayment of other borrowings

 

 

(506

)

 

 

(10

)

Common stock repurchases

 

 

(372

)

 

 

(260

)

Dividends paid on preferred stock

 

 

(442

)

 

 

(424

)

Net cash provided by financing activities

 

 

39,834

 

 

 

16,656

 

Increase (decrease) in cash and cash equivalents

 

 

46,615

 

 

 

(12,346

)

Cash and cash equivalents, beginning of period

 

 

45,968

 

 

 

68,933

 

Cash and cash equivalents, end of period

 

$

92,583

 

 

$

56,587

 

 

 

 

 

 

 

 

 

 

Supplemental Disclosures of Cash Flow Information

 

 

 

 

 

 

 

 

Interest paid

 

$

946