10-Q 1 uwhr-10q_20180630.htm 10-Q uwhr-10q_20180630.htm

ing

 

 

 

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, 2018

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, a smaller reporting company, or 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: 7,100,749 shares of common stock outstanding as of August 6, 2018.

 

 


 

 

Table of Contents

 

 

 

 

 

Page No.

 

 

 

 

 

Part I.

 

FINANCIAL INFORMATION

 

 

 

 

 

 

 

Item 1 -

 

Financial Statements (Unaudited)

 

 

 

 

 

 

 

 

 

Consolidated Balance Sheets as of June 30, 2018 and December 31, 2017

 

3

 

 

 

 

 

 

 

Consolidated Statements of Income for the Three and Six Months Ended June 30, 2018 and 2017

 

4

 

 

 

 

 

 

 

Consolidated Statements of Comprehensive Income for the Three and Six Months Ended June 30, 2018 and 2017

 

5

 

 

 

 

 

 

 

Consolidated Statements of Changes in Shareholders’ Equity for the Six Months Ended June 30, 2018

 

6

 

 

 

 

 

 

 

Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2018 and 2017

 

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

 

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

 

35

 

 

 

 

 

Item 6 -

 

Exhibits

 

36

 

 

 

 

 

 

 

Signatures

 

37

-2-


 

Uwharrie Capital Corp and Subsidiaries

Consolidated Balance Sheets

 

Part I. Financial Information

Item 1.

Financial Statements.

 

 

 

June 30, 2018 (Unaudited)

 

 

December 31, 2017*

 

 

 

(dollars in thousands)

 

ASSETS

 

 

 

 

 

 

 

 

Cash and due from banks

 

$

7,505

 

 

$

7,538

 

Interest-earning deposits with banks

 

 

91,520

 

 

 

62,865

 

Securities available for sale, at fair value

 

 

90,429

 

 

 

95,743

 

Securities held to maturity, at amortized cost (fair value $11,002 and $11,461, respectively)

 

 

11,118

 

 

 

11,458

 

Loans held for sale

 

 

5,292

 

 

 

4,414

 

Loans:

 

 

 

 

 

 

 

 

Loans held for investment

 

 

370,577

 

 

 

356,871

 

Less allowance for loan losses

 

 

(2,583

)

 

 

(2,458

)

Net loans held for investment

 

 

367,994

 

 

 

354,413

 

Premises and equipment, net

 

 

15,064

 

 

 

14,728

 

Interest receivable

 

 

1,714

 

 

 

1,709

 

Restricted stock

 

 

1,094

 

 

 

1,067

 

Bank owned life insurance

 

 

8,613

 

 

 

8,546

 

Other real estate owned

 

 

1,439

 

 

 

2,349

 

Prepaid assets

 

 

1,150

 

 

 

786

 

Other assets

 

 

11,303

 

 

 

10,742

 

Total assets

 

$

614,235

 

 

$

576,358

 

 

 

 

 

 

 

 

 

 

LIABILITIES

 

 

 

 

 

 

 

 

Deposits:

 

 

 

 

 

 

 

 

Demand noninterest-bearing

 

$

133,924

 

 

$

113,762

 

Interest checking and money market accounts

 

 

307,736

 

 

 

289,953

 

Savings deposits

 

 

49,804

 

 

 

45,698

 

Time deposits, $250,000 and over

 

 

7,633

 

 

 

7,933

 

Other time deposits

 

 

51,556

 

 

 

55,282

 

Total deposits

 

 

550,653

 

 

 

512,628

 

Short-term borrowed funds

 

 

1,522

 

 

 

1,752

 

Long-term debt

 

 

9,534

 

 

 

9,534

 

Interest payable

 

 

149

 

 

 

148

 

Other liabilities

 

 

8,452

 

 

 

7,756

 

Total liabilities

 

 

570,310

 

 

 

531,818

 

 

 

 

 

 

 

 

 

 

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 7,100,749 and 7,112,853

 

 

8,876

 

 

 

8,891

 

Preferred stock, 10,000,000 shares authorized; none issued and outstanding

 

 

 

 

 

 

Additional paid-in capital

 

 

12,762

 

 

 

12,824

 

Undivided profits

 

 

13,699

 

 

 

13,282

 

Accumulated other comprehensive income (loss)

 

 

(2,066

)

 

 

(1,107

)

Total Uwharrie Capital shareholders’ equity

 

 

33,271

 

 

 

33,890

 

Noncontrolling interest

 

 

10,654

 

 

 

10,650

 

Total shareholders’ equity

 

 

43,925

 

 

 

44,540

 

Total liabilities and shareholders’ equity

 

$

614,235

 

 

$

576,358

 

 

(*)

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,

 

 

 

2018

 

 

2017

 

 

2018

 

 

2017

 

 

 

(in thousands, except share and per share data)

 

Interest Income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans, including fees

 

$

4,469

 

 

$

4,132

 

 

$

8,725

 

 

$

8,122

 

Investment securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

US Treasury

 

 

 

 

 

12

 

 

 

 

 

 

23

 

US Government agencies and corporations

 

 

364

 

 

 

378

 

 

 

751

 

 

 

753

 

State and political subdivisions

 

 

120

 

 

 

117

 

 

 

244

 

 

 

240

 

Interest-earning deposits with banks and federal funds sold

 

 

365

 

 

 

158

 

 

 

642

 

 

 

262

 

Total interest income

 

 

5,318

 

 

 

4,797

 

 

 

10,362

 

 

 

9,400

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest Expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest checking and money market accounts

 

 

192

 

 

 

98

 

 

 

336

 

 

 

182

 

Savings deposits

 

 

13

 

 

 

13

 

 

 

25

 

 

 

25

 

Time deposits, $250,000 and over

 

 

17

 

 

 

19

 

 

 

33

 

 

 

30

 

Other time deposits

 

 

47

 

 

 

45

 

 

 

92

 

 

 

92

 

Short-term borrowed funds

 

 

4

 

 

 

6

 

 

 

7

 

 

 

13

 

Long-term debt

 

 

138

 

 

 

137

 

 

 

273

 

 

 

272

 

Total interest expense

 

 

411

 

 

 

318

 

 

 

766

 

 

 

614

 

Net interest income

 

 

4,907

 

 

 

4,479

 

 

 

9,596

 

 

 

8,786

 

Provision for (recovery of) loan losses

 

 

38

 

 

 

(114

)

 

 

116

 

 

 

(173

)

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

 

 

4,869

 

 

 

4,593

 

 

 

9,480

 

 

 

8,959

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Noninterest Income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Service charges on deposit accounts

 

 

290

 

 

 

286

 

 

 

573

 

 

 

575

 

Interchange and card transaction fees

 

 

144

 

 

 

201

 

 

 

286

 

 

 

337

 

Other service fees and commissions

 

 

652

 

 

 

592

 

 

 

1,290

 

 

 

1,388

 

Income from mortgage loan sales

 

 

869

 

 

 

878

 

 

 

1,531

 

 

 

1,749

 

Other income

 

 

216

 

 

 

66

 

 

 

385

 

 

 

352

 

Total noninterest income

 

 

2,171

 

 

 

2,023

 

 

 

4,065

 

 

 

4,401

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Noninterest Expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Salaries and employee benefits

 

 

4,121

 

 

 

3,642

 

 

 

8,067

 

 

 

7,340

 

Net occupancy expense

 

 

396

 

 

 

307

 

 

 

760

 

 

 

611

 

Equipment expense

 

 

165

 

 

 

148

 

 

 

335

 

 

 

300

 

Data processing costs

 

 

283

 

 

 

178

 

 

 

533

 

 

 

360

 

Office supplies and printing

 

 

39

 

 

 

37

 

 

 

75

 

 

 

62

 

Foreclosed real estate expense

 

 

33

 

 

 

176

 

 

 

72

 

 

 

264

 

Professional fees and services

 

 

214

 

 

 

171

 

 

 

462

 

 

 

347

 

Marketing and donations

 

 

209

 

 

 

228

 

 

 

420

 

 

 

486

 

Electronic banking expense

 

 

98

 

 

 

86

 

 

 

199

 

 

 

170

 

Software amortization and maintenance

 

 

234

 

 

 

190

 

 

 

447

 

 

 

371

 

FDIC insurance

 

 

65

 

 

 

46

 

 

 

131

 

 

 

91

 

Other noninterest expense

 

 

638

 

 

 

462

 

 

 

1,207

 

 

 

1,139

 

Total noninterest expense

 

 

6,495

 

 

 

5,671

 

 

 

12,708

 

 

 

11,541

 

Income before income taxes

 

 

545

 

 

 

945

 

 

 

837

 

 

 

1,819

 

Income taxes

 

 

78

 

 

 

313

 

 

 

136

 

 

 

570

 

Net income

 

$

467

 

 

$

632

 

 

$

701

 

 

$

1,249

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consolidated net income

 

$

467

 

 

$

632

 

 

$

701

 

 

$

1,249

 

Less: net income attributable to noncontrolling interest

 

 

(141

)

 

 

(148

)

 

 

(284

)

 

 

(294

)

Net income attributable to Uwharrie Capital Corp and common shareholders

 

$

326

 

 

$

484

 

 

$

417

 

 

$

955

 

Net income (loss) per common share

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.05

 

 

$

0.07

 

 

$

0.06

 

 

$

0.13

 

Diluted

 

$

0.05

 

 

$

0.07

 

 

$

0.06

 

 

$

0.13

 

Weighted average shares outstanding

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

7,107,245

 

 

 

7,141,240

 

 

 

7,109,782

 

 

 

7,163,493

 

Diluted

 

 

7,107,245

 

 

 

7,141,572

 

 

 

7,109,782

 

 

 

7,163,986

 

 

 

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,

 

 

 

2018

 

 

2017

 

 

2018

 

 

2017

 

 

 

(in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Income

 

$

467

 

 

$

632

 

 

$

701

 

 

$

1,249

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized gain (loss) on available for sale securities

 

 

(142

)

 

 

467

 

 

 

(1,241

)

 

 

844

 

Related tax effect

 

 

32

 

 

 

(159

)

 

 

282

 

 

 

(287

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total other comprehensive income (loss)

 

 

(110

)

 

 

308

 

 

 

(959

)

 

 

557

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Comprehensive income (loss)

 

 

357

 

 

 

940

 

 

 

(258

)

 

 

1,806

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Less: Comprehensive income (loss) attributable to noncontrolling

   interest

 

 

(141

)

 

 

(148

)

 

 

(284

)

 

 

(294

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Comprehensive income (loss) attributable to Uwharrie Capital

 

$

216

 

 

$

792

 

 

$

(542

)

 

$

1,512

 

 

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, 2017

 

 

7,112,853

 

 

$

8,891

 

 

$

12,824

 

 

$

13,282

 

 

$

(1,107

)

 

$

10,650

 

 

$

44,540

 

Net Income

 

 

 

 

 

 

 

 

 

 

 

417

 

 

 

 

 

 

284

 

 

 

701

 

Repurchase of common stock

 

 

(25,482

)

 

 

(31

)

 

 

(111

)

 

 

 

 

 

 

 

 

 

 

 

(142

)

Stock options exercised

 

 

13,378

 

 

 

16

 

 

 

49

 

 

 

 

 

 

 

 

 

 

 

 

65

 

Other comprehensive Income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(959

)

 

 

 

 

 

(959

)

Record preferred stock dividend Series B

   (noncontrolling interest)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(206

)

 

 

(206

)

Record preferred stock dividend Series C

   (noncontrolling interest)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(74

)

 

 

(74

)

Balance, June 30, 2018

 

 

7,100,749

 

 

$

8,876

 

 

$

12,762

 

 

$

13,699

 

 

$

(2,066

)

 

$

10,654

 

 

$

43,925

 

 

See accompanying notes

 

 

-6-


 

Uwharrie Capital Corp and Subsidiaries

Consolidated Statements of Cash Flows (Unaudited)

 

 

 

 

Six Months Ended June 30,

 

 

 

2018

 

 

2017

 

 

 

(dollars in thousands)

 

Cash flows from operating activities

 

 

 

 

 

 

 

 

Net income

 

$

701

 

 

$

1,249

 

Adjustments to reconcile net income to net cash

 

 

 

 

 

 

 

 

Provided (used) by operating activities:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

515

 

 

 

426

 

Provision for (recovery of) loan losses

 

 

116

 

 

 

(173

)

Gain on sale of OREO

 

 

27

 

 

 

35

 

Net amortization of premium on investment securities AFS

 

 

364

 

 

 

453

 

Net amortization of premium on investment securities HTM

 

 

75

 

 

 

72

 

Net amortization of mortgage servicing rights

 

 

346

 

 

 

374

 

OREO write downs

 

 

 

 

 

78

 

Originations and purchases of mortgage loans for sale

 

 

(48,033

)

 

 

(47,656

)

Proceeds from sales of mortgage loans for sale

 

 

46,809

 

 

 

49,993

 

Cash surrender value of life insurance

 

 

(67

)

 

 

(60

)

Net change in:

 

 

 

 

 

 

 

 

Accrued interest receivable

 

 

(5

)

 

 

26

 

Prepaid assets

 

 

(364

)

 

 

(533

)

Miscellaneous other assets

 

 

(275

)

 

 

(1,196

)

Accrued interest payable

 

 

1

 

 

 

(2

)

Miscellaneous other liabilities

 

 

696

 

 

 

1,029

 

Net cash provided by operating activities

 

 

906

 

 

 

4,115

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash flows from investing activities

 

 

 

 

 

 

 

 

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

 

 

265

 

 

 

138

 

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

 

 

3,709

 

 

 

4,081

 

Purchase of life insurance investment

 

 

 

 

 

(1,525

)

Net change in restricted stock

 

 

(27

)

 

 

(15

)

Net increase in loans

 

 

(13,857

)

 

 

(11,581

)

Purchase of premises and equipment

 

 

(851

)

 

 

(304

)

Proceeds from sale of OREO

 

 

1,043

 

 

 

1,510

 

Net cash used by investing activities

 

 

(9,718

)

 

 

(7,696

)

 

 

 

 

 

 

 

 

 

Cash flows from financing activities

 

 

 

 

 

 

 

 

Net increase in deposit accounts

 

 

38,025

 

 

 

36,401

 

Net decrease in federal funds purchased

 

 

 

 

 

 

 

 

and securities sold under agreements to repurchase and other short-term borrowings

 

 

(230

)

 

 

(714

)

Repayment of other borrowings

 

 

 

 

 

(506

)

Common stock repurchased

 

 

(142

)

 

 

(367

)

Exercise of stock options

 

 

65

 

 

 

 

Dividends paid on preferred stock

 

 

(284

)

 

 

(294

)

Net cash provided by financing activities

 

 

37,434

 

 

 

34,520

 

Increase in cash and cash equivalents

 

 

28,622

 

 

 

30,939

 

Cash and cash equivalents, beginning of period

 

 

70,403

 

 

 

45,968

 

Cash and cash equivalents, end of period

 

$

99,025

 

 

$

76,907

 

 

 

 

 

 

 

 

 

 

Supplemental Disclosures of Cash Flow Information

 

 

 

 

 

 

 

 

Interest paid

 

$

765

 

 

$

616

 

Income taxes paid

 

 

335

 

 

 

433

 

Supplemental Schedule of Non-Cash Activities

 

 

 

 

 

 

 

 

Net change in fair value securities available for sale, net of tax

 

$

959

 

 

$

557

 

Loans transferred to foreclosed real estate

 

 

160

 

 

 

248

 

Mortgage servicing rights capitalized

 

 

169

 

 

 

329

 

 

 

See accompanying notes

 

 

-7-


 

UWHARRIE CAPITAL CORP AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

 

 

Note 1 – Basis of Presentation

The financial statements and accompanying notes are presented on a consolidated basis including Uwharrie Capital Corp (the “Company”) and its subsidiaries, Uwharrie Bank (the “Bank”), Uwharrie Investment Advisors, Inc., and Uwharrie Mortgage, Inc. The Bank consolidates its subsidiaries, the Strategic Alliance Corporation, BOS Agency, Inc. and Gateway Mortgage, Inc., each of which is wholly-owned by the Bank.

The information contained in the consolidated financial statements is unaudited. In the opinion of management, the consolidated financial statements have been prepared in conformity with generally accepted accounting principles in the United States of America (“GAAP”) and material adjustments necessary for a fair presentation of results of interim periods, all of which are of a normal recurring nature, have been made. The results of operations for the interim periods are not necessarily indicative of the results that may be expected for an entire year. Management is not aware