10-Q 1 uwhr-10q_20180930.htm 10-Q uwhr-10q_20180930.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 September 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 every Interactive Data File required to be submitted 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 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

 

 

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: 7,019,604 shares of common stock outstanding as of November 5, 2018.

 

 


 

 

Table of Contents

 

 

 

 

 

Page No.

 

 

 

 

 

Part I.

 

FINANCIAL INFORMATION

 

 

 

 

 

 

 

Item 1 -

 

Financial Statements (Unaudited)

 

 

 

 

 

 

 

 

 

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

 

3

 

 

 

 

 

 

 

Consolidated Statements of Income for the Three and Nine Months Ended September 30, 2018 and 2017

 

4

 

 

 

 

 

 

 

Consolidated Statements of Comprehensive Income for the Three and Nine Months Ended September 30, 2018 and 2017

 

5

 

 

 

 

 

 

 

Consolidated Statements of Changes in Shareholders’ Equity for the Nine Months Ended September 30, 2018

 

6

 

 

 

 

 

 

 

Consolidated Statement of Cash Flows for the Nine Months Ended September 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.

 

 

 

September 30, 2018 (Unaudited)

 

 

December 31, 2017*

 

 

 

(dollars in thousands)

 

ASSETS

 

 

 

 

 

 

 

 

Cash and due from banks

 

$

6,629

 

 

$

7,538

 

Interest-earning deposits with banks

 

 

110,097

 

 

 

62,865

 

Securities available for sale, at fair value

 

 

92,471

 

 

 

95,743

 

Securities held to maturity, at amortized cost (fair value $10,728 and $11,461, respectively)

 

 

10,871

 

 

 

11,458

 

Loans held for sale

 

 

1,946

 

 

 

4,414

 

Loans:

 

 

 

 

 

 

 

 

Loans held for investment

 

 

377,738

 

 

 

356,871

 

Less allowance for loan losses

 

 

(2,365

)

 

 

(2,458

)

Net loans held for investment

 

 

375,373

 

 

 

354,413

 

Premises and equipment, net

 

 

14,849

 

 

 

14,728

 

Interest receivable

 

 

1,681

 

 

 

1,709

 

Restricted stock

 

 

1,094

 

 

 

1,067

 

Bank owned life insurance

 

 

8,642

 

 

 

8,546

 

Other real estate owned

 

 

1,086

 

 

 

2,349

 

Prepaid assets

 

 

708

 

 

 

786

 

Other assets

 

 

11,943

 

 

 

10,742

 

Total assets

 

$

637,390

 

 

$

576,358

 

 

 

 

 

 

 

 

 

 

LIABILITIES

 

 

 

 

 

 

 

 

Deposits:

 

 

 

 

 

 

 

 

Demand noninterest-bearing

 

$

137,203

 

 

$

113,762

 

Interest checking and money market accounts

 

 

322,730

 

 

 

289,953

 

Savings deposits

 

 

56,802

 

 

 

45,698

 

Time deposits, $250,000 and over

 

 

6,848

 

 

 

7,933

 

Other time deposits

 

 

49,959

 

 

 

55,282

 

Total deposits

 

 

573,542

 

 

 

512,628

 

Short-term borrowed funds

 

 

1,305

 

 

 

1,752

 

Long-term debt

 

 

9,934

 

 

 

9,534

 

Interest payable

 

 

12

 

 

 

148

 

Other liabilities

 

 

8,888

 

 

 

7,756

 

Total liabilities

 

 

593,681

 

 

 

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 7,019,604 and 7,112,853

 

 

8,774

 

 

 

8,891

 

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

 

 

 

 

 

 

Additional paid-in capital

 

 

12,414

 

 

 

12,824

 

Undivided profits

 

 

14,198

 

 

 

13,282

 

Accumulated other comprehensive loss

 

 

(2,332

)

 

 

(1,107

)

Total Uwharrie Capital shareholders’ equity

 

 

33,054

 

 

 

33,890

 

Noncontrolling interest

 

 

10,655

 

 

 

10,650

 

Total shareholders’ equity

 

 

43,709

 

 

 

44,540

 

Total liabilities and shareholders’ equity

 

$

637,390

 

 

$

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 September 30,

 

 

Nine Months Ended September 30,

 

 

 

2018

 

 

2017

 

 

2018

 

 

2017

 

 

 

(in thousands, except share and per share data)

 

Interest Income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans, including fees

 

$

4,680

 

 

$

4,214

 

 

$

13,405

 

 

$

12,336

 

Investment securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

US Treasury

 

 

12

 

 

 

5

 

 

 

12

 

 

 

28

 

US Government agencies and corporations

 

 

304

 

 

 

369

 

 

 

1,055

 

 

 

1,122

 

State and political subdivisions

 

 

119

 

 

 

121

 

 

 

363

 

 

 

361

 

Interest-earning deposits with banks and federal funds sold

 

 

539

 

 

 

258

 

 

 

1,181

 

 

 

520

 

Total interest income

 

 

5,654

 

 

 

4,967

 

 

 

16,016

 

 

 

14,367

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest Expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest checking and money market accounts

 

 

269

 

 

 

113

 

 

 

605

 

 

 

295

 

Savings deposits

 

 

38

 

 

 

12

 

 

 

63

 

 

 

37

 

Time deposits, $250,000 and over

 

 

10

 

 

 

16

 

 

 

43

 

 

 

46

 

Other time deposits

 

 

55

 

 

 

51

 

 

 

147

 

 

 

143

 

Short-term borrowed funds

 

 

5

 

 

 

1

 

 

 

12

 

 

 

14

 

Long-term debt

 

 

138

 

 

 

138

 

 

 

411

 

 

 

410

 

Total interest expense

 

 

515

 

 

 

331

 

 

 

1,281

 

 

 

945

 

Net interest income

 

 

5,139

 

 

 

4,636

 

 

 

14,735

 

 

 

13,422

 

Provision for (recovery of) loan losses

 

 

(24

)

 

 

(136

)

 

 

92

 

 

 

(309

)

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

 

 

5,163

 

 

 

4,772

 

 

 

14,643

 

 

 

13,731

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Noninterest Income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Service charges on deposit accounts

 

 

292

 

 

 

299

 

 

 

865

 

 

 

874

 

Interchange and card transaction fees, net

 

 

190

 

 

 

149

 

 

 

476

 

 

 

486

 

Other service fees and commissions

 

 

650

 

 

 

606

 

 

 

1,940

 

 

 

1,994

 

Loss on sale of securities (includes reclassification of $0, ($14,000),

$0, and ($14,000) from accumulated other comprehensive income)

 

 

 

 

 

(14

)

 

 

 

 

 

(14

)

Income from mortgage loan sales

 

 

730

 

 

 

790

 

 

 

2,261

 

 

 

2,539

 

Other income

 

 

119

 

 

 

219

 

 

 

504

 

 

 

571

 

Total noninterest income

 

 

1,981

 

 

 

2,049

 

 

 

6,046

 

 

 

6,450

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Noninterest Expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Salaries and employee benefits

 

 

4,074

 

 

 

3,647

 

 

 

12,141

 

 

 

10,987

 

Net occupancy expense

 

 

447

 

 

 

327

 

 

 

1,207

 

 

 

938

 

Equipment expense

 

 

220

 

 

 

151

 

 

 

555

 

 

 

451

 

Data processing costs

 

 

206

 

 

 

429

 

 

 

739

 

 

 

789

 

Office supplies and printing

 

 

59

 

 

 

27

 

 

 

134

 

 

 

89

 

Foreclosed real estate expense

 

 

13

 

 

 

48

 

 

 

85

 

 

 

312

 

Professional fees and services

 

 

280

 

 

 

223

 

 

 

742

 

 

 

570

 

Marketing and donations

 

 

196

 

 

 

251

 

 

 

616

 

 

 

737

 

Electronic banking expense

 

 

98

 

 

 

93

 

 

 

297

 

 

 

263

 

Software amortization and maintenance

 

 

239

 

 

 

198

 

 

 

686

 

 

 

569

 

FDIC insurance

 

 

54

 

 

 

76

 

 

 

185

 

 

 

167

 

Other noninterest expense

 

 

503

 

 

 

504

 

 

 

1,710

 

 

 

1,643

 

Total noninterest expense

 

 

6,389

 

 

 

5,974

 

 

 

19,097

 

 

 

17,515

 

Income before income taxes

 

 

755

 

 

 

847

 

 

 

1,592

 

 

 

2,666

 

Income taxes (includes reclassification of $0, ($5,000), $0,

and ($5,000) from accumulated other comprehensive income)

 

 

112

 

 

 

259

 

 

 

248

 

 

 

829

 

Net income

 

$

643

 

 

$

588

 

 

$

1,344

 

 

$

1,837

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consolidated net income

 

$

643

 

 

$

588

 

 

$

1,344

 

 

$

1,837

 

Less: net income attributable to noncontrolling interest

 

 

(144

)

 

 

(148

)

 

 

(428

)

 

 

(442

)

Net income attributable to Uwharrie Capital Corp and common shareholders

 

$

499

 

 

$

440

 

 

$

916

 

 

$

1,395

 

Net income (loss) per common share

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.07

 

 

$

0.06

 

 

$

0.13

 

 

$

0.20

 

Diluted

 

$

0.07

 

 

$

0.06

 

 

$

0.13

 

 

$

0.20

 

Weighted average shares outstanding

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

7,095,120

 

 

 

7,118,720

 

 

 

7,104,841

 

 

 

7,148,405

 

Diluted

 

 

7,095,120

 

 

 

7,119,585

 

 

 

7,104,841

 

 

 

7,149,021

 

 

 

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,

 

 

 

2018

 

 

2017

 

 

2018

 

 

2017

 

 

 

(in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Income

 

$

643

 

 

$

588

 

 

$

1,344

 

 

$

1,837

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized gain (loss) on available for sale securities

 

 

(346

)

 

 

40

 

 

 

(1,587

)

 

 

884

 

Related tax effect

 

 

80

 

 

 

(14

)

 

 

362

 

 

 

(301

)

Reclassification of loss recognized in net income

 

 

 

 

 

14

 

 

 

 

 

 

14

 

Related tax effect

 

 

 

 

 

(5

)

 

 

 

 

 

(5

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total other comprehensive income (loss)

 

 

(266

)

 

 

35

 

 

 

(1,225

)

 

 

592

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Comprehensive income (loss)

 

 

377

 

 

 

623

 

 

 

119

 

 

 

2,429

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Less: Comprehensive income (loss) attributable to noncontrolling

   interest

 

 

(144

)

 

 

(148

)

 

 

(428

)

 

 

(442

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Comprehensive income (loss) attributable to Uwharrie Capital

 

$

233

 

 

$

475

 

 

$

(309

)

 

$

1,987

 

 

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

 

 

 

 

 

 

 

 

 

 

 

916

 

 

 

 

 

 

428

 

 

 

1,344

 

Repurchase of common stock

 

 

(106,627

)

 

 

(133

)

 

 

(459

)

 

 

 

 

 

 

 

 

 

 

 

(592

)

Stock options exercised

 

 

13,378

 

 

 

16

 

 

 

49

 

 

 

 

 

 

 

 

 

 

 

 

65

 

Other comprehensive Income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,225

)

 

 

 

 

 

(1,225

)

Record preferred stock dividend Series B

   (noncontrolling interest)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(312

)

 

 

(312

)

Record preferred stock dividend Series C

   (noncontrolling interest)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(111

)

 

 

(111

)

Balance, September 30, 2018

 

 

7,019,604

 

 

$

8,774

 

 

$

12,414

 

 

$

14,198

 

 

$

(2,332

)

 

$

10,655

 

 

$

43,709

 

 

See accompanying notes

 

 

-6-


 

Uwharrie Capital Corp and Subsidiaries

Consolidated Statements of Cash Flows (Unaudited)

 

 

 

 

Nine Months Ended September 30,

 

 

 

2018

 

 

2017

 

 

 

(dollars in thousands)

 

Cash flows from operating activities

 

 

 

 

 

 

 

 

Net income

 

$

1,344

 

 

$

1,837

 

Adjustments to reconcile net income to net cash

 

 

 

 

 

 

 

 

Provided (used) by operating activities:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

792

 

 

 

636

 

Provision for (recovery of) loan losses

 

 

92

 

 

 

(309

)

Loss on sale of securities available for sale

 

 

 

 

 

14

 

Loss on sale of OREO

 

 

35

 

 

 

31

 

Net amortization of premium on investment securities AFS

 

 

660

 

 

 

665

 

Net amortization of premium on investment securities HTM

 

 

112

 

 

 

112

 

Net amortization of mortgage servicing rights

 

 

513

 

 

 

557

 

OREO write downs

 

 

 

 

 

92

 

Originations and purchases of mortgage loans for sale

 

 

(67,516

)

 

 

(70,968

)

Proceeds from sales of mortgage loans for sale

 

 

69,471

 

 

 

73,509

 

Cash surrender value of life insurance

 

 

(96

)

 

 

(92

)

Net change in:

 

 

 

 

 

 

 

 

Accrued interest receivable

 

 

28

 

 

 

113

 

Prepaid assets

 

 

78

 

 

 

(174

)

Miscellaneous other assets

 

 

(834

)

 

 

(495

)

Accrued interest payable

 

 

(136

)

 

 

 

Miscellaneous other liabilities

 

 

1,132

 

 

 

1,439

 

Net cash provided by operating activities

 

 

5,675

 

 

 

6,967

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash flows from investing activities

 

 

 

 

 

 

 

 

Proceeds from sales of investment securities available for sale

 

 

 

 

 

8,918

 

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

 

 

475

 

 

 

385

 

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

 

 

6,025

 

 

 

5,823

 

Purchase of investment securities available for sale

 

 

(5,000

)

 

 

(6,338

)

Purchase of life insurance investment

 

 

 

 

 

(1,525

)

Net change in restricted stock

 

 

(27

)

 

 

(16

)

Net increase in loans

 

 

(21,212

)

 

 

(8,401

)

Purchase of premises and equipment

 

 

(913

)

 

 

(765

)

Proceeds from sale of OREO

 

 

1,388

 

 

 

1,733

 

Net cash used by investing activities

 

 

(19,264

)

 

 

(186

)

 

 

 

 

 

 

 

 

 

Cash flows from financing activities

 

 

 

 

 

 

 

 

Net increase in deposit accounts

 

 

60,914

 

 

 

41,534

 

Net decrease in federal funds purchased

 

 

 

 

 

 

 

 

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

 

 

(447

)

 

 

(380

)

Proceeds from long-term borrowings

 

 

400

 

 

 

 

Repayment of other borrowings

 

 

 

 

 

(506

)

Common stock repurchased

 

 

(592

)

 

 

(372

)

Exercise of stock options

 

 

65

 

 

 

 

Dividends paid on preferred stock

 

 

(428

)

 

 

(442

)

Net cash provided by financing activities

 

 

59,912

 

 

 

39,834

 

Increase in cash and cash equivalents

 

 

46,323

 

 

 

46,615

 

Cash and cash equivalents, beginning of period

 

 

70,403

 

 

 

45,968