uwhr-ex991

We are pleased to report a successful third quarter of operations in 2018 and continued progress for Uwharrie Capital Corp and its subsidiaries. Total assets reached a new milestone at $637 million as of September 30, 2018, an annualized increase of 8% compared to $592 million on December 31, 2017, and our best growth period since the 2007-2008 economic crisis began.

This achievement is a result of the company’s investment in diverse strategic initiatives, some begun more than two years ago. Loan production has been very strong for the past three years and increased $28M net year-over-year in 2018. Net Interest Income improved by $1.3 million year-over-year due to the loan growth and an increase in interest rates. We have also maintained our asset quality at historically low levels of past due and non-accrual loans.

In addition to our new full-service Charlotte branch and increased loan production, we embarked on a revenue enhancement strategy by ramping up our government-guaranteed lending activities for small businesses with the Small Business Administration (SBA) and the United States Department of Agriculture (USDA), and expanding our wealth management business in Charlotte and Asheboro, and our residential mortgage business in Fort Mill, SC.

Additionally, in the third quarter of 2018, your company completed the largest and most complex core data processing conversion we have ever undertaken. A large number of Uwharrie Bank associates worked diligently for almost two years to prepare for and execute this conversion. This new system ensures Uwharrie continues to deliver an exceptional customer experience.

The investments we have made to expand our markets, product lines, and technology do have a financial impact on our current results; however, these expenses are being leveraged to create additional revenue while improving customer satisfaction. The benefits are now beginning to be reaped and are evident in our third quarter results. Reported net income available to common shareholders was $499 thousand for the three months ended September 30, 2018, and accounts for over 50% of our 2018 year-to-date reported net income available to shareholders of $916 thousand.

This is the strongest quarter we have experienced in more than two years. The quarterly growth and financial improvement is confirmation of your company’s determination to remain relevant and focused on leveraging our investments into long-term value for all of our stakeholders. Local deposits are being invested back into their communities. New prosperity and new jobs are happening in the communities and main streets that we serve.

The value of your investment, like the communities we serve, is growing. Accordingly, we are pleased to share with you that your Board of Directors declared a 2% stock dividend to be paid to common stock shareholders on December 14, 2018. The dividend evidences the tangible wealth that is being created. In years where your company has declared a stock dividend, it has been our practice to repurchase an equal amount of shares that the dividend represents through our stock repurchase program. Under this

methodology, the stock dividend is not dilutive to our shareholders, as shareholders who seek current income can convert the dividend to cash by selling their dividend shares, while shareholders who prefer to defer the income can retain their additional shares.

Shareholders of Uwharrie Capital Corp, as of the record date November 28, 2018, will receive the dividend, which will be paid electronically via book-entry. No stock certificates will be issued. Going to a paperless book entry system is saving shareholders $40 thousand, as well as being environmentally friendly.

Going into this holiday season, we take this opportunity to express our gratitude to you for your support and investment in community banking. The need for a community bank focused on people and Main Street economies has never been greater. Remember to invite your family, friends and associates to do business with us and experience the difference and care that we deliver, while keeping community wealth in the community and helping to build a better future.

This Report may contain, among other things, certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including, without limitation, (i) statements regarding certain of the Company's goals and expectations with respect to earnings, income per share, revenue, expenses and the growth rate in such items, as well as other measures of economic performance, including statements relating to estimates of credit quality trends, and (ii) statements preceded by, followed by or that include the words “may," ”could," ”should,” “would,” “believe," ”anticipate," "estimate," "expect," “intend,” ”plan,” ”projects," ”outlook," or similar expressions. These statements are based upon the current belief and expectations of the Company‘s management and are subject to significant risks and uncertainties that are subject to change based on various factors (many of which are beyond the Company’s control).

Uwharrie Capital Corp and Subsidiaries
Consolidated Balance Sheets (Unaudited)
	September 30,			September 30,
(Amounts in thousands except share and per share data)	2018			2017

Assets
Cash and due from banks	$	6,629		$	6,826
Interest-earning deposits with banks		110,097			85,757
Securities available for sale		92,471			97,717
Securities held to maturity (fair value $10,728 and $11,575, respectively)		10,871			11,493
Loans held for sale		1,946			2,725
Loans held for investment		377,738			349,919
Less: Allowance for loan losses		2,365			2,448
Net loans held for investment		375,373			347,471
Interest receivable		1,681			1,516
Premises and equipment, net		14,849			14,302
Restricted stock		1,094			1,068
Bank-owned life insurance		8,642			8,514
Other real estate owned		1,086			2,681
Other assets		12,651			11,882
Total assets	$	637,390		$	591,952

Liabilities
Deposits:
Demand, noninterest-bearing	$	137,203		$	118,459
Interest checking and money market accounts		322,730			295,330
Savings accounts		56,802			45,075
Time deposits, $250,000 and over		6,848			10,408
Other time deposits		49,959			57,981
Total deposits		573,542			527,253
Interest payable		12			151
Short-term borrowed funds		1,305			1,788
Long-term debt		9,934			9,534
Other liabilities		8,888			8,066
Total liabilities		593,681			546,792

Shareholders' Equity
Common stock, $1.25 par value: 20,000,000 shares authorized;
issued and outstanding or in process of issuance
7,019,604 and 6,978,263 shares, respectively.
Book value per share $4.71 in 2018 and $4.85 in 2017 (1)		8,774			8,723
Additional paid-in capital		12,414			12,258
Undivided profits		14,198			14,262
Accumulated other comprehensive income (loss)		(2,332	)		(726	)
Total Uwharrie Capital Corp shareholders' equity		33,054			34,517
Noncontrolling interest		10,655			10,643
Total shareholders' equity		43,709			45,160
Total liabilities and shareholders' equity	$	637,390		$	591,952

(1) Net income per share, book value per share and weighted average shares outstanding have been adjusted to reflect the 2% stock dividend in 2017.

Uwharrie Capital Corp and Subsidiaries
Consolidated Statements of Income (Unaudited)
	Three Months Ended						Nine Months Ended
	September 30,						September 30,
(Amounts in thousands except share and per share data)	2018			2017			2018			2017

Interest Income
Interest and fees on loans	$	4,680		$	4,214		$	13,405		$	12,336
Interest on investment securities		435			495			1,430			1,511
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 paid on deposits		372			192			858			521
Interest paid on borrowed funds		143			139			423			424
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		190			149			476			486
Other service fees and commissions		650			606			1,940			1,994
Income from mortgage loan sales		730			790			2,261			2,539
Other income		119			205			504			557
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
Occupancy expense		447			327			1,207			938
Equipment expense		220			151			555			451
Data processing		206			429			739			789
Other operating expenses		1,442			1,420			4,455			4,350
Total noninterest expense		6,389			5,974			19,097			17,515

Income before income taxes		755			847			1,592			2,666
Provision for income taxes		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 Per Common Share (1)
Basic	$	0.07		$	0.06		$	0.13		$	0.20
Assuming dilution	$	0.07		$	0.06		$	0.13		$	0.20
Weighted Average Common Shares Outstanding (1)
Basic		7,095,120			7,118,720			7,104,841			7,148,405
Assuming dilution		7,095,120			7,119,585			7,104,841			7,149,021

/s/ Roger L. Dick		/s/ Brendan P. Duffey
President and Chief Executive Officer		Chief Operating Officer