Exhibit 99.1

 

 

November 16, 2020

 

 

Dear Shareholder:

 

The beginning of autumn always brings some much-anticipated changes, cooler weather, leaves changing color and much more.  The year 2020 has brought about widespread change and most of us have come to accept some level of daily repetition.  Some of us stay in the same place for both work and non-work, and weekdays blend into weekends.  Those of us with school aged kids have an entirely new set of routine adjustments and challenges to face.  Amidst this pandemic, with an undefined duration, adaptation has become essential. 

We thank you for your patience during this community health crisis.  We appreciate the opportunity to serve you even as we have changed service delivery to practice caution and protect the health and well-being of our customers, associates and communities.  While many account transactions may be conducted at our drive thru locations, by phone, online and by appointment, we remain committed to continue to take care of and serve our markets.

Your Company continues to have a strong earnings year as a result of the diversified business units that have been able to react to the needs of our customers and the communities we serve, even during a pandemic.

We are pleased to report to you that net income for the first nine months of 2020 was $3.5 million, as compared to $2.6 million for the same nine month period in 2019.  This equates to $3.1 million in net income available to common shareholders or $0.43 cents per share, compared to $2.2 million in net income available to common shareholders or $0.30 per share that we reported in 2019 for the same period.  This represents an earnings growth of 43% in net income per available share year-to-date compared to the first nine months of 2019.

The main driver of our earnings increase is income from mortgage loan production, a direct result of the extended low interest rate environment that we continue to experience in 2020. During March, rates dropped significantly and the refinance boom began. Rates have fallen and stayed at much lower rates than ever anticipated. Our bank subsidiary, Uwharrie Bank, provides mortgage financing options for customers and then sells the loans (to eliminate the interest rate risk on the balance sheet), but retains the servicing of the loan. The servicing of these loans allows our customers to continue to work with us and provides an income stream for the Bank over the life of the loan.

Your Company has grown to $792 million in assets, up from $661 million at September 30, 2019. The $131 million or 20% increase is directly related to a growing deposit base. The deposit growth is reflective of a trend in the entire banking industry. According to the Federal Reserve Board*, seasonally adjusted deposits at banks nationally have grown nearly $2 trillion since the coronavirus hit the U.S in January. This is a result of stimulus and subsidies provided by the government in an effort to bolster the economy. Additionally, we have seen an overall increase in our customers’ account balances of


approximately 30% compared to 2019 as consumers have transitioned into a saving mode, due to the increased uncertainty in the world today.

While the fixed overhead of our backroom is sufficient to service the current growth in the balance sheet, margin continues to be an area of concern for the banking industry as we operate in a historically low interest rate environment with a relatively flat yield curve. We have seen margin** compression of 26 basis points from 3.44% at September 30, 2019 to 3.18% at September 30, 2020. Our peers are experiencing the same difficulties maintaining spreads at 3% or above. The diversity in our non-interest income revenue sources will prove beneficial as margin struggles continue.

As a result of the continued progress of your Company, your Board of Directors has declared a 2% stock dividend.  All shareholders of record on November 9, 2020, will receive the dividend payable on November 23, 2020.  The stock dividend will be paid electronically via book-entry (no stock certificates will be issued).  Once again, we chose to pay a stock dividend as opposed to cash to provide our shareholders with options to suit their needs.  Those shareholders still in peak earning years have the option of holding the dividend shares, which defers income, and paying taxes in later years at the lower capital gains rate.  For our shareholders desiring current income, these new shares can be sold for cash.  The stock dividend gives you, the shareholder, the option of deciding when you want to recognize the income and whether you pay ordinary income tax or capital gains.  If you wish to buy or sell shares, please contact our Investor Relations department and we can facilitate the transactions.  Shareholders are also reminded to turn in all stock certificates from prior years (which are still valid) for exchange to electronic form.  Our Investor Relations team can also assist you with this process (704-982-4415).

Though 2020 continues to be a year of challenges, your Company has adapted and continues to look for opportunities to fulfill our mission by providing the financial services to the communities we serve.  As a community banking organization, we believe local money should be put to work for local people.  Our local businesses have weathered challenging times and are certainly not out of the woods yet. Whenever possible and going into the holiday season, please shop local.  Local businesses are the foundation on which most of our communities are built and they need our support now, more than ever.

God bless you and we pray that you and your families remain safe and healthy.  Thank you for your continued support.

 

Sincerely,

 

UWHARRIE CAPITAL CORP

 

 

 

/s/ Roger L. Dick

 

President and Chief Executive Officer

 

 

*https://www.federalreserve.gov/releases/h8/current/default.htm

**Net Interest margin as a percentage of earning assets.

 

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)

2020

 

 

2019

 

 

 

 

 

 

 

 

 

Assets

 

 

 

 

 

 

 

Cash and due from banks

$

6,494

 

 

$

5,003

 

Interest-earning deposits with banks

 

63,955

 

 

 

141,926

 

Securities available for sale

 

178,582

 

 

 

92,538

 

Securities held to maturity (fair value $27,373 and $10,533, respectively)

 

26,244

 

 

 

10,461

 

Equity security, at fair value

 

1,335

 

 

 

-

 

Loans held for sale

 

7,812

 

 

 

3,240

 

Loans held for investment

 

467,726

 

 

 

369,475

 

     Less: Allowance for loan losses

 

(4,494

)

 

 

(2,071

)

     Net loans held for investment

 

463,232

 

 

 

367,404

 

Interest receivable

 

2,447

 

 

 

1,510

 

Premises and equipment, net

 

16,392

 

 

 

16,733

 

Restricted stock

 

1,166

 

 

 

1,144

 

Bank-owned life insurance

 

8,901

 

 

 

8,758

 

Other real estate owned

 

359

 

 

 

718

 

Other assets

 

14,985

 

 

 

11,424

 

     Total assets

$

791,904

 

 

$

660,859

 

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

Deposits:

 

 

 

 

 

 

 

     Demand, noninterest-bearing

$

200,764

 

 

$

149,835

 

     Interest checking and money market accounts

 

379,108

 

 

 

265,903

 

     Savings accounts

 

71,194

 

 

 

57,018

 

     Time deposits, $250,000 and over

 

9,051

 

 

 

57,649

 

     Other time deposits

 

53,570

 

 

 

58,848

 

          Total deposits

 

713,687

 

 

 

589,253

 

Interest payable

 

27

 

 

 

53

 

Short-term borrowed funds

 

635

 

 

 

503

 

Long-term debt

 

10,992

 

 

 

10,360

 

Other liabilities

 

12,271

 

 

 

11,783

 

     Total liabilities

 

737,612

 

 

 

611,952

 

 

 

 

 

 

 

 

 

Shareholders' Equity

 

 

 

 

 

 

 

Common stock, $1.25 par value:  20,000,000 shares authorized;

 

 

 

 

 

 

 

     issued and outstanding or in process of issuance

 

 

 

 

 

 

 

     6,961,230 and 6,975,734 shares, respectively.

 

 

 

 

 

 

 

     Book value per share $6.15 in 2020 and $5.27 in 2019 (1)

 

8,702

 

 

 

8,720

 

Common stock dividend distributable

 

174

 

 

 

-

 

Additional paid-in capital

 

12,756

 

 

 

12,323

 

Undivided profits

 

18,600

 

 

 

16,608

 

Accumulated other comprehensive income

 

3,405

 

 

 

601

 

     Total Uwharrie Capital Corp shareholders' equity

 

43,637

 

 

 

38,252

 

Noncontrolling interest

 

10,655

 

 

 

10,655

 

     Total shareholders' equity

 

54,292

 

 

 

48,907

 

     Total liabilities and shareholders' equity

$

791,904

 

 

$

660,859

 

 

 

 

 

 

 

 

 

(1) Net income per share, book value per share and weighted average shares outstanding have been adjusted to reflect the 2% stock dividend in 2019 and the 2% stock dividend in 2020.

 

 

 

 

 

 

 

 


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)

2020

 

2019

 

 

2020

 

2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest Income

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest and fees on loans

$

5,190

 

$

4,840

 

 

$

14,774

 

$

14,242

 

Interest on investment securities

 

926

 

 

532

 

 

 

2,281

 

 

1,518

 

Interest on equity securities

 

34

 

 

-

 

 

 

34

 

 

-

 

Interest-earning deposits with banks and federal funds sold

 

26

 

 

678

 

 

 

616

 

 

2,158

 

     Total interest income

 

6,176

 

 

6,050

 

 

 

17,705

 

 

17,918

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest Expense

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest paid on deposits

 

312

 

 

811

 

 

 

1,412

 

 

2,170

 

Interest paid on borrowed funds

 

142

 

 

147

 

 

 

419

 

 

440

 

     Total interest expense

 

454

 

 

958

 

 

 

1,831

 

 

2,610

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Interest Income

 

5,722

 

 

5,092

 

 

 

15,874

 

 

15,308

 

Provision for (recovery of) loan losses

 

1,066

 

 

(80

)

 

 

2,465

 

 

(508

)

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

 

4,656

 

 

5,172

 

 

 

13,409

 

 

15,816

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Noninterest Income

 

 

 

 

 

 

 

 

 

 

 

 

 

Service charges on deposit accounts

 

241

 

 

335

 

 

 

763

 

 

1,003

 

Interchange and card transaction fees

 

266

 

 

229

 

 

 

640

 

 

627

 

Other service fees and commissions

 

588

 

 

658

 

 

 

1,911

 

 

1,987

 

Gain (loss) on sale of securities

 

19

 

 

(35

)

 

 

77

 

 

(35

)

Unrealized gain on equity security

 

101

 

 

-

 

 

 

434

 

 

-

 

Income from mortgage loan sales

 

3,961

 

 

1,197

 

 

 

8,727

 

 

2,776

 

Other income

 

370

 

 

204

 

 

 

428

 

 

185

 

     Total noninterest income

 

5,546

 

 

2,588

 

 

 

12,980

 

 

6,543

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Noninterest Expense

 

 

 

 

 

 

 

 

 

 

 

 

 

Salaries and employee benefits

 

5,254

 

 

4,284

 

 

 

14,708

 

 

12,669

 

Occupancy expense

 

430

 

 

422

 

 

 

1,261

 

 

1,245

 

Equipment expense

 

202

 

 

187

 

 

 

564

 

 

546

 

Data processing

 

171

 

 

163

 

 

 

491

 

 

557

 

Other operating expenses

 

1,945

 

 

1,541

 

 

 

4,721

 

 

4,078

 

     Total  noninterest expense

 

8,002

 

 

6,597

 

 

 

21,745

 

 

19,095

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income before income taxes

 

2,200

 

 

1,163

 

 

 

4,644

 

 

3,264

 

Provision for income taxes

 

618

 

 

195

 

 

 

1,132

 

 

655

 

Net Income

$

1,582

 

$

968

 

 

$

3,512

 

$

2,609

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consolidated net income

$

1,582

 

$

968

 

 

$

3,512

 

$

2,609

 

  Less: Net income attributable to noncontrolling interest

 

(142

)

 

(142

)

 

 

(424

)

 

(422

)

Net income attributable to Uwharrie Capital Corp and common shareholders

$

1,440

 

$

826

 

 

$

3,088

 

$

2,187

 

Net Income Per Common Share (1)

 

 

 

 

 

 

 

 

 

 

 

 

 

     Basic

$

0.20

 

$

0.11

 

 

$

0.43

 

$

0.30

 

     Assuming dilution

$

0.20

 

$

0.11

 

 

$

0.43

 

$

0.30

 

Weighted Average Common Shares Outstanding (1)

 

 

 

 

 

 

 

 

 

 

 

 

 

     Basic

7,105,982

 

7,323,166

 

 

7,145,938

 

7,370,663

 

     Assuming dilution

7,105,982

 

7,323,166

 

 

7,145,938

 

7,370,663

 

 

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