Exhibit 99.1
September 17, 2010
Uwharrie Capital Corp and its subsidiary banks continued to deliver solid results during the first half of 2010. Though we are living through what are certainly difficult and historic times, your family of community banks has continued to endure the storm. Not since the Great Depression have the economy, financial markets and banking industry been so stressed. With prudent underwriting, staying close to our customers and giving our clients solid financial guidance, Uwharrie Capital Corp continues to make significant market share gains that will strengthen our foundation for the future.
We value the confidence that our customers place in us and we work hard to earn that trust every day. One of the great factors behind our consistent growth is the level of care we give to our customers. Total assets ended the quarter at $515.0 million, an increase of $51.2 million or 11.0% compared to assets of $463.8 million at June 30, 2009. Loans increased 8.0% to $367.2 million and total deposits increased 10.2% to $409.9 million.
As of June 30, 2010, year to date net interest income was $9.3 million, an increase of $866 thousand, or 10.2% over the first six months of 2009. Net interest margin was 4.25%, an improvement from 4.09% for the same period of 2009.
While the soft economy continues to be difficult, we remain committed to assisting our customers in working through the challenges they face. We have taken steps to not only recognize current problems but to stay ahead of the curve if recovery is slower still. This position has impacted earnings for the first half of 2010.
Net income was $870 thousand for the six-month period ended June 30, 2010, compared to $1.528 million for the same period last year. Net income available to shareholders was $547 thousand for the six-month period compared to $1.206 million for the six-month period ending June 30, 2009. For the three months ending June 30, 2010, net income was $331 thousand, a decrease from $623 thousand for the same period last year. Net income available to shareholders was $170 thousand compared to $463 thousand last year.
Across the state and nation, banks continue to report less than stellar earnings and while ours are not as strong as the prior year, we have identified two primary contributing factors which we are managing proactively.
As loan loss trends continue, we have prudently increased our provision in recognition of the potential effect a sustained economic slowdown would have on our loan portfolio. We are thankful we are not experiencing the level of asset deterioration some financial intermediaries are facing this year, but we are not without some exposure to these market forces.
Additionally, revenue in 2009 benefited from unprecedented home refinancing in early 2009 which positively impacted income as the Company produced 1.5 times the volume of a normal year. This year home refinancing volume was lower in the first six months of 2010 compared to 2009, but represents more normalized volume.
Our business is based on building relationships rather than individual transactions and we are constantly focusing on strengthening the long-term partnership with our customers. We are seeing an increase of new customers transferring their relationships to our banks and wealth management services due to referrals from satisfied customers, our valued shareholders and our board members. Somewhat offsetting this favorable development are the continued financial challenges many local businesses and individual customers are facing, and the deflation of historic real estate values due to a lack of liquidity and economic confidence.
Your Company remains ‘well capitalized’ by regulatory standards and we are confident in our ability to accomplish our Mission and Vision of a self-supporting local economy. Once again, please “shop local” and patronize our local businesses –now more than ever. Thank you for your loyalty and confidence.
Sincerely, |
UWHARRIE CAPITAL CORP |
/s/ Roger L. Dick |
Roger L. Dick |
President and Chief Executive Officer |
Uwharrie Capital Corp and Subsidiaries
Consolidated Balance Sheets
(Amounts in thousands except share and per share data) | June 30, 2010 | June 30, 2009 | ||||||
Assets | ||||||||
Cash and due from banks | $ | 11,277 | $ | 10,557 | ||||
Investment securities available for sale | 94,994 | 74,650 | ||||||
Federal funds sold | — | — | ||||||
Loans held for sale | 1,991 | 2,922 | ||||||
Loans held for investment | 372,821 | 344,721 | ||||||
Less: Allowance for loan losses | 5,635 | 4,732 | ||||||
Net loans held for investment | 367,186 | 339,989 | ||||||
Interest receivable | 2,416 | 1,987 | ||||||
Premises and equipment, net | 14,127 | 12,863 | ||||||
Federal Home Loan Bank stock | 3,330 | 3,147 | ||||||
Bank-owned life insurance | 5,835 | 5,608 | ||||||
Goodwill | 987 | 987 | ||||||
Other real estate owned | 3,281 | 2,497 | ||||||
Other assets | 9,612 | 8,629 | ||||||
Total assets | $ | 515,036 | $ | 463,836 | ||||
Liabilities | ||||||||
Deposits: | ||||||||
Demand, noninterest-bearing | $ | 50,651 | $ | 47,206 | ||||
Interest checking and money market accounts | 167,874 | 118,932 | ||||||
Savings accounts | 36,586 | 32,128 | ||||||
Time deposits, $100,000 and over | 64,283 | 70,837 | ||||||
Other time deposits | 90,494 | 102,681 | ||||||
Total deposits | 409,888 | 371,784 | ||||||
Interest payable | 389 | 487 | ||||||
Short-term borrowed funds | 22,515 | 14,642 | ||||||
Long-term debt | 33,589 | 30,648 | ||||||
Other liabilities | 2,424 | 3,051 | ||||||
Total liabilities | 468,805 | 420,612 | ||||||
Shareholders’ Equity | ||||||||
Preferred Stock, no par value: 10,000,000 shares authorized; | ||||||||
10,000 shares of series A issued and outstanding | 10,000 | 10,000 | ||||||
500 shares of series B issued and outstanding | 500 | 500 | ||||||
Discount on preferred stock | (350 | ) | (450 | ) | ||||
Common stock, $1.25 par value: 20,000,000 shares authorized; issued and outstanding or in process of issuance 7,593,929 and 7,593,929 shares, respectively. | ||||||||
Book value per share $4.75 in 2010 and $4.37 in 2009. | 9,492 | 9,492 | ||||||
Additional paid-in capital | 14,032 | 14,028 | ||||||
Unearned ESOP compensation | (629 | ) | (701 | ) | ||||
Undivided profits | 10,603 | 11,214 | ||||||
Accumulated other comprehensive income (loss) | 2,583 | (859 | ) | |||||
Total shareholders’ equity | 46,231 | 43,224 | ||||||
Total liabilities and shareholders’ equity | $ | 515,036 | $ | 463,836 | ||||
Uwharrie Capital Corp and Subsidiaries
Consolidated Statements of Income
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
(Amounts in thousands except share and per share data) | 2010 | 2009 | 2010 | 2009 | ||||||||||||
Interest Income | ||||||||||||||||
Interest and fees on loans | $ | 5,492 | $ | 5,218 | $ | 10,794 | $ | 10,593 | ||||||||
Interest on investment securities | 756 | 945 | 1,500 | 1,915 | ||||||||||||
Other interest income | 10 | 19 | 18 | 43 | ||||||||||||
Total interest income | 6,258 | 6,182 | 12,312 | 12,551 | ||||||||||||
Interest Expense | ||||||||||||||||
Interest paid on deposits | 1,048 | 1,557 | 2,132 | 3,165 | ||||||||||||
Interest on borrowed funds | 438 | 439 | 846 | 918 | ||||||||||||
Total interest expense | 1,486 | 1,996 | 2,978 | 4,083 | ||||||||||||
Net Interest Income | 4,772 | 4,186 | 9,334 | 8,468 | ||||||||||||
Provision for loan losses | 830 | 196 | 1,043 | 568 | ||||||||||||
Net interest income after provision for loan losses | 3,942 | 3,990 | 8,291 | 7,900 | ||||||||||||
Noninterest Income | ||||||||||||||||
Service charges on deposit accounts | 563 | 567 | 1,129 | 1,135 | ||||||||||||
Other service fees and commissions | 768 | 575 | 1,429 | 1,032 | ||||||||||||
Gain (loss) on sale of securities | 62 | 20 | (36 | ) | (20 | ) | ||||||||||
Loss on nonmarketable securities | — | — | — | (172 | ) | |||||||||||
Total other-than-temporary impairment loss | — | (1,855 | ) | — | (1,855 | ) | ||||||||||
Portion of loss recognized in other comprehensive income | — | 1,651 | — | 1,651 | ||||||||||||
Net impairment recognized in earnings | — | (204 | ) | — | (204 | ) | ||||||||||
Income from mortgage loan sales | 390 | 1,131 | 736 | 2,567 | ||||||||||||
Other income | 40 | 84 | 168 | 164 | ||||||||||||
Total noninterest income | 1,823 | 2,173 | 3,426 | 4,502 | ||||||||||||
Noninterest Expense | ||||||||||||||||
Salaries and employee benefits | 2,886 | 2,886 | 5,714 | 5,759 | ||||||||||||
Occupancy expense | 272 | 242 | 538 | 487 | ||||||||||||
Equipment expense | 176 | 180 | 358 | 361 | ||||||||||||
Data processing | 209 | 198 | 411 | 389 | ||||||||||||
Other operating expenses | 1,672 | 1,775 | 3,366 | 3,164 | ||||||||||||
Total noninterest expense | 5,215 | 5,281 | 10,387 | 10,160 | ||||||||||||
Income before income taxes | 550 | 882 | 1,330 | 2,242 | ||||||||||||
Provision for income taxes | 219 | 259 | 460 | 714 | ||||||||||||
Net Income | $ | 331 | $ | 623 | $ | 870 | $ | 1,528 | ||||||||
Net Income | $ | 331 | $ | 623 | $ | 870 | $ | 1,528 | ||||||||
Dividends - preferred stock | (161 | ) | (160 | ) | (323 | ) | (322 | ) | ||||||||
Net income available to common shareholders | $ | 170 | $ | 463 | $ | 547 | $ | 1,206 | ||||||||
Net Income Per Common Share (1) | ||||||||||||||||
Basic | $ | 0.02 | $ | 0.06 | $ | 0.07 | $ | 0.16 | ||||||||
Assuming dilution | $ | 0.02 | $ | 0.06 | $ | 0.07 | $ | 0.16 | ||||||||
Weighted Average Common Shares Outstanding (1) | ||||||||||||||||
Basic | 7,488,781 | 7,472,003 | 7,486,695 | 7,469,905 | ||||||||||||
Assuming dilution | 7,488,781 | 7,472,003 | 7,486,695 | 7,469,905 |