Exhibit 99.1
Second Quarter Report
June 30, 2011
August 24, 2011
Dear Shareholder:
Times of crisis in the economy can be considered blessed moments in history. These are the times that we, as a community and nation of people, stop and reevaluate our paths. We are in a global economic recession, with high unemployment, virtually no job growth, and so ridden with debt that Standard & Poor’s has downgraded our nation’s credit quality. We have not seen times like these before, and these challenges require us, as individuals and corporate bodies, to rethink our attitudes about debt, investing, and generally speaking, our risk-taking in a world that has become a lot more uncertain.
The recession has been devastating on individuals and businesses in our state and our markets are no exception. Uwharrie Capital Corp remains committed to helping families and local businesses through these challenging times. We are working tomake a difference in the overall financial health of our customers and the communities we serve.
As a result of the recession, all banks in North Carolina have been challenged in loan quality and earnings since 2008. Thanks to the support of you and our communities, we have continued to be profitable and have performed better than our peers in all measures of asset quality and earnings. Earnings for second quarter 2011 of $709 thousand compared favorably to second quarter 2010 earnings of $331 thousand, for an increase of 114%. This is a result of an improvement in our credit quality, due primarily to a reduction in the loan loss provision from $830 thousand during the second quarter of 2010 to $160 thousand for the same period 2011. On a year-to-date basis our earnings are up 5.5% to $918 thousand.
During 2011, the loan demand in our markets has been down substantially, which has been indicative of the industry as consumers and businesses across the nation are borrowing less and saving more. This has multiple implications for our company. Assets increased by $6.3 million from June 2010 to June 2011; however, since the first of the year, loan demand has been very soft, resulting in a lower loan balance from the close of December 2010. During 2011 the increased savings in our noninterest-bearing deposits grew by 5.73%, helping to provide a lower cost funding source in the face of declining loan and investment yields. Our net interest margin was 3.99% and 4.19% for the comparable periods in 2011 and 2010, respectively.
A community bank’s health reflects the community and markets it serves. We believe that localizing our economies by supporting the small businesses in our communities, we can immunize ourselves against the global economic currents. Working together we can build strong local economies that are independent.
Our core earnings philosophy remains strong as does our capital. We continue to focus on increasing revenue, quality loan growth and improving asset quality. Development of our e-zMobile banking services are adding new customer convenience, while advancements in savings and investment programs are helping protect hard earned dollars. Responsible lending programs for home owners and businesses allow families and individuals to pursue their dreams while creating a brighter future for the communities we call home.
We are successfully accomplishing our strategy of providing the best value in financial services in the markets we serve. Working together…caring about each other and being motivated to do the right kinds of things…we are making a difference. We are building more than just a good banking organization to serve our communities; we are building strong local economies and sustainable communities that can survive this new age. Our best days are ahead!
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, 2011 | June 30, 2010 | ||||||
Assets | ||||||||
Cash and due from banks | $ | 13,361 | $ | 11,277 | ||||
Investment securities available for sale | 89,166 | 94,994 | ||||||
Federal funds sold | — | — | ||||||
Loans held for sale | 731 | 1,991 | ||||||
Loans held for investment | 378,291 | 372,821 | ||||||
Less: Allowance for loan losses | 7,274 | 5,635 | ||||||
|
|
|
| |||||
Net loans held for investment | 371,017 | 367,186 | ||||||
|
|
|
| |||||
Interest receivable | 2,067 | 2,416 | ||||||
Premises and equipment, net | 14,678 | 14,127 | ||||||
Federal Home Loan Bank stock | 2,872 | 3,330 | ||||||
Bank-owned life insurance | 6,067 | 5,835 | ||||||
Goodwill | 987 | 987 | ||||||
Other real estate owned | 8,586 | 3,281 | ||||||
Other assets | 11,830 | 9,612 | ||||||
|
|
|
| |||||
Total assets | $ | 521,362 | $ | 515,036 | ||||
|
|
|
| |||||
Liabilities | ||||||||
Deposits: | ||||||||
Demand, noninterest-bearing | $ | 57,982 | $ | 50,651 | ||||
Interest checking and money market accounts | 176,669 | 167,874 | ||||||
Savings accounts | 40,073 | 36,586 | ||||||
Time deposits, $100,000 and over | 60,110 | 64,283 | ||||||
Other time deposits | 92,730 | 90,494 | ||||||
|
|
|
| |||||
Total deposits | 427,564 | 409,888 | ||||||
|
|
|
| |||||
Interest payable | 322 | 389 | ||||||
Short-term borrowed funds | 22,879 | 22,515 | ||||||
Long-term debt | 23,238 | 33,589 | ||||||
Other liabilities | 3,053 | 2,424 | ||||||
|
|
|
| |||||
Total liabilities | 477,056 | 468,805 | ||||||
|
|
|
| |||||
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 | (250 | ) | (350 | ) | ||||
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 $4.48 in 2011 and $4.75 in 2010. | 9,492 | 9,492 | ||||||
Additional paid-in capital | 14,036 | 14,032 | ||||||
Unearned ESOP compensation | (672 | ) | (629 | ) | ||||
Undivided profits | 10,719 | 10,603 | ||||||
Accumulated other comprehensive income (loss) | 481 | 2,583 | ||||||
|
|
|
| |||||
Total shareholders’ equity | 44,306 | 46,231 | ||||||
|
|
|
| |||||
Total liabilities and shareholders’ equity | $ | 521,362 | $ | 515,036 | ||||
|
|
|
|
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) | 2011 | 2010 | 2011 | 2010 | ||||||||||||
Interest Income | ||||||||||||||||
Interest and fees on loans | $ | 5,417 | $ | 5,492 | $ | 10,759 | $ | 10,794 | ||||||||
Interest on investment securities | 534 | 756 | 1,131 | 1,500 | ||||||||||||
Other interest income | 11 | 10 | 18 | 18 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total interest income | 5,962 | 6,258 | 11,908 | 12,312 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Interest Expense | ||||||||||||||||
Interest paid on deposits | 875 | 1,048 | 1,774 | 2,132 | ||||||||||||
Interest on borrowed funds | 351 | 438 | 730 | 846 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total interest expense | 1,226 | 1,486 | 2,504 | 2,978 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Net Interest Income | 4,736 | 4,772 | 9,404 | 9,334 | ||||||||||||
Provision for loan losses | 160 | 830 | 1,529 | 1,043 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Net interest income after provision for loan losses | 4,576 | 3,942 | 7,875 | 8,291 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Noninterest Income | ||||||||||||||||
Service charges on deposit accounts | 449 | 563 | 893 | 1,129 | ||||||||||||
Other service fees and commissions | 909 | 768 | 1,766 | 1,429 | ||||||||||||
Gain (loss) on sale of securities | 357 | 62 | 933 | (36 | ) | |||||||||||
Income from mortgage loan sales | 331 | 390 | 714 | 736 | ||||||||||||
Other income | 83 | 40 | 200 | 168 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total noninterest income | 2,129 | 1,823 | 4,506 | 3,426 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Noninterest Expense | ||||||||||||||||
Salaries and employee benefits | 3,050 | 2,886 | 6,095 | 5,714 | ||||||||||||
Occupancy expense | 282 | 272 | 583 | 538 | ||||||||||||
Equipment expense | 194 | 176 | 400 | 358 | ||||||||||||
Data processing | 208 | 209 | 417 | 411 | ||||||||||||
Other operating expenses | 1,932 | 1,672 | 3,610 | 3,366 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total noninterest expense | 5,666 | 5,215 | 11,105 | 10,387 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Income before income taxes | 1,039 | 550 | 1,276 | 1,330 | ||||||||||||
Provision for income taxes | 330 | 219 | 358 | 460 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Net Income | $ | 709 | $ | 331 | $ | 918 | $ | 870 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Net Income | $ | 709 | $ | 331 | $ | 918 | $ | 870 | ||||||||
Dividends - preferred stock | (161 | ) | (161 | ) | (323 | ) | (323 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Net income available to common shareholders | $ | 548 | $ | 170 | $ | 595 | $ | 547 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Net Income Per Common Share (1) | ||||||||||||||||
Basic | $ | 0.07 | $ | 0.02 | $ | 0.08 | $ | 0.07 | ||||||||
Assuming dilution | $ | 0.07 | $ | 0.02 | $ | 0.08 | $ | 0.07 | ||||||||
Weighted Average Common Shares Outstanding (1) | ||||||||||||||||
Basic | 7,474,178 | 7,488,781 | 7,476,193 | 7,486,695 | ||||||||||||
Assuming dilution | 7,474,178 | 7,488,781 | 7,476,193 | 7,486,695 |