Exhibit 99.1
May 24, 2023
Dear Shareholder:
Our Company was formed 40 years ago on April 26, 1983, with the vision of creating a financial institution for the people, by the people. We were focused on building and enriching local economies by retaining control of our local wealth; helping our neighbors obtain a quality of life that promotes values and inspires us to care for one another. It was our desire that this effort would allow opportunities for our children and grandchildren to achieve financial security. This is the founding purpose of your Company that still holds true today.
Community banks are very different from large, regional or national banks. Each has their own role in the marketplace; community banks are representative of the customers and businesses that they serve and focus largely on relationships and local community development. Our loans and deposits come from the local families, businesses and institutions we serve.
Banking is about risk management (each loan we make has some probability of default, and all deposits can leave at any time), but prudent risk management is what creates successful banks. Unfortunately, the banking industry is now being defined by the results of poor management of a few institutions. At Uwharrie Capital, we are careful, deliberate and experienced risk managers. We regularly review, evaluate, and monitor the strength of our balance sheet and make necessary adjustments where they are needed. We strive to operate legally, lawfully, ethically, and transparently in full compliance with all federal and state banking statutes and regulations that affect us.
Your Company has grown to $1.05 billion in total assets as of March 31, 2023, an increase of $72 million from the same period in 2022. Deposit growth contributed to total asset growth. Loan growth has been strong year-over-year at 13.7%, despite rising interest rates. Due to the strong deposit growth, we still have the funds to meet loan demand for our local consumers and businesses. Even with the growth in loans, the Company’s loan-to-deposit ratio is approximately 54%, allowing the Company to remain conservative in its approach to balance sheet risk management.
During the first quarter of 2023, Uwharrie Capital Corp adopted CECL (Current Expected Credit Losses: ASU 2016-13), a new required way to allocate a reserve for credit losses based on expected losses over the life of the loans. This adoption required the $1.9 million net reduction to retained earnings upon adoption to fund the reserve. In essence, there is now double the amount of reserve for credit losses set aside for potential problem assets, with no changes to the asset quality of the balance sheet.
Net income for the first three months of 2023 was $2.0 million, as compared to $801 thousand for the same three-month period in 2022. This equates to $1.8 million in net income available to common shareholders, or $0.26 per share, compared to $662 thousand in net income available to common shareholders, or $0.09 per share, that we reported in 2022 for the same period. The key driver of the improvement in earnings year-over-year is directly attributable to the increase in margins as a result of the drastically increasing rate environment along with growth in the volume of loans.
As we approach the warm, summer months, we are reminded of the gifts and joys that each day brings. We appreciate your loyalty to Uwharrie Capital Corp and your being a part of helping to build strong, sustainable Main Street economies.
Sincerely,
UWHARRIE CAPITAL CORP
/s/ Roger L. Dick |
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President and Chief Executive Officer |
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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 |
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Consolidated Balance Sheets (Unaudited) |
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| March 31, |
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| March 31, |
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(Amounts in thousands except share and per share data) | 2023 |
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| 2022 |
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Assets |
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Cash and due from banks | $ | 7,339 |
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| $ | 6,705 |
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Interest-earning deposits with banks |
| 110,039 |
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| 109,005 |
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Securities available for sale |
| 331,154 |
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| 322,268 |
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Securities held to maturity, net (fair value $26,596 and $29,909, respectively) |
| 29,164 |
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| 30,722 |
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Equity security, at fair value |
| 326 |
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| 383 |
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Loans held for sale |
| 4,089 |
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| 11,910 |
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Loans held for investment |
| 516,394 |
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| 445,924 |
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Less: Allowance for credit losses on loans |
| 4,596 |
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| 4,156 |
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Net loans held for investment |
| 511,798 |
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| 441,768 |
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Premises and equipment, net |
| 14,544 |
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| 15,716 |
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Interest receivable |
| 3,837 |
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| 2,731 |
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Restricted stock |
| 1,468 |
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| 1,428 |
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Bank-owned life insurance |
| 7,686 |
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| 9,095 |
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Deferred income tax benefit |
| 9,928 |
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| 5,922 |
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Loan servicing assets |
| 4,746 |
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| 5,240 |
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Other assets |
| 9,294 |
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| 10,847 |
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Total assets | $ | 1,045,412 |
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| $ | 973,740 |
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Liabilities |
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Deposits: |
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Demand, noninterest-bearing | $ | 279,097 |
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| $ | 268,574 |
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Interest checking and money market accounts |
| 457,121 |
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| 436,397 |
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Savings accounts |
| 101,625 |
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| 109,535 |
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Time deposits, $250,000 and over |
| 54,133 |
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| 21,809 |
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Other time deposits |
| 68,822 |
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| 47,183 |
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�� Total deposits |
| 960,798 |
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| 883,498 |
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Short-term borrowed funds |
| 982 |
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| 1,344 |
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Long-term debt |
| 29,376 |
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| 29,549 |
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Other liabilities |
| 12,413 |
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| 12,191 |
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Total liabilities |
| 1,003,569 |
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| 926,582 |
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Shareholders' Equity |
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Common stock, $1.25 par value: 20,000,000 shares authorized; |
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issued and outstanding or in process of issuance |
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7,075,125 and 6,930,717 shares, respectively. |
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Book value per share $4.41 in 2023 and $5.14 in 2022 (1) |
| 8,844 |
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| 8,664 |
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Additional paid-in capital |
| 12,633 |
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| 11,814 |
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Undivided profits |
| 36,930 |
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| 31,213 |
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Accumulated other comprehensive loss |
| (27,219 | ) |
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| (15,188 | ) |
Total Uwharrie Capital Corp shareholders' equity |
| 31,188 |
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| 36,503 |
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Noncontrolling interest |
| 10,655 |
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| 10,655 |
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Total shareholders' equity |
| 41,843 |
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| 47,158 |
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Total liabilities and shareholders' equity | $ | 1,045,412 |
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| $ | 973,740 |
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(1) Net income per share, book value per share and weighted average shares outstanding have been adjusted to reflect the 2.5% stock dividend in 2022. |
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Uwharrie Capital Corp and Subsidiaries |
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Consolidated Statements of Income (Unaudited) |
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| Three Months Ended |
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| March 31, |
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(Amounts in thousands except share and per share data) | 2023 |
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| 2022 |
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Interest Income |
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Interest and fees on loans | $ | 6,367 |
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| $ | 5,107 |
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Interest on investment securities |
| 2,867 |
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| 1,378 |
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Interest-earning deposits with banks and federal funds sold |
| 1,070 |
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| 40 |
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Total interest income |
| 10,304 |
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| 6,525 |
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Interest Expense |
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Interest paid on deposits |
| 2,116 |
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| 177 |
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Interest paid on borrowed funds |
| 343 |
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| 337 |
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Total interest expense |
| 2,459 |
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| 514 |
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Net Interest Income |
| 7,845 |
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| 6,011 |
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Provision for credit losses |
| 284 |
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| 118 |
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Net interest income after provision for credit losses |
| 7,561 |
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| 5,893 |
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Noninterest Income |
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Service charges on deposit accounts |
| 249 |
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| 243 |
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Interchange and card transaction fees |
| 304 |
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| 238 |
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Other service fees and commissions |
| 889 |
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| 901 |
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Loss on sale of securities |
| (51 | ) |
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| (91 | ) |
Realized/unrealized gain (loss) on equity securities |
| 34 |
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| (9 | ) |
Income from mortgage banking |
| 694 |
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| 1,267 |
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Other income (loss) |
| (137 | ) |
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| 80 |
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Total noninterest income |
| 1,982 |
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| 2,629 |
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Noninterest Expense |
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Salaries and employee benefits |
| 4,744 |
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| 5,016 |
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Occupancy expense |
| 453 |
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| 425 |
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Equipment expense |
| 188 |
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| 188 |
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Data processing |
| 204 |
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| 212 |
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Loan costs |
| 93 |
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| 169 |
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Professional fees and services |
| 258 |
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| 212 |
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Marketing and donations |
| 382 |
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| 334 |
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Software amortization and maintenance |
| 307 |
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| 311 |
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Other operating expenses |
| 489 |
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| 686 |
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Total noninterest expense |
| 7,118 |
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| 7,553 |
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Income before income taxes |
| 2,425 |
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| 969 |
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Provision for income taxes |
| 471 |
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| 168 |
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Net Income | $ | 1,954 |
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| $ | 801 |
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Consolidated net income | $ | 1,954 |
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| $ | 801 |
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Less: Net income attributable to noncontrolling interest |
| (139 | ) |
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| (139 | ) |
Net income attributable to Uwharrie Capital Corp and common shareholders | $ | 1,815 |
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| $ | 662 |
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Net Income Per Common Share (1) |
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Basic | $ | 0.26 |
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| $ | 0.09 |
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Assuming dilution | $ | 0.26 |
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| $ | 0.09 |
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Weighted Average Common Shares Outstanding (1) |
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Basic |
| 7,075,125 |
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| 7,125,760 |
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Assuming dilution |
| 7,075,125 |
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| 7,125,760 |
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