UWHARRIE CAPITAL CORP

Previous wording

During the nine months ended September 30, 2024, the Company’s total assets increased $108.5 million, from $1.07 billion to $1.18 billion.

Current wording

During the three months ended March 31, 2025, the Company’s total assets increased $34.6 million, from $1.13 billion to $1.16 billion.

Previous wording

Cash and cash equivalents increased $60.5 million during the nine months ended September 30, 2024, from $63.4 million to $123.9 million. The increase is related to continued growth in deposits.

Current wording

Cash and cash equivalents increased $24.9 million during the three months ended March 31, 2025, from $52.3 million to $77.2 million. The increase is related to continued growth in deposits.

Previous wording

Investment securities consist of securities available for sale and securities held to maturity. For the nine-month period ended September 30, 2024, investment securities decreased $5.8 million from $365.3 million at December 31, 2023 to $359.5 million at September 30, 2024. At September 30, 2024, the Company had net unrealized losses on securities available for sale of $25.1 million, compared to net unrealized losses of $32.6 million at December 31, 2023, an improvement of $7.4 million. The improvement in the fair value of available for sale securities offset $12.1 million in net paydowns and maturities during the nine months ended September 30, 2024. During the first nine months of 2024, a $10,000 provision was recorded against the allowance for credit losses on securities held to maturity bringing the balance to $66,000, with an amortized cost basis of $26.8 million, at September 30, 2024.

Current wording

Investment securities consist of securities available for sale and securities held to maturity. For the three-month period ended March 31, 2025, investment securities increased $10.9 million from $359.8 million at December 31, 2024 to $370.7 million at March 31, 2025. At March 31, 2025, the Company had net unrealized losses on securities available for sale of $29.0 million, compared to net unrealized losses of $32.1 million at December 31, 2024, an improvement of $3.1 million. The allowance for credit losses on securities held to maturity was $68,000 at March 31, 2025 and December 31, 2024. The amortized cost basis of securities held to maturity totaled $26.8 million and $26.7 million at March 31, 2025 and December 31, 2024, respectively.

Previous wording

At September 30, 2024, equity securities improved in value from $302,000 at December 31, 2023 to $355,000 as a result of the increase in value in the equity market.

Current wording

At March 31, 2025, equity securities deteriorated in value from $334,000 at December 31, 2024 to $311,000 as a result of the decrease in value in the equity market.

Previous wording

Loans held for sale increased $92,000 from December 31, 2023 to $4.8 million at September 30, 2024. Loans held for investment increased from $592.1 million at December 31, 2023 to $647.1 million at September 30, 2024, an increase of $55.1 million. The Company experienced a net increase in all loan sectors with the exception of loans categorized as “Commercial - Other."

Current wording

Loans held for sale decreased $15,000 from December 31, 2024 to $4.5 million at March 31, 2025. Loans held for investment decreased from $666.4 million at December 31, 2024 to $664.9 million at March 31, 2025, a decrease of $1.5 million. The Company experienced a net decrease in the loans categorized as “Other Real Estate - Construction,” “Real Estate - 1-4 Family Construction,” “Consumer,” and “Commercial - Other.” All other loan sectors experienced a net increase during the quarter ended March 31, 2025.

Previous wording

The allowance for credit losses on loans was $5.7 million at September 30, 2024, which represented 0.89% of total loans held for investment, compared to $5.6 million, or 0.94% of total loans held for investment, at December 31, 2023. Additional discussion regarding the allowance is included in the Asset Quality section below.

Current wording

The allowance for credit losses on loans was $6.1 million at March 31, 2025, which represented 0.91% of total loans held for investment, compared to $5.8 million, or 0.87% of total loans held for investment, at December 31, 2024. Additional discussion regarding the allowance is included in the Asset Quality section below.

Previous wording

Other changes in the Company’s consolidated assets are primarily related to deferred tax assets, which decreased $1.9 million from $8.9 million at December 31, 2023 to $7.0 million at September 30, 2024 as a result of the improvement in fair value of the available for sale security portfolio. Interest receivable increased $428,000 from $4.4 million as of December 31, 2023 to $4.8 million at September 30, 2024. This increase was attributable to the $55.1 million above-mentioned loan growth.

Current wording

Other changes in the Company’s consolidated assets are primarily related to deferred tax assets, which decreased $701,000 from $9.0 million at December 31, 2024 to $8.3 million at March 31, 2025 as a result of the improvement in fair value of the available for sale securities portfolio. Interest receivable increased $342,000 from $4.4 million as of December 31, 2024 to $4.7 million at March 31, 2025. Mortgage banking derivatives increased $398,000 during the first three months of 2025, primarily related to an increase in the value of interest rate lock commitments (“IRLCs”). The value of IRLCs appreciated $527,000 during the three-month period ended March 31, 2025 as the notional amount of the mortgage pipeline increased $4.2 million.

Previous wording

Customer deposits, our primary funding source, experienced a $96.1 million increase during the nine-month period ended September 30, 2024, increasing from $981.7 million to $1.08 billion. The overall increase in deposits is attributable to organic deposit growth combined with promotional time deposit offerings. Demand noninterest-bearing checking accounts increased $18.3 million, primarily from growth in commercial accounts, and time deposits increased $70.5 million during the nine-month period ended September 30, 2024. Interest checking and money market accounts increased $13.9 million and savings deposits decreased $6.6 million during the nine months ended September 30, 2024.

Current wording

Customer deposits, our primary funding source, experienced a $29.1 million increase during the three-month period ended March 31, 2025, increasing from $1.03 billion to $1.06 billion. The overall increase in deposits is attributable to organic deposit growth combined with promotional time deposit offerings. Demand noninterest-bearing checking accounts increased $9.7 million and time deposits increased $5.9 million during the three-month period ended March 31, 2025. Interest checking and money market accounts increased $10.6 million and savings deposits increased $2.8 million during the three months ended March 31, 2025.

Previous wording

Total short-term borrowings increased $40,000 for the nine-month period ended September 30, 2024. At September 30, 2024, the Company had $29.1 million in long-term debt outstanding, which consists solely of its junior subordinated debt securities, net of unamortized debt issuance costs. During the third quarter of 2019, the Company issued $10.0 million in subordinated debt securities with a final maturity date of September 30, 2029 that may be redeemed on or after September 30, 2024. This junior subordinated debt pays interest quarterly at an annual fixed rate of 5.25%. During the third quarter of 2021, the Company issued $12.0 million and $8.0 million of 10-year and 15-year fixed-to-floating rate subordinated debt securities, respectively. The 10-year subordinated notes mature on September 3, 2031, though they are redeemable at the Company’s option on or after September 3, 2026, and initially pay interest quarterly at an annual rate of 3.5%. From and including September 3, 2026 to but excluding September 3, 2031, or up to any early redemption date, the interest rate on the 10-year subordinated notes will reset quarterly to an annual rate equal to the then-current three-month secured overnight financing rate (“SOFR”), plus 283 basis points payable quarterly in arrears. The 15-year subordinated notes mature on September 3, 2036, though they are redeemable at the Company’s option on or after September 3, 2031, and initially pay interest quarterly at an annual rate of 4.0%. From and including September 3, 2031 to but excluding September 3, 2036, or up to any early redemption date, the interest rate on the 15-year subordinated notes will reset quarterly to an annual rate equal to the then-current three-month SOFR plus 292 basis points payable quarterly in arrears. The subordinated debt has been structured to qualify as and is included in the calculation of the Company’s Tier 2 capital. Of the subordinated debt that remains outstanding at September 30, 2024, $27.2 million qualifies as Tier 2 capital. The Company also has a $3.0 million line of credit of which $3.0 million was available to use at September 30, 2024.

Current wording

Total short-term borrowings increased $53,000 for the three-month period ended March 31, 2025. At March 31, 2025, the Company had $29.2 million in long-term debt outstanding, which consists solely of its junior subordinated debt securities, net of unamortized debt issuance costs. During the third quarter of 2019, the Company issued $10.0 million in subordinated debt securities with a final maturity date of September 30, 2029 that became redeemable by the Company on September 30, 2024. This junior subordinated debt pays interest quarterly at an annual fixed rate of 5.25%. During the third quarter of 2021, the Company issued $12.0 million and $8.0 million of 10-year and 15-year fixed-to-floating rate subordinated debt securities, respectively. The 10-year subordinated notes mature on September 3, 2031, though they are redeemable at the Company’s option on or after September 3, 2026, and initially pay interest quarterly at an annual rate of 3.5%. From and including September 3, 2026 to but excluding September 3, 2031, or up to any early redemption date, the interest rate on the 10-year subordinated notes will reset quarterly to an annual rate equal to the then-current three-month secured overnight financing rate (“SOFR”), plus 283 basis points payable quarterly in arrears. The 15-year subordinated notes mature on September 3, 2036, though they are redeemable at the Company’s option on or after September 3, 2031, and initially pay interest quarterly at an annual rate of 4.0%. From and including September 3, 2031 to but excluding September 3, 2036, or up to any early redemption date, the interest rate on the 15-year subordinated notes will reset quarterly to an annual rate equal to the then-current three-month SOFR plus 292 basis points payable quarterly in arrears. The subordinated debt has been structured to qualify as and is included in the calculation of the Company’s Tier 2 capital. Once the remaining term to maturity drops under five years, the Company must impose a twenty percent annual reduction of the amount of the proceeds from the sale of these securities that are eligible to be counted as Tier 2 capital. Of the subordinated debt that remains outstanding at March 31, 2025, $27.3 million qualifies as Tier 2 capital. The Company also has a $3.0 million line of credit of which $3.0 million was available to use at March 31, 2025.

Previous wording

Other changes in the Company’s liabilities are related to an increase of $872,000 in other liabilities from December 31, 2023 to September 30, 2024 resulting primarily from accrual of reserves for payables due throughout 2024.

Current wording

Other changes in the Company’s liabilities are related to an increase of $705,000 in other liabilities from December 31, 2024 to March 31, 2025 resulting primarily from accrual of reserves for payables due throughout 2025. Mortgage banking derivatives liabilities increased in the form of to-be-announced mortgage-backed securities (“TBAs”) by $102,000 during the same period.

Previous wording

At September 30, 2024, total shareholders’ equity was $61.1 million, an increase of $11.7 million from December 31, 2023. Net income for the nine-month period ended September 30, 2024 was $7.6 million, which positively contributed to our shareholders’ equity. Additionally, improvement in the unrealized loss position on our available for sale securities portfolio contributed $5.7 million to the increase in shareholders' equity during the same nine-month period. During the nine months ended September 30, 2024, the Company repurchased 160,115 shares of common stock at a total cost of $1.3 million, and the Company paid $424,000 in dividends attributable to noncontrolling interest during the same period. See Note 3 (Noncontrolling Interest) to the Company’s Notes to Consolidated Financial Statements for additional discussion of the noncontrolling interest. On October 15, 2024, the Company's Board of Directors declared a 2% stock dividend payable on November 18, 2024 to shareholders of record on October 28, 2024. All information presented in this discussion and analysis and in the interim consolidated financial statements regarding earnings per share and weighted average number of shares outstanding has been computed giving effect to this stock dividend.

Current wording

At March 31, 2025, total shareholders’ equity was $62.3 million, an increase of $4.7 million from December 31, 2024. Net income for the three-month period ended March 31, 2025 was $2.6 million, which positively contributed to shareholders’ equity. Improvement in the unrealized loss position of the available for sale securities portfolio also contributed to the increase in shareholders’ equity during the same three-month period. During the three months ended March 31, 2025, the Company repurchased 16,164 shares of common stock at a total cost of $146,000, and the Company paid $139,000 in dividends attributable to noncontrolling interest. See Note 3 (Noncontrolling Interest) to the Company’s Notes to Consolidated Financial Statements for additional discussion of the noncontrolling interest.

Previous wording

Uwharrie Capital Corp reported net income of $3.0 million for the three months ended September 30, 2024, as compared to $2.1 million for the three months ended September 30, 2023. Net income available to common shareholders was $2.9 million, or $0.40 per common share, for the three months ended September 30, 2024 compared to $2.0 million, or $0.27 per common share, for the three months ended September 30, 2023. Net income available to common shareholders is net income less dividends on the aforementioned noncontrolling interest.

Current wording

Uwharrie Capital Corp reported net income of $2.6 million for the three months ended March 31, 2025, compared to $2.4 million for the three months ended March 31, 2024. Net income available to common shareholders was $2.4 million, or $0.34 per common share, for the three months ended March 31, 2025, compared to $2.2 million, or $0.31 per common share, for the three months ended March 31, 2024. Net income available to common shareholders is net income less dividends on the aforementioned noncontrolling interest.

Previous wording

Net interest income for the three months ended September 30, 2024 was $9.1 million, an $881,000 increase from the $8.2 million reported for the comparative period in 2023. During the third quarter of 2024, the average yield on our interest-earning assets increased 48 basis points to 5.18% from the same period in 2023, and the average rate we paid for our interest-bearing liabilities increased 60 basis points to 2.55%. These changes resulted in a lower interest rate spread of 2.63% as of September 30, 2024, compared to 2.76% as of September 30, 2023. The Company’s net interest margin was 3.34% and 3.30% for the comparable periods in 2024 and 2023, respectively.

Current wording

Net interest income for the three months ended March 31, 2025 was $9.1 million, a $566,000 increase from the $8.5 million reported for the comparative period in 2024. During the first three months of 2025, the average yield on our interest-earning assets increased 12 basis points to 5.12% from the same period in 2024, and the average rate we paid for our interest-bearing liabilities increased 13 basis points to 2.36%. These changes resulted in an interest rate spread of 2.77% as of March 31, 2025 and 2024. The Company’s net interest margin was 3.39% for both comparable periods in 2025 and 2024.

Previous wording

The recovery of credit losses was $230,000 for the three months ended September 30, 2024, compared to a provision of $599,000 for the same period in 2023. There were net loan recoveries of $51,000 for the three months ended September 30, 2024, as compared to net loan charge-offs of $196,000 during the same period of 2023. Refer to the Asset Quality section below for further information.

Current wording

The provision of credit losses was $281,000 for the three months ended March 31, 2025, compared to a recovery of $30,000 for the same period in 2024. There were net loan charge-offs of $47,000 for the three months ended March 31, 2025, as compared to net loan charge-offs of $33,000 during the same period of 2024. Refer to the Asset Quality section below for further information.

Previous wording

The Company places significant emphasis on diversification of revenue sources rather than relying solely upon interest income. Total noninterest income increased by $10,000 for the three-month period ended September 30, 2024, as compared to the same period in 2023. Other service fees and commissions contributed $116,000 to the increase in total noninterest income. The increase in noninterest income was offset by a decrease in income from mortgage banking of $96,000.

Current wording

The Company places significant emphasis on diversification of revenue sources rather than relying solely upon interest income. Total noninterest income increased by $52,000 for the three-month period ended March 31, 2025, as compared to the same period in 2024. The 2024 period included a loss of $148,000 on the call of a held to maturity security under early redemption provisions, compared to no losses from sales or calls of securities during the 2025 period. Income from mortgage banking increased $217,000 quarter-over-quarter, driven by increased loan pipeline volume and improved pricing on loans. These increases were offset by a decrease in supplemental executive retirement plans of $237,000 based on negative market adjustments.

Previous wording

Noninterest expense for the three months ended September 30, 2024 increased by $430,000 from the same period in 2023. Salaries and benefits, the largest component of noninterest expense, increased $330,000 due to wage increases during the 2024 period.

Current wording

Noninterest expense for the three months ended March 31, 2025 increased by $46,000 from the same period in 2024. Salaries and benefits, the largest component of noninterest expense, increased $206,000 due to wage and benefit increases during 2025. This increase was offset by a $237,000 decrease in supplemental executive retirement plan expense due to negative market value adjustments.

Previous wording

Total other noninterest expense increased $25,000 for the three months ended September 30, 2024, compared to the same period in 2023. The table below reflects the composition of other noninterest expense for the referenced periods.

Current wording

Total other noninterest expense decreased $48,000 for the three months ended March 31, 2025, compared to the same period in 2024. The table below reflects the composition of other noninterest expense for the referenced periods.

Previous wording

The Company had income tax expense of $962,000 for the three months ended September 30, 2024 at an effective tax rate of 24.1% compared to income tax expense of $558,000 with an effective tax rate of 20.6% in the comparable 2023 period. Income taxes computed at the statutory rate are primarily affected by the state income tax expense offset by the eligible amount of interest earned on state and municipal securities, tax-free municipal loans and income earned on bank-owned life insurance. For the three months ended September 30, 2024, the effective tax rate increased due to the increase in interest expense disallowance resulting from compliance

Current wording

The Company had income tax expense of $723,000 for the three months ended March 31, 2025 at an effective tax rate of 22.1% compared to income tax expense of $632,000 with an effective tax rate of 21.0% in the comparable 2024 period. Income taxes computed at the statutory rate are primarily affected by the state income tax expense offset by the eligible amount of interest earned on state and municipal securities, tax-free municipal loans and income earned on bank-owned life insurance. For the three months ended March 31, 2025, the effective tax rate increased due to the increase in interest expense disallowance resulting from compliance

Previous wording

At September 30, 2024, the level of our individually assessed loans, which includes all loans in nonaccrual status with total relationship exposure of more than $100,000 of collateral dependency, was $285,000. The allowance for credit losses related to individually evaluated loans was $187,000 at September 30, 2024.

Current wording

At March 31, 2025, there were no individually assessed loans, which includes all collateral dependent loans in nonaccrual status with total relationship exposure greater than or equal to $100,000. As such, there was no allowance for credit losses related to individually evaluated loans at March 31, 2025.

Previous wording

The allowance, expressed as a percentage of gross loans held for investment, decreased five basis points from 0.94% at December 31, 2023 to 0.89% at September 30, 2024. The primary driver of the reduction in allowance was the decline in the 10-Year T-Bill forecast which is utilized in the regression model for our probability of default forecast. The ratio of nonaccrual loans to total loans decreased from 0.19% at December 31, 2023 to 0.09% at September 30, 2024, and was related to the $543,000 decrease in nonaccrual loans. Four loans totaling $449,000 were paid off and one loan totaling $16,000 was removed from nonaccrual during the first nine months of 2024, offset by four loans totaling $204,000 that were converted to nonaccrual. Principal payments in the amount of $282,000 were received during the same period.

Current wording

The allowance, expressed as a percentage of gross loans held for investment, increased four basis points from 0.87% at December 31, 2024 to 0.91% at March 31, 2025. The increase in the allowance was driven by growth in commercial and industrial loans with higher loss given default rates and slight increases in the 10-Year T-Bill and unemployment rate forecasts. The ratio of nonaccrual loans to total loans increased from 0.03% at December 31, 2024 to 0.04% at March 31, 2025, and was related to the $79,000 increase in nonaccrual loans. Two loans totaling $124,000 were converted to nonaccrual during the first three months of 2025, offset by paydowns of $5,000 and one loan totaling $40,000 that was moved to other real estate owned.

Previous wording

2024 and 36.5% of total deposits at December 31, 2023. The Company and its subsidiary bank have multiple funding sources, in addition to deposits, that can be used to increase liquidity and provide additional financial flexibility. At September 30, 2024, these sources were the subsidiary bank’s established federal funds lines with correspondent banks aggregating $38.0 million, with available credit of $38.0 million; an established borrowing relationship with the FHLB, with available credit of $136.3 million; and access to borrowings from the FRB discount window, with available credit of $29.0 million. The Company also has a $3.0 million line of credit with TIB The Independent BankersBank, N.A. The line is held by the holding company and is secured with 100% of the outstanding common shares of the Company’s subsidiary bank. As of September 30, 2024, $3.0 million remained available for use on the line of credit.

Current wording

The Company’s primary sources of internally generated funds are principal and interest payments on loans, cash flows generated from operations and cash flow generated by investments. Growth in deposits is typically the primary source of funds for loan growth. Estimated uninsured deposits, including deposits collateralized by pledged assets, represented 39.8% and 38.8% of total deposits at March 31, 2025 and December 31, 2024, respectively. The Company and its subsidiary bank have multiple funding sources, in addition to deposits, that can be used to increase liquidity and provide additional financial flexibility. At March 31, 2025, these sources were the subsidiary bank’s established federal funds lines with correspondent banks aggregating $38.0 million, with available credit of $38.0 million; an established borrowing relationship with the FHLB, with available credit of $176.2 million; and access to borrowings from the FRB discount window, with available credit of $26.1 million. The Company also has a $3.0 million line of credit with TIB The Independent BankersBank, N.A. The line is held by the holding company and is secured with 100% of the outstanding common shares of the Company’s subsidiary bank. As of March 31, 2025, $3.0 million remained available for use on the line of credit.

Previous wording

The Company continues to maintain capital ratios that support its asset growth. The federal bank regulatory agencies have implemented regulatory capital rules known as “Basel III.” The Basel III rules require a common equity Tier 1 capital to risk-weighted assets minimum ratio of 4.50%, a minimum ratio of Tier 1 capital to risk-weighted assets of 6.00%, a minimum ratio of total capital to risk-weighted assets of 8.00%, and a minimum Tier 1 leverage ratio of 4.00%. There is also a capital conservation buffer that requires banks to hold common equity Tier 1 capital in excess of minimum risk-based capital ratios by at least 2.5% to avoid limits on capital distributions and certain discretionary bonus payments to executive officers and similar employees. The Company’s accumulated other comprehensive income or loss, resulting from unrealized gains and losses, net of income tax, on investment securities available for sale, is excluded from regulatory capital.

Current wording

The Company continues to maintain capital ratios that support its asset growth. The federal bank regulatory agencies have implemented regulatory capital rules known as “Basel III.” The Basel III rules require a common equity Tier 1 capital to risk-weighted assets minimum ratio of 4.50%, a minimum ratio of Tier 1 capital to risk-weighted assets of 6.00%, a minimum ratio of total capital to risk-weighted assets of 8.00%, and a minimum Tier 1 leverage ratio of 4.00%. There is also a capital conservation buffer that requires banks to hold common equity Tier 1 capital in excess of minimum risk-based capital ratios by at least 2.5% to avoid limits on capital distributions and certain discretionary bonus payments to executive officers and similar employees. The Company’s accumulated other comprehensive income or loss, resulting from unrealized gains and losses, net of income tax, on investment securities available for sale, is excluded from regulatory capital. As of March 31, 2025, the Company’s subsidiary bank continued to exceed minimum capital standards and remained well-capitalized under the applicable rules.

Previous wording

The Company’s subsidiary bank has a net total of $10.7 million in outstanding Fixed Rate Noncumulative Perpetual Preferred Stock. The preferred stock qualifies as Tier 1 capital at the Bank and pays dividends at an annual rate of 5.30%. The net total of $10.7 million is presented as noncontrolling interest at the Company level and qualifies as Tier 1 capital at the Company. At September 30, 2024, the Company had $29.1 million, net of unamortized debt issuance costs, in subordinated debt outstanding, of which $27.2 million qualifies as Tier 2 capital at the Company level. The Company has made all interest and dividend payments in a timely manner.

Current wording

The Company’s subsidiary bank has a net total of $10.7 million in outstanding Fixed Rate Noncumulative Perpetual Preferred Stock. The preferred stock qualifies as Tier 1 capital at the Bank and pays dividends at an annual rate of 5.30%. The net total of $10.7 million is presented as noncontrolling interest at the Company level and qualifies as Tier 1 capital at the Company. At March 31, 2025, the Company had $29.1 million, net of unamortized debt issuance costs of $212,000, in subordinated debt outstanding, of which $27.3 million qualifies as Tier 2 capital at the Company level. The Company has made all interest and dividend payments in a timely manner.