U. S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
(X) QUARTERLY REPORT UNDER SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2000
( ) TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from ____________ to ____________
Commission file Number 0-22062
UWHARRIE CAPITAL CORP
(Exact name of small business issuer as specified in its charter)
NORTH CAROLINA 56-1814206
(State of incorporation) (I.R.S Employer Identification No.)
167 North Second Street
Albemarle, North Carolina 28001
(Address of principal executive offices)
Issuer's telephone number, including area code: (704) 983-6181
Check whether the issuer (1) has filed all reports required to be filed by
Section 13 of 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes X No
--- ---
State the number of shares outstanding of each of the issuer's classes of common
stock, as of the latest practicable date:
Title of Each Class Outstanding at July 31, 2000
------------------- ----------------------------
Common stock, par value $1.25 per share 5,577,914 shares outstanding
Transitional Small Business Disclosure Format (check one):
Yes No X
--- ----
<PAGE>
UWHARRIE CAPITAL CORP AND SUBSIDIARIES
FORM 10-QSB
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
Part 1 Financial Information
Item 1 Financial Statements
Consolidated Statements of Financial Condition
June 30, 2000 and December 31, 1999 3
Consolidated Statements of Income for the Three Months and the
Six Months Ended June 30, 2000 and 1999 4
Consolidated Statements of Changes in Shareholders' Equity for the
Six Months Ended June 30, 2000 5
Consolidated Statements of Cash Flows for the Six Months
Ended June 30, 2000 and 1999 6
Notes to Consolidated Financial Statements 7
Item 2 Management's Discussion and Analysis of Financial Condition
and Results of Operations 9
Part II Other Information
Item 4 Submission of Matters to Vote of Security Holders 14
Item 6 Exhibits and Reports on Form 8-K 14
Signatures 14
Exhibit 27 Financial Data Schedule for the Six Months Ended June 30, 2000 15
</TABLE>
<PAGE>
Part I - Financial Information
Item 1. Financial Statements
UWHARRIE CAPITAL CORP AND SUBSIDIARIES
Consolidated Statements of Financial Condition
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
(In thousands) June 30, December 31,
2000 1999
ASSETS (unaudited)
----------------- ----------------
<S> <C> <C>
Cash and due from banks $ 5,578 $ 7,316
Interest-bearing deposits with banks 755 383
Securities available for sale:
U.S. Treasury 991 1,988
U.S. Government agencies 20,991 17,081
State and political subdivisions 14,508 14,004
Other securities 3,617 2,654
----------------- ----------------
Total securities 40,107 35,727
----------------- ----------------
Federal funds sold - -
Loans (Note 2) 169,924 140,095
Less: Allowance for loan losses 1,083 1,003
----------------- ----------------
Loans, net 168,841 139,092
----------------- ----------------
Premises and equipment, net 4,063 3,358
Interest receivable 1,234 1,104
Other assets 4,658 5,737
----------------- ----------------
Total assets $225,236 $192,717
================= ================
LIABILITIES
Deposits:
Demand deposits $ 16,789 $ 17,063
Money market and NOW accounts 31,488 32,442
Savings deposits 41,733 34,001
Time deposits $100,000 and over 17,579 18,484
Other time deposits 43,187 32,833
----------------- ----------------
Total deposits 150,776 134,823
----------------- ----------------
Federal funds purchased 2,700 2,725
Securities sold under repurchase agreements 3,955 2,856
Commercial paper 2,317 2,958
Other short-term borrowed funds 21,500 13,200
Long-term debt 24,903 18,251
Interest payable 361 220
Other liabilities 882 623
----------------- ----------------
Total liabilities 207,394 175,656
----------------- ----------------
Off balance sheet items, commitments and contingencies (Note 4)
SHAREHOLDERS' EQUITY
Common stock, $1.25 par value: 20,000,000 shares authorized;
issued and outstanding: 5,578,732 and 5,545,607 shares, respectively 6,973 6,932
Additional paid-in capital 6,234 6,319
Common stock subscriptions receivable (98) (204)
Common stock acquired by ESOP (1,168) (1,168)
Undivided profits 6,175 5,406
Accumulated other comprehensive income
Net unrealized gain on securities available for sale, net of related tax effect (274) (224)
----------------- ----------------
Total shareholders' equity 17,842 17,061
----------------- ----------------
Total liabilities and shareholders' equity $225,236 $192,717
================= ================
</TABLE>
See accompanying notes.
3
<PAGE>
UWHARRIE CAPITAL CORP AND SUBSIDIARIES
Consolidated Statements of Income (Unaudited)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
(In thousands) Three Months Ended Six Months Ended
June 30, June 30,
2000 1999 2000 1999
------------- ------------- --------------- ---------------
INTEREST INCOME:
<S> <C> <C> <C> <C>
Interest on loans $ 3,519 $ 2,714 $ 6,732 $ 5,460
Interest on securities:
U.S. Treasury 16 47 43 98
U.S. Government agencies 367 295 683 501
State and political subdivisions 200 77 398 157
Other securities 57 20 104 41
Other interest income 40 9 80 22
------------- ------------- --------------- ---------------
Total interest income 4,199 3,162 8,040 6,279
INTEREST EXPENSE:
Interest on deposits and borrowed funds 2,215 1,331 4,121 2,680
------------- ------------- --------------- ---------------
NET INTEREST INCOME 1,984 1,831 3,919 3,599
Provision for loan losses 22 50 32 80
------------- ------------- --------------- ---------------
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES 1,962 1,781 3,887 3,519
------------- ------------- --------------- ---------------
NONINTEREST INCOME:
Service charges on deposit accounts 279 258 542 512
Other service fees and commissions 206 147 445 294
Other income(loss) 22 14 44 25
------------- ------------- --------------- ---------------
Total noninterest income 507 419 1,031 831
------------- ------------- --------------- ---------------
NONINTEREST EXPENSE:
Salaries, wages and employee benefits 1,099 931 2,163 1,867
Occupancy expenses 92 70 176 138
Equipment expense 142 143 283 270
Data processing 126 113 243 225
Other expenses 533 409 1,071 814
------------- ------------- --------------- ---------------
Total noninterest expense 1,992 1,666 3,936 3,314
------------- ------------- --------------- ---------------
INCOME BEFORE INCOME TAXES 477 534 982 1,036
Provision for income taxes 91 161 213 314
------------- ------------- --------------- ---------------
NET INCOME $ 386 $ 373 $ 769 $ 722
============= ============= =============== ===============
Net Income Per Common Share
Basic $ .07 $ .07 $ .14 $ .14
Assuming dilution $ .07 $ .07 $ .14 $ .14
Weighted Average Shares Outstanding
Basic 5,331,964 5,317,436 5,317,191 5,263,379
Effect of dilutive stock options 123,523 35,833 144,365 36,144
------------- ------------- --------------- ---------------
Assuming dilution 5,455,487 5,353,269 5,461,556 5,299,523
============= ============= =============== ===============
</TABLE>
See accompanying notes.
4
<PAGE>
UWHARRIE CAPITAL CORP AND SUBSIDIARIES
Consolidated Statements of Changes in Shareholders' Equity (unaudited)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
(in thousands) Accumulated
Additional Common Stock Other
Common Paid-in Subscriptions ESOP Notes Undivided Comprehensive
Stock Capital Receivable Receivable Profits Income Total
------ ---------- -------------- ---------- --------- ------------- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1999 $ 6,932 $ 6,319 $ (204) $ (1,168) $ 5,406 $ (224) $ 17,061
Comprehensive income
Net income - - - - 769 - 769
Net increase (decrease) in fair
value of securities available
for sale - - - - - (50) (50)
-------------
Total comprehensive income 719
-------------
Common stock issued pursuant to:
Stock options exercised 111 152 - - - - 263
Repurchase of common stock (70) (237) - - - - (307)
Collections of subscriptions receivable - - 106 - - - 106
----------------------------------------------------------------------------------------------
Balance, June 30, 2000 $ 6,973 $ 6,234 $ (98) $ (1,168) $ 6,175 $ (274) $ 17,842
==============================================================================================
</TABLE>
See accompanying notes.
5
<PAGE>
UWHARRIE CAPITAL CORP AND SUBSIDIARIES
Consolidated Statements of Cash Flows (unaudited)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
(in thousands) Six Months Ended
June 30, June 30,
2000 1999
------------ -----------
OPERATING ACTIVITIES
<S> <C> <C>
Net income $ 769 $ 722
Adjustments to reconcile net income to net cash provided by operations:
Depreciation 194 170
Amortization of investment discounts and premiums, net 1 (12)
Provision for loan losses 32 80
(Gain) loss on sale of foreclosed real estate (3) (3)
Changes in assets and liabilities:
Interest receivable (94) 8
Other assets 15 (433)
Interest payable 89 (38)
Accrued and other liabilities (862) 56
------------ -----------
Net cash provided by operating activities 141 550
------------ -----------
INVESTING ACTIVITIES
Net (increase) decrease in interest-bearing deposits with banks (372) 69
Proceeds from sales of securities available for sale - 455
Proceeds from maturities of securities available for sale 7,524 5,278
Purchase of securities available for sale (7,055) (13,287)
Net decrease in federal funds sold - 1,950
Net (increase) decrease in loans made to customers (18,129) 5,254
Net cash paid for business acquired (3,214) -
Purchase of premises and equipment (256) (357)
Collection of receivables from securities sales 2,460 -
Proceeds from sale of foreclosed properties 32 -
------------ -----------
Net cash used in investing activities (19,010) (638)
------------ -----------
FINANCING ACTIVITIES
Net increase (decrease) in deposit accounts 1,684 (8,077)
Net increase (decrease) in federal funds purchased (25) 175
Net increase in securities sold under repurchase agreements 1,099 778
Net proceeds from long-term advances from Federal Home Loan Bank 6,652 1,552
Net increase (decrease) in commercial paper (641) 372
Net decrease in other short-term borrowed funds 8,300 4,500
Proceeds from issuance of common stock 369 3,124
Net increase in common stock subscribed - (326)
Repurchases of common stock (307) (688)
Common stock acquired by ESOP - (1,200)
------------ -----------
Net cash provided by financing activities 17,131 $ 210
------------ -----------
DECREASE IN CASH AND DUE FROM BANKS (1,738) 122
Cash and due from banks at beginning of period 7,316 4,371
------------ -----------
Cash and due from banks at end of period $ 5,578 $ 4,493
============ ===========
</TABLE>
See accompanying notes.
6
<PAGE>
UWHARRIE CAPITAL CORP AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)
------------------------------------------------------
Note 1 - Basis of Presentation
The financial statements and accompanying notes are presented on a consolidated
basis including Uwharrie Capital Corp (the "Company"), it's subsidiaries, Bank
of Stanly ("Stanly"), Anson Bank & Trust Co. ("Anson"), and Strategic Investment
Advisors, Inc., (SIA). Bank of Stanly consolidates its two subsidiaries, the
Strategic Alliance Corporation and BOS Agency, Inc. each of which are
wholly-owned by Stanly.
The information contained in the consolidated financial statements is unaudited.
In the opinion of management, the consolidated financial statements have been
prepared in conformity with generally accepted accounting principles and all
material adjustments necessary for a fair presentation of results of interim
periods have been made. The results of operations for the interim periods are
not necessarily indicative of the results which may be expected for an entire
year. Management is not aware of economic events, outside influences or changes
in concentrations of business that would require additional clarification or
disclosure in the consolidated financial statements. Certain prior period
amounts have been reclassified to conform to current period classifications.
The organization and business of the Company, accounting policies followed by
the Company and other information are contained in the notes to consolidated
financial statements filed as part of the Company's 1999 annual report on Form
10-KSB. This quarterly report should be read in conjunction with such annual
report.
Note 2 - Loans
<TABLE>
<CAPTION>
Loans outstanding at period end:
------------------------------------------------------------------------------------------------------------------------
(in thousands) June 30, December 31,
2000 1999
---------------- ----------------
<S> <C> <C>
Real estate loans $ 123,358 $ 99,961
Commercial and industrial 29,866 23,673
Loans to individuals for household, family and other
consumer expenditures 16,674 16,445
All other loans 26 16
---------------- ----------------
Total $ 169,924 $ 140,095
================ ================
--------------------------------------------------------------------------------------------------------------------------
</TABLE>
Note 3 - Per Share Data
In the fourth quarter of 1999, the Company's Board of Directors declared a 3%
stock dividend payable on November 19, 1999 to shareholders of record on
November 1, 1999. All information presented in the accompanying interim
consolidated financial statements regarding earnings per share and weighted
average number of shares outstanding has been computed giving effect to this
stock dividend.
Note 4 - Commitments and Contingencies
The subsidiary banks are parties to financial instruments with off-balance sheet
risk in the normal course of business to meet the financing needs of its
customers. These financial instruments include commitments to extend credit,
lines of credit and standby letters of credit. These instruments involve
elements of credit risk in excess of amounts recognized in the accompanying
financial statements.
7
<PAGE>
The banks' risks of loss with the unfunded loans and lines of credit or standby
letters of credits is represented by the contractual amount of these
instruments. The banks use the same credit policies in making commitments under
such instruments as it does for on-balance sheet instruments. The amount of
collateral obtained, if any, is based on management's credit evaluation of the
borrower. Since many of the commitments are expected to expire without being
drawn upon, the total commitment amounts do not necessarily represent future
cash requirements. Credit card commitments are unsecured. At June 30, 2000,
outstanding financial instruments whose contract amounts represent credit risk
were approximately (in thousands):
Commitments to extend credit $ 24,257
Credit card commitments 5,352
Standby letters of credit 477
--------------
Total commitments $ 30,086
==============
Note 5 - Acquisition of Anson Bank & Trust Co.
In 1999 the Company announced the signing of an agreement to acquire Anson
Bancorp, Inc. and its wholly-owned subsidiary, Anson Savings Bank. Anson Savings
Bank, a state chartered savings bank operated a full service banking location in
Wadesboro, North Carolina. The acquisition closed on January 19, 2000, with the
acquisition cost of approximately $10.2 million paid principally in cash. This
business combination is being accounted for using the purchase method.
At the date of closing, Anson Bancorp, Inc. had total consolidated assets of
approximately $24 million and customer deposits of approximately $14.5 million.
The savings bank retained its North Carolina savings bank charter and became a
wholly-owned subsidiary of Uwharrie Capital Corp as Anson Bank & Trust Co.
The Company recorded intangible assets of approximately $1,150,000 as a result
of this acquisition.
8
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
This Quarterly Report on Form 10-QSB may contain certain forward-looking
statements consisting of estimates with respect to the financial condition,
results of operations and business of the Company that are subject to various
factors which could cause actual results to differ materially from these
estimates. These factors include, but are not limited to, general economic
conditions, changes in interest rates, deposit flows, loan demand, real estate
values, and competition; changes in accounting principles, policies, or
guidelines; changes in legislation or regulation; and other economic,
competitive, governmental, regulatory, and technological factors affecting the
Company's operations, pricing, products and services.
Comparison of Financial Condition at June 30, 2000 and December 31, 1999
As of June 30, 2000 total assets were $225.2 million, compared to $192.7 million
at December 31, 1999, an increase of $32.5 million or 16.9%. This increase was
provided by growth in the loan and investment portfolios of $14.0 million and by
the acquisition of Anson Bancorp, Inc., consummated on January 19, 2000, which
contributed $24 million to the increase in assets. At year-end 1999, the
Company's balance sheet reflected approximately $3 million in additional cash on
hand relative to anticipated cash needs for Y2K. Other assets at that date
included $2.5 million in net proceeds receivable from the sale and purchase of
securities with trade dates in December and settlements in January 2000. The
effect of the disposition of these transactions reduced assets and borrowings by
approximately $5.5 million in the first quarter of 2000.
The Company has experienced steady growth in loans, which increased from $140.1
million at December 31, 1999 to $169.9 million on June 30, 2000, reflecting an
increase of $29.8 million. The acquisition provided $11.8 million in loans and
loan growth amounted to $18.0 million, an increase of 12.8%.
During the six-month period ended June 30, 2000, deposits increased $16.0
million. The acquisition contributed $14.3 million and deposits grew by $1.7
million or 1.3%. Other funding sources and borrowings increased by $15.4 million
during this period.
Shareholders' equity was $17.1 million at December 31, 1999 compared to $17.8
million at June 30, 2000, an increase of $781 thousand. This increase was the
result of net income of $769 thousand, offset by an increase in the unrealized
loss on securities available for sale and stock repurchases. At June 30, 2000,
the Company and its subsidiary banks exceeded all applicable regulatory capital
requirements.
Comparison of results of operations for the three months ended June 30, 2000 and
1999
Earnings
The second quarter of 2000 reflected good operating results with net income of
$386 thousand, an increase of 3.5% when compared to earnings of $373 in the
second quarter of 1999. This improvement can be primarily attributed to a 8.4%
increase in net interest income due to growth in the loan and investment
portfolios and improvement in fee income of $80 thousand, an increase of 19.8%.
Net Interest Income
The Company's major source of revenue is net interest income, which is the
excess of interest income earned on loans and securities over interest expense
paid on deposits and borrowings. Income from net interest income increased by
$153 thousand or 8.4% when comparing the three-month periods presented,
attributable to increased volume of interest earning assets.
9
<PAGE>
Noninterest Income and Expense
Income from service charges and fees produced earnings of $485 and $405 thousand
for the second quarters of 2000 and 1999, respectively, an increase of 19.8%.
Other income increased by $8 thousand, compared to the prior second quarter.
For this same period, noninterest expenses amounted to $2 million compared to
$1.7 million, an increase of $326 thousand or 19.6%. Salaries and benefits, the
largest component of noninterest expense, increased by $168 thousand. Personnel
costs increased due to additional staff to support the Company's growth, normal
salary adjustments and associated benefit costs, including the acquisition of
Anson. All other expenses as a group increased by $158 thousand when comparing
results of the second quarter of 2000 to the same period in 1999.
Comparison of results of operations for the six months ended June 30, 2000 and
1999
Earnings
Earnings for the six months ended June 30, 2000 were $769 thousand compared to
$722 thousand during this period in 1999, an increase of 6.5%. This improvement
can be primarily attributed to the increase in net interest income due to growth
in the loan and investment portfolios and improvement in fee income.
Net Interest Income
Net interest income increased $320 thousand or 8.9% when comparing the six-month
periods presented, attributable to an increased volume of interest earning
assets. The net interest margin, on a tax equivalent basis, decreased from 4.70%
in the six months of 1999 compared to 4.26% in the current six-month period.
Factors that contributed to the decline in this ratio were: rising interest
rates, competitive markets for deposit funding, interest expense on parent
company debt relative to the acquisition of Anson, which carries a higher rate
than the overnight funding costs of its subsidiary banks, and an increase in
other borrowings.
The average rate paid on interest-bearing liabilities increased from 4.03% in
1999 to 4.74% in 2000. Interest-bearing deposits, as a percent of total
interest-bearing liabilities were 76.3% at June 30, 2000 compared to 90.1% at
June 30, 1999. Other funding sources increased during this period and represents
23.7% of interest-bearing liabilities in 2000 compared to 9.9% in 1999. This has
a negative impact on margin as other funding sources carry a higher cost than
blended deposit sources.
10
<PAGE>
The following table presents average balance sheets and a net interest income
analysis for the six months ended June 30, 2000 and 1999.
Average Balance Sheet and Net Interest Income Analysis
For the Six Months Ended June 30,
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Average Level Income/Expense Rate/Yield
($ in thousands) 2000 1999 2000 1999 2000 1999
----------- ----------- ----------- ------------ ----------- -----------
Interest-earning assets:
<S> <C> <C> <C> <C> <C> <C>
Loans (1) $ 153,048 $ 130,569 $ 6,584 $ 5,392 8.65% 8.33%
Nontaxable loans (2) 5,129 2,549 148 68 8.93% 8.28%
Taxable securities 24,248 20,034 830 640 6.89% 6.44%
Nontaxable securities (2) 13,981 5,407 398 157 8.81% 9.01%
Other (3) 2,368 957 80 22 6.79% 4.64%
----------- ----------- ----------- ------------ ----------- -----------
Total interest-earning assets 198,774 159,516 8,040 6,279 8.43% 8.09%
----------- ----------- ----------- ------------ ----------- -----------
Interest-bearing liabilities:
Interest-bearing deposits 133,310 120,940 2,831 2,351 4.27% 3.92%
Short-term borrowings 21,709 6,814 688 130 6.37% 3.85%
Long-term borrowings 19,712 6,508 602 199 6.14% 6.17%
----------- ----------- ----------- ------------ ----------- -----------
Total interest-bearing
liabilities 174,731 134,262 4,121 2,680 4.74% 4.03%
----------- ----------- ----------- ------------ ----------- -----------
Net interest spread $24,043 $ 25,254 $ 3,919 $3,599 3.69% 4.06%
=========== =========== =========== ============ =========== ===========
Net interest margin (2)
(% of earning assets) 4.26% 4.70%
=========== ===========
</TABLE>
(1) Average loan balances are stated net of unearned income and include
nonaccrual loans. Interest recognized on nonaccrual loans is included in
interest income.
(2) Yields related to securities and loans exempt from income taxes are stated
on a fully tax-equivalent basis, assuming a 35% tax rate.
(3) Includes federal funds sold and due from banks, interest-bearing.
--------------------------------------------------------------------------------
Noninterest Income and Expense
Income from service charges and fees produced earnings of $987 thousand compared
to $806 thousand during the first six months of 2000 and 1999, respectively, an
increase of 22.5%. Other income increased by $19 thousand, compared to the prior
period.
For this same period, noninterest expenses increased by $622 thousand or 18.8%.
Salaries and benefits, the largest component of noninterest expense, increased
by $296 thousand. Personnel costs increased due to additional staff to support
the Company's growth, normal salary adjustments and associated benefit costs,
including the acquisition of Anson. All other expenses as a group increased by
$326 thousand when comparing results of the second quarter of 2000 to the same
period in 1999.
11
<PAGE>
Provision for Loan Losses
The provision for loan losses was $32 thousand during the six-month period of
2000, compared to $80 for the same period in 1999. The loan portfolio is
analyzed periodically in an effort to identify potential problems before they
actually occur. An allowance for loan losses, which is utilized to absorb actual
losses in the loan portfolio, is maintained at a level sufficient to provide for
estimated potential charge-offs of non-collectible loans. Management believes
the allowance for loan losses is sufficient to absorb known risks in the
portfolio; however, no assurance can be given that economic conditions will not
adversely affect borrowers and result in increased losses.
Net charge-offs for the six months ended June 30, 2000 totaled $56 thousand,
reflecting a ratio to average loans of .04% compared to net charge-offs of $137
thousand in the prior period.
Income Tax Expense
Income taxes computed at the statutory rate are reduced primarily by the
eligible amount of interest earned on state and municipal securities. Income tax
expense calculated to date in 2000 totaled $213 thousand, an effective tax rate
of 21.7% of pretax income compared to $314 thousand in 1999, which reflected an
effective rate of 30.3%.
During the fourth quarter of 1999, the Company implemented a tax savings
transaction that resulted in realized losses from sales of investment
securities. The proceeds from the sale of taxable securities were reinvested in
non-taxable municipal securities, which will result in increased interest
income, primarily non-taxable income, in year 2000 and beyond. The reduction in
taxes, reflected in the effective tax rate, is a result of this transaction.
Non-performing assets
Non-performing assets include non-accrual loans, accruing loans contractually
past due 90 days or more, restructured loans, other real estate, and other real
estate under contract for sale. While non-performing assets represent potential
losses to the Company, management does not anticipate any aggregate material
losses since most loans are believed to be adequately secured.
The following table summarizes non-performing assets at June 30, 2000 and
December 31, 1999. Other than the amounts listed, there were no other loans that
(i) represent or result from trends or uncertainties which management reasonably
expects will materially impact future operating results, liquidity or capital
resources or (ii) represent material credits about which management has
information that causes them to have serious doubts as to the ability of such
borrowers to comply with the loan repayment terms.
Schedule of Non-Performing Assets
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
(In thousands) June 30, December 31,
2000 1999
---------------- ----------------
<S> <C> <C>
Nonaccrual loans $ 172 $ 317
Loans past due 90 days or more and still accruing 44 26
Other real estate owned, net 85 114
Renegotiated troubled debt - -
---------------- ----------------
Total non-performing assets $ 301 $ 457
================ ================
Non-performing assets as a percentage of gross loans .18% .33%
-------------------------------------------------------------------------------------------------------------
</TABLE>
12
<PAGE>
Liquidity and Capital Resources
The objective of the Company's liquidity management is to ensure the
availability of sufficient cash flows to meet all financial commitments and to
capitalize on the opportunities for expansion. Liquidity management addresses
the ability to meet deposit withdrawals on demand or at contractual maturity, to
repay borrowings as they mature, and to fund new loans and investments as
opportunities arise.
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. The Company and its subsidiary banks have multiple
funding sources in addition to deposits that can be used to increase liquidity
and provide additional financial flexibility. These sources are the subsidiary
banks' established federal funds lines with correspondent banks aggregating
$16.0 million at June 30, 2000, established borrowing relationships with the
Federal Home Loan Bank totaling approximately $49.2 million, access to
borrowings from the Federal Reserve Bank discount window, and the sale of
securities under agreements. In addition the parent company has a line of credit
of $4.5 million and issues commercial paper. Total debt from these sources
aggregated $55.4 million at June 30, 2000, compared to $40.0 million at December
31, 1999.
Banks and bank holding companies, as regulated institutions, must meet required
levels of capital. The FDIC and the Federal Reserve, the primary regulators of
the Company and its subsidiary banks, have adopted minimum capital regulations
or guidelines that categorize components and the level of risk associated with
various types of assets.
Regulatory guidelines require a minimum of total capital to risk-adjusted assets
ratio of 8 percent and Tier I leverage ratio of 4 percent. Banks, which meet or
exceed a Tier I ratio of 6 percent, a total capital ratio of 10 percent and a
Tier I leverage ratio of 5 percent are considered well capitalized by regulatory
standards. Financial institutions are expected to maintain a level of capital
commensurate with the risk profile assigned to its assets in accordance with
those guidelines.
Both the Company and its subsidiary banks have maintained capital levels
exceeding minimum levels for "well capitalized" banks and bank holding
companies.
Accounting and Regulatory Matters
Management is not aware of any known trends, events, uncertainties or current
recommendations by regulatory authorities that will have or that are reasonably
likely to have a material effect on the Company's liquidity, capital resources,
or other operations.
Impact of Inflation and Changing Prices
Inflation affects financial institutions in ways that are different from most
commercial and industrial companies, which have significant investments in fixed
assets and inventories. The effect of inflation on interest rates can materially
impact bank operations, which rely on net interest margins as a major source of
earnings. Noninterest expenses, such as salaries and wages, occupancy and
equipment cost are also negatively impacted by inflation.
Year 2000
The Company's management is pleased that business continued as normal without
adverse impact to the Company during the critical date change. In coming months,
the Company will continue monitoring external
13
<PAGE>
entities to assure that they have not experienced any Year 2000 problems that
could impact their relationship with the Company.
Part II - Other Information
Item 4. Submission Of Matters To Vote Of Security Holders
The Company's annual meeting of shareholders was held on Tuesday, May 2, 2000 in
Albemarle, North Carolina. Proposals listed in the proxy Statement dated April
7, 2000, (1) to elect six directors of the Company, (2) to amend the Articles of
Incorporation to authorize the issuance of preferred stock, and (3) to ratify
the appointment of the Company's independent public accountants for 2000, were
approved by the shareholders as proposed. There were no other matters submitted
for vote of the shareholders at this meeting.
Item 6. Exhibits and Reports On Form 8-K
a. Exhibits - Exhibit 27 - Financial Data Schedule
b. Reports on Form 8-K
None
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned who is thereunto duly authorized.
UWHARRIE CAPITAL CORP
(Registrant)
Date August 9, 2000 By:
----------------------
/s/ Roger L. Dick
--------------------------------------
Roger L. Dick
President and Chief Executive Officer
/s/ Barbara S. Williams
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Barbara S. Williams
Senior Vice President-Finance
14
