8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): November 16, 2020

UWHARRIE CAPITAL CORP

(Exact name of Registrant as Specified in Its Charter)

Registrant’s Telephone Number, Including Area Code: 704-983-6181

N/A

(Former Name or Former Address, if Changed Since Last Report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instructions A.2. below):

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§ 230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§ 240.12b-2 of this chapter).

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Securities registered pursuant to Section 12(b) of the Act:

Item 2.02 Results of Operations and Financial Condition

On November 16, 2020, Uwharrie Capital Corp (the "Registrant") released a quarterly report to its shareholders that included a letter to the shareholders from President and CEO Roger L. Dick and unaudited financial information for the period ended September 30, 2020.

A copy of this report is attached hereto as Exhibit 99.1 and incorporated by reference herein.

This Current Report on Form 8-K (including information included or incorporated by reference herein) 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 Registrant’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 Registrant’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 Registrant’s control).

Item 9.01 Financial Statements and Exhibits

(c) Exhibits

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 thereunto duly authorized.

uwhr-ex991_6.htm

Exhibit 99.1

November 16, 2020

Dear Shareholder:

The beginning of autumn always brings some much-anticipated changes, cooler weather, leaves changing color and much more.  The year 2020 has brought about widespread change and most of us have come to accept some level of daily repetition.  Some of us stay in the same place for both work and non-work, and weekdays blend into weekends.  Those of us with school aged kids have an entirely new set of routine adjustments and challenges to face.  Amidst this pandemic, with an undefined duration, adaptation has become essential.

We thank you for your patience during this community health crisis.  We appreciate the opportunity to serve you even as we have changed service delivery to practice caution and protect the health and well-being of our customers, associates and communities.  While many account transactions may be conducted at our drive thru locations, by phone, online and by appointment, we remain committed to continue to take care of and serve our markets.

Your Company continues to have a strong earnings year as a result of the diversified business units that have been able to react to the needs of our customers and the communities we serve, even during a pandemic.

We are pleased to report to you that net income for the first nine months of 2020 was $3.5 million, as compared to $2.6 million for the same nine month period in 2019.  This equates to $3.1 million in net income available to common shareholders or $0.43 cents per share, compared to $2.2 million in net income available to common shareholders or $0.30 per share that we reported in 2019 for the same period.  This represents an earnings growth of 43% in net income per available share year-to-date compared to the first nine months of 2019.

The main driver of our earnings increase is income from mortgage loan production, a direct result of the extended low interest rate environment that we continue to experience in 2020. During March, rates dropped significantly and the refinance boom began. Rates have fallen and stayed at much lower rates than ever anticipated. Our bank subsidiary, Uwharrie Bank, provides mortgage financing options for customers and then sells the loans (to eliminate the interest rate risk on the balance sheet), but retains the servicing of the loan. The servicing of these loans allows our customers to continue to work with us and provides an income stream for the Bank over the life of the loan.

Your Company has grown to $792 million in assets, up from $661 million at September 30, 2019. The $131 million or 20% increase is directly related to a growing deposit base. The deposit growth is reflective of a trend in the entire banking industry. According to the Federal Reserve Board*, seasonally adjusted deposits at banks nationally have grown nearly $2 trillion since the coronavirus hit the U.S in January. This is a result of stimulus and subsidies provided by the government in an effort to bolster the economy. Additionally, we have seen an overall increase in our customers’ account balances of

approximately 30% compared to 2019 as consumers have transitioned into a saving mode, due to the increased uncertainty in the world today.

While the fixed overhead of our backroom is sufficient to service the current growth in the balance sheet, margin continues to be an area of concern for the banking industry as we operate in a historically low interest rate environment with a relatively flat yield curve. We have seen margin** compression of 26 basis points from 3.44% at September 30, 2019 to 3.18% at September 30, 2020. Our peers are experiencing the same difficulties maintaining spreads at 3% or above. The diversity in our non-interest income revenue sources will prove beneficial as margin struggles continue.

As a result of the continued progress of your Company, your Board of Directors has declared a 2% stock dividend.  All shareholders of record on November 9, 2020, will receive the dividend payable on November 23, 2020.  The stock dividend will be paid electronically via book-entry (no stock certificates will be issued).  Once again, we chose to pay a stock dividend as opposed to cash to provide our shareholders with options to suit their needs.  Those shareholders still in peak earning years have the option of holding the dividend shares, which defers income, and paying taxes in later years at the lower capital gains rate.  For our shareholders desiring current income, these new shares can be sold for cash.  The stock dividend gives you, the shareholder, the option of deciding when you want to recognize the income and whether you pay ordinary income tax or capital gains.  If you wish to buy or sell shares, please contact our Investor Relations department and we can facilitate the transactions.  Shareholders are also reminded to turn in all stock certificates from prior years (which are still valid) for exchange to electronic form.  Our Investor Relations team can also assist you with this process (704-982-4415).

Though 2020 continues to be a year of challenges, your Company has adapted and continues to look for opportunities to fulfill our mission by providing the financial services to the communities we serve.  As a community banking organization, we believe local money should be put to work for local people.  Our local businesses have weathered challenging times and are certainly not out of the woods yet. Whenever possible and going into the holiday season, please shop local.  Local businesses are the foundation on which most of our communities are built and they need our support now, more than ever.

God bless you and we pray that you and your families remain safe and healthy.  Thank you for your continued support.

Sincerely,

UWHARRIE CAPITAL CORP

*https://www.federalreserve.gov/releases/h8/current/default.htm

**Net Interest margin as a percentage of earning assets.

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).

All values are in US Dollars.