Quarterly Report for Quarter Ending September 30, 2026 (Form 10-Q)

Management's Discussion and Analysis of Financial Condition and Results of Operations.

Caution Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q may contain certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements generally relate to estimates with respect to the financial condition, results of operations and business of the Company that are subject to various factors that could cause actual results to differ materially from these estimates. These factors include, but are not limited to: increases in our past due loans and provision for credit losses that may result from local and/or broader economic effects, including constraints on the availability of credit that may impact our borrowers; declines in general economic conditions, including increased stress in the financial markets; 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. Any use of "we" or "our" in the following discussion refers to the Company on a consolidated basis.

Comparison of Financial Condition at September 30, 2026 and December 31, 2025.

During the nine months ended September 30, 2026, the Company's total assets increased by $34.8 million, from $1.20 billion to $1.23 billion. Cash and cash equivalents increased by $2.0 million during the nine months ended September 30, 2026, from $73.3 million to $75.3 million.

Investment securities consist of securities available for sale and securities held to maturity. For the nine-month period ended September 30, 2026, investment securities increased by $13.9 million from $379.7 million at December 31, 2025 to $393.6 million at September 30, 2026. At September 30, 2026, the Company had net unrealized losses on securities available for sale of $37.4 million, compared to net unrealized losses of $21.5 million at December 31, 2025, a deterioration of $15.9 million. The allowance for credit losses on securities held to maturity was $30,000 at September 30, 2026 and $45,000 at December 31, 2025. The amortized cost basis of securities held to maturity totaled $18.6 million and $22.0 million at September 30, 2026 and December 31, 2025, respectively.

Equity securities decreased by $34,000 at September 30, 2026, compared to December 31, 2025, as a result of the decline in value in the equity market. During the nine-month period ended September 30, 2026, the Company participated in Visa Inc.'s exchange offer described in Note 5 of the Notes to Consolidated Financial Statements (Unaudited) included in Item 1 of this Report. The Company received Visa Class C common stock with a fair value of approximately $826,000 and subsequently converted and sold all 633 shares. The Company also received 550 shares of Visa Class B-3 common stock in the exchange; however, no carrying value was assigned to the Class B-3 shares, and therefore they are not included in the Company's equity securities balance at September 30, 2026.

Loans held for sale decreased by $2.4 million from December 31, 2025 to $6.6 million at September 30, 2026. Loans held for investment increased from $689.6 million at December 31, 2025 to $702.8 million at September 30, 2026, an increase of $13.2 million. The allowance for credit losses on loans was $5.8 million at September 30, 2026, which represented 0.82% of total loans held for investment, compared to $6.4 million, or 0.93% of total loans held for investment, at December 31, 2025. Additional discussion regarding the allowance is included in the Asset Quality section below.

Other changes in the Company's consolidated assets are primarily related to deferred tax assets, which increased by $3.3 million from $6.8 million at December 31, 2025 to $10.2 million at September 30, 2026, as a result of the deterioration in fair value of the available-for-sale securities portfolio. Premises and equipment increased by $2.6 million from $14.7 million at December 31, 2025 to $17.4 million at September 30, 2026 related to construction expenses for a new branch building in Mount Pleasant, North Carolina. Annual Company contributions and favorable market performance increased supplemental executive retirement plans ("SERP"), included in Other Assets, by $1.1 million during the nine months ended September 30, 2026. Also included in Other Assets, the Company's investment in a Small Business Investment Company ("SBIC") increased by $233,000.

Customer deposits, our primary funding source, experienced growth of $37.1 million during the nine-month period ended September 30, 2026, increasing from $1.08 billion to $1.12 billion. The overall increase in deposits is attributable to organic deposit growth. Demand noninterest-bearing checking accounts increased by $34.0 million while interest checking and money market accounts increased by $12.9 million during the nine-month period ended September 30, 2026. Savings deposits increased by $3.0 million and time deposits decreased by $12.9 million during the same period.

Total short-term borrowings increased by $127,000 for the nine-month period ended September 30, 2026. At September 30, 2026, the Company had $31.6 million in long-term debt outstanding, $29.1 million of which consists of 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 and became redeemable at the Company's option on September 3, 2026. 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 resets 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. At September 30, 2026, the interest rate on the 10-year subordinated notes was 6.67%. 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 September 30, 2026, $21.1 million qualifies as Tier 2 capital. The Company also maintains a $3.0 million line of credit, of which $2.5 million was outstanding at September 30, 2026.

Other changes in the Company's liabilities are related to an increase of $1.8 million in other liabilities from December 31, 2025 to September 30, 2026 resulting primarily from accrual of reserves for payables due during the last quarter of 2026. As with SERP assets mentioned above, SERP liabilities increased $1.1 million during the same period.

At September 30, 2026, total shareholders' equity was $68.6 million, a decrease of $7.0 million from December 31, 2025. Net income for the nine-month period ended September 30, 2026 was $10.0 million, which positively contributed to shareholders' equity. During the nine months ended September 30, 2026, the Company repurchased 308,554 shares of common stock at a total cost of $4.2 million, and the Company paid $422,000 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.

Results of Operations for the Three Months Ended September 30, 2026 and 2025.

Net Income and Net Income Available to Common Shareholders

Uwharrie Capital Corp reported net income of $2.9 million for both three-month periods ended September 30, 2026 and 2025. Net income available to common shareholders was $2.7 million, or $0.37 per common share, for the three months ended September 30, 2026 and 2025. Net income available to common shareholders is net income less dividends on the aforementioned noncontrolling interest.

Net Interest Income

Net interest income for the three months ended September 30, 2026 was $10.2 million, a $325,000 increase from the $9.9 million reported for the comparative period in 2025. During the third quarter of 2026, the average yield on our interest-earning assets decreased by 9 basis points to 5.10% from the same period in 2025, and the average rate we paid for our interest-bearing liabilities decreased 7 basis points to 2.25%. These changes resulted in an interest rate spread of 2.86% as of both September 30, 2026 and September 30, 2025. The Company's net interest margin was 3.48% and 3.50% for the comparable periods in 2026 and 2025, respectively. The following table presents average balance sheet and a net interest income analysis for the three months ended September 30, 2026 and 2025, respectively:

Provision for (Recovery of) Credit Losses

The Company recorded a $287,000 recovery of credit losses for the three months ended September 30, 2026, compared to a provision of $176,000 for the same period in 2025. There were net loan recoveries of $11,000 for the three months ended September 30, 2026, as compared to net loan charge-offs of $67,000 during the same period of 2025. Refer to the Asset Quality section below for further information.

Noninterest Income

The Company places significant emphasis on diversification of revenue sources rather than relying solely upon interest income. Total noninterest income increased by $155,000 for the three months ended September 30, 2026, compared to the same period in 2025. Income associated with market adjustments on SERP accounts increased by $446,000 and growth in assets under management ("AUM") within the wealth management division contributed a $120,000 increase in other service fees and commissions. These increases offset the decline in mortgage banking income resulting from higher mortgage interest rates, which reduced mortgage origination and refinancing activity during the third quarter of 2026. Future mortgage banking income could be adversely affected if mortgage origination and refinancing volumes remain constrained by the higher interest rate environment.

Interchange fees are charges that merchants pay to us and other card-issuing banks for processing electronic payment transactions. Interchange and card transaction fees consist of income from check card usage, point-of-sale income from PIN-based debit card transactions, ATM service fees, and credit card usage. A comparison of gross interchange and card transaction fees, net of associated network costs for the reported periods is presented in the table below:

Noninterest Expense

Noninterest expense for the three months ended September 30, 2026 increased by $1.1 million compared to the same period in 2025. Salaries and benefits, the largest component of noninterest expense, increased by $259,000 due to higher compensation and benefit costs during the three months ended September 30, 2026. Expense associated with market adjustments on SERP accounts increased by $446,000 compared to the three months ended September 30, 2025. Marketing and donations expense increased by $129,000 during the same period, primarily due to higher charitable contributions and other community support efforts.

Total other noninterest expense increased by $107,000 for the three months ended September 30, 2026, compared to the same period in 2025. The table below reflects the composition of other noninterest expense for the referenced periods.

Income Tax Expense

The Company recorded income tax expense of $788,000 for the three months ended September 30, 2026, reflecting an effective tax rate of 21.6%, compared to income tax expense of $867,000 and an effective tax rate of 23.1% for the same period in 2025. The lower

effective tax rate in 2026 was primarily attributable to a catch-up adjustment recorded during the third quarter of 2025 to align year-to-date tax expense with the estimated annual effective tax rate. Income taxes computed at the statutory rate are primarily affected by state income taxes, partially offset by tax-exempt interest earned on state and municipal securities, interest income from tax-free municipal loans, and income earned on bank-owned life insurance.

Results of Operations for the Nine Months Ended September 30, 2026 and 2025.

Net Income and Net Income Available to Common Shareholders

Uwharrie Capital Corp reported net income of $10.0 million for the nine months ended September 30, 2026, compared to $8.3 million for the nine months ended September 30, 2025. Net income available to common shareholders was $9.6 million, or $1.31 per common share, for the nine months ended September 30, 2026, compared to $7.8 million, or $1.05 per common share, for the nine months ended September 30, 2025. Net income available to common shareholders is net income less dividends on the aforementioned noncontrolling interest.

Net Interest Income

Net interest income for the nine months ended September 30, 2026 was $30.2 million, a $1.4 million increase from the $28.7 million reported for the comparative period in 2025. During the first nine months of 2026, the average yield on our interest-earning assets decreased by 10 basis points to 5.10% from the same period in 2025, and the average rate we paid for our interest-bearing liabilities decreased 10 basis points to 2.24%. These changes resulted in an interest rate spread of 2.86% as of both September 30, 2026 and September 30, 2025. The Company's net interest margin was 3.47% and 3.50% for the comparable periods in 2026 and 2025, respectively. The following table presents average balance sheet and a net interest income analysis for the nine months ended September 30, 2026 and 2025, respectively:

Provision for (Recovery of) Credit Losses

The Company recorded a $773,000 recovery of credit losses for the nine months ended September 30, 2026, compared to a provision of $711,000 for the same period in 2025. There were net loan recoveries of $64,000 for the nine months ended September 30, 2026, as compared to net loan charge-offs of $190,000 during the same period of 2025. Refer to the Asset Quality section below for further information.

Noninterest Income

The Company places significant emphasis on diversification of revenue sources rather than relying solely upon interest income. Total noninterest income increased by $1.7 million for the nine-month period ended September 30, 2026, compared to the same period in 2025. The increase in noninterest income was primarily attributable to a gain of $827,000 recognized in connection with Visa Inc.'s exchange offer. During the second quarter of 2026, the Company exchanged its Visa Class B-1 common stock for Class B-3 common stock and Visa Class C common stock. Because the exchanged Class B-1 common stock had no carrying value, the Company recognized a gain equal to the fair value of the Class C common stock received, together with cash received in lieu of fractional shares. The Visa Class B-3 common stock received in the exchange represents a continuation of the Company's restricted ownership interest and, accordingly, no carrying value was assigned to the Class B-3 shares received. By September 30, 2026, the Company had converted and sold all 633 shares of Visa Class C common stock received in the exchange. These Visa-related transactions were

nonrecurring in nature and positively impacted noninterest income and net income during the current period. Growth in AUM within the wealth management division contributed a $313,000 increase in other service fees and commissions during the nine months ended September 30, 2026, compared to the same period in 2025. In addition, income associated with market adjustments on SERP accounts increased by $491,000, while gains on the sale of available-for-sale securities increased by $158,000.

Interchange fees are charges that merchants pay to us and other card-issuing banks for processing electronic payment transactions. Interchange and card transaction fees consist of income from check card usage, point-of-sale income from PIN-based debit card transactions, ATM service fees, and credit card usage. A comparison of gross interchange and card transaction fees, net of associated network costs for the reported periods is presented in the table below:

Noninterest Expense

Noninterest expense for the nine months ended September 30, 2026 increased by $2.5 million compared to the same period in 2025. Salaries and benefits, the largest component of noninterest expense, increased by $983,000 due to higher compensation and benefit costs during 2026. Marketing and donations expense increased by $472,000 during the first nine months of 2026 compared to the same period in 2025, primarily due to larger donations being made earlier in the year, with contribution levels being adjusted to remain consistent with expected year-end giving. Management anticipates overall giving for 2026 will remain consistent with the Company's customary level of support. Additionally, expense associated with market adjustments on SERP accounts increased by $491,000 during the nine-month period ended September 30, 2026, compared to the same period in 2025.

Total other noninterest expense increased by $299,000 for the nine months ended September 30, 2026, compared to the same period in 2025. The table below reflects the composition of other noninterest expense for the referenced periods.

Income Tax Expense

The Company recorded income tax expense of $2.7 million for the nine months ended September 30, 2026, reflecting an effective tax rate of 21.5%, compared to income tax expense of $2.3 million and an effective tax rate of 22.1% for the same period in 2025. The decrease in the effective tax rate resulted from normal period-to-period fluctuations in the composition of taxable and tax-advantaged income. Income taxes computed at the statutory rate are primarily affected by state income taxes, partially offset by tax-exempt interest earned on state and municipal securities, interest income from tax-free municipal loans, and income earned on bank-owned life insurance.

Asset Quality

The Company's allowance for credit losses on loans is established through charges to earnings in the form of a provision for credit losses. The allowance is increased by provisions charged to operations and recoveries of amounts previously charged off and is reduced by recovery of provisions and loans charged off. Management continuously evaluates the adequacy of the allowance for credit losses. In evaluating the adequacy of the allowance, management considers the following: the growth, composition and industry diversification of the portfolio; historical loan loss experience; current delinquency levels; adverse situations that may affect a borrower's ability to repay; estimated value of any underlying collateral; prevailing economic conditions; and other relevant factors.

The allowance for credit losses on loans represents management's estimate of lifetime credit losses inherent in loans as of the balance sheet date. The allowance for credit losses is estimated by management using relevant available information, from both internal and external sources, relating to past events, current conditions, and reasonable and supportable forecasts. The Company's credit administration function, through a review process, periodically validates the accuracy of the initial risk grade assessment. In addition, as a given loan's credit quality improves or deteriorates, the credit administration department has the responsibility to change the borrower's risk grade accordingly.

The Company individually reviews loans that do not share the same risk characteristics as loans in the collectively assessed population. Individually assessed loans determined to be collateral dependent are evaluated based on the fair value of the underlying collateral, as repayment is expected to be derived through the operation or sale of the collateral. When management determines that foreclosure is probable and the borrower is experiencing financial difficulty, the expected credit losses are measured using the fair value of collateral at the reporting date, adjusted for selling costs as appropriate. Loans that are not deemed collateral dependent are assigned a probability of default based on default history. If the loan has defaulted, it will be assigned a 100% probability of default; otherwise, it will be assigned a probability of default based on the Company's historical experience, which is higher than the forecasted probability of default applied in the collectively assessed portfolio. This evaluation is inherently subjective, as it requires material estimates, including internal and external appraisal services. In addition, regulatory agencies, as an integral part of their examination process, periodically review the allowance for credit losses on loans and may require additions for estimated losses based upon judgments different from those of management.

The Company measures expected credit losses for loans on a pooled basis when similar risk characteristics exist. The Company
evaluates credit risk in the Consumer segment based upon consumer credit scores and collateral and the Commercial segment based
upon loan risk grade and collateral. The allowance for credit losses for each segment is calculated using a non-discounted cash flow methodology. Management uses a risk-grading program designed to evaluate the credit risk in the loan portfolio. In this program, risk grades are initially assigned by loan officers and then reviewed and monitored by credit administration. This process includes the maintenance of an internally classified loan list that is designed to help management assess the overall quality of the loan portfolio and the adequacy of the allowance for credit losses on loans. In establishing the appropriate classification for specific assets, management considers, among other factors, the estimated value of the underlying collateral, the borrower's ability to repay, the borrower's payment history, and the current delinquent status.

Additionally, the allowance for credit losses calculation includes subjective adjustments for qualitative risk factors that are likely to cause estimated credit losses to differ from historical experience. These qualitative adjustments may increase or reduce reserve levels and include adjustments for lending management experience and risk tolerance, loan review and audit results, asset quality and portfolio trends, loan portfolio growth, industry concentrations, trends in underlying collateral, external factors and economic conditions not already captured.

At September 30, 2026, the level of our individually evaluated loans was $4.0 million, and the allowance for credit losses related to individually evaluated loans was $713,000. The allowance, expressed as a percentage of gross loans held for investment, was 0.82% and 0.93% at September 30, 2026 and December 31, 2025, respectively. The ratio of nonaccrual loans to total loans increased from 0.05% at December 31, 2025 to 0.11% at September 30, 2026, and was related to the $362,000 increase in nonaccrual loans. Seven loans totaling $468,000 were converted to nonaccrual during the first nine months of 2026, offset by a $50,000 charge-off and paydowns of $56,000.

The Company did not hold any other real estate owned at September 30, 2026 and December 31, 2025.

As of September 30, 2026, management believed the level of the allowance for credit losses on loans was appropriate in light of the risk inherent in the loan portfolio. While management believes that it uses the best information available to establish the allowance for credit losses on loans, future adjustments may be necessary and results of operations could be adversely affected if circumstances differ from the assumptions used in making the determinations. Furthermore, while management believes it has established the allowance in conformity with GAAP, there can be no assurance that banking regulators, in reviewing the Company's loan portfolio, will not require an adjustment to the allowance for credit losses on loans. In addition, because future events affecting borrowers and

collateral cannot be predicted with certainty, there can be no assurance that the existing allowance is adequate or that increases will not be necessary, should the quality of any loans deteriorate because of the factors discussed herein. Any material increase in the allowance for credit losses on loans may adversely affect the Company's financial condition, results of operations and the value of its securities.

The following table shows the comparison of nonperforming assets at September 30, 2026 and December 31, 2025:

Liquidity and Capital Resources

The objective of the Company's liquidity management policy is to ensure the availability of sufficient cash flows to meet all financial commitments and to capitalize on any 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 flows 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 41.2% and 40.5% of total deposits at September 30, 2026 and December 31, 2025, 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 September 30, 2026, 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 $175.9 million; and access to borrowings from the FRB discount window, with available credit of $33.5 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, 2026, $500,000 remained available for use on the line of credit.

The following table summarizes the Company's interest-earning cash and cash equivalents as of the periods indicated.

Banks and bank holding companies, as regulated institutions, must meet required levels of capital. The Federal Reserve, the primary federal regulator of the Company and its subsidiary bank, has adopted minimum capital regulations or guidelines that categorize components and the level of risk associated with various types of assets.

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 September 30, 2026, the Company's subsidiary bank continued to exceed minimum capital standards and remained well-capitalized under the applicable rules.

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, 2026, the Company had $29.1 million, net of unamortized debt issuance costs of $96,000, in subordinated debt outstanding, of which $21.1 million qualifies as Tier 2 capital at the Company level. The Company has made all interest and dividend payments in a timely manner.

Off-Balance Sheet Arrangements

Off-balance sheet arrangements include transactions, agreements or other contractual arrangements to which an unconsolidated entity of the Company is a party and pursuant to which the Company has obligations, including an obligation to provide guarantees on behalf of an unconsolidated entity, or retains an interest in assets transferred to an unconsolidated entity. We currently have no off-balance sheet arrangements of this kind.

Derivative financial instruments include futures contracts, forward contracts, interest rate swaps, options contracts, and other financial instruments with similar characteristics. We have not engaged in significant derivative activities through September 30, 2026, with the exception of mortgage banking derivatives. See Note 12 ("Mortgage Banking Derivatives") to the Company's Notes to Consolidated Financial Statements for additional discussion of mortgage banking derivatives.

Contractual Obligations

The timing and amount of our contractual obligations has not changed materially since our 2025 Annual Report on Form 10-K, which was filed with the Securities and Exchange Commission on March 5, 2026.