10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2014

OR

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                      to                     .

COMMISSION FILE NUMBER 000-22062

UWHARRIE CAPITAL CORP

(Exact name of registrant as specified in its charter)

NORTH CAROLINA	56-1814206
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification No.)
132 NORTH FIRST STREET ALBEMARLE, NORTH CAROLINA	28001
(Address of Principal Executive Offices)	(Zip Code)

Registrant’s Telephone number, including area code: (704) 983-6181

N/A

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 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.    x  Yes    ¨  No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	¨	Accelerated filer	¨
Non-accelerated filer	¨  (Do not check if a smaller reporting company)	Smaller reporting company	x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    ¨  Yes    x  No

Indicate the number of shares outstanding of each of the issuer’s classes of common stock as of the latest practicable date: 7,193,485 shares of common stock outstanding as of April 30, 2014.

Table of Contents

		Page No.
Part I.	FINANCIAL INFORMATION
Item 1 -	Financial Statements (Unaudited)
	Consolidated Balance Sheets March 31, 2014 and December 31, 2013		3
	Consolidated Statements of Income for the Three Months Ended March 31, 2014 and 2013		4
	Consolidated Statements of Comprehensive Income for the Three Months Ended March 31, 2014 and 2013		5
	Consolidated Statements of Changes in Shareholders’ Equity Three Months Ended March 31, 2014		6
	Consolidated Statements of Cash Flows Three Months Ended March 31, 2014 and 2013		7
	Notes to Consolidated Financial Statements		8
Item 2 -	Management’s Discussion and Analysis of Financial Condition and Results of Operations		28
Item 3 -	Quantitative and Qualitative Disclosures about Market Risk		35
Item 4 -	Controls and Procedures		36
Part II.	OTHER INFORMATION
Item 1 -	Legal Proceedings		36
Item 1A -	Risk Factors		36
Item 2 -	Unregistered Sales of Equity Securities and Use of Proceeds		36
Item 3 -	Defaults Upon Senior Securities		36
Item 4 -	Mine Safety Disclosures		37
Item 5 -	Other Information		37
Item 6 -	Exhibits		37
	Exhibit Index		40

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Uwharrie Capital Corp and Subsidiaries

Consolidated Balance Sheets

Part I. FINANCIAL INFORMATION

Item 1 – Financial Statements

	March 31, 2014 (Unaudited)			December 31, 2013*
	(dollars in thousands)
ASSETS
Cash and due from banks	$	6,607		$	7,947
Interest-earning deposits with banks		54,267			64,447
Securities available for sale, at fair value		111,508			100,280
Loans held for sale		364			1,139
Loans:
Loans held for investment		304,735			307,348
Less allowance for loan losses		(4,198	)		(5,095	)
Net loans held for investment		300,537			302,253
Premises and equipment, net		15,356			13,781
Interest receivable		1,651			1,747
Restricted stock		1,038			1,184
Bank owned life insurance		6,557			6,516
Other real estate owned		7,447			7,170
Other assets		10,260			10,856
Total assets	$	515,592		$	517,320
LIABILITIES
Deposits:
Demand noninterest-bearing	$	80,139		$	74,493
Interest checking and money market accounts		227,737			228,933
Savings deposits		38,654			41,512
Time deposits, $100,000 and over		44,176			44,690
Other time deposits		61,503			64,080
Total deposits		452,209			453,708
Short-term borrowed funds		5,887			5,509
Long-term debt		9,567			11,163
Interest payable		193			224
Other liabilities		4,755			4,491
Total liabilities		472,611			475,095
Off balance sheet items, commitments and contingencies (Note 9)
Redeemable common stock held by the Employee Stock
Ownership Plan (ESOP)		1,864			1,716
SHAREHOLDERS’ EQUITY
Common stock, $1.25 par value: 20,000,000 shares authorized; shares issued and outstanding 7,193,485 and 7,445,931 shares, respectively		8,992			9,307
Additional paid-in capital		11,130			11,922
Unearned ESOP compensation		—			(989	)
Undivided profits		10,680			10,289
Accumulated other comprehensive loss		(234	)		(562	)
Total Uwharrie Capital shareholders’ equity		30,568			29,967
Noncontrolling interest		10,549			10,542
Total shareholders’ equity		41,117			40,509
Total liabilities and shareholders’ equity	$	515,592		$	517,320

(*) Derived from audited consolidated financial statements

See accompanying notes

-3-

Uwharrie Capital Corp and Subsidiaries

Consolidated Statements of Income (Unaudited)

	Three Months Ended March 31,
	2014			2013
	(in thousands, except share and per share data)
Interest Income
Loans, including fees	$	4,059		$	4,427
Investment securities
US Treasury		93			93
US Government agencies and corporations		317			179
State and political subdivisions		65			66
Interest-earning deposits with banks and federal funds sold		45			55
Total Interest income		4,579			4,820
Interest Expense
Interest checking and money market accounts		85			116
Savings deposits		25			42
Time deposits, $100,000 and over		121			174
Other time deposits		142			213
Short-term borrowed funds		18			80
Long-term debt		157			171
Total interest expense		548			796
Net interest income		4,031			4,024
Provision for (recovery of) loan losses		(424	)		(369	)
Net interest income after provision (recovery of) for loan losses		4,455			4,393
Noninterest Income
Service charges on deposit accounts		378			405
Other service fees and commissions		937			793
Gain on sale of securities (includes reclassification of $21,000 and $14,000 from accumulated other comprehensive income)		21			14
Gain on sale of other assets		1			247
Income from mortgage loan sales		162			840
Other income		97			115
Total noninterest income		1,596			2,414
Noninterest Expense
Salaries and employee benefits		3,006			3,092
Net occupancy expense		286			274
Equipment expense		170			168
Data processing costs		179			200
Office supplies and printing		65			63
Foreclosed real estate expense		228			175
Professional fees and services		157			238
Marketing and donations		146			173
Electronic banking expense		239			222
Software amortization and maintenance		118			144
FDIC insurance		112			171
Other noninterest expense		540			709
Total noninterest expenses		5,246			5,629
Income before income taxes		805			1,178
Income taxes (includes reclassification of $8,000 and $5,000 from accumulated other comprehensive income)		268			415
Net income	$	537		$	763
Net income	$	537		$	763
Less: Net Income attributable to noncontrolling interest		(146	)		(103	)
Net income attributable to Uwharrie Capital		391			660
Dividends - preferred stock		—			(161	)
Net income available to common shareholders	$	391		$	499
Net income per common share
Basic	$	0.05		$	0.07
Diluted		0.05			0.07
Weighted average common shares outstanding
Basic		7,190,614			7,307,912
Diluted		7,190,614			7,307,912

See accompanying notes

-4-

UWHARRIE CAPITAL CORP AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

	Three Months Ended March 31,
	2014			2013
	(in thousands)
Net Income	$	537		$	763
Unrealized gain (loss) on available for sale securities		518			(124	)
Related tax effect		(177	)		42
Reclassification of gain recognized in net income		(21	)		(14	)
Related tax effect		8			5
Total other comprehensive income (loss)		328			(91	)
Comprehensive income		865			672
Less: Comprehensive income attributable to noncontrolling interest		(146	)		(103	)
Comprehensive income attributable to Uwharrie Capital	$	719		$	569

See accompanying notes

-5-

Uwharrie Capital Corp and Subsidiaries

Consolidated Statement of Changes in Shareholders’ Equity (Unaudited)

	Number Common Shares Issued			Common Stock			Additional Paid-in Capital			Unearned ESOP Compensation			Undivided Profits		Accumulated Other Comprehensive Income (Loss)			Non Controlling Interest			Total
	(dollars in thousands, except share data)
Balance, December 31, 2013		7,445,931		$	9,307		$	11,922		$	(989	)	$	10,289	$	(562	)	$	10,542		$	40,509
Net Income		—			—			—			—			391		—			146			537
Other comprehensive Income		—			—			—			—			—		328			—			328
Release of ESOP shares		—			—			5			16			—		—			—			21
Repayment of ESOP notes receivable		(252,446	)		(315	)		(649	)		973			—		—			—			9
Reclass to mezzanine capital		—			—			(148	)		—			—		—			—			(148	)
Record preferred stock dividend
Series B (noncontrolling interest)		—			—			—			—			—		—			(103	)		(103	)
Record preferred stock dividend
Series C (noncontrolling interest)		—			—			—			—			—		—			(36	)		(36	)
Balance, March 31, 2014		7,193,485		$	8,992		$	11,130		$	—		$	10,680	$	(234	)	$	10,549		$	41,117

See accompanying notes

-6-

Uwharrie Capital Corp and Subsidiaries

Consolidated Statements of Cash Flows (Unaudited)

	Three Months Ended March 31,
	2014			2013
	(dollars in thousands)
Cash flows from operating activities
Net income	$	537		$	763
Adjustments to reconcile net income to net cash
Provided by (used in) operating activities:
Depreciation		218			236
Net amortization of security premiums/discounts		231			430
Net amortization of mortgage servicing rights		170			237
Impairment of foreclosed real estate		9			30
Recovery of loan losses provisions		(424	)		(369	)
Net realized gain on sales / calls available for sales securities		(21	)		(14	)
Income from mortgage loan sales		(162	)		(840	)
Proceeds from sales of loans held for sale		6,369			31,214
Origination of loans held for sale		(5,432	)		(26,046	)
Gain on sale of premises, equipment and other assets		—			(229	)
Increase in cash surrender value of life insurance		(41	)		(32	)
Gain on sales of foreclosed real estate		(1	)		(18	)
Release and write-off of ESOP shares		30			11
Net change in interest receivable		96			107
Net change in other assets		360			1,415
Net change in interest payable		(31	)		(8	)
Net change in other liabilities		264			866
Net cash provided by operating activities		2,172			7,753
Cash flows from investing activities
Proceeds from sales, maturities and calls of securities available for sale		1,849			4,748
Purchase of securities available for sale		(12,790	)		(25,734	)
Net decrease in loans		1,644			2,721
Proceeds from sales of premises, equipment and other assets		—			949
Purchase of premises and equipment		(1,793	)		(154	)
Proceeds from sales of foreclosed real estate		211			18
Investment in other assets		(96	)		(267	)
Net decrease in restricted stock		146			327
Net cash used in investing activities		(10,829	)		(17,392	)
Cash flows from financing activities
Net increase (decrease) in deposit accounts		(1,499	)		6,863
Net increase (decrease) in short-term borrowed funds		378			(6,563	)
Net decrease in long-term debt		(1,596	)		(2	)
Proceeds from preferred stock series B issued by subsidiaries		—			366
Repurchase of common stock		—			(52	)
Dividends on preferred stock		—			(136	)
Dividend on noncontrolling interest		(146	)		(103	)
Net cash provided (used in) in financing activities		(2,863	)		373
Decrease in cash and cash equivalents		(11,520	)		(9,266	)
Cash and cash equivalents, beginning of period		72,394			81,728
Cash and cash equivalents, end of period	$	60,874		$	72,462
Supplemental Disclosures of Cash Flow Information
Interest paid	$	579		$	804
Income taxes paid		—			280
Supplemental Schedule of Non-Cash Activities
Net change in fair value securities available for sale, net of tax	$	328		$	(91	)
Loans transferred to foreclosed real estate		496			2,239
Company financed sales of other real estate owned		—			—
Net change in ESOP liability		148			55
Funds moved from escrow liability to noncontrolling interest, subsidiary issued series B preferred stock net of cost		—			7,376
Redemption of preferred stock series A to other liabilities		—			(7,742	)
Exchange of unearned ESOP shares for ESOP debt		964			—

See accompanying notes

-7-

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”) and its subsidiaries, Uwharrie Bank (the “Bank”), Strategic Investment Advisors, Inc. (“SIA”), and Uwharrie Mortgage Inc. The Bank consolidates its subsidiaries, the Strategic Alliance Corporation, BOS Agency, Inc. and Gateway Mortgage, Inc., each of which is wholly-owned by the Bank.

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 in the United States of America (“GAAP”) and material adjustments necessary for a fair presentation of results of interim periods, all of which are of a normal recurring nature, have been made. The results of operations for the interim periods are not necessarily indicative of the results that 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.

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 2013 Annual Report on Form 10-K. This Quarterly Report should be read in conjunction with such Annual Report.

Note 2 – Comprehensive Income

The Company reports as comprehensive income all changes in shareholders’ equity during the year from sources other than shareholders. Other accumulated comprehensive income refers to all components (revenues, expenses, gains, and losses) of comprehensive income that are excluded from net income. The Company’s only component of accumulated other comprehensive income is unrealized gains and losses, net of income tax, on investment securities available for sale. The following table presents the changes in accumulated other comprehensive income for the three months ended March 31, 2014 and 2013:

	Unrealized holding gains on available-for-sale Securities (net)
	Three months ended March 31, 2014			Three months ended March 31, 2013
	(dollars in thousands)
Beginning Balance	$	(562	)	$	1,487
Other comprehensive income (loss) before reclassifications, net of $177,000 and $43,000 tax effect, respectively		341			(82	)
Amounts reclassified from accumulated other Comprehensive income, net of $8,000 and $5,000 tax effect		(13	)		(9	)
Net current-period other comprehensive loss		328			(91	)
Ending Balance	$	(234	)	$	1,396

-8-

Note 3 – Noncontrolling Interest

In January 2013 each of the Company’s subsidiary banks issued $7.9 million of Fixed Rate Noncumulative Perpetual Preferred Stock, Series B. The preferred stock qualified as Tier 1 capital at each bank and pays dividends at an annual rate of 5.30%. The preferred stock has no voting rights. This capital is presented as noncontrolling interest in the consolidated balance sheets. Dividends declared on this preferred stock are presented as earnings allocated to the noncontrolling interest in the consolidated statements of income. Effective September 1, 2013, the Fixed Rate Noncumulative Perpetual Preferred Stock, Series B was rolled into one issue under Uwharrie Bank in connection with the consolidation and name change.

During 2013, the Company’s subsidiary bank, Uwharrie Bank, Raised $2.8 million of Fixed Rate Noncumulative Perpetual Preferred Stock, Series C. The preferred stock qualifies as Tier 1 capital at the bank and pays dividends at an annual rate of 5.30%. The preferred stock has no voting rights.

Note 4 – Per Share Data

Basic and diluted net income per common share is computed based on the weighted average number of shares outstanding during each period after retroactively adjusting for stock dividends. Diluted net income per common share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the net income of the Company. For both the three months ended March 31, 2014 and 2013, the Company’s 92,491 stock options outstanding did not have a dilutive effect on per share results because the exercise prices exceeded the share values for each period. The Employee Stock Ownership Plan, (“ESOP”) effect is the average of the unallocated ESOP shares.

Basic and diluted net income per common share have been computed based upon net income available to common shareholders as presented in the accompanying consolidated statements of income divided by the weighted average number of common shares outstanding or assumed to be outstanding. The computation of basic and dilutive earnings per share is summarized below:

	Three Months Ended March 31,
	2014			2013
Weighted average number of common shares outstanding		7,358,977			7,502,496
Effect of unreleased ESOP shares		(168,363	)		(194,584	)
Adjusted weighted average number of common shares used in computing basic net income per common share		7,190,614			7,307,912
Effect of dilutive stock options		—			—
Weighted average number of common shares and dilutive potential common shares used in computing diluted net income per common share		7,190,614			7,307,912

During the first quarter of 2014, the board of directors of the Company voted to terminate the ESOP effective March 1, 2014. As of February 28, 2014, the ESOP held 740,530 shares, or 9.95% of the Company’s total outstanding shares of common stock, of which 252,446 shares were unallocated to participants in the ESOP.

-9-

The Company had made a term loan to the ESOP in 1999. In addition, the Company established a $500,000 line of credit to the ESOP in 2010 and established a second $500,000 line of credit to the ESOP in 2013. The ESOP used the proceeds of the term loan and lines of credit to purchase shares of the Company’s common stock for the benefit of qualified employees. The unallocated shares of stock held by the ESOP were pledged as collateral for the term loan and lines of credit. As debt payments were made on the term loan and lines of credit, unallocated shares associated with those debt payments were released to the ESOP and allocated among participants.

In connection with the termination of the ESOP, the ESOP trustees transferred the 252,446 remaining unallocated shares to the Company in partial satisfaction of the outstanding balance on the term loan and lines of credit. The fair value of these unallocated shares was insufficient to repay the term loan and lines of credit in full. As a result, the Company forgave the remaining balance. Upon the transfer of the unallocated shares to the Company, these shares were cancelled and returned to the Company’s pool of authorized but unissued shares of common stock.

The Company has filed a request for a favorable determination letter from the Internal Revenue Service as to the tax-qualified status of the ESOP on its termination. Upon receipt of a favorable determination letter, all shares allocated to participant accounts will be distributed to the participants.

Note 5 – Investment Securities

Carrying amounts and fair values of securities available for sale are summarized below:

March 31, 2014	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
	(dollars in thousands)
U.S. Treasury	$	20,950	$	468	$	168	$	21,250
U.S. Government agencies		44,910		118		623		44,405
GSE - Mortgage-backed securities and CMO’s		35,956		39		562		35,433
State and political subdivisions		10,046		374		—		10,420
Total securities available for sale	$	111,862	$	999	$	1,353	$	111,508

December 31, 2013	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
	(dollars in thousands)
U.S. Treasury	$	20,992	$	502	$	208	$	21,286
U.S. Government agencies		34,931		145		776		34,300
GSE - Mortgage-backed securities and CMO’s		37,871		121		986		37,006
State and political subdivisions		7,337		351		—		7,688
Total securities available for sale	$	101,131	$	1,119	$	1,970	$	100,280

At both March 31, 2014 and December 31, 2013 the Company owned Federal Reserve Bank stock reported at cost of $532,000 and $467,000, respectively that is included in other assets. Also at March 31, 2014 and December 31, 2013, the Company owned Federal Home Loan Bank Stock (FHLB) of $506,000 and $717,000, respectively. The investments in Federal Reserve stock and FHLB stock are required investments related to the Company’s membership in, and borrowings with, these banks. These investments are carried at cost since there is no ready market and redemption has historically been made at par value. The Company estimated that the fair value approximated cost and that these investments were not impaired at March 31, 2014.

-10-

Results from sales of securities available for sale for the three month period ended March 31, 2014 and March 31, 2013 are as follows:

	Three Months Ended March 31,
	2014		2013
	(dollars in thousands)
Gross proceeds from sales	$	328	$	426
Gross realized gains from sales	$	21	$	14
Gross realized losses from sales		—		—
Net realized gains	$	21	$	14

At March 31, 2014 and December 31, 2013, securities available for sale with a carrying amount of $61.2 million and $63.1 million, respectively, were pledged as collateral on public deposits and for other purposes as required or permitted by law.

The following tables show the gross unrealized losses and fair value of investments, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, at March 31, 2014 and December 31, 2013. These unrealized losses on investment securities are a result of temporary fluctuations in market prices due to a rise in interest rates, which will adjust if rates decline, and in a volatile market. Management does not believe these fluctuations are a reflection of the quality of the investments. At March 31, 2014, the unrealized losses for securities less than twelve months related to one United States Treasury note, eleven government agency bonds and nine government sponsored enterprise (GSE) mortgage backed securities. The Company had two GSE mortgage backed securities that had been in a loss position for more than twelve months. At December 31, 2013, the unrealized losses less than twelve months related to one United States Treasury note, ten government agency bonds and eleven government sponsored enterprise (GSE) mortgage backed securities. The Company had two GSE mortgage backed securities that had been in a loss position for more than twelve months at December 31, 2013.

	Less than 12 Months				12 Months or More				Total
March 31, 2014	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
	(dollars in thousands)
Securities available for sale temporary impairment
U.S. Treasury	$	4,764	$	168	$	—	$	—	$	4,764	$	168
U.S. Gov’t agencies		39,288		623		—		—		39,288		623
GSE-Mortgage-backed securities and CMO’s		16,157		441		3,710		121		19,867		562
State and political subdivisions		—		—		—		—		—		—
	$	60,209	$	1,232	$	3,710	$	121	$	63,919	$	1,353

-11-

	Less than 12 Months				12 Months or More				Total
December 31, 2013	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
	(dollars in thousands)
Securities available for sale temporary impairment
U.S. Treasury	$	4,722	$	208	$	—	$	—	$	4,722	$	208
U.S. Gov’t agencies		29,147		776		—		—		29,147		776
GSE-Mortgage-backed securities and CMO’s		22,206		842		3,849		144		26,055		986
State and political subdivisions		—		—		—		—		—		—
	$	56,075	$	1,826	$	3,849	$	144	$	59,924	$	1,970

Declines in the fair value of the investment portfolio are believed by management to be temporary in nature. When evaluating an investment for other-than-temporary impairment losses, management considers among other things, the length of time and the extent to which the fair value has been in a loss position, the financial condition of the issuer and the intent and the ability the Company has to hold the investment until the loss position is recovered.

At March 31, 2014, the Company had two GSE mortgage backed securities that had been in a loss position for twelve months or more. The unrealized losses are not likely to reverse unless market interest rates decline to the levels that existed when the securities were purchased. None of the unrealized losses relate to the marketability of the securities or the issuer’s ability to honor redemption obligations. The fair value is expected to recover as the bonds approach their maturity date or market yields for such investments decline. At March 31, 2014, the Company had no intent to sell and was not more likely than not to be required to sell the available for sale securities that were in a loss position prior to full recovery. For the three months ended March 31, 2014, there were no available for sale securities deemed to be other than temporarily impaired.

-12-

The aggregate amortized cost and fair value of the available for sale securities portfolio at March 31, 2014 by remaining contractual maturity are as follows:

	March 31, 2014
	Amortized Cost		Estimated Fair Value		Book Yield
	(dollars in thousands)
Securities available for sale
U. S. Treasury
Due after one but within five years		16,018		16,486		1.91	%
Due after five but within ten years		4,932		4,764		1.37	%
		20,950		21,250		1.79	%
U.S. Government agencies
Due within twelve months		4,999		5,117		2.77	%
Due after one but within five years		26,034		25,834		1.31	%
Due after five but within ten years		13,877		13,454		1.45	%
		44,910		44,405		1.52	%
Mortgage-backed securities
Due after one but within five years		5,119		5,021		1.58	%
Due after five but within ten years		1,463		1,507		3.01	%
Due after ten years		29,374		28,905		2.04	%
		35,956		35,433		2.01	%
State and political subdivisions
Due within twelve months		480		482		4.97	%
Due after one but within five years		1,468		1,588		5.73	%
Due after five but within ten years		4,355		4,573		4.64	%
Due after ten years		3,743		3,777		5.14	%
		10,046		10,420		5.00	%
Total Securities available for sale
Due within twelve months		5,479		5,599		2.96	%
Due after one but within five years		48,639		48,929		1.67	%
Due after five but within ten years		24,627		24,298		2.09	%
Due after ten years		33,117		32,682		2.39	%
	$	111,862	$	111,508		2.04	%

Note 6 – Loans Held for Investment

The composition of net loans held for investment by class as of March 31, 2014 and December 31, 2013 are as follows:

	March 31, 2014			December 31, 2013
	(dollars in thousands)
Commercial
Commercial	$	48,512		$	47,436
Real estate - commercial		92,718			95,922
Other real estate construction loans		17,743			17,583
Noncommercial
Real estate 1-4 family construction		3,849			3,418
Real estate - residential		88,216			87,463
Home equity		44,486			45,231
Consumer loans		8,604			9,623
Other loans		576			612
		304,704			307,288
Less:
Allowance for loan losses		(4,198	)		(5,095	)
Deferred loan (fees) costs, net		31			60
Loans held for investment, net	$	300,537		$	302,253

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Note 7 – Allowance for Loan Losses

The following table shows the change in the allowance for loss losses by loan segment for the three month period ended March 31, 2014 and 2013, respectively:

Commercial	Three Months Ended March 31,
	2014			2013
	(dollars in thousands)
Balance, beginning of period	$	2,665		$	2,791
Provision (recovery) charged to operations		(245	)		(268	)
Charge-offs		(237	)		(271	)
Recoveries		9			5
Net (charge-offs)		(228	)		(266	)
Balance at end of period	$	2,192		$	2,257

Non-Commercial	Three Months Ended March 31,
	2014			2013
	(dollars in thousands)
Balance, beginning of period	$	2,430		$	4,010
Provision (recovery) charged to operations		(179	)		(101	)
Charge-offs		(269	)		(224	)
Recoveries		24			31
Net (charge-offs)		(245	)		(193	)
Balance at end of period	$	2,006		$	3,716

Total	Three Months Ended March 31,
	2014			2013
	(dollars in thousands)
Balance, beginning of period	$	5,095		$	6,801
Provision (recovery) charged to operations		(424	)		(369	)
Charge-offs		(506	)		(495	)
Recoveries		33			36
Net (charge-offs)		(473	)		(459	)
Balance at end of period	$	4,198		$	5,973

The following table shows period-end loans and reserve balances by loan segment both individually and collectively evaluated for impairment at March 31, 2014 and December 31, 2013:

March 31, 2014

	Individually Evaluated				Collectively Evaluated				Total
	Reserve		Loans		Reserve		Loans		Reserve		Loans
	(dollars in thousands)
Commercial	$	1,163	$	7,513	$	1,029	$	151,460	$	2,192	$	158,973
Non-Commercial		575		8,063		1,431		137,699		2,006		145,762
Total	$	1,738	$	15,576	$	2,460	$	289,159	$	4,198	$	304,735

-14-

December 31, 2013

	Individually Evaluated				Collectively Evaluated				Total
	Reserve		Loans		Reserve		Loans		Reserve		Loans
	(dollars in thousands)
Commercial	$	1,519	$	8,700	$	1,146	$	152,241	$	2,665	$	160,941
Non-Commercial		868		8,853		1,562		137,554		2,430		146,407
Total	$	2,387	$	17,553	$	2,708	$	289,795	$	5,095	$	307,348

Past due loan information is used by management when assessing the adequacy of the allowance for loan losses. The following table summarizes the past due information of the loan portfolio by class:

March 31, 2014

	Loans 30-89 Days Past Due		Loans 90 Days or More Past due		Total Past Due Loans		Current Loans		Total Loans		Accruing Loans 90 or More Days Past Due
	(dollars in thousands)
Commercial	$	89	$	—	$	89	$	48,423	$	48,512	$	—
Real estate - commercial		112		1,364		1,476		91,242		92,718		—
Other real estate construction		35		1,685		1,720		16,023		17,743		—
Real estate 1 - 4 family construction		—		—		—		3,849		3,849		—
Real estate - residential		1,575		562		2,137		86,110		88,247		—
Home equity		133		—		133		44,353		44,486		—
Consumer loans		122		—		122		8,482		8,604		—
Other loans		—		—		—		576		576		—
Total	$	2,066	$	3,611	$	5,677	$	299,058	$	304,735	$	—

December 31, 2013

	Loans 30-89 Days Past Due		Loans 90 Days or More Past due		Total Past Due Loans		Current Loans		Total Loans		Accruing Loans 90 or More Days Past Due
	(dollars in thousands)
Commercial	$	143	$	204	$	347	$	47,089	$	47,436	$	—
Real estate - commercial		165		1,064		1,229		94,693		95,922		—
Other real estate construction		145		1,637		1,782		15,801		17,583		—
Real estate construction		—		—		—		3,418		3,418		—
Real estate - residential		1,426		1,564		2,990		84,533		87,523		—
Home equity		207		248		455		44,776		45,231		—
Consumer loan		55		—		55		9,568		9,623		—
Other loans		—		—		—		612		612		—
Total	$	2,141	$	4,717	$	6,858	$	300,490	$	307,348	$	—

Once a loan becomes 90 days past due, the loan is automatically transferred to a nonaccrual status. The exception to this policy is credit card loans that remain in accruing 90 days or more until they are paid current or charged off. Also, mortgage loans that were originated for sale but were not sold and are being held in the loan portfolio remain in an accruing status until they are foreclosed.

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The composition of nonaccrual loans by class as of March 31, 2014 and December 31, 2013 is as follows:

	March 31, 2014		December 31, 2013
	(dollars in thousands)
Commercial	$	—	$	204
Real estate - commercial		1,364		1,064
Other real estate construction		1,685		1,637
Real estate 1 - 4 family construction		—		—
Real estate - residential		562		1,564
Home equity		—		248
Consumer loans		—		—
Other loans		—		—
	$	3,611	$	4,717

Management uses a risk-grading program to facilitate the evaluation of probable inherent loan losses and to measure the adequacy of the allowance for loan losses. In this program, risk grades are initially assigned by the loan officers and reviewed and monitored by the lenders and credit administration. The program has eight risk grades summarized in five categories as follows:

Pass: Loans that are pass grade credits include loans that are fundamentally sound and risk factors are reasonable and acceptable. They generally conform to policy with only minor exceptions and any major exceptions are clearly mitigated by other economic factors.

Watch: Loans that are watch credits include loans on management’s watch list where a risk concern may be anticipated in the near future.

Substandard: Loans that are considered substandard are loans that are inadequately protected by current sound net worth, paying capacity of the obligor or the value of the collateral pledged. All nonaccrual loans are graded as substandard.

Doubtful: Loans that are considered to be doubtful have all weaknesses inherent in loans classified substandard, plus the added characteristic that the weaknesses make the collection or liquidation in full on the basis of current existing facts, conditions and values highly questionable and improbable.

Loss: Loans that are considered to be a loss are considered to be uncollectible and of such little value that their continuance as bankable assets is not warranted.

The tables below summarize risk grades of the loan portfolio by class at March 31, 2014 and December 31, 2013:

March 31, 2014

	Pass		Watch		Sub- standard		Doubtful		Total
	(dollars in thousands)
Commercial	$	47,794	$	580	$	138	$	—	$	48,512
Real estate - commercial		79,742		7,928		5,048		—		92,718
Other real estate construction		13,194		2,245		1,469		835		17,743
Real estate 1 - 4 family construction		3,849		—		—		—		3,849
Real estate - residential		70,878		12,367		5,002		—		88,247
Home equity		42,997		1,097		392		—		44,486
Consumer loans		8,221		332		51		—		8,604
Other loans		576		—		—		—		576
Total	$	267,251	$	24,549	$	12,100	$	835	$	304,735

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December 31, 2013

	Pass		Watch		Sub- standard		Doubtful		Total
	(dollars in thousands)
Commercial	$	46,520	$	635	$	281	$	—	$	47,436
Real estate - commercial		80,679		9,396		5,847		—		95,922
Other real estate construction		12,898		2,465		1,385		835		17,583
Real estate 1 - 4 family construction		3,418		—		—		—		3,418
Real estate - residential		70,407		12,911		4,205		—		87,523
Home equity		43,830		1,005		396		—		45,231
Consumer loans		9,216		361		46		—		9,623
Other loans		612		—		—		—		612
Total	$	267,580	$	26,773	$	12,160	$	835	$	307,348

Loans that are in nonaccrual status or 90 days past due and still accruing are considered to be nonperforming. At both March 31, 2014 and December 31, 2013 there were no loans 90 days past due and still accruing. The following tables show the breakdown between performing and nonperforming loans by class at March 31, 2014 and December 31, 2013:

March 31, 2014

	Performing		Non- Performing		Total
	(dollars in thousands)
Commercial	$	48,512	$	—	$	48,512
Real estate - commercial		91,354		1,364		92,718
Other real estate construction		16,058		1,685		17,743
Real estate 1 - 4 family construction		3,849		—		3,849
Real estate - residential		87,685		562		88,247
Home equity		44,486		—		44,486
Consumer loans		8,604		—		8,604
Other loans		576		—		576
Total	$	301,124	$	3,611	$	304,735

December 31, 2013

	Performing		Non- Performing		Total
	(dollars in thousands)
Commercial	$	47,232	$	204	$	47,436
Real estate - commercial		94,858		1,064		95,922
Other real estate construction		15,946		1,637		17,583
Real estate 1 - 4 family construction		3,418		—		3,418
Real estate - residential		85,959		1,564		87,523
Home equity		44,983		248		45,231
Consumer loans		9,623		—		9,623
Other loans		612		—		612
Total	$	302,631	$	4,717	$	307,348

Loans are considered impaired when, based on current information and events it is probable the Company will be unable to collect all amounts due in accordance with the original contractual terms of the loan agreement. If a loan is deemed impaired, a specific calculation is performed and a specific reserve is allocated, if necessary. The tables below summarize the loans deemed impaired and the amount of specific reserves allocated by class at March 31, 2014 and December 31, 2013.

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March 31, 2014

	Unpaid Principal Balance		Recorded Investment With No Allowance		Recorded Investment With Allowance		Related Allowance
	(dollars in thousands)
Commercial	$	166	$	86	$	80	$	62
Real estate - commercial		5,898		4,643		784		204
Other real estate construction		1,968		257		1,663		897
Real estate 1 - 4 family construction		372		23		349		16
Real estate - residential		7,651		4,478		2,924		458
Home equity		181		47		134		59
Consumer loans		108		56		52		42
Other loans		—		—		—		—
Total	$	16,344	$	9,590	$	5,986	$	1,738

December 31, 2013

	Unpaid Principal Balance		Recorded Investment With No Allowance		Recorded Investment With Allowance		Related Allowance
	(dollars in thousands)
Commercial	$	377	$	291	$	86	$	67
Real estate - commercial		6,808		3,962		2,375		507
Other real estate construction		2,034		247		1,739		945
Real estate 1 - 4 family construction		374		25		349		16
Real estate - residential		8,197		4,619		3,329		530
Home equity		415		58		357		279
Consumer loans		116		61		55		43
Other loans		—		—		—		—
Total	$	18,321	$	9,263	$	8,290	$	2,387

	Three Months ended March 31, 2014				Three Months ended March 31, 2013
	Average Recorded Investment		Interest Income		Average Recorded Investment		Interest Income
	(dollars in thousands)
Commercial	$	271	$	2	$	1,504	$	11
Real estate - commercial		5,882		54		8,651		75
Other real estate construction		1,953		3		3,014		6
Real estate 1- 4 family construction		373		5		617		5
Real estate - residential		7,675		78		8,806		89
Home equity		298		2		1,056		5
Consumer loans		112		2		223		3
Other loans		—		—		—		—
Total	$	16,564	$	146	$	23,871	$	194

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Note 8 – Troubled Debt Restructures

A modification of a loan constitutes a troubled debt restructuring (“TDR”) when a borrower is experiencing financial difficulty and the modification involves providing a concession to the existing loan contract. The Company offers various types of concessions when modifying loans to troubled borrowers, however, forgiveness of principal is rarely granted. Concessions offered are term extensions, capitalizing accrued interest, reducing interest rates to below current market rates or a combination of any of these. Combinations from time to time may include allowing a customer to be placed on interest-only payments. The presentations below in the “other” category are TDR’s with a combination of concessions. At the time of a TDR, additional collateral or a guarantor may be requested.

Loans modified as TDRs are typically already on nonaccrual status and in some cases, partial chargeoffs may have already been taken against the outstanding loan balance. The Company classifies TDR loans as impaired loans and evaluates the need for an allowance for loan loss on a loan-by-loan basis. An allowance is based on either the present value of expected future cash flows discounted at the loan’s effective interest rate, the loan’s observable market price or the estimated fair value of the underlying collateral less any selling costs, if the loan is deemed to be collateral dependent.

For the three months ended March 31, 2014 and 2013, the following table presents a breakdown of the types of concessions made by loan class:

	For the three months ended March 31, 2014
	Number of Contracts		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
	(dollars in thousands)
Extend payment terms:
Commercial		—	$	—	$	—
Real estate - commercial		—		—		—
Other real estate construction		—		—		—
Real estate 1 - 4 family construction		—		—		—
Real estate - residential		—		—		—
Home equity		—		—		—
Consumer loans		1		39		34
Other loans		—		—		—
		1	$	39	$	34
Other:
Commercial		—	$	—	$	—
Real estate - commercial		1		344		269
Other real estate construction		—		—		—
Real estate 1 - 4 family construction		—		—		—
Real estate - residential		9		1,287		1,253
Home equity		—		—		—
Consumer loans		—		—		—
Other loans		—		—		—
		10	$	1,631	$	1,522
Total		11	$	1,670	$	1,556

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	For the three months March 31, 2013
	Number of Contracts		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
	(dollars in thousands)
Extend payment terms:
Commercial		—	$	—	$	—
Real estate - commercial		—		—		—
Other real estate construction		—		—		—
Real estate 1 - 4 family construction		—		—		—
Real estate - residential		2		65		65
Home equity		—		—		—
Consumer loans		—		—		—
Other loans		—		—		—
		2	$	65	$	65
Other:
Commercial		1	$	10	$	9
Real estate - commercial		2		619		618
Other real estate construction		—		—		—
Real estate 1 - 4 family construction		—		—		—
Real estate - residential		1		24		24
Home equity		—		—		—
Consumer loans		1		52		51
Other loans		—		—		—
		5	$	705	$	702
Total		7	$	770	$	767

-20-

The following table presents loans that were modified as TDRs within the previous twelve months and for which there was a payment default during the twelve months ended March 31, 2014 and March 31, 2013:

	Twelve months ended March 31, 2014				Twelve months ended March 31, 2013
	Number of Loans		Recorded Investment		Number of Loans		Recorded Investment
	(dollars in thousands)
Extend payment terms:
Commercial		—	$	—		—	$	—
Real estate - commercial		—		—		—		—
Other real estate construction		—		—		—		—
Real estate 1 - 4 family construction		—		—		—		—
Real estate - residential		—		—		3		266
Home equity		—		—		—		—
Consumer loans		—		—		—		—
Other loans		—		—		—		—
		—	$	—		3	$	266
Forgiveness of principal:
Commercial		—	$	—		—	$	—
Real estate - commercial		—		—		—		—
Other real estate construction		—		—		—		—
Real estate 1 - 4 family construction		—		—		—		—
Real estate - residential		—		—		1		25
Home equity		—		—		—		—
Consumer loans		—		—		—		—
Other loans		—		—		—		—
		—	$	—		1	$	25
Other:
Commercial		—	$	—		—	$	—
Real estate - commercial		—		—		—		—
Other real estate construction		—		—		—		—
Real estate 1 - 4 family construction		—		—		—		—
Real estate - residential		—		—		1		238
Home equity		—		—		—		—
Consumer loans		—		—		1		17
Other loans		—		—		—		—
		—	$	—		2	$	255
Total		—	$	—		6	$	546

A default on a TDR is defined as being past due 90 days or being out of compliance with the modification agreement. As previously mentioned, the Company considers TDRs to be impaired loans and has $363,000 in the allowance for loan loss as of March 31, 2014, as a direct result of these TDRs. At March 31, 2013, there was $708,000 in the allowance for loan loss related to TDRs.

-21-

The following table presents the successes and failures of the types of modifications within the previous twelve months as of March 31, 2014 and 2013:

	Paid In Full				Paying as restructured				Converted to nonaccrual				Foreclosure/ Default
	Number of Loans		Recorded Investments		Number of Loans		Recorded Investments		Number of Loans		Recorded Investments		Number of Loans		Recorded Investments
	(dollars in thousands)
March 31, 2014
Extended payment terms		—	$	—		1	$	34		—	$	—		—	$	—
Other		—		—		10		1,522		—		—		—		—
Total		—	$	—		11	$	1,556		—	$	—		—	$	—
March 31, 2013
Extended payment terms		—	$	—		—	$	—		—	$	—		1	$	207
Other		—		—		6		514		2		244		8		717
Total		—	$	—		6	$	514		2	$	244		9	$	924

The Company has not committed to fund any additional disbursements for TDRs.

Note 9 – Commitments and Contingencies

The subsidiary bank is party 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.

The bank’s risk of loss with the unfunded loans and lines of credit or standby letters of credit is represented by the contractual amount of these instruments. The bank uses 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 March 31, 2014, outstanding financial instruments whose contract amounts represent credit risk were approximately:

	(dollars in thousands)
Commitments to extend credit	$	82,263
Credit card commitments		8,474
Standby letters of credit		1,328
Total commitments	$	92,065

Note 10 – Fair Value Disclosures

Accounting Standards Codification (ASC) 820 defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. ASC 820 does not require any new fair value measurements, but clarifies and standardizes some divergent practices that have emerged since prior guidance was issued. ASC 820 creates a three-level hierarchy under which individual fair value estimates are to be ranked based on the relative reliability of the inputs used in the valuation.

ASC 820 defines fair value as the price that would be received to sell an asset or transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities, the Company considers the

-22-

principal or most advantageous market in which those assets or liabilities are sold and considers assumptions that market participants would use when pricing those assets or liabilities. Fair values determined using Level 1 inputs rely on active and observable markets to price identical assets or liabilities. In situations where identical assets and liabilities are not traded in active markets, fair values may be determined based on Level 2 inputs, which exist when observable data exists for similar assets and liabilities. Fair values for assets and liabilities for which identical or similar assets and liabilities are not actively traded in observable markets are based on Level 3 inputs, which are considered to be unobservable.

Among the Company’s assets and liabilities, investment securities available for sale are reported at their fair values on a recurring basis. Certain other assets are adjusted to their fair value on a nonrecurring basis, including other real estate owned, impaired loans, loans held for sale, which are carried at the lower of cost or market; loan servicing rights, where fair value is determined using similar assets with similar characteristics, when available, or based upon discounted cash flows using market-based assumptions; and goodwill, which is periodically tested for impairment. Deposits, short-term borrowings and long-term obligations are not reported at fair value.

Prices for US Treasury securities are readily available in the active markets in which those securities are traded, and the resulting fair values are shown in the ‘Level 1 input’ column. Prices for government agency securities, mortgage-backed securities and for state, county and municipal securities are obtained for similar securities, and the resulting fair values are shown in the ‘Level 2 input’ column. Prices for all other non-marketable investments are determined based on various assumptions that are not observable. The fair values for these investment securities are shown in the ‘Level 3 input’ column. Non-marketable investment securities, which are carried at their purchase price, include those that may only be redeemed by the issuer. The changes in securities between Level 1 and Level 2 were related to the purchase and sale of several securities and not the migration of securities between levels.

The Company does not record loans at fair value on a recurring basis. However, from time to time, a loan is considered impaired and an allowance for loan losses is established. Loans for which it is probable that payment of interest and principal will not be made in accordance with the contractual terms of the loan agreement are considered impaired. Once a loan is identified as individually impaired, management measures impairment by using one of several methods including collateral value, fair value of similar debt and discounted cash flows. Those impaired loans not requiring an allowance represent loans for which the present value of the expected repayments or fair value of collateral exceed the recorded investments in such loans. At March 31, 2014, substantially all of the total impaired loans were evaluated based on the fair value of the underlying collateral. When the fair value of the collateral is based on an observable market price or a current appraised value, the Company records the impaired loan as nonrecurring Level 2. When an internal assessment of fair value based upon market data issued or management determines the fair value of the underlying collateral is further impaired below the appraised value, the Company records the impaired loan as nonrecurring Level 3.

Foreclosed assets are adjusted to fair value upon transfer of the loans to other real estate owned. Real estate acquired in settlement of loans is recorded initially at estimated fair value of the property less estimated selling costs at the date of foreclosure. The initial recorded value may be subsequently reduced by additional allowances, which are charged to earnings if the estimated fair value of the property less estimated selling costs declines below the initial recorded value. Fair value is based upon independent market prices, appraised values of the collateral or management’s estimation of the value of the collateral. When the fair value of the collateral is based on an observable market price or a current appraised value, the Company records the foreclosed asset as nonrecurring Level 2. When an internal assessment of fair

-23-

value based upon market data is used or management determines the fair value of the underlying collateral is further impaired below the appraised value, the Company records the impaired loan as nonrecurring Level 3.

Loans originated and intended for sale in the secondary market are carried at the lower of cost or estimated fair value in the aggregate, based on secondary market prices. Net unrealized losses, if any, are recognized through a valuation allowance by charges to income.

Servicing assets are evaluated for impairment based upon the fair value. Fair value is determined based upon discounted cash flows using market-based assumptions.

The following table provides fair value information for assets and liabilities measured at fair value on a recurring basis as of March 31, 2014 and December 31, 2013:

	March 31, 2014
	(dollars in thousands)
	Total		Level 1		Level 2		Level 3
Securities available for sale:
US Treasury	$	21,250	$	21,250	$	—	$	—
US Government Agencies		44,405		—		44,405		—
GSE - Mortgage-backed securities and CMO’s		35,433		—		35,433		—
State and political subdivisions		10,420		—		10,420		—
Total assets at fair value	$	111,508	$	21,250	$	90,258	$	—
Total liabilities at fair value	$	—	$	—	$	—	$	—

	December 31, 2013
	(dollars in thousands)
	Total		Level 1		Level 2		Level 3
Securities available for sale:
US Treasury	$	21,286	$	21,286	$	—	$	—
US Gov’t		34,300		—		34,300		—
Mortgage-backed securities and CMO’s		37,006		—		37,006		—
State and political subdivisions		7,688		—		7,688		—
Total assets at fair value	$	100,280	$	21,286	$	78,994	$	—
Total liabilities at fair value	$	—	$	—	$	—	$	—

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The Company may be required, from time to time, to measure certain assets at fair value on a nonrecurring basis in accordance with U.S. GAAP. These include assets that are measured at the lower of cost or market that were recognized at fair value below cost at the end of the period. Assets measured at fair value on a nonrecurring basis are included in the table below as of March 31, 2014 and December 31, 2013:

	March 31, 2014
	(dollars in thousands)
	Total		Level 1		Level 2		Level 3
Impaired loans	$	4,248	$	—	$	—	$	4,248
Loans held for sale		364		—		364		—
Other real estate owned		3,174		—		—		3,174
Total assets at fair value	$	7,786	$	—	$	364	$	7,422
Total liabilities at fair value	$	—	$	—	$	—	$	—

	December 31, 2013
	(dollars in thousands)
	Total		Level 1		Level 2		Level 3
Impaired loans	$	5,903	$	—	$	—	$	5,903
Loans held for sale		1,139		—		1,139		—
Other real estate owned		3,533		—		—		3,533
Total assets at fair value	$	10,575	$	—	$	1,139	$	9,436
Total liabilities at fair value	$	—	$	—	$	—	$	—

Quantitative Information about Level 3 Fair Value Measurements

	Valuation Technique		Unobservable Input	General Range
Nonrecurring measurements:
Impaired loans		Discounted appraisals	Collateral discounts and Estimated costs to sell	0 – 30%
OREO		Discounted appraisals	Collateral discounts and Estimated costs to sell	0 – 10%

Note 11 – Fair Values of Financial Instruments and Interest Rate Risk

ASC 825, “Disclosures about Fair Value of Financial Instruments,” requires disclosure of the fair value of financial assets and financial liabilities, including those that are not measured and reported at fair value on a recurring basis or non-recurring basis.

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The fair value estimates presented at March 31, 2014 and December 31, 2013, are based on relevant market information and information about the financial instruments. Fair value estimates are intended to represent the price an asset could be sold at or the price at which a liability could be settled. However, given there is no active market or observable market transactions for many of the Company’s financial instruments, the Company has made estimates of many of these fair values which are subjective in nature, involve uncertainties and matters of significant judgment and therefore cannot be determined with precision. Changes in assumptions could significantly affect the estimated values. The estimated fair values disclosed in the following table do not represent market values of all assets and liabilities of the Company and should not be interpreted to represent the underlying value of the Company. The following table reflects a comparison of carrying amounts and the estimated fair value of the financial instruments as of March 31, 2014 and December 31, 2013:

March 31, 2014

	Carrying Value		Estimated Fair Value		Level 1		Level 2		Level 3
	(dollars in thousands)
FINANCIAL ASSETS
Cash and cash equivalents	$	60,874	$	60,874	$	60,874	$	—	$	—
Securities available for sale		111,508		111,508		21,250		90,258		—
Loans held for investment, net		300,537		306,947		—		—		306,947
Loans held for sale		364		364		—		364		—
Restricted stock		1,038		1,038		1,038		—		—
Bank-owned life insurance		6,557		6,557		—		—		6,557
Mortgage servicing rights		2,250		3,060		—		—		3,060
Accrued interest receivable		1,651		1,651		—		—		1,651
FINANCIAL LIABILITIES
Deposits	$	452,209	$	439,542	$	—	$	—	$	439,542
Short-term borrowings		5,887		5,892		—		5,892		—
Long-term borrowings		33		33		—		33		—
Junior subordinated debt		9,534		9,711		—		—		9,711
Accrued interest payable		193		193		—		—		193

December 31, 2013

	Carrying Value		Estimated Fair Value		Level 1		Level 2		Level 3
	(dollars in thousands)
FINANCIAL ASSETS
Cash and cash equivalents	$	72,394	$	72,394	$	72,394	$	—	$	—
Securities available for sale		100,280		100,280		21,286		78,994		—
Loans held for investment, net		302,253		308,112		—		—		308,112
Loans held for sale		1,139		1,139		—		1,139		—
Restricted stock		1,184		1,184		1,184		—		—
Bank-owned life insurance		6,516		6,516		—		—		6,516
Mortgage servicing rights		2,356		3,085		—		—		3,085
Accrued interest receivable		1,747		1,747		—		—		1,747
FINANCIAL LIABILITIES
Deposits	$	453,708	$	438,593	$	—	$	—	$	438,593
Short-term borrowings		5,509		5,509		—		5,509		—
Long-term borrowings		36		36		—		36		—
Junior subordinated debt		11,127		11,271		—		—		11,271
Accrued interest payable		224		224		—		—		224

The following methods and assumptions were used by the Company in estimating the fair value of financial instruments:

• Cash and cash equivalents – The carrying amount of cash and cash equivalents approximate their fair values due to the short period of time until their expected realization and are recorded in Level 1.

• Securities available for sale – Securities available for sale are carried at fair value based on quoted and observable market prices and are recorded in Levels 1 and 2. Also see discussion in Note 5.

• Loans – The fair value of loans is estimated based on discounted expected cash flows using the current interest rates at which similar loans would be made and carried in level 3. Loans held for sale, which represent current mortgage production forward sales not yet delivered, are valued based on secondary market prices. The fair value of loans does not consider the lack of liquidity and uncertainty in the market that would affect the valuation. Loans held for sale are recorded in Level 2.

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• Restricted stock – It is not practicable to determine fair value of restricted stock which is comprised of Federal Home Loan Bank and Federal Reserve Bank stock due to restrictions placed on its transferability and it is presented at its carrying value and is recorded in Level 1 due to the redemption provisions of the Federal Home Loan Bank and the Federal Reserve Bank.

• Bank-owned life insurance – The carrying amount of bank-owned life insurance is the current cash surrender value and is recorded in level 3.

• Mortgage serving rights – Fair value is determined based upon discounted cash flows using market-based assumptions and is recorded in Level 3.

• Accrued interest receivable and payable – Both accrued interest receivable and payable are recorded in Level 3, as there are not active markets for these.

• Deposits – The fair value of deposits is estimated based on discounted cash flow analyses using offered market rates and is recorded in Level 3. The fair value of deposits does not consider any customer related intangibles.

• Borrowings – The fair value disclosed for short-term borrowings, which are composed of overnight borrowings and debt due within one year approximate the carrying value for such debt and is recorded in Level 2. The estimated fair value for long-term borrowings are estimated based on discounted cash flow analyses using offered market rates. Total borrowings are carried in Level 2. Junior subordinated debt is fair valued based on discounted cash flow analyses and is recorded in Level 3.

At March 31, 2014, the subsidiary bank had outstanding standby letters of credit and commitments to extend credit. These off-balance sheet financial instruments are generally exercisable at the market rate prevailing at the date the underlying transaction will be completed; therefore, they were deemed to have no current fair value. See Note 9.

Note 12 – Recent Accounting Pronouncements

In January 2014, the FASB issued ASU 2014-04, an update to ASC 310 “Receivables – Troubled Debt Restructurings by Creditors”. The amendments in this update clarify that if an in substance repossession or foreclosure occurs, and a creditor is considered to have received physical possession of residential real estate property collateralizing a consumer mortgage loan, upon either (1) the creditor obtaining legal title to the residential real estate property upon completion of a foreclosure or (2) the borrower conveying all interest in the residential real estate property to the creditor to satisfy that loan through completion of a deed in lieu of foreclosure or through a similar legal agreement. Additionally, the amendments require interim and annual disclosure of both (1) the amount of foreclosed residential real estate property held by the creditor and (2) the recorded investment in consumer mortgage loans collateralized by residential real estate property that are in the process of foreclosure according to local requirements of the applicable jurisdiction. The update is effective for reporting periods beginning after December 15, 2014. The adoption of this update will not have a significant impact on the Company’s financial statements except for added disclosures.

From time to time the FASB issues exposure drafts of proposed statements of financial accounting standards. Such exposure drafts are subject to comment from the public, to revisions by the FASB and to final issuance by the FASB as statements of financial accounting standards. Management considers the effect of the proposed statements on the consolidated financial statements of the Company and monitors the status of changes to and proposed effective dates of exposure drafts.

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Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations

This Quarterly Report on Form 10-Q 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. Any use of “we” or “our” in the following discussion refers to the Company on a consolidated basis.

Comparison of Financial Condition at March 31, 2014 and December 31, 2013.

During the three months ended March 31, 2014, the Company’s total assets decreased $1.7 million, from $517.3 million to $515.6 million. During the same period, cash and cash equivalents decreased $11.5 million and loans held for investment decreased $2.6 million, while, securities available for sale increased $11.2 million.

Cash and cash equivalents decreased $11.5 million, during the three months ended March 31, 2014. Cash and due from banks decreased $1.3 million, while interest-earning deposits with banks decreased $10.2 million.

Investment securities increased $11.2 million to $111.5 million for the period ended March 31, 2014. During the first three months of 2014, the Company purchased securities of $12.8 million. The increase from new purchases was reduced by sales of $328,000 and normal reductions stemming from principal payments on mortgage backed securities. The Company is investing the funds generated from the pay downs in the loan portfolio in lower duration securities as well as variable rate securities. These sectors should provide better protection in a rising rate environment, and mitigate the downside risk embedded in the current portfolio and improve the yield on earning assets. At March 31, 2014, the Company had net unrealized losses of $354,000.

Loans held for investment decreased from $307.3 million to $304.7 million, a decrease of $2.6 million. The commercial real estate, home equity and consumer loan segments of the loan portfolio decreased during the first quarter of 2014 with the commercial real estate segment experiencing the largest decline of 3.3%. The Company experienced growth in the remaining segments of its loan portfolio during the first quarter of 2014 with the commercial loan segment having the largest increase of 2.3%. The Company had four relationships that were foreclosed on for $496,000. The remainder of the decrease has related loan payoffs and normal payment activity. Loans held for sale decreased 68.0% or $775,000. The allowance for loan losses was $4.2 million at March 31, 2014, which represented 1.38% of the loan portfolio.

Other changes in our consolidated assets are related to premises and equipment, interest receivable, restricted stock, bank owned life insurance, other real estate owned and other assets. Bank owned life insurance increased $41,000, while premises and equipment increased $1.6 million. The increase in premises and equipment was related to the purchase of a piece of property that was currently being leased. Accrued interest receivable declined $96,000. Restricted stock which is comprised of Federal Home Loan Bank stock and Federal Reserve Bank stock decreased $146,000. Federal Home Loan Bank member institutions are required to increase or decrease their ownership as their utilization of FHLB borrowings change. The Company’s required ownership in FHLB stock decreased $211,000, while the Company’s required ownership in Federal Reserve Bank stock increased $65,000 to $532,000 during the first quarter of 2014. Other real estate owned increased $277,000. The Company foreclosed on four loan relationships during the first quarter of 2014 totaling $496,000 and sold three pieces of property totaling $210,000. The Company recorded net valuation write-down adjustments of $9,000. Other assets decreased $596,000.

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Customer deposits, our primary funding source, experienced a $1.5 million decrease during the three month period ended March 31, 2014, decreasing from $453.7 million to $452.2 million. Demand noninterest bearing checking increased $5.6 million. This increase was offset by declines in interest checking and money market accounts of $1.2 million, savings deposits of $2.8 million, time deposits over $100,000 of $514,000 and other time deposits of $2.6 million.

Total borrowings decreased $1.2 million for the period and consist of both short-term and long-term borrowed funds. During the first quarter of 2014, the Company conducted a private placement offering of fixed rate junior subordinated debt securities at $1,000 per security with a required minimum investment of $50,000. The offering raised $9.5 million. These securities have a final maturity date of March 31, 2024 and may be redeemed by the Company after March 31, 2019. The junior subordinated debt pays interest quarterly at an annual fixed rate of 5.75%. All proceeds of this private placement were issued and outstanding at March 31, 2014. All proceeds also qualify for and are included in the calculation of Tier 2 capital. On March 31, 2014, the Company called its entire $11.1 million private outstanding issue of fixed rate junior subordinated debt that had a final maturity of December 31, 2018. These two events had a net reduction in total borrowings of $1.6 million at March 31, 2014. Other components of total borrowings include $1.5 million in Federal Home Loan Bank advances and $4.3 million in master notes and other secured borrowings.

Other liabilities increased from $4.5 million at December 31, 2013 to $4.8 million at March 31, 2014, an increase of $264,000.

The Company has an Employee Stock Ownership Plan (ESOP) in place. Late in 2011, the Internal Revenue Service issued IRS notice 2011-19 that drew a clear line between what stock exchanges are considered public and which are not. The Company historically trades its stock on the OTC Bulletin Board, which is a publically traded exchange, however, the IRS no longer recognizes the Bulletin Board as a public exchange. The result of this ruling is that companies that have ESOP plans in place are required to set aside funds to handle allocated shares put back to the company. The plan that the Company has, does include a put option that requires the Company to repurchase allocated shares of participants at the participants’ option. The Company reclassed capital from additional paid-in capital to set aside the liability to cover all allocated shares that the Company may be requested to buy back. During the first quarter of 2014, the Company reclassed an additional $148,000 to this liability from additional paid-in capital.

As disclosed in Note 4 to the financial statement filed with as this report, the Company voted to terminate its ESOP effective March 1, 2014. In connection with this termination, the ESOP trustees transferred the 252,446 remaining unallocated shares to the Company to partially satisfy the term loan and lines of credit the ESOP had outstanding at the time. The effect this had on equity was minimal with total outstanding shares being reduced. The remaining balance of $8,600 on the loans was expensed by the Company to completely satisfy the loans. At March 31, 2014, the Company and its subsidiary bank exceeded all applicable regulatory capital requirements.

At March 31, 2014, total shareholders’ equity was $41.1 million, an increase of $608,000 from December 31, 2013. Net income for the period was $537,000. Unrealized gains and losses on investment securities, net of tax, increased $328,000. The Company paid $146,000 in dividends attributed to noncontrolling interest.

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Comparison of Results of Operations for the Three Months Ended March 31, 2014 and 2013.

Net Income and Net Income Available to Common Shareholders

Uwharrie Capital Corp reported net income of $537,000 for the three months ended March 31, 2014, as compared to $763,000 for the three months ended March 31, 2013, a decrease of $226,000. Net income available to common shareholders was $391,000 or $0.05 per common share at March 31, 2014, compared at $499,000 or $0.07 per common share at March 31, 2013. For the three months ending March 31, 2013, net income available to common shareholders is net income less any dividends on preferred stock related to the $10.0 million of capital received from the United States Department of the Treasury under the Capital Purchase Program in December 2008 and dividends on the aforementioned noncontrolling interest. For the three months ending March 31, 2014, net income available to common shareholders is net income less dividends on the aforementioned noncontrolling interest. The entire $10.0 million of preferred stock capital was redeemed and retired during 2013.

Net Interest Income

As with most financial institutions, the primary component of earnings for our subsidiary bank is net interest income. Net interest income is the difference between interest income, principally from loan and investment securities portfolios, and interest expense, principally on customer deposits and wholesale borrowings. Changes in net interest income result from changes in volume, spread and margin. For this purpose, volume refers to the average dollar level of interest-earning assets and interest-bearing liabilities, spread refers to the difference between the average yield on interest-earning assets and the average cost of interest-bearing liabilities, and margin refers to net interest income divided by average interest-earning assets. Margin is influenced by the level and relative mix of interest-earning assets and interest-bearing liabilities, as well as by levels of noninterest-bearing liabilities and capital.

Net interest income for the three months ended March 31, 2014 and March 31, 2013 was $4.0 million for both periods. During the current quarter, our decline in the volume of interest-earning assets outpaced the decline in volume of interest-bearing liabilities by $267,000. The average yield on our interest–earning assets increased three basis points to 4.04%, while the average rate we paid for our interest-bearing liabilities decreased twenty basis points. The Company’s assets that are interest rate sensitive adjust at the time the Federal Reserve Open Market Committee adjusts interest rates, while interest-bearing time deposits adjust at the time of maturity. The aforementioned changes resulted in an increase of 23 basis points in our interest rate spread, from 3.24% in the first quarter of 2013 to 3.47% in the first quarter of 2014. Our net interest margin was 3.55% and 3.35% for the comparable periods in 2014 and 2013, respectively.

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The following table presents average balance sheets and a net interest income analysis for the three months ended March 31, 2014 and 2013:

Average Balance Sheet and Net Interest Income Analysis

For the Three Months Ended March 31,

(dollars in thousands)
	Average Balance				Income/Expenses				Rate/Yield
	2014		2013		2014		2013		2014			2013
Interest-earning assets:
Taxable securities	$	94,599	$	98,792	$	410	$	272		1.76	%		1.12	%
Nontaxable securities (1)		8,122		7,393		65		66		5.26	%		5.90	%
Short-term investments		63,258		63,337		45		55		0.29	%		0.35	%
Taxable loans		288,798		314,693		3,946		4,324		5.54	%		5.57	%
Non-taxable loans (1)		16,481		14,210		113		103		4.53	%		4.80	%
Total interest-earning assets		471,258		498,425		4,579		4,820		4.04	%		4.01	%
Interest-bearing liabilities:
Interest-bearing deposits		374,427		388,197		373		545		0.40	%		0.57	%
Short-term borrowed funds		5,930		17,033		18		80		1.23	%		1.90	%
Long-term debt		11,141		12,674		157		171		5.72	%		5.47	%
Total interest bearing liabilities		391,498		417,904		548		796		0.57	%		0.77	%
Net interest spread	$	79,760	$	80,521	$	4,031	$	4,024		3.47	%		3.24	%
Net interest margin (1) (% of earning assets)										3.55	%		3.35	%

(1) Yields related to securities and loans exempt from income taxes are stated on a fully tax-equivalent basis, assuming a 38.55% tax rate.

Provision and Allowance for Loan Losses

The Company recovered $424,000 for the three months ending March 31, 2014 compared to adding $369,000 of recovered provision for the same period in 2013. There were net loan charge-offs of $473,000 for the three months ended March 31, 2014, as compared with net loan charge-offs of $458,000 during the same period of 2013. Refer to the Asset Quality discussion on page 32 for further information.

Noninterest Income

The Company generates most of its revenue from net interest income; however, like all financial institutions, diversification of our revenue base is of major importance in our long term success. Total noninterest income decreased $818,000 for the three month period ending March 31, 2014 as compared to the same period in 2013. The primary factor contributing to the overall decrease was a decline in income from mortgage loan sales of $678,000, declining from $840,000 for the quarter ended March 31, 2013 to $162,000 for the same period in 2014. Service charges on deposit accounts produced revenue of $378,000, a decrease of $27,000 for the three months ended March 31, 2014. The primary factor leading to this decrease was a decrease in NSF (non-sufficient funds) fees for the comparable periods. Other service fees and commissions experienced a $144,000 or 18.2% increase for the comparable three month period, primarily due to an increase in brokerage commissions and asset management fees. The Company realized gains on the sale of investment securities during the three months ended March 31, 2014 of $21,000 as compared to realized gains of $14,000 for the same period in 2013. Also, during the first quarter of 2013, the Company realized a gain on the sale of a piece of property being held in premises and equipment in the amount of $229,000.

Noninterest Expense

Noninterest expense for the quarter ended March 31, 2014 was $5.2 million compared to $5.6 million for the same period of 2013, a decrease of $383,000. Salaries and employee benefits, the largest component of noninterest expense, decreased $86,000 for the quarter ending March 31, 2014. This decrease is attributable to a reduction in staff related to the consolidation of the Company’s subsidiary banks during 2013. Professional fees and services decreased $81,000 during the three months ending March 31, 2014 as compared to the same period in 2013. The improvement the Company is experiencing in asset quality is attributable to this decrease with lower legal fees associated with loan collections fees. FDIC deposit insurance premiums also declined $59,000 for the comparable periods. Foreclosed real estate expense increased $53,000 for the three months ending March 31, 2014. The major factor related to the increase in foreclosed real estate expense was expenses related to a prior year sale of other real estate owned. Write-downs on properties held in other real estate owned are attributed to updated appraisals and the lowering of list prices, which declined from $30,000 for the three month period ending March 31, 2013 to $3,000 for the same period in 2014. Other noninterest expense decreased $169,000 for the comparable three month periods. The table below reflects the composition of other noninterest expense.

-31-

Other noninterest expense

	Three Months Ended March 31,
	2014		2013
	(in thousands)
Postage	$	51	$	47
Telephone and data lines		34		54
Shareholder relations expense		62		42
Dues and subscriptions		33		40
Other		360		526
Total	$	540	$	709

Income Tax Expense

The Company had income tax expense of $268,000 for the three months ended March 31, 2014 at an effective tax rate of 33.29% compared to income tax expense of $415,000 with an effective tax rate of 35.23% in the 2013 period.

Asset Quality

The Company’s allowance for loan losses is established through charges to earnings in the form of a provision for loan losses. The allowance is increased by provisions charged to operations and by 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 loan 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 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. For loans determined to be impaired, the allowance is based on either the present value of expected future cash flows discounted at the loan’s effective interest rate, the loan’s observable market price or the estimated fair value of the underlying collateral less the selling costs. This evaluation is inherently subjective, as it requires material estimates, including the amounts and timing of future cash flows expected to be received on impaired loans, which may be susceptible to significant change. In addition, regulatory agencies, as an integral part of their examination process, periodically review the allowance for loan losses and may require additions for estimated losses based upon judgments different from those of management.

Management uses a risk-grading program to facilitate the evaluation of probable inherent loan losses and the adequacy of the allowance for loan losses. In this program, risk grades are initially assigned by loan officers and reviewed and monitored by credit administration. The Company strives to maintain its loan portfolio in accordance with conservative loan underwriting policies that result in loans specifically tailored to the needs of its market area. Every effort is made to identify and minimize the credit risks associated with such lending strategies. The Company has no foreign loans and does not engage in significant lease financing or highly leveraged transactions. The Company follows a loan review program designed to evaluate the credit risk in the loan portfolio. 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 loan losses. 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. Because of this process, certain loans are deemed as impaired and evaluated as an impaired loan.

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The allowance for loan losses represents management’s best estimate of an appropriate amount to provide for inherent risk in the loan portfolio in the normal course of business. While management believes that it uses the best information available to establish the allowance for loan losses, future adjustments to the allowance 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 for loan losses in conformity with generally accepted accounting principles, there can be no assurance that banking regulators, in reviewing the Company’s portfolio, will not require an adjustment to the allowance for loan losses. In addition, because future events affecting borrowers and collateral cannot be predicted with certainty, there can be no assurance that the existing allowance for loan losses 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 loan losses may adversely affect the Company’s financial condition and results of operations.

The recovery of loan losses was ($424,000) for the three months ended March 31, 2014 as compared to a recovery of ($369,000) for the same period in 2013. At March 31, 2014 the levels of our impaired loans, which includes all loans in nonaccrual status, TDRs and other loans deemed by management to be impaired, were $15.6 million compared to $17.6 million at December 31, 2013, a decrease of $2.0 million. Total nonaccrual loans, which are a component of impaired loans, decreased from $4.7 million at December 31, 2013 to $3.6 million at March 31, 2014. During the first quarter of 2014, the Company transferred $496,000 in impaired loans to other real estate owned. This coupled with relationship upgrades of $811,000 and these relationships no longer being deemed impaired by management, along with $526,000 in payoffs were the primary factors contributing to the decrease in impaired loans. The upgrades and payoffs resulted in $163,000 in recovered reserves during the quarter. The Company had net loan charge-offs for the first quarter of 2014 of $473,000 compared to net loan charge-offs of $458,000 for the same period in 2013.

The allowance expressed as a percentage of gross loans held for investment decreased 28 basis points from 1.66% at December 31, 2013 to 1.38% at March 31, 2014. The collectively evaluated reserve allowance as a percentage of collectively evaluated loans was 0.93% at December 31, 2013 and 0.85% at March 31, 2014, while the individually evaluated allowance as a percentage of individually evaluated loans decreased from 13.60% to 11.16% for the same periods. The portion of the Company’s allowance for loan loss model related to general reserves captures the mean loss of individual loans and the rare event of severe loss that can occur within the loan portfolio. Specifically, the Company calculates probable losses on loans by computing a probability of loss and expected loss scenario by FDIC call report codes. Together, these expected components as well as a level of more extreme unexpected losses form the basis of the allowance model. The loans that are impaired and included in the specific reserve are excluded from these calculations.

The Company assesses the probability of losses inherent in the loan portfolio using probability of default data, acquired from a third party vendor representing a one year loss horizon for each obligor. The Company updates the data inputs into the model; specifically the loss given default and the probability of defaults obtained from the vendor annually during the second quarter. The Company updates the beacon scores that are one of the components used within the allowance model semi-annually, during the first and third quarters. For the first time in several updates, beacon scores experienced significant improvement during 2013. This trend continued during the first quarter of 2014 with beacon scores continuing to show improvement. The average beacon score increased nine basis points from 702 to 712 during the first quarter. This increase resulted in approximately $235,000 in recovered reserves during the first quarter.

During second and third quarters of 2013, the Company updated its allowance for loan loss model to more accurately assess the probability of losses inherent in the loan portfolio. Two

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alterations were made: the previous “VaR” calculation was replaced by an improved “VaR” that more adequately reflected the risk in the loan portfolio, and the least squares regression was replaced by a simple average.

The previous “VaR” calculation measured the size of exposures within the loan portfolio while the current “VaR” calculation measures the potential loss to the portfolio in aggregate. The previous “VaR” could not be larger than the largest loan in the portfolio while the current “VaR” has no such restriction. In addition the current “VaR” reflects correlations within the loan portfolio as well as the exposure to large individual credits

Nonperforming loans, which consist of nonaccrual loans and loans past due 90 days and still accruing, to total loans decreased from 1.66% at December 31, 2013, to 1.38% at March 31, 2014.

Other real estate owned increased $277,000 during the first quarter of 2014. The Company sold three pieces of foreclosed property totaling $210,000 realizing a gain of $1,000 The Company also had write downs and changes in reserves totaling $9,000 on the remaining existing property. The Company did have one write down totaling $678,000. These decreases in other real estate owned were offset by four new pieces of property being foreclosed on totaling $496,000. Management believes the current level of the allowance for loan losses is appropriate in light of the risk inherent in the loan portfolio.

Restructured loans at March 31, 2014 totaled $6.6 million compared to $6.4 million at December 31, 2013.

The following nonperforming assets table shows the comparison of March 31, 2014 to December 31, 2013:

Nonperforming Assets

(dollars in thousands)
	March 31, 2014			December 31, 2013
Nonperforming assets:
Loans past due 90 days or more	$	—		$	—
Nonaccrual loans		3,611			4,717
Other real estate owned		7,447			7,170
Total nonperforming assets	$	11,058		$	11,887
Allowance for loans losses	$	4,198		$	5,095
Nonperforming loans to total loans		1.19	%		1.53	%
Allowance for loan losses to total loans		1.38	%		1.66	%
Nonperforming assets to total assets		2.15	%		2.30	%
Allowance for loan losses to nonperforming loans		116.26	%		108.02	%

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.

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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 bank 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 bank’s established federal funds lines with correspondent banks aggregating $15.8 million at March 31, 2014, with available credit of $15.8 million; established borrowing relationships with the Federal Home Loan Bank, with available credit of $40.9 million; access to borrowings from the Federal Reserve Bank discount window, with available credit of $29.9 million and the issuance of commercial paper. The Company has also secured long-term debt from other sources. Total debt from these sources aggregated $15.5 million at March 31, 2014, compared to $16.7 million at December 31, 2013.

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.

Regulatory guidelines require a minimum of total capital to risk-adjusted assets ratio of 8 percent and a Tier 1 leverage ratio of 4 percent. Banks are considered “well capitalized” by regulatory standards when they meet or exceed a Tier 1 risk-based capital ratio of 6 percent, a total risk-based capital ratio of 10 percent and a leverage ratio of 5 percent. Financial institutions are expected to maintain a level of capital commensurate with the risk profile assigned to their assets in accordance with those guidelines.

The Company and its subsidiary bank have each maintained capital levels exceeding minimum levels for “well capitalized” banks and bank holding companies. The Company expects to continue to exceed minimum capital requirements without altering current operations or strategy. As previously discussed, the Company’s subsidiary bank has a net total of $10.5 million in outstanding fixed Rate Noncumulative Perpetual Preferred Stock. The preferred stock qualifies as Tier 1 capital at the bank and will pay dividends at an annual rate of 5.30%. The net total of $10.5 million is presented as noncontrolling interest at the Company level and does qualify as Tier 1 capital at the Company. At March 31, 2014, the Company had $9.5 million in subordinated debt outstanding that qualifies as Tier 2 capital. The Company has made all interest and dividend payments in a timely manner.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

The Company’s primary market risk is interest rate risk. Interest rate risk is the result of differing maturities or repricing intervals of interest-earning assets and interest-bearing liabilities and the fact that rates on these financial instruments do not change uniformly. These conditions may impact the earnings generated by the Company’s interest earning assets or the cost of its interest-bearing liabilities, thus directly impacting the Company’s overall earnings. The Company’s management actively monitors and manages interest rate risk. One way this is accomplished is through the development of and adherence to the Company’s asset/liability policy. This policy sets forth management’s strategy for matching the risk characteristics of the Company’s interest-earning assets and liabilities so as to mitigate the effect of changes in the rate environment. In management’s opinion, the Company’s market risk profile has not changed significantly since December 31, 2013.

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Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

At the end of the period covered by this report, the Company carried out an evaluation, under the supervision and with the participation of the Company’s management, including the Company’s principal executive officer and principal financial officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures pursuant to Securities Exchange Act (“Exchange Act”) Rule 13a-15.

Based upon that evaluation, the principal executive officer and principal financial officer concluded that in their opinion, the Company’s disclosure controls and procedures were effective (1) to provide reasonable assurance that information required to be disclosed by the Company in the reports filed or submitted by it under the Exchange Act was recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and (2) to provide reasonable assurance that information required to be disclosed by the Company in such reports is accumulated and communicated to the Company’s management, including its principal executive officer and principal financial officer, as appropriate to allow for timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting

Management of the Company has evaluated, with the participation of the Company’s principal executive officer and principal financial officer, changes in the Company’s internal controls over financial reporting (as defined in Rule 13a -15(f) and 15d – 15(f) of the Exchange Act) during the first quarter of 2014. In connection with such evaluation, the Company has determined that there were no changes in the Company’s internal control over financial reporting during the period covered by this report that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting. The Company reviews its disclosure controls and procedures, which may include its internal control over financial reporting, on an ongoing basis, and may from time to time make changes aimed at enhancing their effectiveness and to ensuring that the Company’s systems evolve with its business.

Part II. OTHER INFORMATION

Item 1. Legal Proceedings

Neither the Company nor its subsidiaries, nor any of their properties are subject to any material legal proceedings. From time to time, the Company’s subsidiary bank is engaged in ordinary routine litigation incidental to its business.

Item 1A. Risk Factors

Disclosure under this item is not required for smaller reporting companies.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Trades of the Company’s stock occur in the Over-the-Counter Bulletin Board market from time to time. The Company also has in place a Stock Repurchase Plan that provides liquidity to its shareholders in the event a willing buyer is not available to purchase shares that are offered for sale. The Company is under no obligation to purchase shares offered; however, it will accommodate such offers as its Stock Repurchase Plan allows.

Item 3. Defaults Upon Senior Securities

None

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Item 4. Mine Safety Disclosures

Not applicable

Item 5. Other Information

None

Item 6. Exhibits

Exhibit Number	Description of Exhibit
3.1	Registrant’s Articles of Incorporation (1)
3.2	Registrant’s By-laws (6)
3.2	Articles of Amendment dated December 19, 2008 (5)
4.1	Form of stock certificate (1)
4.2	Form of Security Holders Agreement
10.1	Incentive Stock Option Plan, as amended (1)
10.2	Employee Stock Ownership Plan and Trust (2)
10.3	2006 Incentive Stock Option Plan (3)
10.4	2006 Employee Stock Purchase Plan (3)
10.5	Amendment to the Employee Stock Ownership Plan and Trust (4)
10.6	Relocation Assistance Agreement dated February 9, 2009, between the Registrant and Brendan P. Duffey (6)
10.7	Nonqualified Deferred Compensation Plan and Supplemental Retirement Plan Agreement dated December 31, 2008, between the Registrant and Roger L. Dick, Brendan P. Duffey, and Christy D. Stoner (6)
31.1	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes- Oxley Act of 2002 (filed herewith)
31.2	Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes- Oxley Act of 2002 (filed herewith)
32	Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith)
101	Interactive data files providing financial information from the Registrant’s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2014, in XBRL (eXtensible Business Reporting Language) (7)

(1) Incorporated by reference from exhibits to Registrant’s Registration Statement on Form S-4 (Reg. No. 33-58882).

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(2) Incorporated by reference to Registrant’s Annual Report on Form 10-KSB for the Fiscal year ended 1999.

(3) Incorporated by reference to Registrant’s Quarterly Report on Form 10-Q for the Quarter ended June 30, 2007.

(4) Incorporated by reference to Registrant’s Quarterly Report on Form 10-Q for the Quarter ended September 30, 2008.

(5) Incorporated by reference to Registrant’s Quarterly Report on Form 10-Q for the Quarter ended September 30, 2009.

(6) Incorporated by reference to Registrant’s Annual Report on Form 10-K for the Fiscal year ended 2009.

(7) Pursuant to Regulation 406T of Regulation S-T, these interactive data files are furnished and not filed or part of a registration statement or prospectus for purposes of section 11 or 12 of the Securities Act of 1933, as amended, or section 18 of the Securities Exchange Act of 1934, as amended, and are otherwise not subject to liability.

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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.

	UWHARRIE CAPITAL CORP
		(Registrant)
Date: May 6, 2014		By:	/s/ Roger L. Dick
		Roger L. Dick
		President and Chief Executive Officer
Date: May 6, 2014		By:	/s/ R. David Beaver, III
		R. David Beaver, III
		Principal Financial Officer

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EXHIBIT INDEX

Exhibit Number	Description of Exhibit
3.1	Registrant’s Articles of Incorporation (1)
3.2	Registrant’s By-laws (6)
3.3	Articles of Amendment dated December 19, 2008 (5)
4.1	Form of stock certificate (1)
4.2	Form of Security Holders Agreement
10.1	Incentive Stock Option Plan, as amended (1)
10.2	Employee Stock Ownership Plan and Trust (2)
10.3	2006 Incentive Stock Option Plan (3)
10.4	2006 Employee Stock Purchase Plan (3)
10.5	Amendment to the Employee Stock Ownership Plan and Trust (4)
10.6	Relocation Assistance Agreement dated February 9, 2009, between the Registrant and Brendan P. Duffey (6)
10.7	Nonqualified Deferred Compensation Plan and Supplemental Retirement Plan Agreement dated December 31, 2008, between the Registrant and Roger L. Dick, Brendan P. Duffey, and Christy D. Stoner (6)
31.1	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes- Oxley Act of 2002 (filed herewith)
31.2	Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith)
32	Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith)
101	Interactive data files providing financial information from the Registrant’s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2014, in XBRL (eXtensible Business Reporting Language) (7)

(1) Incorporated by reference from exhibits to Registrant’s Registration Statement on Form S-4 (Reg. No. 33-58882).

(2) Incorporated by reference to Registrant’s Annual Report on Form 10-KSB for the Fiscal year ended 1999.

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(3) Incorporated by reference to Registrant’s Quarterly Report on Form 10-Q for the Quarter ended June 30, 2007.

(4) Incorporated by reference to Registrant’s Quarterly Report on Form 10-Q for the Quarter ended September 30, 2008.

(5) Incorporated by reference to Registrant’s Quarterly Report on Form 10-Q for the Quarter ended September 30, 2009.

(6) Incorporated by reference to Registrant’s Annual Report on Form 10-K for the Fiscal year ended 2009.

(7) Pursuant to Regulation 406T of Regulation S-T, these interactive data files are furnished and not filed or part of a registration statement or prospectus for purposes of section 11 or 12 of the Securities Act of 1933, as amended, or section 18 of the Securities Exchange Act of 1934, as amended, and are otherwise not subject to liability.

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EX-4.2

Exhibit 4.2

UWHARRIE CAPITAL CORP

as Issuer

SECURITYHOLDERS AGREEMENT

Dated as of March 31, 2014

FIXED RATE JUNIOR SUBORDINATED DEBT SECURITIES DUE 2024

TABLE OF CONTENTS

ARTICLE I DEFINITIONS			1
	Section 1.1	Definitions.	1
ARTICLE II DEBT SECURITIES			6
	Section 2.1	Issuance of Debt Securities.	6
	Section 2.2	Form and Denomination of Debt Securities.	6
	Section 2.3	Execution of Debt Securities.	6
	Section 2.4	Exchange and Registration of Transfer of Debt Securities.	7
	Section 2.5	Mutilated, Destroyed, Lost or Stolen Debt Securities.	9
	Section 2.6	Temporary Debt Securities.	10
	Section 2.7	Payment of Interest.	10
	Section 2.8	Cancellation of Debt Securities Paid, etc.	11
	Section 2.9	Computation of Interest.	11
	Section 2.10	CUSIP Numbers.	12
ARTICLE III PARTICULAR COVENANTS OF THE COMPANY			12
	Section 3.1	Payment of Principal, Premium and Interest; Agreed Treatment of the Debt Securities.	12
	Section 3.2	Offices for Notices and Payments, etc.	13
	Section 3.3	Provision as to Paying Agent.	13
	Section 3.4	Certificate to Securityholders.	14
	Section 3.5	Compliance with Consolidation Provisions.	14
	Section 3.6	Limitation on Dividends.	14
ARTICLE IV LISTS AND REPORTS BY THE COMPANY			15
	Section 4.1	Securityholders’ Lists.	15
	Section 4.2	Financial and Other Information.	15
ARTICLE V REMEDIES OF THE SECURITYHOLDERS UPON AN EVENT OF DEFAULT			16
	Section 5.1	Events of Default.	16
	Section 5.2	Payment of Debt Securities on Certain Events of Default; Suit Therefor.	17
	Section 5.3	Proceedings by Securityholders.	18
	Section 5.4	Remedies Cumulative and Continuing.	18

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TABLE OF CONTENTS

(continued)

			Page
	Section 5.5	Direction of Proceedings and Waiver of Defaults by Majority of Securityholders.	19
	Section 5.6	Undertaking to Pay Costs.	19
ARTICLE VI SUBORDINATION OF DEBT SECURITIES			19
	Section 6.1	Agreement to Subordinate.	19
	Section 6.2	Default on Senior Indebtedness.	20
	Section 6.3	Liquidation; Dissolution; Bankruptcy.	20
	Section 6.4	Subrogation.	21
	Section 6.5	Subordination May Not Be Impaired.	22
ARTICLE VII CONCERNING THE SECURITYHOLDERS			23
	Section 7.1	Action by Securityholders.	23
	Section 7.2	Proof of Execution by Securityholders.	23
	Section 7.3	Who Are Deemed Absolute Owners.	24
	Section 7.4	Debt Securities Owned by Company Deemed Not Outstanding.	24
	Section 7.5	Revocation of Consents; Future Holders Bound.	24
ARTICLE VIII SECURITYHOLDERS’ MEETINGS			25
	Section 8.1	Purposes of Meetings.	25
	Section 8.2	Call of Meetings by Company.	25
	Section 8.3	Call of Meetings by Securityholders.	25
	Section 8.4	Qualifications for Voting.	25
	Section 8.5	Regulations.	26
	Section 8.6	Voting.	26
	Section 8.7	Quorum; Actions.	27
ARTICLE IX SUPPLEMENTAL SECURITYHOLDERS AGREEMENTS			28
	Section 9.1	Supplemental Securityholders Agreements with Consent of Holders of 25% in Aggregate Principal Amount of Debt Securities then Outstanding.	28
	Section 9.2	Supplemental Securityholders Agreements with Consent of Holders of a Majority in Aggregate Principal Amount of Debt Securities then Outstanding.	29

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TABLE OF CONTENTS

(continued)

			Page
	Section 9.3	Effect of Supplemental Securityholders Agreements.	30
	Section 9.4	Notation on Debt Securities.	30
ARTICLE X REDEMPTION OF SECURITIES			30
	Section 10.1	Optional Redemption.	30
	Section 10.2	Special Event Redemption.	30
	Section 10.3	Notice of Redemption; Selection of Debt Securities.	31
	Section 10.4	Payment of Debt Securities Called for Redemption.	31
ARTICLE XI CONSOLIDATION, MERGER, SALE, CONVEYANCE AND LEASE			32
	Section 11.1	Company May Consolidate, etc., on Certain Terms	32
	Section 11.2	Successor Entity to be Substituted.	32
ARTICLE XII SATISFACTION AND DISCHARGE OF SECURITYHOLDERS AGREEMENT			33
	Section 12.1	Discharge of Securityholders Agreement.	33
	Section 12.2	Deposited Moneys to be Held in Trust by a Paying Agent.	33
	Section 12.3	Paying Agent to Repay Moneys Held.	33
	Section 12.4	Return of Unclaimed Moneys.	34
ARTICLE XIII IMMUNITY OF INCORPORATORS, STOCKHOLDERS, OFFICERS AND DIRECTORS			34
	Section 13.1	Securityholders Agreement and Debt Securities Solely Corporate Obligations.	34
ARTICLE XIV MISCELLANEOUS PROVISIONS			34
	Section 14.1	Successors.	34
	Section 14.2	Official Acts by Successor Entity.	34
	Section 14.3	Surrender of Company Powers.	35
	Section 14.4	Addresses for Notices, etc.	35
	Section 14.5	Governing Law.	35
	Section 14.6	Evidence of Compliance with Conditions Precedent.	35
	Section 14.7	Business Day Convention.	36
	Section 14.8	Table of Contents, Headings, etc.	36
	Section 14.9	Execution in Counterparts.	36

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TABLE OF CONTENTS

(continued)

		Page
Section 14.10	Severability.	36
Section 14.11	Assignment.	36

EXHIBIT A	FORM OF FIXED RATE JUNIOR SUBORDINATED DEBT SECURITY DUE 2024	A-1
EXHIBIT B	FORM OF CERTIFICATE OF OFFICER OF THE COMPANY	B-1

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THIS SECURITYHOLDERS AGREEMENT (the “Securityholders Agreement”), dated as of March 31, 2014 between Uwharrie Capital Corp, a bank holding company incorporated in North Carolina (hereinafter sometimes called the “Company”), and the Securityholders made a party hereto.

W I T N E S S E T H :

WHEREAS, for its lawful corporate purposes, the Company has duly authorized the issuance of its Fixed Rate Junior Subordinated Debt Securities due 2024 (the “Debt Securities”);

WHEREAS, pursuant to a subscription offer agreement executed by the Securityholder and accepted by the Company, each Securityholder has agreed to purchase from the Company the amount of Debt Securities described therein, has agreed that the Debt Securities are subject to the provisions of this Securityholders Agreement, and has agreed to become a party to this Securityholders Agreement.

NOW, THEREFORE, in consideration of the premises, and the purchase of the Debt Securities by the Securityholders, and the mutual promises contained herein, the Company and the Securityholders agree as follows:

ARTICLE I

DEFINITIONS

Section 1.1 Definitions.

The terms defined in this Section 1.1 (except as herein otherwise expressly provided or unless the context otherwise requires) for all purposes of this Securityholders Agreement and of any Securityholders Agreement supplemental hereto shall have the respective meanings specified in this Section 1.1. All accounting terms used herein and not expressly defined shall have the meanings assigned to such terms in accordance with generally accepted accounting principles and the term “generally accepted accounting principles” means such accounting principles as are generally accepted in the United States at the time of any computation. The words “herein,” “hereof” and “hereunder” and other words of similar import refer to this Securityholders Agreement as a whole and not to any particular Article, Section or other subdivision.

“Additional Provisions” shall have the meaning set forth in Section 6.1.

“Bankruptcy Law” means Title 11, U.S. Code, or any similar federal or state law for the relief of debtors.

“Board of Directors” means the board of directors or the executive committee or any other duly authorized designated officers of the Company.

“Board Resolution” means a copy of a resolution certified by the Secretary or an Assistant Secretary of the Company to have been duly adopted by the Board of Directors and to be in full force and effect on the date of such certification and delivered to the Securityholders.

“Business Day” means any day other than a Saturday, Sunday or any other day on which banking institutions in New York, New York or Albemarle, North Carolina are permitted or required by any applicable law or executive order to close.

“Capital Treatment Event” means the receipt by the Company of an Opinion of Counsel experienced in such matters to the effect that, as a result of any amendment to, or change in, the laws, rules or regulations of the United States or any political subdivision thereof or therein, or as the result of any official or administrative pronouncement or action or decision interpreting or applying such laws, rules or regulations, which amendment or change is effective or which pronouncement, action or decision is announced on or after the date of original issuance of the Debt Securities, there is more than an insubstantial risk that the Company will not, within 90 days of the date of such opinion, be entitled to treat an amount equal to the aggregate Liquidation Amount of the Capital Securities as “Tier 2 Capital” (or the then equivalent thereof) for purposes of the capital adequacy guidelines of the Federal Reserve (or any successor regulatory authority with jurisdiction over bank holding companies), as then in effect and applicable to the Company.

“Certificate” means a certificate signed by any one of the principal executive officer, the principal financial officer or the principal accounting officer of the Company.

“Code” means the Internal Revenue Code of 1986, as amended.

“Company” means Uwharrie Capital Corp, a bank holding company incorporated in North Carolina, and, subject to the provisions of Article XI, shall include its successors and assigns.

“Debt Security” or “Debt Securities” has the meaning stated in the first recital of this Securityholders Agreement.

“Debt Security Register” has the meaning specified in Section 2.4.

“Default” means any event, act or condition that with notice or lapse of time, or both, would constitute an Event of Default.

“Defaulted Interest” has the meaning set forth in Section 2.7.

“Event of Default” means any event specified in Section 5.1, which has continued for the period of time, if any, and after the giving of the notice, if any, therein designated.

“Exchange Act” means the Securities Exchange Act of 1934, as amended.

“Federal Reserve” means the Board of Governors of the Federal Reserve System.

2

“Interest Payment Date” means March 31, June 30, September 30 and December 31 of each year, commencing on the first such date following the original date of issuance of any Debt Security and continuing until the Redemption Date, Special Redemption Date or Maturity Date, as applicable.

“Interest Period” has the meaning set forth in Section 2.7.

“Interest Rate” means a fixed per annum rate of interest equal to the rate set forth on the face of any Debt Security.

“Maturity Date” means March 31, 2024.

“Officers’ Certificate” means a certificate signed by the Chairman of the Board, the Vice Chairman, the President or any Vice President, and by the Chief Financial Officer, the Treasurer, an Assistant Treasurer, the Comptroller, an Assistant Comptroller, the Secretary or an Assistant Secretary of the Company, and delivered to the Securityholders. Each such certificate shall include the statements provided for in Section 14.6 if and to the extent required by the provisions of such Section.

“Opinion of Counsel” means an opinion in writing signed by legal counsel, who may be an employee of or counsel to the Company, or may be other counsel reasonably satisfactory to the Securityholders. Each such opinion shall include the statements provided for in Section 14.6 if and to the extent required by the provisions of such Section.

The term “outstanding,” when used with reference to Debt Securities, subject to the provisions of Section 7.4, means, as of any particular time, all Debt Securities issued and delivered by the Company under this Securityholders Agreement, except

(a) Debt Securities theretofore canceled by the Company or delivered to the Company for cancellation;

(b) Debt Securities, or portions thereof, for the payment or redemption of which moneys in the necessary amount shall have been deposited in trust with the Paying Agent (other than the Company) or shall have been set aside and segregated in trust by the Company (if the Company shall act as its own Paying Agent); provided, that, if such Debt Securities, or portions thereof, are to be redeemed prior to maturity thereof, notice of such redemption shall have been given as provided in Article X and Article XIV or provision satisfactory to the Securityholders shall have been made for giving such notice; and

(c) Debt Securities paid pursuant to Section 2.5 or in lieu of or in substitution for which other Debt Securities shall have been issued and delivered pursuant to the terms of Section 2.5 unless proof satisfactory to the Company is presented that any such Debt Securities are held by bona fide holders in due course.

“Paying Agent” means any paying agent for the Debt Securities appointed pursuant to Section 3.3.

3

“Person” means any individual, corporation, limited liability company, partnership, joint venture, association, joint-stock company, trust, unincorporated organization or government or any agency or political subdivision thereof.

“Predecessor Security” of any particular Debt Security means every previous Debt Security evidencing all or a portion of the same debt as that evidenced by such particular Debt Security; and, for the purposes of this definition, any Debt Security delivered under Section 2.5 in lieu of a lost, destroyed or stolen Debt Security shall be deemed to evidence the same debt as the lost, destroyed or stolen Debt Security.

“Redemption Date” has the meaning set forth in Section 10.1.

“Redemption Price” means 100% of the principal amount of the Debt Securities being redeemed plus accrued and unpaid interest on such Debt Securities to the Redemption Date or, in the case of redemption at maturity, the Maturity Date.

“Securities Act” means the Securities Act of 1933, as amended.

“Securityholder,” “holder of Debt Securities” or other similar terms, means any Person in whose name at the time a particular Debt Security is registered on the Debt Security Register.

“Securityholders Agreement” means this instrument as originally executed or, if amended or supplemented as herein provided, as so amended or supplemented, or both.

“Senior Indebtedness” means, with respect to the Company, (i) the principal, premium, if any, and interest in respect of (A) indebtedness of the Company for money borrowed, similar obligations arising from off-balance sheet guarantees and direct credit substitutes and (B) indebtedness evidenced by securities, debentures, notes, bonds or other similar instruments issued by the Company; (ii) all capital lease obligations of the Company; (iii) all obligations of the Company issued or assumed as the deferred purchase price of property, all conditional sale obligations of the Company and all obligations of the Company under any title retention agreement (but excluding trade accounts payable arising in the ordinary course of business); (iv) all obligations of the Company for the reimbursement of any letter of credit, any banker’s acceptance, any security purchase facility, any repurchase agreement or similar arrangement, all obligations associated with derivative products such as interest rate and foreign exchange contracts and commodity contracts, any interest rate swap, any other hedging arrangement, any obligation under options or any similar credit or other transaction; (v) all obligations of the type referred to in clauses (i) through (iv) above of other Persons for the payment of which the Company is responsible or liable as obligor, guarantor or otherwise; and (vi) all obligations of the type referred to in clauses (i) through (v) above of other Persons secured by any lien on any property or asset of the Company (whether or not such obligation is assumed by the Company), whether incurred on or prior to the date of this Securityholders Agreement or thereafter incurred, unless, with the prior approval of the Federal Reserve if not otherwise generally approved, it is provided in the instrument creating or evidencing the same or pursuant to which the same is outstanding, that such obligations are not superior or are pari passu in right of payment to the Debt Securities; provided, however, that Senior Indebtedness

4

shall not include (a) any debt securities issued to any trust (or a trustee of such trust) that is a financing vehicle of the Company (a “financing entity”), in connection with the issuance by such financing entity of equity or other securities, including the issuance of trust preferred securities or (b) any guarantees of the Company in respect of the equity or other securities of any financing entity referred to in clause (a) above or (c) the Company’s outstanding Fixed Rate Junior Subordinated Debt Securities due December 31, 2018.

“Special Event” means any Tax Event or Capital Treatment Event.

“Special Redemption Date” has the meaning set forth in Section 10.2.

“Special Redemption Price” means, with respect to the redemption of any Debt Security following a Special Event, 100% of the principal amount of the Debt Securities being redeemed plus accrued and unpaid interest on such Debt Securities to the Special Redemption Date.

“Subsidiary” means, with respect to any Person, (i) any corporation, at least a majority of the outstanding voting stock of which is owned, directly or indirectly, by such Person or by one or more of its Subsidiaries, or by such Person and one or more of its Subsidiaries, (ii) any general partnership, joint venture or similar entity, at least a majority of the outstanding partnership or similar interests of which shall at the time be owned by such Person, or by one or more of its Subsidiaries, or by such Person and one or more of its Subsidiaries, and (iii) any limited partnership of which such Person or any of its Subsidiaries is a general partner. For the purposes of this definition, “voting stock” means shares, interests, participations or other equivalents in the equity interest (however designated) in such Person having ordinary voting power for the election of a majority of the directors (or the equivalent) of such Person, other than shares, interests, participations or other equivalents having such power only by reason of the occurrence of a contingency.

“Tax Event” means the receipt by the Company of an Opinion of Counsel experienced in such matters to the effect that, as a result of any amendment to or change (including any announced prospective change) in the laws or any regulations thereunder of the United States or any political subdivision or taxing authority thereof or therein, or as a result of any official administrative pronouncement (including any private letter ruling, technical advice memorandum, regulatory procedure, notice or announcement (an “Administrative Action”)) or judicial decision interpreting or applying such laws or regulations, regardless of whether such Administrative Action or judicial decision is issued to or in connection with a proceeding involving the Company and whether or not subject to review or appeal, which amendment, clarification, change, Administrative Action or decision is enacted, promulgated or announced, in each case on or after the date of original issuance of the Debt Securities, there is more than an insubstantial risk that interest payable by the Company on the Debt Securities is not, or within 90 days of the date of such Opinion of Counsel, will not be, deductible by the Company, in whole or in part, for United States federal income tax purposes.

“United States” means the United States of America and the District of Columbia.

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“U.S. Person” has the meaning given to “United States person” as set forth in Section 7701(a)(30) of the Code.

ARTICLE II

DEBT SECURITIES

Section 2.1 Issuance of Debt Securities.

Upon the execution and delivery of this Securityholders Agreement, or from time to time thereafter, Debt Securities may be issued by the Company to the Securityholders.

Section 2.2 Form and Denomination of Debt Securities.

The Debt Securities shall be registered in minimum denominations of $50,000 and any multiple of $1,000 in excess thereof.

The Debt Securities may be in certificated or uncertificated form. If certificated, the Debt Securities shall be (i) without coupons; (ii) numbered, lettered, or otherwise distinguished in such manner or in accordance with such plans as the officers executing the same may determine; and (iii) substantially in the form of Exhibit A hereto or otherwise typed, printed, lithographed or engraved on steel engraved borders or produced in any other manner all as determined by the officers executing the Debt Securities, as evidenced by their execution of such Debt Securities.

Section 2.3 Execution of Debt Securities.

If certificated, the Debt Securities shall be signed in the name and on behalf of the Company by the manual or facsimile signature of its President or one of its Executive Vice Presidents or any other officer authorized by the Board of Directors to sign documents in the name and on behalf of the Company, under its corporate seal (if then legally required) which may be affixed thereto or printed, engraved or otherwise reproduced thereon, by facsimile or otherwise, and which need not be attested.

In case any officer of the Company who shall have signed any of the Debt Securities shall cease to be such officer before the Debt Securities so signed shall have been delivered by the Company, such Debt Securities nevertheless may be delivered as though the Person who signed such Debt Securities had not ceased to be such officer of the Company; and any Debt Security may be signed on behalf of the Company by such Persons as, at the actual date of the execution of such Debt Security, shall be the proper officers of the Company, although at the date of the execution of this Securityholders Agreement any such person was not such an officer.

Every Debt Security shall be dated the date of its issuance.

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Section 2.4 Exchange and Registration of Transfer of Debt Securities.

The Company shall cause to be kept, at the office or agency maintained for the purpose of registration of transfer and for exchange as provided in Section 3.2, a register (the “Debt Security Register”) for the Debt Securities issued hereunder in which, subject to such reasonable regulations as it may prescribe, the Company shall provide for the registration and transfer of all Debt Securities as provided in this Article II. Such register shall be in written form or in any other form capable of being converted into written form within a reasonable time.

Debt Securities may be exchanged at any office or agency to be maintained by the Company for such purpose as provided in Section 3.2, and the Company shall register (or cause its agent to register), and make available for delivery in accordance with its procedures the Debt Security or Debt Securities which the Securityholder making the exchange shall be entitled to receive. Upon registration of transfer of any Debt Security at any office or agency of the Company maintained for such purpose as provided in Section 3.2, the Company shall register (or cause its agent to register) and the Company shall make available for delivery in the name of the transferee or transferees a new Debt Security for a like aggregate principal amount. Registration or registration of transfer of any Debt Security by any agent of the Company appointed pursuant to Section 3.2, and delivery of such Debt Security, shall be deemed to complete the registration or registration of transfer of such Debt Security.

The Company or its agent may require that certificated Debt Securities to be registered for transfer, exchange or payment be duly endorsed by, or be accompanied by, a written instrument or instruments of transfer in form satisfactory to the Company duly executed by the holder or such holder’s attorney duly authorized in writing.

No service charge shall be made for any exchange or registration of transfer of certificated or uncertificated Debt Securities, but the Company may require payment of a sum sufficient to cover any tax, fee or other governmental charge that may be imposed in connection therewith.

The Company shall not be required to exchange or register a transfer of any Debt Security for a period of 15 days immediately preceding the date of selection of Debt Securities for redemption.

Notwithstanding the foregoing, Debt Securities may not be transferred except in compliance with the restricted securities legend set forth below, unless otherwise determined by the Company in accordance with applicable law, which legend shall be placed on each certificated Debt Security and shall apply to all Debt Securities:

THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY STATE SECURITIES LAWS OR ANY OTHER APPLICABLE SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF

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THE SECURITIES ACT. THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR OTHERWISE TRANSFER SUCH SECURITY ONLY (A) TO THE COMPANY, (B) PURSUANT TO RULE 144A UNDER THE SECURITIES ACT (“RULE 144A”), TO A PERSON THE HOLDER REASONABLY BELIEVES IS A “QUALIFIED INSTITUTIONAL BUYER” AS DEFINED IN RULE 144A THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (C) PURSUANT TO AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT TO AN “ACCREDITED INVESTOR” WITHIN THE MEANING OF SUBPARAGRAPH (a) (1), (2), (3) OR (7) OF RULE 501 UNDER THE SECURITIES ACT THAT IS ACQUIRING THE SECURITY FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF AN “ACCREDITED INVESTOR,” FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT, OR (D) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE COMPANY’S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER PURSUANT TO CLAUSES (C) OR (D) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO IT IN ACCORDANCE WITH THE SECURITYHOLDERS AGREEMENT, A COPY OF WHICH MAY BE OBTAINED FROM THE COMPANY. THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES THAT IT WILL COMPLY WITH THE FOREGOING RESTRICTIONS.

THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES, REPRESENTS AND WARRANTS THAT IT WILL NOT ENGAGE IN HEDGING TRANSACTIONS INVOLVING THIS SECURITY UNLESS SUCH TRANSACTIONS ARE IN COMPLIANCE WITH THE SECURITIES ACT.

THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF ALSO AGREES, REPRESENTS AND WARRANTS THAT IT IS NOT AN EMPLOYEE BENEFIT, INDIVIDUAL RETIREMENT ACCOUNT OR OTHER PLAN OR ARRANGEMENT SUBJECT TO TITLE I OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED (“ERISA”), OR SECTION 4975 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE “CODE”), (EACH A “PLAN”), OR AN ENTITY WHOSE UNDERLYING ASSETS INCLUDE “PLAN ASSETS” BY REASON OF ANY PLAN’S INVESTMENT IN THE ENTITY AND NO PERSON INVESTING “PLAN ASSETS” OF ANY PLAN MAY ACQUIRE OR HOLD THIS SECURITY OR ANY INTEREST THEREIN, UNLESS SUCH PURCHASER OR HOLDER IS ELIGIBLE FOR THE EXEMPTIVE RELIEF AVAILABLE UNDER U.S. DEPARTMENT OF LABOR PROHIBITED TRANSACTION CLASS EXEMPTION 96-23, 95-60, 91-38, 90-1, 84-14, THE NON-FIDUCIARY SERVICE PROVIDER EXEMPTION UNDER SECTION 408(B)(17) OF ERISA OR ANOTHER APPLICABLE EXEMPTION.

IN CONNECTION WITH ANY TRANSFER, THE HOLDER OF THIS SECURITY WILL DELIVER TO THE REGISTRAR AND TRANSFER AGENT SUCH CERTIFICATES AND OTHER INFORMATION AS MAY BE REQUIRED BY THE SECURITYHOLDERS AGREEMENT TO CONFIRM THAT THE TRANSFER COMPLIES WITH THE FOREGOING RESTRICTIONS.

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THIS SECURITY WILL BE ISSUED AND MAY BE TRANSFERRED ONLY IN BLOCKS HAVING A PRINCIPAL AMOUNT OF NOT LESS THAN $50,000 AND MULTIPLES OF $1,000 IN EXCESS THEREOF. ANY ATTEMPTED TRANSFER OF THIS SECURITY IN A BLOCK HAVING A PRINCIPAL AMOUNT OF LESS THAN $50,000 SHALL BE DEEMED TO BE VOID AND OF NO LEGAL EFFECT WHATSOEVER. ANY SUCH PURPORTED TRANSFEREE SHALL BE DEEMED NOT TO BE THE HOLDER OF THIS SECURITY FOR ANY PURPOSE, INCLUDING, BUT NOT LIMITED TO, THE RECEIPT OF DISTRIBUTIONS ON THIS SECURITY, AND SUCH PURPORTED TRANSFEREE SHALL BE DEEMED TO HAVE NO INTEREST WHATSOEVER IN THIS SECURITY.

THIS OBLIGATION IS NOT A DEPOSIT AND IS NOT INSURED BY THE UNITED STATES OR ANY AGENCY OR FUND OF THE UNITED STATES, INCLUDING THE FEDERAL DEPOSIT INSURANCE CORPORATION. THIS OBLIGATION IS SUBORDINATED TO THE CLAIMS OF DEPOSITORS AND THE CLAIMS OF GENERAL AND SECURED CREDITORS OF THE COMPANY, IS INELIGIBLE AS COLLATERAL FOR A LOAN BY THE COMPANY OR ANY OF ITS SUBSIDIARIES AND IS NOT SECURED.

Section 2.5 Mutilated, Destroyed, Lost or Stolen Debt Securities.

In case any certificated Debt Security shall become mutilated or be destroyed, lost or stolen, the Company shall issue an uncertificated, substituted Debt Security or shall execute and deliver a new certificated Debt Security bearing a number not contemporaneously outstanding, in exchange and substitution for the mutilated Debt Security, or in lieu of and in substitution for the Debt Security so destroyed, lost or stolen. In every case the applicant for a substituted Debt Security shall furnish to the Company such security or indemnity as may be required by them to save each of them harmless, and, in every case of destruction, loss or theft, the applicant shall also furnish to the Company evidence to their satisfaction of the destruction, loss or theft of such Debt Security and of the ownership thereof.

Upon the issuance of any substituted Debt Security, the Company may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other expenses connected therewith. In case any Debt Security which has matured or is about to mature or has been called for redemption in full shall become mutilated or be destroyed, lost or stolen, the Company may, instead of issuing a substitute Debt Security, pay or authorize the payment of the same (without surrender thereof except in the case of a mutilated Debt Security) if the applicant for such payment shall furnish to the Company such security or indemnity as may be required by them to save each of them harmless and, in case of destruction, loss or theft, evidence satisfactory to the Company of the destruction, loss or theft of such Security and of the ownership thereof.

Every substituted Debt Security issued pursuant to the provisions of this Section 2.5 by virtue of the fact that any such Debt Security is destroyed, lost or stolen shall constitute an

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additional contractual obligation of the Company, whether or not the destroyed, lost or stolen Debt Security shall be found at any time, and shall be entitled to all the benefits of this Securityholders Agreement equally and proportionately with any and all other Debt Securities duly issued hereunder. All Debt Securities shall be held and owned upon the express condition that, to the extent permitted by applicable law, the foregoing provisions are exclusive with respect to the replacement or payment of mutilated, destroyed, lost or stolen Debt Securities and shall preclude any and all other rights or remedies notwithstanding any law or statute existing or hereafter enacted to the contrary with respect to the replacement or payment of negotiable instruments or other securities without their surrender.

Section 2.6 Temporary Debt Securities.

Pending the preparation of definitive Debt Securities, the Company may execute and make available for delivery temporary Debt Securities that are typed, printed or lithographed. Temporary Debt Securities shall be issuable in any authorized denomination, and substantially in the form of the definitive Debt Securities but with such omissions, insertions and variations as may be appropriate for temporary Debt Securities, all as may be determined by the Company. Every such temporary Debt Security shall be executed by the Company upon the same conditions and in substantially the same manner, and with the same effect, as the definitive Debt Securities. Without unreasonable delay, the Company will execute and deliver to the Securityholder, in exchange for such temporary Debt Securities, a like aggregate principal amount of such definitive Debt Securities, and thereupon any or all temporary Debt Securities shall be surrendered in exchange therefor, at any office or agency maintained by the Company for such purpose as provided in Section 3.2. Such exchange shall be made by the Company at its own expense and without any charge therefor except that in case of any such exchange involving a registration of transfer the Company may require payment of a sum sufficient to cover any tax, fee or other governmental charge that may be imposed in relation thereto. Until so exchanged, the temporary Debt Securities shall in all respects be entitled to the same benefits under this Securityholders Agreement as definitive Debt Securities delivered hereunder.

Section 2.7 Payment of Interest.

Each Debt Security will bear interest at the then applicable Interest Rate from and including each Interest Payment Date or, in the case of the first interest period, the original date of issuance of such Debt Security to, but excluding, the next succeeding Interest Payment Date or, in the case of the last interest period, the Redemption Date, Special Redemption Date or Maturity Date, as applicable (each such period, an “Interest Period”), on the principal thereof, on any overdue principal and on any overdue installment of interest (including Defaulted Interest), payable (subject to the provisions of Article VI) on each Interest Payment Date commencing on the first Interest Payment Date following the original date of issuance of such Debt Security, and on the Redemption Date, the Special Redemption Date or the Maturity Date, as the case may be. Interest on any Debt Security that is payable, and is punctually paid or duly provided for, on any Interest Payment Date shall be paid to the Person in whose name such Debt Security (or one or more Predecessor Securities) is registered at the close of business on the regular record date for such interest installment, except that interest payable on the Maturity Date, the Redemption Date or the Special Redemption Date, as the case may be, shall be paid to the Person to whom principal is paid.

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Any interest on any Debt Security that is payable, but is not punctually paid or duly provided for, on any Interest Payment Date (herein called “Defaulted Interest”) shall forthwith cease to be payable to the registered holder on the relevant regular record date by virtue of having been such holder, and such Defaulted Interest shall be paid by the Company to the Persons in whose names such Debt Securities (or their respective Predecessor Securities) are registered at the close of business on a special record date for the payment of such Defaulted Interest, which special record date shall be fixed by the Company and which shall not be more than fifteen nor less than ten days prior to the date of the proposed payment date. The Company, shall cause notice of the proposed payment of such Defaulted Interest and the special record date therefor to be mailed, first class postage prepaid, to each Securityholder at his or her address as it appears in the Debt Security Register, not less than ten days prior to such special record date. Notice of the proposed payment of such Defaulted Interest and the special record date therefor having been mailed as aforesaid, such Defaulted Interest shall be paid to the Persons in whose names such Debt Securities (or their respective Predecessor Securities) are registered on such special record date and thereafter the Company shall have no further payment obligation in respect of the Defaulted Interest.

The term “regular record date” as used in this Section shall mean the same day as the applicable Interest Payment Date.

Subject to the foregoing provisions of this Section, each Debt Security delivered under this Securityholders Agreement upon registration of transfer of or in exchange for or in lieu of any other Debt Security shall carry the rights to interest accrued and unpaid, and to accrue, that were carried by such other Debt Security.

Section 2.8 Cancellation of Debt Securities Paid, etc.

Any certificated Debt Securities surrendered for the purpose of payment, redemption, exchange or registration of transfer, shall, if surrendered to the Company, be promptly canceled by it, and no Debt Securities shall be issued in lieu thereof except as expressly permitted by any of the provisions of this Securityholders Agreement. The book entries for all uncertificated Debt Securities which are paid, redeemed, exchanged or transferred shall be promptly cancelled by the Company and no Debt Securities shall be issued in lieu thereof except as expressly permitted by any of the provisions of this Securityholders Agreement. If the Company shall acquire any of the Debt Securities, however, such acquisition shall not operate as a redemption or satisfaction of the indebtedness represented by such Debt Securities unless and until the same are duly cancelled.

Section 2.9 Computation of Interest.

(a) The amount of interest payable for each Interest Period will be computed on the basis of a 365-day year and the actual number of days elapsed in such Interest Period.

(b) All percentages resulting from any calculations on the Debt Securities will be rounded, if necessary, to the nearest one hundred-thousandth of a percentage point, with five one-millionths of a percentage point rounded upward (e.g., 9.876545% (or .09876545) being rounded to 9.87655% (or .0987655)), and all dollar amounts used in or resulting from such calculation will be rounded to the nearest cent (with one-half cent being rounded upward).

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(c) The Company shall, upon the request of the holder of any Debt Securities, confirm the Interest Rate. The Paying Agent shall be entitled to rely on information received from the Company as to the Interest Rate. The Company shall, from time to time, provide any necessary information to the Paying Agent relating to any original issue discount and interest on the Debt Securities that is included in any payment and reportable for taxable income calculation purposes.

Section 2.10 CUSIP Numbers.

The Company in issuing the Debt Securities may use “CUSIP” numbers (if then generally in use), and, if so, the Company shall use “CUSIP” numbers in notices of redemption as a convenience to Securityholders; provided, that any such notice may state that no representation is made as to the correctness of such numbers either as printed on the Debt Securities or as contained in any notice of a redemption and that reliance may be placed only on the other identification numbers printed on the Debt Securities, and any such redemption shall not be affected by any defect in or omission of such numbers. The Company will promptly notify the Securityholders in writing of any change in the CUSIP numbers.

ARTICLE III

PARTICULAR COVENANTS OF THE COMPANY

Section 3.1 Payment of Principal, Premium and Interest; Agreed Treatment of the Debt Securities.

(a) The Company covenants and agrees that it will duly and punctually pay or cause to be paid all payments due on the Debt Securities at the place, at the respective times and in the manner provided in this Securityholders Agreement. At the option of the Company, each installment of interest on the Debt Securities may be paid (i) by mailing checks for such interest payable to the order of the holders of Debt Securities entitled thereto as they appear on the Debt Security Register or (ii) by wire transfer, ACH transfer or other banking transfer to any account with a banking institution located in the United States designated by such Person to the Paying Agent no later than the related record date.

(b) The Company will treat the Debt Securities as indebtedness, and the interest payable in respect of such Debt Securities as interest, for all U.S. federal income tax purposes. All payments in respect of such Debt Securities will be made free and clear of U.S. withholding tax to any beneficial owner thereof that has provided an (i) Internal Revenue Service Form W-8BEN (or any substitute or successor form or required documentation) establishing its non-U.S. status for U.S. federal income tax purposes or (ii) an Internal Revenue Service Form W-9 (or any substitute or successor form) establishing its status as a U.S. citizen or other U.S. person (including a resident alien individual) for U.S. federal income tax purposes and the nonapplicability of backup withholding, except where the Company reasonably determines that (i) the beneficial owner directly or indirectly owns 10% or more of the voting power of the

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Company’s stock; (ii) the beneficial owner is a bank that has entered into this Agreement in the ordinary course of its business; or (iii) another exception or provision under the “portfolio interest” rules of the Code applies so as to require withholding of tax by the Company.

Section 3.2 Offices for Notices and Payments, etc.

So long as any of the Debt Securities remain outstanding, the Company will maintain in Albemarle, North Carolina or elsewhere within the State of North Carolina an office or agency where the Debt Securities may be presented for payment, an office or agency where the Debt Securities may be presented for registration of transfer and for exchange as provided in this Securityholders Agreement and an office or agency where notices and demands to or upon the Company in respect of the Debt Securities or of this Securityholders Agreement may be served, provided however, that the Company may waive presentment for transfer, exchange or payment in its sole discretion. The Company will give to the Securityholders written notice of the location of any such office or agency and of any change of location thereof. Until otherwise designated from time to time by the Company in a notice to the Securityholders, or specified as contemplated by Section 2.4, such office or agency for all of the above purposes shall be 132 North First Street, Albemarle, North Carolina 28001.

In addition to any such office or agency, the Company may from time to time designate one or more offices or agencies outside the State of North Carolina where the Debt Securities may be registered for transfer and for exchange in the manner provided in this Securityholders Agreement, and the Company may from time to time rescind such designation, as the Company may deem desirable or expedient; provided, however, that no such designation or rescission shall in any manner relieve the Company of its obligation to maintain any such office or agency within the State of North Carolina for the purposes above mentioned.

Section 3.3 Provision as to Paying Agent.

(a) If the Company shall appoint a Paying Agent, it will cause such Paying Agent to execute and deliver to the Company an instrument in which such agent shall agree with the Company, subject to the provision of this Section 3.3;

(1) that it will hold all sums held by it as such agent for the payment of all payments due on the Debt Securities (whether such sums have been paid to it by the Company or by any other obligor on the Debt Securities) in trust for the benefit of the holders of the Debt Securities;

(2) that it will give the Securityholders prompt written notice of any failure by the Company (or by any other obligor on the Debt Securities) to make any payment on the Debt Securities when the same shall be due and payable; and

(3) that it will, at any time during the continuance of any Event of Default, upon the written request of the Securityholders, forthwith pay to the Securityholders all sums so held in trust by such Paying Agent.

(b) If the Company shall act as its own Paying Agent, it will, on or before each due date of the payments due on the Debt Securities, set aside, segregate and hold in trust

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for the benefit of the holders of the Debt Securities a sum sufficient to pay such principal, premium or interest so becoming due and will notify the Securityholders in writing of any failure to take such action and of any failure by the Company (or by any other obligor under the Debt Securities) to make any payment on the Debt Securities when the same shall become due and payable.

Whenever the Company shall have one or more Paying Agents for the Debt Securities, it will, on or prior to each due date of the payments on the Debt Securities, deposit with a Paying Agent a sum sufficient to pay all payments so becoming due, such sum to be held in trust for the benefit of the Persons entitled thereto and the Company shall promptly notify the Securityholders in writing of its action or failure to act.

(c) Anything in this Section 3.3 to the contrary notwithstanding, the Company may, at any time, for the purpose of obtaining a satisfaction and discharge with respect to the Debt Securities, or for any other reason, pay, or direct any Paying Agent to pay to the Securityholders all sums held in trust by the Company or any such Paying Agent.

(d) Anything in this Section 3.3 to the contrary notwithstanding, the agreement to hold sums in trust as provided in this Section 3.3 is subject to Section 12.3 and to Section 12.4.

Section 3.4 Certificate to Securityholders.

Upon the request of any Securityholder, the Company will deliver to such Securityholder on or before 120 days after the end of the Company’s fiscal year, so long as Debt Securities are outstanding hereunder, a Certificate, substantially in the form of Exhibit B attached hereto, stating that in the course of the performance by the signers of their duties as officers of the Company they would normally have knowledge of any default by the Company in the performance of any covenants contained herein, stating whether or not they have knowledge of any such default and, if so, specifying each such default of which the signers have knowledge and the nature thereof.

Section 3.5 Compliance with Consolidation Provisions.

The Company will not, while any of the Debt Securities remain outstanding, consolidate with, or merge into any other Person, or merge into itself, or sell or convey all or substantially all of its property to any other Person unless the provisions of Article XI are complied with.

Section 3.6 Limitation on Dividends.

If there shall have occurred and be continuing a Default or an Event of Default, then the Company may not (A) declare or pay any dividends or distributions on, or redeem, purchase, acquire, or make a liquidation payment with respect to, any of the Company’s capital stock or (B) make any payment of principal of or interest or premium, if any, on or repay, repurchase or redeem any debt securities of the Company that rank pari passu in all respects with or junior in interest to the Debt Securities (other than (a) repurchases, redemptions or other acquisitions of shares of capital stock of the Company (i) in connection with any employment

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contract, benefit plan or other similar arrangement with or for the benefit of one or more employees, officers, directors or consultants, (ii) in connection with a dividend reinvestment or stockholder stock purchase plan or (iii) in connection with the issuance of capital stock of the Company (or securities convertible into or exercisable for such capital stock) as consideration in an acquisition transaction entered into prior to the occurrence of (i), (ii), or (iii) above, (b) as a result of any exchange or conversion of any class or series of the Company’s capital stock (or any capital stock of a subsidiary of the Company) for any class or series of the Company’s capital stock or of any class or series of the Company’s indebtedness for any class or series of the Company’s capital stock, (c) the purchase of fractional interests in shares of the Company’s capital stock pursuant to the conversion or exchange provisions of such capital stock or the security being converted or exchanged, (d) any declaration of a dividend in connection with any stockholder’s rights plan, or the issuance of rights, stock or other property under any stockholder’s rights plan, or the redemption or repurchase of rights pursuant thereto or (e) any dividend in the form of stock, warrants, options or other rights where the dividend stock or the stock issuable upon exercise of such warrants, options or other rights is the same stock as that on which the dividend is being paid or ranks pari passu with or junior in interest to such stock).

ARTICLE IV

LISTS AND REPORTS BY THE COMPANY

Section 4.1 Securityholders’ Lists.

The Company covenants and agrees that it will furnish or cause to be furnished to any Securityholder, within 30 days after the receipt by the Company of a written request from such Securityholder, a list of the names and addresses of all Securityholders as of a date not more than 15 days prior to the time such list is furnished.

Each and every holder of Debt Securities, by receiving and holding the same whether through book entry or in certificated form, agrees with the Company that neither the Company nor any Paying Agent shall be held accountable by reason of the disclosure of any such information as to the names and addresses of the holders of Debt Securities in accordance with the provisions of this Section 4.1, regardless of the source from which such information was derived.

Section 4.2 Financial and Other Information.

The Company shall deliver to each holder of the Debt Securities (A) if the Company or any of its Subsidiaries is not then (i) subject to Section 13 or 15(d) of the Exchange Act or (ii) exempt from reporting pursuant to Rule 12g3-2(b) thereunder, the information required by Rule 144A(d)(4) under the Securities Act, (B) if the Company is not then required to file Form FR Y-9C, the audited annual financial statements (or, if no audited financial statements are prepared, the unaudited financial statements) of the Company and any Subsidiaries within 90 days after the end of the fiscal year, and (C) within 31 days after the end of each calendar (or such later date as may be required by the Code or applicable regulations), Form 1099 or such other annual U.S. federal income tax information statement required by the Code, containing such information with regard to the Debt Securities held by such holder as is required by the Code and the regulations of the U.S. Department of the Treasury promulgated thereunder.

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ARTICLE V

REMEDIES OF THE SECURITYHOLDERS UPON AN EVENT OF DEFAULT

Section 5.1 Events of Default.

Any of the following events shall be an “Event of Default” with respect to Debt Securities:

(a) the Company defaults in the payment of any interest upon any Debt Security when it becomes due and payable, and such default continues for a period of 30 days; or

(b) Reserved

(c) the Company defaults in the payment of all or any part of the principal of (or premium, if any, on) any Debt Securities as and when the same shall become due and payable either at maturity, upon redemption, by declaration of acceleration or otherwise; or

(d) the Company defaults in the performance of, or breaches, any of its covenants or agreements in Section 3.5 or Section 3.6 of this Securityholders Agreement (other than a covenant or agreement a default in whose performance or whose breach is elsewhere in this Section specifically dealt with), and continuance of such default or breach for a period of 90 days after there has been given, by registered or certified mail, to the Company by the holders of not less than 25% in aggregate principal amount of the outstanding Debt Securities, a written notice specifying such default or breach and requiring it to be remedied and stating that such notice is a “Notice of Default” hereunder; or

(e) a court having jurisdiction in the premises shall enter a decree or order for relief in respect of the Company in an involuntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, or appoints a receiver, liquidator, assignee, custodian, trustee, sequestrator (or other similar official) of the Company, or orders the winding-up or liquidation of its affairs and such decree or order shall remain unstayed and in effect for a period of 90 consecutive days; or

(f) the Company shall commence a voluntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, shall consent to the entry of an order for relief in an involuntary case under any such law, or shall consent to the appointment of or taking possession by a receiver, liquidator, assignee, trustee, custodian, sequestrator (or other similar official) of the Company, or shall make any general assignment for the benefit of creditors, or shall fail generally to pay its debts as they become due.

If an Event of Default specified under clause (e) or (f) of this Section 5.1 occurs, then, in each and every such case, the entire principal amount of the Debt Securities and any premium and interest accrued, but unpaid, thereon shall ipso facto become immediately due and payable without further action.

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The foregoing provisions, however, are subject to the condition that if, at any time after the principal of the Debt Securities shall have become due by acceleration, and before any judgment or decree for the payment of the moneys due shall have been obtained or entered as hereinafter provided, (i) the Company shall pay or shall deposit with the Paying Agent a sum sufficient to pay all matured installments of interest upon all the Debt Securities and all payments on the Debt Securities which shall have become due otherwise than by acceleration (with interest upon all such payments, to the extent permitted by law) and such amount as shall be sufficient to cover reasonable compensation to the Paying Agent and each predecessor Paying Agent, their respective agents, attorneys and counsel, and all other amounts due to the Paying Agent, if any, and (ii) all Events of Default under this Securityholders Agreement, other than the non-payment of the payments on Debt Securities which shall have become due by acceleration, shall have been cured, waived or otherwise remedied as provided herein, then and in every such case the holders of a majority in aggregate principal amount of the Debt Securities then outstanding, by written notice to the Company and to the Paying Agent, may waive all defaults and rescind and annul such acceleration and its consequences, but no such waiver or rescission and annulment shall extend to or shall affect any subsequent default or shall impair any right consequent thereon.

In case the Securityholders shall have proceeded to enforce any right under this Securityholders Agreement and such proceedings shall have been discontinued or abandoned because of such rescission or annulment or for any other reason or shall have been determined adversely to the Securityholders, then and in every such case the Company and the holders of the Debt Securities shall be restored respectively to their several positions and rights hereunder, and all rights, remedies and powers of the Company and the holders of the Debt Securities shall continue as though no such proceeding had been taken.

Section 5.2 Payment of Debt Securities on Certain Events of Default; Suit Therefor.

In case there shall be pending proceedings for the bankruptcy or for the reorganization of the Company or any other obligor on the Debt Securities under Bankruptcy Law, or in case a receiver or trustee shall have been appointed for the property of the Company or such other obligor, or in the case of any other similar judicial proceedings relative to the Company or other obligor upon the Debt Securities, or to the creditors or property of the Company or such other obligor, the Securityholders, irrespective of whether the principal of the Debt Securities shall then be due and payable as therein expressed or by acceleration or otherwise and irrespective of whether the Securityholders shall have made any demand pursuant to the provisions of this Section 5.2, shall be entitled and empowered, by intervention in such proceedings or otherwise, to file and prove a claim or claims for the whole amount of principal and interest owing and unpaid in respect of the Debt Securities and, in case of any judicial proceedings, to file such proofs of claim and other papers or documents as may be necessary or advisable in order to have the claims of the Securityholders (including any claim for reasonable compensation to the Securityholders’ agents, attorneys and counsel, and for reimbursement of all other amounts due to the Securityholders) allowed in such judicial proceedings relative to the Company or any other obligor on the Debt Securities, or to the creditors or property of the Company or such other obligor, unless prohibited by applicable law and regulations, to vote in any election of a trustee or a standby trustee in arrangement, reorganization, liquidation or other

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bankruptcy or insolvency proceedings or Person performing similar functions in comparable proceedings, and to collect and receive any moneys or other property payable or deliverable on any such claims, and any receiver, assignee or trustee in bankruptcy or reorganization is hereby authorized by each of the Securityholders to make such payments to the Securityholders.

Nothing herein contained shall be construed to authorize any single Securityholder to authorize or consent to or accept or adopt on behalf of any other Securityholder any plan of reorganization, arrangement, adjustment or composition affecting the Debt Securities or the rights of any holder thereof or to authorize any Securityholder to vote in respect of the claim of any other Securityholder in any such proceeding.

Section 5.3 Proceedings by Securityholders.

No holder of any Debt Security shall have any right to institute any suit, action or proceeding for any remedy hereunder, unless such holder previously shall have given to the Company written notice of an Event of Default with respect to the Debt Securities and unless the holders of a majority in aggregate principal amount of the Debt Securities then outstanding shall join in such action, suit or proceeding; provided, that no holder of Debt Securities shall have any right to prejudice the rights of any other holder of Debt Securities, obtain priority or preference over any other such holder or enforce any right under this Securityholders Agreement except in the manner herein provided and for the equal, ratable and common benefit of all holders of Debt Securities.

Notwithstanding any other provisions in this Securityholders Agreement, but subject to the provisions of Section 5.5 of this Securityholders Agreement, the right of any holder of any Debt Security to receive payment of the principal of, premium, if any, and interest on such Debt Security when due, shall not be impaired or affected without the consent of such holder. For the protection and enforcement of the provisions of this Section and except to the extent expressly limited by this Section, each and every Securityholder shall be entitled to such relief as can be given either at law or in equity.

Section 5.4 Remedies Cumulative and Continuing.

Except as otherwise provided in Section 2.5, all powers and remedies given by this Article V to the Securityholders shall, to the extent permitted by law, be deemed cumulative and not exclusive of any other powers and remedies available to the holders of the Debt Securities, by judicial proceedings or otherwise, to enforce the performance or observance of the covenants and agreements contained in this Securityholders Agreement or otherwise established with respect to the Debt Securities, and no delay or omission of any holder of any of the Debt Securities to exercise any right or power accruing upon any Event of Default occurring and continuing as aforesaid shall impair any such right or power, or shall be construed to be a waiver of any such default or an acquiescence therein; and, subject to the provisions of Section 5.3, every power and remedy given by this Article V or by law to the Securityholders may be exercised from time to time, and as often as shall be deemed expedient, by the Securityholders.

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Section 5.5 Direction of Proceedings and Waiver of Defaults by Majority of Securityholders.

The holders of a majority in aggregate principal amount of the Debt Securities affected (voting as one group) at the time outstanding shall have the right to direct the time, method and place of conducting any proceeding for any remedy available with respect to such Debt Securities. Prior to any ipso facto acceleration of the maturity of the Debt Securities, the holders of a majority in aggregate principal amount of the Debt Securities at the time outstanding may on behalf of the holders of all of the Debt Securities waive (or modify any previously granted waiver of) any past Default or Event of Default and its consequences, except a default (a) in the payment of principal of, premium, if any, or interest on any of the Debt Securities, or (b) in respect of covenants or provisions hereof which cannot be modified or amended without the consent of the holder of each Debt Security affected. Whenever any Default or Event of Default hereunder shall have been waived as permitted by this Section 5.5, said Default or Event of Default shall for all purposes of the Debt Securities and this Securityholders Agreement be deemed to have been cured and to be not continuing.

Section 5.6 Undertaking to Pay Costs.

All parties to this Securityholders Agreement agree that any court may in its discretion require, in any suit for the enforcement of any right or remedy under this Securityholders Agreement, the filing by any party litigant in such suit of an undertaking to pay the costs of such suit, and that such court may in its discretion assess reasonable costs, including reasonable attorneys’ fees and expenses, against any party litigant in such suit, having due regard to the merits and good faith of the claims or defenses made by such party litigant; but the provisions of this Section 5.6 shall not apply to any suit instituted by any Securityholder or group of Securityholders, holding in the aggregate a majority in principal amount of the Debt Securities outstanding, or to any suit instituted by any Securityholder for the enforcement of the payment of the principal of (or premium, if any) or interest on any Debt Security against the Company on or after the same shall have become due and payable.

ARTICLE VI

SUBORDINATION OF DEBT SECURITIES

Section 6.1 Agreement to Subordinate.

The Company covenants and agrees, and each holder of Debt Securities issued hereunder and under any supplemental Securityholders Agreement (the “Additional Provisions”) by such Securityholder’s acceptance thereof likewise covenants and agrees, that all Debt Securities shall be issued subject to the provisions of this Article VI; and each holder of a Debt Security, whether upon original issue or upon transfer or assignment thereof, accepts and agrees to be bound by such provisions.

The payment by the Company of the payments due on all Debt Securities issued hereunder and under any Additional Provisions shall, to the extent and in the manner hereinafter set forth, be subordinated and junior in right of payment to the prior payment in full of all Senior Indebtedness of the Company, whether outstanding at the date of this Securityholders Agreement or thereafter incurred.

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No provision of this Article VI shall prevent the occurrence of any default or Event of Default hereunder.

Section 6.2 Default on Senior Indebtedness.

In the event and during the continuation of any default by the Company in the payment of principal, premium, interest or any other payment due on any Senior Indebtedness of the Company following any applicable grace period, or in the event that the maturity of any Senior Indebtedness of the Company has been accelerated because of a default, and such acceleration has not been rescinded or canceled and such Senior Indebtedness has not been paid in full then, in either case, no payment shall be made by the Company with respect to the payments due on the Debt Securities.

In the event that, notwithstanding the foregoing, any payment shall be received by the Securityholders when such payment is prohibited by the preceding paragraph of this Section 6.2, such payment shall be held in trust for the benefit of, and shall be paid over or delivered to, the holders of Senior Indebtedness or their respective representatives, or to the trustee or trustees under any indenture pursuant to which any of such Senior Indebtedness may have been issued, as their respective interests may appear, but only to the extent that the holders of the Senior Indebtedness (or their representative or representatives or a trustee) notify the Securityholders in writing within 90 days of such payment of the amounts then due and owing on the Senior Indebtedness and only the amounts specified in such notice to the Securityholders shall be paid to the holders of Senior Indebtedness.

Section 6.3 Liquidation; Dissolution; Bankruptcy.

Upon any payment by the Company or distribution of assets of the Company of any kind or character, whether in cash, property or securities, to creditors upon any dissolution or winding-up or liquidation or reorganization of the Company, whether voluntary or involuntary or in bankruptcy, insolvency, receivership or other proceedings, all amounts due upon all Senior Indebtedness of the Company shall first be paid in full, or payment thereof provided for in money in accordance with its terms, before any payment is made by the Company on the Debt Securities; and upon any such dissolution or winding-up or liquidation or reorganization, any payment by the Company, or distribution of assets of the Company of any kind or character, whether in cash, property or securities, to which the Securityholders would be entitled to receive from the Company, except for the provisions of this Article VI, shall be paid by the Company, or by any receiver, trustee in bankruptcy, liquidating trustee, agent or other Person making such payment or distribution, or by the Securityholders under this Securityholders Agreement if received by them or it, directly to the holders of Senior Indebtedness of the Company (pro rata to such holders on the basis of the respective amounts of Senior Indebtedness held by such holders, as calculated by the Company) or their representative or representatives, or to the trustee or trustees under any indenture pursuant to which any instruments evidencing such Senior Indebtedness may have been issued, as their respective interests may appear, to the extent necessary to pay such Senior Indebtedness in full, in money or money’s worth, after giving effect to any concurrent payment or distribution to or for the holders of such Senior Indebtedness, before any payment or distribution is made to the Securityholders.

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In the event that, notwithstanding the foregoing, any payment or distribution of assets of the Company of any kind or character, whether in cash, property or securities, prohibited by the foregoing, shall be received by any Securityholder before all Senior Indebtedness of the Company is paid in full, or provision is made for such payment in money in accordance with its terms, such payment or distribution shall be held in trust for the benefit of and shall be paid over or delivered to the holders of such Senior Indebtedness or their representative or representatives, or to the trustee or trustees under any indenture pursuant to which any instruments evidencing such Senior Indebtedness may have been issued, as their respective interests may appear, as calculated by the Company, for application to the payment of all Senior Indebtedness of the Company remaining unpaid to the extent necessary to pay such Senior Indebtedness in full in money in accordance with its terms, after giving effect to any concurrent payment or distribution to or for the benefit of the holders of such Senior Indebtedness.

For purposes of this Article VI, the words “cash, property or securities” shall not be deemed to include shares of stock of the Company as reorganized or readjusted, or securities of the Company or any other corporation provided for by a plan of reorganization or readjustment, the payment of which is subordinated at least to the extent provided in this Article VI with respect to the Debt Securities to the payment of all Senior Indebtedness of the Company, that may at the time be outstanding, provided, that (a) such Senior Indebtedness is assumed by the new corporation, if any, resulting from any such reorganization or readjustment, and (b) the rights of the holders of such Senior Indebtedness are not, without the consent of such holders, altered by such reorganization or readjustment. The consolidation of the Company with, or the merger of the Company into, another corporation or the liquidation or dissolution of the Company following the conveyance or transfer of its property as an entirety, or substantially as an entirety, to another corporation upon the terms and conditions provided for in Article XI of this Securityholders Agreement shall not be deemed a dissolution, winding-up, liquidation or reorganization for the purposes of this Section 6.3 if such other corporation shall, as a part of such consolidation, merger, conveyance or transfer, comply with the conditions stated in Article XI of this Securityholders Agreement.

Section 6.4 Subrogation.

Subject to the payment in full of all Senior Indebtedness of the Company, the Securityholders shall be subrogated to the rights of the holders of such Senior Indebtedness to receive payments or distributions of cash, property or securities of the Company applicable to such Senior Indebtedness until all payments due on the Debt Securities shall be paid in full; and, for the purposes of such subrogation, no payments or distributions to the holders of such Senior Indebtedness of any cash, property or securities to which the Securityholders would be entitled except for the provisions of this Article VI, and no payment pursuant to the provisions of this Article VI to or for the benefit of the holders of such Senior Indebtedness by Securityholders, shall, as between the Company, its creditors other than holders of Senior Indebtedness of the Company, and the holders of the Debt Securities be deemed to be a payment or distribution by the Company to or on account of such Senior Indebtedness. It is understood that the provisions

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of this Article VI are and are intended solely for the purposes of defining the relative rights of the holders of the Debt Securities, on the one hand, and the holders of such Senior Indebtedness, on the other hand.

Nothing contained in this Article VI or elsewhere in this Securityholders Agreement, any Additional Provisions or in the Debt Securities is intended to or shall impair, as between the Company, its creditors other than the holders of Senior Indebtedness of the Company, and the holders of the Debt Securities, the obligation of the Company, which is absolute and unconditional, to pay to the holders of the Debt Securities all payments on the Debt Securities as and when the same shall become due and payable in accordance with their terms, or is intended to or shall affect the relative rights of the holders of the Debt Securities and creditors of the Company, other than the holders of Senior Indebtedness of the Company, nor shall anything herein or therein prevent the holder of any Debt Security from exercising all remedies otherwise permitted by applicable law upon default under this Securityholders Agreement, subject to the rights, if any, under this Article VI of the holders of such Senior Indebtedness in respect of cash, property or securities of the Company received upon the exercise of any such remedy.

Upon any payment or distribution of assets of the Company referred to in this Article VI, the Securityholders shall be entitled to conclusively rely upon any order or decree made by any court of competent jurisdiction in which such dissolution, winding-up, liquidation or reorganization proceedings are pending, or a certificate of the receiver, trustee in bankruptcy, liquidation trustee, agent or other Person making such payment or distribution, delivered to the Securityholders, for the purposes of ascertaining the Persons entitled to participate in such distribution, the holders of Senior Indebtedness and other indebtedness of the Company, the amount thereof or payable thereon, the amount or amounts paid or distributed thereon and all other facts pertinent thereto or to this Article VI.

Section 6.5 Subordination May Not Be Impaired.

No right of any present or future holder of any Senior Indebtedness of the Company to enforce subordination as herein provided shall at any time in any way be prejudiced or impaired by any act or failure to act on the part of the Company, or by any act or failure to act, in good faith, by any such holder, or by any noncompliance by the Company, with the terms, provisions and covenants of this Securityholders Agreement, regardless of any knowledge thereof that any such holder may have or otherwise be charged with.

Without in any way limiting the generality of the foregoing paragraph, the holders of Senior Indebtedness of the Company may, at any time and from time to time, without the consent of or notice to the Securityholders, without incurring responsibility to the Securityholders and without impairing or releasing the subordination provided in this Article VI or the obligations hereunder of the holders of the Debt Securities to the holders of such Senior Indebtedness, do any one or more of the following: (a) change the manner, place or terms of payment or extend the time of payment of, or renew or alter, such Senior Indebtedness, or otherwise amend or supplement in any manner such Senior Indebtedness or any instrument evidencing the same or any agreement under which such Senior Indebtedness is outstanding; (b) sell, exchange, release or otherwise deal with any property pledged, mortgaged or otherwise

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securing such Senior Indebtedness; (c) release any Person liable in any manner for the collection of such Senior Indebtedness; and (d) exercise or refrain from exercising any rights against the Company, and any other Person.

ARTICLE VII

CONCERNING THE SECURITYHOLDERS

Section 7.1 Action by Securityholders.

Whenever in this Securityholders Agreement it is provided that the holders of a specified percentage in aggregate principal amount of the Debt Securities may take any action (including the making of any demand or request, the giving of any notice, consent or waiver or the taking of any other action), the fact that at the time of taking any such action the holders of such specified percentage have joined therein may be evidenced (a) by any instrument or any number of instruments of similar tenor executed by such Securityholders in person or by agent or proxy appointed in writing, or (b) by the record of such holders of Debt Securities voting in favor thereof at any meeting of such Securityholders duly called and held in accordance with the provisions of Article VIII, or (c) by a combination of such instrument or instruments and any such record of such a meeting of such Securityholders.

If the Company shall solicit from the Securityholders any request, demand, authorization, direction, notice, consent, waiver or other action or revocation of the same, the Company may, at its option, as evidenced by an Officers’ Certificate, fix in advance a record date for such Debt Securities for the determination of Securityholders entitled to give such request, demand, authorization, direction, notice, consent, waiver or other action or revocation of the same, but the Company shall have no obligation to do so. If such a record date is fixed, such request, demand, authorization, direction, notice, consent, waiver or other action or revocation of the same may be given before or after the record date, but only the Securityholders of record at the close of business on the record date shall be deemed to be Securityholders for the purposes of determining whether Securityholders of the requisite proportion of outstanding Debt Securities have authorized or agreed or consented to such request, demand, authorization, direction, notice, consent, waiver or other action or revocation of the same, and for that purpose the outstanding Debt Securities shall be computed as of the record date; provided, however, that no such authorization, agreement or consent by such Securityholders on the record date shall be deemed effective unless it shall become effective pursuant to the provisions of this Securityholders Agreement not later than six months after the record date.

Section 7.2 Proof of Execution by Securityholders.

Subject to the provisions of Section 8.5, proof of the execution of any instrument by a Securityholder or such Securityholder’s agent or proxy shall be sufficient if made in such manner as shall be satisfactory to the Company. The ownership of Debt Securities shall be proved by the Debt Security Register or by a certificate of the Debt Security registrar. The Company may require such additional proof of any matter referred to in this Section as it shall deem necessary.

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The record of any Securityholders’ meeting shall be proved in the manner provided in Section 8.6.

Section 7.3 Who Are Deemed Absolute Owners.

Prior to the registration for transfer of any Debt Security, the Company, any Paying Agent, any transfer agent and any Debt Security registrar may deem the Person in whose name such Debt Security shall be registered upon the Debt Security Register to be, and may treat such Person as, the absolute owner of such Debt Security (whether or not such Debt Security shall be overdue) for the purpose of receiving payment of or on account of the principal of, premium, if any, and interest on such Debt Security and for all other purposes; and neither the Company nor any Paying Agent nor any transfer agent nor any Debt Security registrar shall be affected by any notice to the contrary. All such payments so made to any holder for the time being or upon such holder’s order shall be valid, and, to the extent of the sum or sums so paid, effectual to satisfy and discharge the liability for moneys payable upon any such Debt Security.

Section 7.4 Debt Securities Owned by Company Deemed Not Outstanding.

In determining whether the holders of the requisite aggregate principal amount of Debt Securities have concurred in any direction, consent or waiver under this Securityholders Agreement, Debt Securities which are owned by the Company or any other obligor on the Debt Securities or by any Person directly or indirectly controlling or controlled by or under direct or indirect common control with the Company or any other obligor on the Debt Securities shall be disregarded and deemed not to be outstanding for the purpose of any such determination. Debt Securities so owned which have been pledged in good faith may be regarded as outstanding for the purposes of this Section 7.4 if the pledgee shall establish the pledgee’s right to vote such Debt Securities and that the pledgee is not the Company or any such other obligor or Person directly or indirectly controlling or controlled by or under direct or indirect common control with the Company or any such other obligor.

Section 7.5 Revocation of Consents; Future Holders Bound.

At any time prior to (but not after) the evidencing to the Company, as provided in Section 7.1, of the taking of any action by the holders of the percentage in aggregate principal amount of the Debt Securities specified in this Securityholders Agreement in connection with such action, any holder (in cases where no record date has been set pursuant to Section 7.1) or any holder as of an applicable record date (in cases where a record date has been set pursuant to Section 7.1) of a Debt Security (or any Debt Security issued in whole or in part in exchange or substitution therefor) the serial number of which is shown by the evidence to be included in the Debt Securities the holders of which have consented to such action may, by filing written notice with the Company, revoke such action so far as concerns such Debt Security (or so far as concerns the principal amount represented by any exchanged or substituted Debt Security). Except as aforesaid any such action taken by the holder of any Debt Security shall be conclusive and binding upon such holder and upon all future holders and owners of such Debt Security, and of any Debt Security issued in exchange or substitution therefor or on registration of transfer thereof, irrespective of whether or not any notation in regard thereto is made upon such Debt Security or any Debt Security issued in exchange or substitution therefor.

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ARTICLE VIII

SECURITYHOLDERS’ MEETINGS

Section 8.1 Purposes of Meetings.

A meeting of Securityholders may be called at any time and from time to time pursuant to the provisions of this Article VIII for any of the following purposes:

(a) to give any notice to the Company, or to consent to the waiving of any default hereunder and its consequences, or to take any other action authorized to be taken by Securityholders pursuant to any of the provisions of Article V;

(b) to consent to the execution of a Securityholders Agreement or Securityholders Agreements supplemental hereto pursuant to the provisions of Section 9.2; or

(c) to take any other action authorized to be taken by or on behalf of the holders of any specified aggregate principal amount of such Debt Securities under any other provision of this Securityholders Agreement or under applicable law.

Section 8.2 Call of Meetings by Company.

The Company may at any time call a meeting of Securityholders to take any action specified in Section 8.1, to be held at such time and at such place within the State of North Carolina as the Company shall determine. Notice of every meeting of the Securityholders, setting forth the time and the place of such meeting and in general terms the action proposed to be taken at such meeting, shall be mailed to holders of Debt Securities affected at their addresses as they shall appear on the Debt Securities Register. Such notice shall be mailed not less than 20 nor more than 180 days prior to the date fixed for the meeting.

Section 8.3 Call of Meetings by Securityholders.

In case at any time the holders of at least 10% in aggregate principal amount of the Debt Securities then outstanding, shall have requested the Company to call a meeting of Securityholders, by written request setting forth in reasonable detail the action proposed to be taken at the meeting, and the Company shall not have mailed the notice of such meeting within 20 days after receipt of such request, then such Securityholders may determine the time and the place within the State of North Carolina for such meeting and may call such meeting to take any action authorized in Section 8.1, by mailing notice thereof as provided in Section 8.2.

Section 8.4 Qualifications for Voting.

To be entitled to vote at any meeting of Securityholders a Person shall be (a) a holder of one or more Debt Securities with respect to which the meeting is being held or (b) a Person appointed by an instrument in writing as proxy by a holder of one or more such Debt Securities. The only Persons who shall be entitled to be present or to speak at any meeting of Securityholders shall be the Persons entitled to vote at such meeting and their counsel and any representatives of the Company and its counsel.

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Section 8.5 Regulations.

Notwithstanding any other provisions of this Securityholders Agreement, the Company may make such reasonable regulations as it may deem advisable for any meeting of Securityholders, in regard to proof of the holding of Debt Securities and of the appointment of proxies, and in regard to the appointment and duties of inspectors of votes, the submission and examination of proxies, certificates and other evidence of the right to vote, and such other matters concerning the conduct of the meeting as it shall deem appropriate.

The Company shall, by an instrument in writing, appoint a temporary chairman of the meeting, unless the meeting shall have been called by the Securityholders as provided in Section 8.3, in which case the Securityholders calling the meeting shall in like manner appoint a temporary chairman. A permanent chairman and a permanent secretary of the meeting shall be elected by the holders of a majority in outstanding principal amount of the Debt Securities represented in person or by proxy at the meeting.

Subject to the provisions of Section 7.4, at any meeting each holder of Debt Securities with respect to which such meeting is being held or proxy therefor shall be entitled to one vote for each $1,000 principal amount of Debt Securities held or represented by such holder; provided, however, that no vote shall be cast or counted at any meeting in respect of any Debt Security challenged as not outstanding and ruled by the chairman of the meeting to be not outstanding. The chairman of the meeting shall have no right to vote other than by virtue of Debt Securities held by such chairman or instruments in writing as aforesaid duly designating such chairman as the Person to vote on behalf of other Securityholders. Any meeting of Securityholders duly called pursuant to the provisions of Section 8.2 or Section 8.3 may be adjourned from time to time by a majority in outstanding principal amount of the Debt Securities represented in person or by proxy at the meeting, whether or not constituting a quorum, and the meeting may be held as so adjourned without further notice.

Section 8.6 Voting.

The vote upon any resolution submitted to any meeting of holders of Debt Securities with respect to which such meeting is being held shall be by written ballots on which shall be subscribed the signatures of such holders or of their representatives by proxy and the serial number or numbers of the Debt Securities held or represented by them. The permanent chairman of the meeting shall appoint two inspectors of votes who shall count all votes cast at the meeting for or against any resolution and who shall make and file with the secretary of the meeting their verified written reports in triplicate of all votes cast at the meeting. A record in duplicate of the proceedings of each meeting of Securityholders shall be prepared by the secretary of the meeting and there shall be attached to said record the original reports of the inspectors of votes on any vote by ballot taken thereat and affidavits by one or more Persons having knowledge of the facts setting forth a copy of the notice of the meeting and showing that said notice was mailed as provided in Section 8.2. The record shall show the serial numbers of the Debt Securities voting in favor of or against any resolution. The record shall be signed and verified by the affidavits of the permanent chairman and secretary of the meeting, and one of the duplicates shall be delivered to the Company and the other shall be preserved by the secretary of the meeting, the latter to have attached thereto the ballots voted at the meeting.

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Any record so signed and verified shall be conclusive evidence of the matters therein stated.

Section 8.7 Quorum; Actions.

The Persons entitled to vote a majority in outstanding principal amount of the Debt Securities shall constitute a quorum for a meeting of Securityholders; provided, however, that if any action is to be taken at such meeting with respect to a consent, waiver, request, demand, notice, authorization, direction or other action which may be given by the holders of not less than a specified percentage in outstanding principal amount of the Debt Securities, the Persons holding or representing such specified percentage in outstanding principal amount of the Debt Securities will constitute a quorum. In the absence of a quorum within 30 minutes of the time appointed for any such meeting, the meeting shall, if convened at the request of Securityholders, be dissolved. In any other case the meeting may be adjourned for a period of not less than 10 days as determined by the permanent chairman of the meeting prior to the adjournment of such meeting. In the absence of a quorum at any such adjourned meeting, such adjourned meeting may be further adjourned for a period of not less than 10 days as determined by the permanent chairman of the meeting prior to the adjournment of such adjourned meeting. Notice of the reconvening of any adjourned meeting shall be given as provided in Section 8.2, except that such notice need be given only once not less than five days prior to the date on which the meeting is scheduled to be reconvened. Notice of the reconvening of an adjourned meeting shall state expressly the percentage, as provided above, of the outstanding principal amount of the Debt Securities which shall constitute a quorum.

Except as limited by the proviso in the first paragraph of Section 9.2, any resolution presented to a meeting or adjourned meeting duly reconvened at which a quorum is present as aforesaid may be adopted by the affirmative vote of the holders of not less than a majority in outstanding principal amount of the Debt Securities; provided, however, that, except as limited by the proviso in the first paragraph of Section 9.2, any resolution with respect to any consent, waiver, request, demand, notice, authorization, direction or other action that this Securityholders Agreement expressly provides may be given by the holders of not less than a specified percentage in outstanding principal amount of the Debt Securities may be adopted at a meeting or an adjourned meeting duly reconvened and at which a quorum is present as aforesaid only by the affirmative vote of the holders of not less than such specified percentage in outstanding principal amount of the Debt Securities.

Any resolution passed or decision taken at any meeting of holders of Debt Securities duly held in accordance with this Section shall be binding on all the Securityholders, whether or not present or represented at the meeting.

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ARTICLE IX

SUPPLEMENTAL SECURITYHOLDERS AGREEMENTS

Section 9.1 Supplemental Securityholders Agreements with Consent of Holders of 25% in Aggregate Principal Amount of Debt Securities then Outstanding.

The Company, when authorized by a Board Resolution, with the consent of not less than 25% in aggregate principal amount of the Debt Securities at the time outstanding, may enter into a supplemental Securityholders Agreement, for one or more of the following purposes:

(a) to evidence the succession of another corporation to the Company, or successive successions, and the assumption by the successor corporation of the covenants, agreements and obligations of the Company, pursuant to Article XI;

(b) to add to the covenants of the Company such further covenants, restrictions or conditions for the protection of the holders of Debt Securities as the Board of Directors shall consider to be for the protection of the holders of such Debt Securities, and to make the occurrence, or the occurrence and continuance, of a Default in any of such additional covenants, restrictions or conditions a Default or an Event of Default permitting the enforcement of all or any of the several remedies provided in this Securityholders Agreement as herein set forth; provided, however, that in respect of any such additional covenant, restriction or condition such supplemental Securityholders Agreement may provide for a particular period of grace after Default (which period may be shorter or longer than that allowed in the case of other Defaults) or may provide for an immediate enforcement upon such Default or may limit the remedies available to the Securityholders upon such default;

(c) to cure any ambiguity or to correct or supplement any provision contained herein or in any supplemental Securityholders Agreement which may be defective or inconsistent with any other provision contained herein or in any supplemental Securityholders Agreement, or to make such other provisions in regard to matters or questions arising under this Securityholders Agreement; provided, that any such action shall not adversely affect the interests of the holders of the Debt Securities;

(d) to add to, delete from, or revise the terms of Debt Securities, including, without limitation, any terms relating to the issuance, exchange, registration or transfer of Debt Securities, including to provide for transfer procedures and restrictions as required by Section 2.4 (for purposes of assuring that no registration of Debt Securities is required under the Securities Act); provided, that any such action shall not adversely affect the interests of the holders of the Debt Securities then outstanding;

(e) to make any change (other than as elsewhere provided in this paragraph) that does not adversely affect the rights of any Securityholder in any material respect; or

(f) to provide for the issuance of and establish the form and terms and conditions of the Debt Securities, to establish the form of any certifications required to be furnished pursuant to the terms of this Securityholders Agreement or the Debt Securities, or to add to the rights of the holders of Debt Securities.

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It shall not be necessary for the consent of the Securityholders under this Section 9.1 to approve the particular form of any proposed supplemental Securityholders Agreement, but it shall be sufficient if such consent shall approve the substance thereof.

Any supplemental Securityholders Agreement authorized by the provisions of this Section 9.1 may be executed by the Company and the holders of the requisite outstanding principal amount of the Debt Securities, without the consent of the remaining holders of the Debt Securities at the time outstanding.

Promptly after the execution by the Company and Securityholders of any supplemental Securityholders Agreement pursuant to the provisions of this Section, the Company shall transmit by mail, first class postage prepaid, a notice, setting forth in general terms the substance of such supplemental Securityholders Agreement, to the Securityholders as their names and addresses appear upon the Debt Security Register. Any failure of the Company to mail such notice, or any defect therein, shall not, however, in any way impair or affect the validity of any such supplemental Securityholders Agreement.

Section 9.2 Supplemental Securityholders Agreements with Consent of Holders of a Majority in Aggregate Principal Amount of Debt Securities then Outstanding.

The Company, when authorized by a Board Resolution, with the consent of not less than a majority in aggregate principal amount of the Debt Securities at the time outstanding, may enter into a supplemental Securityholders Agreement, for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Securityholders Agreement or of any supplemental Securityholders Agreement or of modifying in any manner the rights of the holders of the Debt Securities; provided, however, that no such supplemental Securityholders Agreement shall without such consent of the holders of each Debt Security then outstanding and affected thereby (i) extend the fixed maturity of any Debt Security, or reduce the principal amount thereof or any premium thereon, or reduce the rate or extend the time of payment of interest thereon, or reduce any amount payable on redemption thereof or make the principal thereof or any interest or premium thereon payable in any coin or currency other than that provided in the Debt Securities, or impair or affect the right of any Securityholder to institute suit for payment thereof or impair the right of repayment, if any, at the option of the holder, or (ii) reduce the aforesaid percentage of Debt Securities the holders of which are required to consent to any such supplemental Securityholders Agreement.

It shall not be necessary for the consent of the Securityholders under this Section 9.2 to approve the particular form of any proposed supplemental Securityholders Agreement, but it shall be sufficient if such consent shall approve the substance thereof.

Any supplemental Securityholders Agreement authorized by the provisions of this Section 9.2 may be executed by the Company and the holders of the requisite outstanding principal amount of the Debt Securities, without the consent of the remaining holders of the Debt Securities at the time outstanding.

Promptly after the execution by the Company and Securityholders of any supplemental Securityholders Agreement pursuant to the provisions of this Section, the

29

Company shall transmit by mail, first class postage prepaid, a notice, setting forth in general terms the substance of such supplemental Securityholders Agreement, to the Securityholders as their names and addresses appear upon the Debt Security Register. Any failure of the Company to mail such notice, or any defect therein, shall not, however, in any way impair or affect the validity of any such supplemental Securityholders Agreement.

Section 9.3 Effect of Supplemental Securityholders Agreements.

Upon the execution of any supplemental Securityholders Agreement pursuant to the provisions of this Article IX, this Securityholders Agreement shall be and be deemed to be modified and amended in accordance therewith and the respective rights, limitations of rights, obligations, duties and immunities under this Securityholders Agreement of the Company and the holders of Debt Securities shall thereafter be determined, exercised and enforced hereunder subject in all respects to such modifications and amendments and all the terms and conditions of any such supplemental Securityholders Agreement shall be and be deemed to be part of the terms and conditions of this Securityholders Agreement for any and all purposes.

Section 9.4 Notation on Debt Securities.

Debt Securities delivered in certificated form after the execution of any supplemental Securityholders Agreement pursuant to the provisions of this Article IX may bear a notation as to any matter provided for in such supplemental Securityholders Agreement. If the Company shall so determine, new certificated Debt Securities so modified as to conform, in the opinion of the Board of Directors of the Company, to any modification of this Securityholders Agreement contained in any such supplemental Securityholders Agreement may be prepared and executed by the Company and delivered in exchange for any certificated Debt Securities then outstanding. Nothing in this Section 9.4 shall, however, require the Company to deliver Debt Securities in certificated form whether as a result of the execution of any supplemental Securityholders Agreement or otherwise.

ARTICLE X

REDEMPTION OF SECURITIES

Section 10.1 Optional Redemption.

At any time the Company shall have the right, subject to the receipt by the Company of prior approval from the Federal Reserve, if then required under applicable capital guidelines or policies of the Federal Reserve, to redeem the Debt Securities, in whole or in part, on any March 31, June 30, September 31 and December 31 on or after March 31, 2019 (the “Redemption Date”), at the Redemption Price.

Section 10.2 Special Event Redemption.

If a Special Event shall occur and be continuing, the Company shall have the right, subject to the receipt by the Company of prior approval from the Federal Reserve if then required under applicable capital guidelines or policies of the Federal Reserve, to redeem the Debt Securities, in whole but not in part, at any time within 90 days following the occurrence of such Special Event (the “Special Redemption Date”), at the Special Redemption Price.

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Section 10.3 Notice of Redemption; Selection of Debt Securities.

In case the Company shall desire to exercise the right to redeem all, or, as the case may be, any part of the Debt Securities, it shall fix a date for redemption and shall mail a notice of such redemption at least 30 and not more than 60 days prior to the date fixed for redemption to the holders of Debt Securities so to be redeemed as a whole or in part at their last addresses as the same appear on the Debt Security Register. Such mailing shall be by first class mail. The notice if mailed in the manner herein provided shall be conclusively presumed to have been duly given, whether or not the holder receives such notice. In any case, failure to give such notice by mail or any defect in the notice to the holder of any Debt Security designated for redemption as a whole or in part shall not affect the validity of the proceedings for the redemption of any other Debt Security.

The Debt Securities may be called for redemption only as to all of the Debt Securities or portions thereof (in integral multiples of $1,000) pro rata among all Securityholders based upon the aggregate amount of Debt Securities held by each Securityholder.

Each such notice of redemption shall specify the CUSIP number, if any, of the Debt Securities to be redeemed, the date fixed for redemption, the redemption price at which Debt Securities are to be redeemed, the place or places of payment, that payment, in the case of certificated Debt Securities, will be made upon presentation and surrender of such certificated Debt Securities (unless presentation and surrender is waived by the Company), that interest accrued to the date fixed for redemption will be paid as specified in said notice, and that on and after said date interest thereon or on the portions thereof to be redeemed will cease to accrue. If less than all the Debt Securities are to be redeemed the notice of redemption shall specify the numbers of the Debt Securities to be redeemed. In case the Debt Securities are to be redeemed in part only, the notice of redemption shall state the portion of the principal amount thereof to be redeemed and shall state that on and after the date fixed for redemption, and, in the case of a certificated Debt Security, only upon surrender of such certificated Debt Security, a new Debt Security or Debt Securities in principal amount equal to the unredeemed portion thereof will be issued.

Prior to 10:00 a.m. North Carolina time on the Redemption Date or the Special Redemption Date specified in the notice of redemption given as provided in this Section, the Company will deposit with one or more Paying Agents an amount of money sufficient to redeem on the redemption date all the Debt Securities so called for redemption at the appropriate redemption price, together with accrued interest to the date fixed for redemption.

Section 10.4 Payment of Debt Securities Called for Redemption.

If notice of redemption has been given as provided in Section 10.3, the Debt Securities or portions of Debt Securities with respect to which such notice has been given shall become due and payable on the Redemption Date or the Special Redemption Date (as the case may be) and at the place or places stated in such notice at the applicable redemption price,

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together with interest accrued to the date fixed for redemption, and on and after said Redemption Date or the Special Redemption Date (unless the Company shall default in the payment of such Debt Securities at the redemption price, together with interest accrued to said date) interest on the Debt Securities or portions of Debt Securities so called for redemption shall cease to accrue. On presentation and surrender of certificated Debt Securities to be redeemed at a place of payment specified in said notice, such certificated Debt Securities along with such uncertificated Debt Securities as are to be redeemed in accordance with the provisions hereof shall be paid and redeemed by the Company at the applicable redemption price, together with interest accrued thereon to the Redemption Date or the Special Redemption Date (as the case may be).

Upon redemption of any certificated Debt Security in part only, the Company shall execute and make available for delivery to the holder thereof, at the expense of the Company, a new Debt Security or Debt Securities of authorized denominations in principal amount equal to the unredeemed portion of the Debt Security so presented and shall otherwise update, or cause its agent to update, book entries with respect to all uncertificated Debt Securities redeemed in part only.

ARTICLE XI

CONSOLIDATION, MERGER, SALE, CONVEYANCE AND LEASE

Section 11.1 Company May Consolidate, etc., on Certain Terms

Nothing contained in this Securityholders Agreement or in the Debt Securities shall prevent any consolidation or merger of the Company with or into any other corporation or corporations (whether or not affiliated with the Company) or successive consolidations or mergers in which the Company or its successor or successors shall be a party or parties, or shall prevent any sale, conveyance, transfer or other disposition of the property or capital stock of the Company or its successor or successors as an entirety, or substantially as an entirety, to any other corporation (whether or not affiliated with the Company, or its successor or successors) authorized to acquire and operate the same; provided, however, that the Company hereby covenants and agrees that, upon any such consolidation, merger (where the Company is not the surviving corporation), sale, conveyance, transfer or other disposition, the due and punctual payment of all payments due on all of the Debt Securities in accordance with their terms, according to their tenor, and the due and punctual performance and observance of all the covenants and conditions of this Securityholders Agreement to be kept or performed by the Company, shall be expressly assumed by the entity formed by such consolidation, or into which the Company shall have been merged, or by the entity which shall have acquired such property or capital stock.

Section 11.2 Successor Entity to be Substituted.

In case of any such consolidation, merger, sale, conveyance, transfer or other disposition contemplated in Section 11.1 and upon the assumption by the successor entity of the due and punctual payment of the principal of and premium, if any, and interest on all of the Debt Securities and the due and punctual performance and observance of all of the covenants and conditions of this Securityholders Agreement to be performed or observed by the Company, such

32

successor entity shall succeed to and be substituted for the Company, with the same effect as if it had been named herein as the Company, and thereupon the predecessor entity shall be relieved of any further liability or obligation hereunder or upon the Debt Securities. Such successor entity thereupon may cause to be signed, and may issue either in its own name or in the name of the Company, any or all of the Debt Securities issuable hereunder which theretofore shall not have been signed by the Company. All the Debt Securities so issued shall in all respects have the same legal rank and benefit under this Securityholders Agreement as the Debt Securities theretofore or thereafter issued in accordance with the terms of this Securityholders Agreement as though all of such Debt Securities had been issued at the date of the execution hereof.

ARTICLE XII

SATISFACTION AND DISCHARGE OF SECURITYHOLDERS AGREEMENT

Section 12.1 Discharge of Securityholders Agreement.

When all the Debt Securities not theretofore canceled shall have become due and payable, or are by their terms to become due and payable within one year or are to be called for redemption within one year, and the Company shall deposit with a Paying Agent, in trust, funds, which shall be immediately due and payable, sufficient to pay at maturity or upon redemption all of the Debt Securities (other than any Debt Securities which shall have been destroyed, lost or stolen and which shall have been replaced or paid as provided in Section 2.5) not theretofore canceled, including principal and premium, if any, and interest due or to become due to such date of maturity or redemption date, as the case may be, but excluding, however, the amount of any moneys for the payment of principal of, and premium, if any, or interest on the Debt Securities (a) theretofore repaid to the Company in accordance with the provisions of Section 12.4, or (b) paid to any state or to the District of Columbia pursuant to its unclaimed property or similar laws, and if in the case of either clause (a) or clause (b) the Company shall also pay or cause to be paid all other sums payable hereunder by the Company, then this Securityholders Agreement shall cease to be of further effect except for the provisions of Section 2.5, Section 2.6, Section 3.1, Section 3.2, Section 3.3, and Section 12.4 hereof, which shall survive until such Debt Securities shall mature or are redeemed, as the case may be, and are paid. Thereafter, Section 12.4 shall survive.

Section 12.2 Deposited Moneys to be Held in Trust by a Paying Agent.

Subject to the provisions of Section 12.3 and Section 12.4, all moneys deposited with any Paying Agent pursuant to Section 12.1 shall be held in trust and applied by it to the payment, to the holders of the particular Debt Securities for the payment of which such moneys have been deposited with the Paying Agent, of all sums due and to become due thereon for principal, and premium, if any, and interest.

Section 12.3 Paying Agent to Repay Moneys Held.

Upon the satisfaction and discharge of this Securityholders Agreement, all moneys then held by any Paying Agent of the Debt Securities shall, upon demand of the Company, be repaid to the Company, and thereupon such Paying Agent shall be released from all further liability with respect to such moneys.

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Section 12.4 Return of Unclaimed Moneys.

Any moneys deposited with or paid to any Paying Agent for payment of the principal of, and premium, if any, or interest on Debt Securities and not applied but remaining unclaimed by the holders of Debt Securities for two years after the date upon which the principal of, and premium, if any, or interest on such Debt Securities, as the case may be, shall have become due and payable, shall be repaid to the Company by such Paying Agent on written demand; and the holder of any of the Debt Securities shall thereafter look only to the Company for any payment which such holder may be entitled to collect and all liability of such Paying Agent with respect to such moneys shall thereupon cease.

ARTICLE XIII

IMMUNITY OF INCORPORATORS, STOCKHOLDERS, OFFICERS AND DIRECTORS

Section 13.1 Securityholders Agreement and Debt Securities Solely Corporate Obligations.

No recourse for the payment of the principal of or premium, if any, or interest on any Debt Security, or for any claim based thereon or otherwise in respect thereof, and no recourse under or upon any obligation, covenant or agreement of the Company in this Securityholders Agreement or in any supplemental Securityholders Agreement, or in any such Debt Security, or because of the creation of any indebtedness represented thereby, shall be had against any incorporator, stockholder, officer, director, employee or agent, as such, past, present or future, of the Company or of any predecessor or successor corporation of the Company, either directly or through the Company or any successor corporation of the Company, whether by virtue of any constitution, statute or rule of law, or by the enforcement of any assessment or penalty or otherwise; it being expressly understood that all such liability is hereby expressly waived and released as a condition of, and as a consideration for, the execution of this Securityholders Agreement and the issue of the Debt Securities.

ARTICLE XIV

MISCELLANEOUS PROVISIONS

Section 14.1 Successors.

All the covenants, stipulations, promises and agreements of the Company contained in this Securityholders Agreement shall bind its successors and assigns whether so expressed or not.

Section 14.2 Official Acts by Successor Entity.

Any act or proceeding by any provision of this Securityholders Agreement authorized or required to be done or performed by any board, committee or officer of the

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Company shall and may be done and performed with like force and effect by the like board, committee, officer or other authorized Person of any entity that shall at the time be the lawful successor of the Company.

Section 14.3 Surrender of Company Powers.

The Company by instrument in writing executed by authority of 2/3 (two-thirds) of its Board of Directors and delivered to the Securityholders may surrender any of the powers reserved to the Company and thereupon such power so surrendered shall terminate both as to the Company and as to any permitted successor.

Section 14.4 Addresses for Notices, etc.

Any notice or demand which by any provision of this Securityholders Agreement is required or permitted to be given or served by the Securityholders on the Company may be given or served in writing by being deposited postage prepaid by registered or certified mail in a post office letter box addressed (until another address is filed by the Company with the Securityholders for such purpose) to the Company at:

Attention: Chief Financial Officer

Uwharrie Capital Corp

P.O. Box 338

Albemarle, NC 28002

Any notice, direction, request or demand by the Company to or upon and Securityholders shall be deemed to have been sufficiently given or made, for all purposes, if given or made in to the address of such Securityholder most recently furnished to the Company by such Securityholder.

Section 14.5 Governing Law.

This Securityholders Agreement and each Debt Security shall be deemed to be a contract made under the law of the State of North Carolina, and for all purposes shall be governed by and construed in accordance with the law of said State, without regard to conflict of laws principles thereof.

Section 14.6 Evidence of Compliance with Conditions Precedent.

Each certificate or opinion provided for in this Securityholders Agreement and delivered to the Securityholders with respect to compliance with a condition or covenant provided for in this Securityholders Agreement (except certificates delivered pursuant to Section 3.4) shall include (a) a statement that the person making such certificate or opinion has read such covenant or condition; (b) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based; (c) a statement that, in the opinion of such person, he or she has made such examination or investigation as is necessary to enable him or her to express an informed opinion as to whether or not such covenant or condition has been complied with; and (d) a statement as to whether or not, in the opinion of such person, such condition or covenant has been complied with.

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Section 14.7 Business Day Convention.

Notwithstanding anything to the contrary contained herein, if any Interest Payment Date, Maturity Date, Redemption Date or Special Redemption Date falls on a day that is not a Business Day, then the principal, premium, if any, and/or interest payable on such date will be paid on the latest immediately preceding day which is a Business Day with the same force and effect as though paid on the originally scheduled Interest Payment Date, Maturity Date, Redemption Date or Special Redemption Date, as the case may be, and no additional interest will accrue for each day that such payment is delayed as a result thereof.

Section 14.8 Table of Contents, Headings, etc.

The table of contents and the titles and headings of the articles and sections of this Securityholders Agreement have been inserted for convenience of reference only, are not to be considered a part hereof, and shall in no way modify or restrict any of the terms or provisions hereof.

Section 14.9 Execution in Counterparts.

This Securityholders Agreement may be executed in any number of counterparts, each of which shall be an original, but such counterparts shall together constitute but one and the same instrument.

Section 14.10 Severability.

In case any one or more of the provisions contained in this Securityholders Agreement or in the Debt Securities shall for any reason be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provisions of this Securityholders Agreement or of such Debt Securities, but this Securityholders Agreement and such Debt Securities shall be construed as if such invalid or illegal or unenforceable provision had never been contained herein or therein.

Section 14.11 Assignment.

Subject to Article XI, the Company will have the right at all times to assign any of its rights or obligations under this Securityholders Agreement to a direct or indirect wholly owned Subsidiary of the Company, provided, that, in the event of any such assignment, the Company will remain liable for all such obligations. Subject to the foregoing, this Securityholders Agreement is binding upon and inures to the benefit of the parties hereto and their respective successors and assigns. This Securityholders Agreement may not otherwise be assigned by the parties thereto.

[Signature page follows]

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IN WITNESS WHEREOF, the parties hereto have caused this Securityholders Agreement to be duly executed by their respective officers thereunto duly authorized, as of the day and year first above written.

COMPANY:
UWHARRIE CAPITAL CORP
By
	Name:
	Title:
SECURITYHOLDER:
[if an entity]
By
	Name:
	Title:
	[if an individual]
	Name:

Signature Page to Securityholders Agreement

EXHIBIT A

FORM OF FIXED RATE JUNIOR SUBORDINATED DEBT SECURITY DUE 2024

[FORM OF FACE OF SECURITY]

THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY STATE SECURITIES LAWS OR ANY OTHER APPLICABLE SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR OTHERWISE TRANSFER SUCH SECURITY ONLY (A) TO THE COMPANY, (B) PURSUANT TO RULE 144A UNDER THE SECURITIES ACT (“RULE 144A”), TO A PERSON THE HOLDER REASONABLY BELIEVES IS A “QUALIFIED INSTITUTIONAL BUYER” AS DEFINED IN RULE 144A THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (C) PURSUANT TO AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT TO AN “ACCREDITED INVESTOR” WITHIN THE MEANING OF SUBPARAGRAPH (a) (1), (2), (3) OR (7) OF RULE 501 UNDER THE SECURITIES ACT THAT IS ACQUIRING THE SECURITY FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF AN “ACCREDITED INVESTOR,” FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT, OR (D) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE COMPANY’S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER PURSUANT TO CLAUSES (C) OR (D) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO IT IN ACCORDANCE WITH THE SECURITYHOLDERS AGREEMENT, A COPY OF WHICH MAY BE OBTAINED FROM THE COMPANY. THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES THAT IT WILL COMPLY WITH THE FOREGOING RESTRICTIONS.

THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES, REPRESENTS AND WARRANTS THAT IT WILL NOT ENGAGE IN HEDGING TRANSACTIONS INVOLVING THIS SECURITY UNLESS SUCH TRANSACTIONS ARE IN COMPLIANCE WITH THE SECURITIES ACT.

THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF ALSO AGREES, REPRESENTS AND WARRANTS THAT IT IS NOT AN EMPLOYEE BENEFIT, INDIVIDUAL RETIREMENT ACCOUNT OR OTHER PLAN OR ARRANGEMENT

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SUBJECT TO TITLE I OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED (“ERISA”), OR SECTION 4975 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE “CODE”), (EACH A “PLAN”), OR AN ENTITY WHOSE UNDERLYING ASSETS INCLUDE “PLAN ASSETS” BY REASON OF ANY PLAN’S INVESTMENT IN THE ENTITY AND NO PERSON INVESTING “PLAN ASSETS” OF ANY PLAN MAY ACQUIRE OR HOLD THIS SECURITY OR ANY INTEREST THEREIN, UNLESS SUCH PURCHASER OR HOLDER IS ELIGIBLE FOR THE EXEMPTIVE RELIEF AVAILABLE UNDER U.S. DEPARTMENT OF LABOR PROHIBITED TRANSACTION CLASS EXEMPTION 96-23, 95-60, 91-38, 90-1, 84-14, THE NON-FIDUCIARY SERVICE PROVIDER EXEMPTION UNDER SECTION 408(B)(17) OF ERISA OR ANOTHER APPLICABLE EXEMPTION.

IN CONNECTION WITH ANY TRANSFER, THE HOLDER OF THIS SECURITY WILL DELIVER TO THE REGISTRAR AND TRANSFER AGENT SUCH CERTIFICATES AND OTHER INFORMATION AS MAY BE REQUIRED BY THE SECURITYHOLDERS AGREEMENT TO CONFIRM THAT THE TRANSFER COMPLIES WITH THE FOREGOING RESTRICTIONS.

THIS SECURITY WILL BE ISSUED AND MAY BE TRANSFERRED ONLY IN BLOCKS HAVING A PRINCIPAL AMOUNT OF NOT LESS THAN $50,000 AND MULTIPLES OF $1,000 IN EXCESS THEREOF. ANY ATTEMPTED TRANSFER OF THIS SECURITY IN A BLOCK HAVING A PRINCIPAL AMOUNT OF LESS THAN $50,000 SHALL BE DEEMED TO BE VOID AND OF NO LEGAL EFFECT WHATSOEVER. ANY SUCH PURPORTED TRANSFEREE SHALL BE DEEMED NOT TO BE THE HOLDER OF THIS SECURITY FOR ANY PURPOSE, INCLUDING, BUT NOT LIMITED TO, THE RECEIPT OF DISTRIBUTIONS ON THIS SECURITY, AND SUCH PURPORTED TRANSFEREE SHALL BE DEEMED TO HAVE NO INTEREST WHATSOEVER IN THIS SECURITY.

THIS OBLIGATION IS NOT A DEPOSIT AND IS NOT INSURED BY THE UNITED STATES OR ANY AGENCY OR FUND OF THE UNITED STATES, INCLUDING THE FEDERAL DEPOSIT INSURANCE CORPORATION. THIS OBLIGATION IS SUBORDINATED TO THE CLAIMS OF DEPOSITORS AND THE CLAIMS OF GENERAL AND SECURED CREDITORS OF THE COMPANY, IS INELIGIBLE AS COLLATERAL FOR A LOAN BY THE COMPANY OR ANY OF ITS SUBSIDIARIES AND IS NOT SECURED.

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Fixed Rate Junior Subordinated Debt Security due 2024

of

UHWARRIE CAPITAL CORP

Uwharrie Capital Corp, a bank holding company incorporated in the State of North Carolina (the “Company”), for value received promises to pay to [SECURITY HOLDER] (the “Holder”), or registered assigns, the principal sum of [            ] Dollars ($[            ]) on March 31, 2024 and to pay interest on said principal sum from March 31, 2014 or from the most recent interest payment date to which interest has been paid or duly provided for, quarterly in arrears on March 31, June 30, September 30 and December 31 (each such date, an “Interest Payment Date”) of each year commencing on the first Interest Payment Date following the original date of issuance of such Debt Security, at a fixed per annum rate of interest equal to 5.75% (the “Interest Rate”) until the principal hereof shall have become due and payable, and on any overdue principal and (without duplication and to the extent that payment of such interest is enforceable under applicable law) on any overdue installment of interest at an annual rate equal to the Interest Rate. Notwithstanding anything to the contrary contained herein, if any Interest Payment Date, Maturity Date, Redemption Date or Special Redemption Date falls on a day that is not a Business Day, then the principal, premium, if any, and/or interest payable on such date will be paid on the latest immediately preceding day which is a Business Day with the same force and effect as though paid on the originally scheduled Interest Payment Date, Maturity Date, Redemption Date or Special Redemption Date, as the case may be. The interest installment so payable, and punctually paid or duly provided for, on any Interest Payment Date will, as provided in the Securityholders Agreement, be paid to the Person in whose name this Debt Security (or one or more Predecessor Securities, as defined in said Securityholders Agreement) is registered at the close of business on the regular record date for such interest installment, except that interest payable on the Maturity Date shall be paid to the Person to whom principal is paid. Any such interest installment not punctually paid or duly provided for shall forthwith cease to be payable to the registered holders on such regular record date and may be paid to the Person in whose name this Debt Security (or one or more Predecessor Debt Securities) is registered at the close of business on a special record date to be fixed by the Company for the payment of such defaulted interest, notice whereof shall be given to the registered holders of the Debt Securities not less than 10 days prior to such special record date, all as more fully provided in the Securityholders Agreement. The principal of and interest on this Debt Security shall be payable at the office or agency of the Company (or Paying Agent appointed by the Company) maintained for that purpose in any coin or currency of the United States of America that at the time of payment is legal tender for payment of public and private debts; provided, however, that payment of interest may be made at the option of the Company by check mailed to the registered holder at such address as shall appear in the Debt Security Register or by ACH or wire transfer to an account appropriately designated by the holder hereof.

The indebtedness evidenced by this Debt Security is, to the extent provided in the Securityholders Agreement, subordinate and junior in right of payment to the prior payment in full of all Senior Indebtedness, and this Debt Security is issued subject to the provisions of the Securityholders Agreement with respect thereto. Each holder of this Debt Security, by accepting the same, agrees to and shall be bound by such provisions. Each holder hereof, by such holder’s

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acceptance hereof, hereby waives all notice of the acceptance of the subordination provisions contained herein and in the Securityholders Agreement by each holder of Senior Indebtedness, whether now outstanding or hereafter incurred, and waives reliance by each such holder upon said provisions.

The Company waives demand, presentment for payment, notice of nonpayment, notice of protest, and all other notices.

The provisions of this Debt Security are continued on the reverse side hereof and such continued provisions shall for all purposes have the same effect as though fully set forth at this place.

This Debt Security may contain more than one counterpart of the signature page and this Debt Security may be executed by the affixing of the signature of a proper officer of the Company to any of such counterpart signature pages. All of such counterpart signature pages shall be read as though one, and they shall have the same force and effect as though the Company had executed a single signature page.

[Signature page follows]

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IN WITNESS WHEREOF, the Company has duly executed this certificate.

UWHARRIE CAPITAL CORP
By:
	Name:
	Title:

Dated:                    ,     

A-1-5

[FORM OF REVERSE OF SECURITY]

This Debt Security is one of a duly authorized series of Debt Securities of the Company, all issued or to be issued pursuant to a Securityholders Agreement (the “Securityholders Agreement”), dated as of March 31, 2014 duly executed and entered into among the Company and the holders of Debt Securities of like tenor, to which Securityholders Agreement and all Securityholders Agreements supplemental thereto reference is hereby made for a description of the rights, limitations of rights, obligations, duties and immunities thereunder of the Company and the holders of the Debt Securities (referred to herein as the “Debt Securities”) of which this Debt Security is a part. The summary of the terms of this Debt Security contained herein does not purport to be complete and is qualified by reference to the Securityholders Agreement.

Upon the occurrence and continuation of a Tax Event or a Capital Treatment Event, this Debt Security may become due and payable, in whole but not in part, at any time, within 90 days following the occurrence of such Tax Event or Capital Treatment Event (the “Special Redemption Date”), as the case may be, at the Special Redemption Price. The Company shall also have the right to redeem this Debt Security at the option of the Company, in whole or in part, on any March 31, June 30, September 31 and December 31 on or after March 31, 2019 (a “Redemption Date”), at the Redemption Price.

Any redemption pursuant to the preceding paragraph will be made, subject to the receipt by the Company of prior approval from the Board of Governors of the Federal Reserve System (the “Federal Reserve”) if then required under applicable capital guidelines or policies of the Federal Reserve, upon not less than 30 days’ nor more than 60 days’ notice. If the Debt Securities are only partially redeemed by the Company, the Debt Securities will be redeemed pro rata.

“Redemption Price” means 100% of the principal amount of the Debt Securities being redeemed plus accrued and unpaid interest on such Debt Securities to the Redemption Date or, in the case of a redemption due to the occurrence of a Special Event, to the Special Redemption Date.

“Special Redemption Price” means, with respect to the redemption of any Debt Security following a Special Event, 100% of the principal amount of the Debt Securities being redeemed plus accrued and unpaid interest on such Debt Securities to the Special Redemption Date.

In the event of redemption of this Debt Security in part only, a new certificated or uncertificated Debt Security or Debt Securities for the unredeemed portion hereof will be issued in the name of the holder hereof upon the cancellation hereof.

If case an Event of Default specified under Section 5.1(e) or Section 5.1(f) of the Securityholders Agreement occurs, then, in each and every such case, the entire principal amount of the Debt Securities and any premium and interest accrued, but unpaid, thereon shall ipso facto become immediately due and payable without further action, with the effect and subject to the conditions provided in the Securityholders Agreement.

A-1-6

The Securityholders Agreement contains provisions permitting the Company and the holders of not less than 25% in aggregate principal amount of the Debt Securities at the time outstanding affected thereby, as specified in the Securityholders Agreement, to execute supplemental Securityholders Agreements for the purpose of (i) evidencing the succession of another corporation to the Company; (ii) adding to the covenants of the Company further covenants for the protection of the holders of Debt Securities; (iii) curing any ambiguity, or correcting any defective or inconsistent provision; (iv) adding to, deleting from, or revising the terms of the Debt Securities, provided that such actions do not adversely affect the interests of the holders of the Debt Securities then outstanding; (v) making any other change that does not adversely affect the rights of any Securityholder in any material respect; or (vi) providing for the issuance of Debt Securities, establishing the form of certifications to be given pursuant to the terms of the Securityholders Agreement or the Debt Securities, or adding to the rights of the Debt Securities.

The Securityholders Agreement contains provisions permitting the Company and the holders of not less than a majority in aggregate principal amount of the Debt Securities at the time outstanding affected thereby, as specified in the Securityholders Agreement, to execute supplemental Securityholders Agreements for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of the Securityholders Agreement or of any supplemental Securityholders Agreement or of modifying in any manner the rights of the holders of the Debt Securities; provided, however, that no such supplemental Securityholders Agreement shall, among other things, without the consent of the holders of each Debt Security then outstanding and affected thereby (i) extend the fixed maturity of the Debt Securities, or reduce the principal amount thereof or any redemption premium thereon, or reduce the rate or extend the time of payment of interest thereon, or make payments due on the Debt Securities payable in any coin or currency other than that provided in the Debt Securities, or impair or affect the right of any holder of Debt Securities to institute suit for the payment thereof, or (ii) reduce the aforesaid percentage of Debt Securities, the holders of which are required to consent to any such supplemental Securityholders Agreement.

The Securityholders Agreement also contains provisions permitting the holders of a majority in aggregate principal amount of the Debt Securities at the time outstanding, on behalf of all of the holders of the Debt Securities, to waive any past default in the performance of any of the covenants contained in the Securityholders Agreement, or established pursuant to the Securityholders Agreement, and its consequences, except a default in payments due on any of the Debt Securities. Any such consent or waiver by the registered holder of this Debt Security (unless revoked as provided in the Securityholders Agreement) shall be conclusive and binding upon such holder and upon all future holders and owners of this Debt Security and of any Debt Security issued in exchange herefor or in place hereof (whether by registration of transfer or otherwise), irrespective of whether or not any notation of such consent or waiver is made upon this Debt Security.

No reference herein to the Securityholders Agreement and no provision of this Debt Security or of the Securityholders Agreement shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay all payments due on this Debt Security at the time and place and at the rate and in the money herein prescribed.

A-1-7

As provided in the Securityholders Agreement and subject to certain limitations herein and therein set forth, this Debt Security is transferable by the registered holder hereof on the Debt Security Register of the Company, upon surrender of this Debt Security for registration of transfer at the office or agency of the Company maintained for such purpose accompanied by a written instrument or instruments of transfer in form satisfactory to the Company duly executed by the registered holder hereof or such holder’s attorney duly authorized in writing, and thereupon one or more new Debt Securities of authorized denominations and for the same aggregate principal amount will be issued to the designated transferee or transferees. No service charge will be made for any such registration of transfer, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge payable in relation thereto.

Prior registration of transfer of this Debt Security, the Company, any Paying Agent, any transfer agent and the Debt Security registrar may deem and treat the registered holder hereof as the absolute owner hereof (whether or not this Debt Security shall be overdue and notwithstanding any notice of ownership or writing hereon) for the purpose of receiving payment of or on account of the principal hereof, premium, if any, and interest due hereon and for all other purposes, and neither the Company nor any Paying Agent nor any transfer agent nor any Debt Security registrar shall be affected by any notice to the contrary.

No recourse shall be had for the payment of the principal of or premium, if any, or the interest on this Debt Security, or for any claim based hereon, or otherwise in respect hereof, or based on or in respect of the Securityholders Agreement, against any incorporator, stockholder, officer or director, past, present or future, as such, of the Company or of any predecessor or successor corporation, whether by virtue of any constitution, statute or rule of law, or by the enforcement of any assessment or penalty or otherwise, all such liability being, by the acceptance hereof and as part of the consideration for the issuance hereof, expressly waived and released.

The Debt Securities are issuable in registered uncertificated or certificated form without coupons. As provided in the Securityholders Agreement and subject to certain limitations herein and therein set forth, Debt Securities are exchangeable for a like aggregate principal amount of Debt Securities of a different authorized denomination, as requested by the holder surrendering the same.

All terms used in this Debt Security that are defined in the Securityholders Agreement shall have the meanings assigned to them in the Securityholders Agreement.

THE LAW OF THE STATE OF NORTH CAROLINA SHALL GOVERN THE SECURITYHOLDERS AGREEMENT AND THE DEBT SECURITIES, WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES THEREOF.

A-1-8

EXHIBIT B

FORM OF CERTIFICATE

OF OFFICER

OF

UWHARRIE CAPITAL CORP.

Pursuant to Section 3.4 of the Securityholders Agreement among Uwharrie Capital Corp, as issuer (the “Company”), and the Securityholders which are parties thereto, dated as of March 31, 2014 (as amended or supplemented from time to time, the “Securityholders Agreement”), the undersigned certifies that he/she is a principal executive officer, principal financial officer or principal accounting officer of the Company and in the course of the performance by the undersigned of his/her duties as an officer of the Company, the undersigned would normally have knowledge of any default by the Company in the performance of any covenants contained in the Securityholders Agreement, and the undersigned hereby further certifies that he/she has no knowledge of any such default for the year 20     [,except as follows: specify each such default and the nature thereof].

Capitalized terms used herein, and not otherwise defined herein, have the respective meanings ascribed thereto in the Securityholders Agreement.

IN WITNESS WHEREOF, the undersigned has executed this Certificate as of             , 20    .

UWHARRIE CAPITAL CORP

Name:

Title:

B-1-1

EX-31.1

Exhibit 31.1

UWHARRIE CAPITAL CORP

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

Pursuant to Rule 13a -14(a)

I, Roger L. Dick, certify that:

1. I have reviewed this quarterly report on Form 10-Q for the quarterly period ended March 31, 2014 of Uwharrie Capital Corp (the “registrant”);

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a – 15(f) and 15d – 15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 6, 2014	/s/ Roger L. Dick
	Roger L. Dick
	President and Chief Executive Officer

EX-31.2

Exhibit 31.2

UWHARRIE CAPITAL CORP

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER

Pursuant to Rule 13a -14(a)

I, R. David Beaver, III, certify that:

1. I have reviewed this quarterly report on Form 10-Q for the quarterly period ended March 31, 2014 of Uwharrie Capital Corp the (“registrant”);

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a – 15(f) and 15d – 15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 6, 2014	/s/ R. David Beaver, III
	R. David Beaver, III
	Principal Financial Officer

EX-32

Exhibit 32

Certification pursuant to 18 U.S.C. 1350 as adopted pursuant

to Section 906 of the Sarbanes-Oxley Act of 2002

The undersigned each hereby certifies that, to his knowledge, (i) the Form 10-Q filed by Uwharrie Capital Corp (the “Issuer”) for the quarter ended March 31, 2014, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, and (ii) the information contained in that report fairly presents, in all material respects, the financial condition and results of operations of the Issuer on the dates and for the periods presented therein.

Date: May 6, 2014	/s/ Roger L. Dick
	Roger L. Dick
	President and Chief Executive Officer
Date: May 6, 2014	/s/ R. David Beaver, III
	R. David Beaver, III
	Principal Financial Officer

XML

Investment Securities - Gross Unrealized Losses and Fair Value of Investments (Detail) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2014	Dec. 31, 2013
Schedule of Available-for-sale Securities [Line Items]
Available-for-sale Securities, Gross unrealized losses, Less than Twelve Months, Fair Value	$ 60,209	$ 56,075
Available-for-sale Securities, Gross unrealized losses, Less than Twelve Months, Unrealized Losses	1,232	1,826
Available-for-sale Securities, Gross unrealized losses, Twelve Months or More, Fair Value	3,710	3,849
Available-for-sale Securities, Gross unrealized losses, Twelve Months or More, Unrealized Losses	121	144
Available-for-sale Securities, Gross unrealized losses, Fair Value	63,919	59,924
Available-for-sale Securities, Gross unrealized losses, Unrealized Losses	1,353	1,970
U.S. Treasury [Member]
Schedule of Available-for-sale Securities [Line Items]
Available-for-sale Securities, Gross unrealized losses, Less than Twelve Months, Fair Value	4,764	4,722
Available-for-sale Securities, Gross unrealized losses, Less than Twelve Months, Unrealized Losses	168	208
Available-for-sale Securities, Gross unrealized losses, Fair Value	4,764	4,722
Available-for-sale Securities, Gross unrealized losses, Unrealized Losses	168	208
U.S. Government Agencies [Member]
Schedule of Available-for-sale Securities [Line Items]
Available-for-sale Securities, Gross unrealized losses, Less than Twelve Months, Fair Value	39,288	29,147
Available-for-sale Securities, Gross unrealized losses, Less than Twelve Months, Unrealized Losses	623	776
Available-for-sale Securities, Gross unrealized losses, Fair Value	39,288	29,147
Available-for-sale Securities, Gross unrealized losses, Unrealized Losses	623	776
Mortgage-Backed Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Available-for-sale Securities, Gross unrealized losses, Less than Twelve Months, Fair Value	16,157	22,206
Available-for-sale Securities, Gross unrealized losses, Less than Twelve Months, Unrealized Losses	441	842
Available-for-sale Securities, Gross unrealized losses, Twelve Months or More, Fair Value	3,710	3,849
Available-for-sale Securities, Gross unrealized losses, Twelve Months or More, Unrealized Losses	121	144
Available-for-sale Securities, Gross unrealized losses, Fair Value	19,867	26,055
Available-for-sale Securities, Gross unrealized losses, Unrealized Losses	562	986
State and Political Subdivisions [Member]
Schedule of Available-for-sale Securities [Line Items]
Available-for-sale Securities, Gross unrealized losses, Less than Twelve Months, Fair Value
Available-for-sale Securities, Gross unrealized losses, Less than Twelve Months, Unrealized Losses
Available-for-sale Securities, Gross unrealized losses, Twelve Months or More, Fair Value
Available-for-sale Securities, Gross unrealized losses, Twelve Months or More, Unrealized Losses
Available-for-sale Securities, Gross unrealized losses, Fair Value
Available-for-sale Securities, Gross unrealized losses, Unrealized Losses

XML

Commitments and Contingencies - Outstanding Financial Instruments Whose Contract Amounts Represent Credit Risk (Detail) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2014
Loss Contingencies [Line Items]
Total commitments	$ 92,065
Commitments to Extend Credit [Member]
Loss Contingencies [Line Items]
Total commitments	82,263
Credit Card Commitments [Member]
Loss Contingencies [Line Items]
Total commitments	8,474
Standby Letters of Credit [Member]
Loss Contingencies [Line Items]
Total commitments	$ 1,328

XML

Allowance for Loan Losses - Summary of Performing and Nonperforming Loans by Class (Detail) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2014	Dec. 31, 2013
Financing Receivable, Recorded Investment [Line Items]
Loans	$ 304,735	$ 307,348
Commercial [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	48,512	47,436
Real Estate - Commercial [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	92,718	95,922
Other Real Estate Construction [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	17,743	17,583
Real Estate 1 - 4 Family Construction [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	3,849	3,418
Real Estate - Residential [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	88,247	87,523
Home Equity [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	44,486	45,231
Consumer Loans [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	8,604	9,623
Other Loans [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	576	612
Performing [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	301,124	302,631
Performing [Member] | Commercial [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	48,512	47,232
Performing [Member] | Real Estate - Commercial [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	91,354	94,858
Performing [Member] | Other Real Estate Construction [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	16,058	15,946
Performing [Member] | Real Estate 1 - 4 Family Construction [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	3,849	3,418
Performing [Member] | Real Estate - Residential [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	87,685	85,959
Performing [Member] | Home Equity [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	44,486	44,983
Performing [Member] | Consumer Loans [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	8,604	9,623
Performing [Member] | Other Loans [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	576	612
Non-Performing [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	3,611	4,717
Non-Performing [Member] | Commercial [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans		204
Non-Performing [Member] | Real Estate - Commercial [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	1,364	1,064
Non-Performing [Member] | Other Real Estate Construction [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	1,685	1,637
Non-Performing [Member] | Real Estate - Residential [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	562	1,564
Non-Performing [Member] | Home Equity [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans		$ 248

XML

Fair Value Disclosures - Fair Value Information for Assets and Liabilities Measured at Fair Value on Recurring Basis (Detail) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2014	Dec. 31, 2013
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total assets at fair value	$ 111,508	$ 100,280
Level 1 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total assets at fair value	21,250	21,286
Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total assets at fair value	90,258	78,994
Fair Value on a Recurring Basis [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total assets at fair value	111,508	100,280
Total liabilities at fair value
Fair Value on a Recurring Basis [Member] | U.S. Treasury [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total assets at fair value	21,250	21,286
Fair Value on a Recurring Basis [Member] | U.S. Government Agencies [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total assets at fair value	44,405	34,300
Fair Value on a Recurring Basis [Member] | Mortgage-Backed Securities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total assets at fair value	35,433	37,006
Fair Value on a Recurring Basis [Member] | State and Political Subdivisions [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total assets at fair value	10,420	7,688
Fair Value on a Recurring Basis [Member] | Level 1 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total assets at fair value	21,250	21,286
Total liabilities at fair value
Fair Value on a Recurring Basis [Member] | Level 1 [Member] | U.S. Treasury [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total assets at fair value	21,250	21,286
Fair Value on a Recurring Basis [Member] | Level 1 [Member] | U.S. Government Agencies [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total assets at fair value
Fair Value on a Recurring Basis [Member] | Level 1 [Member] | Mortgage-Backed Securities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total assets at fair value
Fair Value on a Recurring Basis [Member] | Level 1 [Member] | State and Political Subdivisions [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total assets at fair value
Fair Value on a Recurring Basis [Member] | Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total assets at fair value	90,258	78,994
Total liabilities at fair value
Fair Value on a Recurring Basis [Member] | Level 2 [Member] | U.S. Treasury [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total assets at fair value
Fair Value on a Recurring Basis [Member] | Level 2 [Member] | U.S. Government Agencies [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total assets at fair value	44,405	34,300
Fair Value on a Recurring Basis [Member] | Level 2 [Member] | Mortgage-Backed Securities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total assets at fair value	35,433	37,006
Fair Value on a Recurring Basis [Member] | Level 2 [Member] | State and Political Subdivisions [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total assets at fair value	10,420	7,688
Fair Value on a Recurring Basis [Member] | Level 3 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total assets at fair value
Total liabilities at fair value
Fair Value on a Recurring Basis [Member] | Level 3 [Member] | U.S. Treasury [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total assets at fair value
Fair Value on a Recurring Basis [Member] | Level 3 [Member] | U.S. Government Agencies [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total assets at fair value
Fair Value on a Recurring Basis [Member] | Level 3 [Member] | Mortgage-Backed Securities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total assets at fair value
Fair Value on a Recurring Basis [Member] | Level 3 [Member] | State and Political Subdivisions [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total assets at fair value

XML

Allowance for Loan Losses - Composition of Nonaccrual Loans by Class (Detail) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2014	Dec. 31, 2013
Financing Receivable, Impaired [Line Items]
Increase in non-performing loans	$ 3,611	$ 4,717
Commercial [Member]
Financing Receivable, Impaired [Line Items]
Increase in non-performing loans		204
Real Estate - Commercial [Member]
Financing Receivable, Impaired [Line Items]
Increase in non-performing loans	1,364	1,064
Other Real Estate Construction [Member]
Financing Receivable, Impaired [Line Items]
Increase in non-performing loans	1,685	1,637
Real Estate 1 - 4 Family Construction [Member]
Financing Receivable, Impaired [Line Items]
Increase in non-performing loans
Real Estate - Residential [Member]
Financing Receivable, Impaired [Line Items]
Increase in non-performing loans	562	1,564
Home Equity [Member]
Financing Receivable, Impaired [Line Items]
Increase in non-performing loans		248
Consumer Loans [Member]
Financing Receivable, Impaired [Line Items]
Increase in non-performing loans
Other Loans [Member]
Financing Receivable, Impaired [Line Items]
Increase in non-performing loans

XML

Noncontrolling Interest - Additional Information (Detail) (USD $) In Millions, unless otherwise specified	1 Months Ended	12 Months Ended
	Jan. 31, 2013 Preferred Stock Series B [Member]	Dec. 31, 2013 Preferred Stock Series C [Member]
Consolidation, Less than Wholly Owned Subsidiary, Parent Ownership Interest, Effects of Changes, Net [Line Items]
Preferred stock issued	$ 7.9	$ 2.8
Dividends rate	5.30%	5.30%
Voting rights	The preferred stock has no voting rights	The preferred stock has no voting rights

XML

Fair Value Disclosures - Quantitative Information about Level 3 Fair Value Measurements (Detail)	3 Months Ended
	Mar. 31, 2014
Impaired Loans [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Valuation Technique	Discounted appraisals
OREO [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Valuation Technique	Discounted appraisals
Minimum [Member] | Impaired Loans [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Fair value inputs discount rate and estimated costs to sell	0.00%
Minimum [Member] | OREO [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Fair value inputs discount rate and estimated costs to sell	0.00%
Maximum [Member] | Impaired Loans [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Fair value inputs discount rate and estimated costs to sell	30.00%
Maximum [Member] | OREO [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Fair value inputs discount rate and estimated costs to sell	10.00%

XML

Loans Held for Investment (Tables)

3 Months Ended

Mar. 31, 2014

Receivables [Abstract]

Composition of Net Loans Held for Investment by Class

The composition of net loans held for investment by class as of March 31, 2014 and December 31, 2013 are as follows:

	March 31, 2014			December 31, 2013
	(dollars in thousands)
Commercial
Commercial	$	48,512		$	47,436
Real estate - commercial		92,718			95,922
Other real estate construction loans		17,743			17,583
Noncommercial
Real estate 1-4 family construction		3,849			3,418
Real estate - residential		88,216			87,463
Home equity		44,486			45,231
Consumer loans		8,604			9,623
Other loans		576			612
		304,704			307,288
Less:
Allowance for loan losses		(4,198	)		(5,095	)
Deferred loan (fees) costs, net		31			60
Loans held for investment, net	$	300,537		$	302,253

XML

Troubled Debt Restructures - Breakdown of Types of Concessions Made by Loan Class (Detail) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2014 Contract	Mar. 31, 2013 Contract
Financing Receivable, Modifications [Line Items]
Number of Contracts	11	7
Pre-Modification Outstanding Recorded Investment	$ 1,670	$ 770
Post-Modification Outstanding Recorded Investment	1,556	767
Extend Payment Terms [Member]
Financing Receivable, Modifications [Line Items]
Number of Contracts	1	2
Pre-Modification Outstanding Recorded Investment	39	65
Post-Modification Outstanding Recorded Investment	34	65
Extend Payment Terms [Member] | Commercial [Member]
Financing Receivable, Modifications [Line Items]
Number of Contracts
Pre-Modification Outstanding Recorded Investment
Post-Modification Outstanding Recorded Investment
Extend Payment Terms [Member] | Real Estate - Commercial [Member]
Financing Receivable, Modifications [Line Items]
Number of Contracts
Pre-Modification Outstanding Recorded Investment
Post-Modification Outstanding Recorded Investment
Extend Payment Terms [Member] | Other Real Estate Construction [Member]
Financing Receivable, Modifications [Line Items]
Number of Contracts
Pre-Modification Outstanding Recorded Investment
Post-Modification Outstanding Recorded Investment
Extend Payment Terms [Member] | Real Estate 1 - 4 Family Construction [Member]
Financing Receivable, Modifications [Line Items]
Number of Contracts
Pre-Modification Outstanding Recorded Investment
Post-Modification Outstanding Recorded Investment
Extend Payment Terms [Member] | Real Estate - Residential [Member]
Financing Receivable, Modifications [Line Items]
Number of Contracts		2
Pre-Modification Outstanding Recorded Investment		65
Post-Modification Outstanding Recorded Investment		65
Extend Payment Terms [Member] | Home Equity [Member]
Financing Receivable, Modifications [Line Items]
Number of Contracts
Pre-Modification Outstanding Recorded Investment
Post-Modification Outstanding Recorded Investment
Extend Payment Terms [Member] | Consumer Loans [Member]
Financing Receivable, Modifications [Line Items]
Number of Contracts	1
Pre-Modification Outstanding Recorded Investment	39
Post-Modification Outstanding Recorded Investment	34
Extend Payment Terms [Member] | Other Loans [Member]
Financing Receivable, Modifications [Line Items]
Number of Contracts
Pre-Modification Outstanding Recorded Investment
Post-Modification Outstanding Recorded Investment
Other [Member]
Financing Receivable, Modifications [Line Items]
Number of Contracts	10	5
Pre-Modification Outstanding Recorded Investment	1,631	705
Post-Modification Outstanding Recorded Investment	1,522	702
Other [Member] | Commercial [Member]
Financing Receivable, Modifications [Line Items]
Number of Contracts		1
Pre-Modification Outstanding Recorded Investment		10
Post-Modification Outstanding Recorded Investment		9
Other [Member] | Real Estate - Commercial [Member]
Financing Receivable, Modifications [Line Items]
Number of Contracts	1	2
Pre-Modification Outstanding Recorded Investment	344	619
Post-Modification Outstanding Recorded Investment	269	618
Other [Member] | Other Real Estate Construction [Member]
Financing Receivable, Modifications [Line Items]
Number of Contracts
Pre-Modification Outstanding Recorded Investment
Post-Modification Outstanding Recorded Investment
Other [Member] | Real Estate 1 - 4 Family Construction [Member]
Financing Receivable, Modifications [Line Items]
Number of Contracts
Pre-Modification Outstanding Recorded Investment
Post-Modification Outstanding Recorded Investment
Other [Member] | Real Estate - Residential [Member]
Financing Receivable, Modifications [Line Items]
Number of Contracts	9	1
Pre-Modification Outstanding Recorded Investment	1,287	24
Post-Modification Outstanding Recorded Investment	1,253	24
Other [Member] | Home Equity [Member]
Financing Receivable, Modifications [Line Items]
Number of Contracts
Pre-Modification Outstanding Recorded Investment
Post-Modification Outstanding Recorded Investment
Other [Member] | Consumer Loans [Member]
Financing Receivable, Modifications [Line Items]
Number of Contracts		1
Pre-Modification Outstanding Recorded Investment		52
Post-Modification Outstanding Recorded Investment		51
Other [Member] | Other Loans [Member]
Financing Receivable, Modifications [Line Items]
Number of Contracts
Pre-Modification Outstanding Recorded Investment
Post-Modification Outstanding Recorded Investment

XML

Allowance for Loan Losses - Changes in the Allowance for Loan Losses (Detail) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2014	Mar. 31, 2013
Schedule Of Allowance For Loan Losses [Line Items]
Balance, beginning of period	$ 5,095	$ 6,801
Provision (recovery) charged to operations	(424)	(369)
Charge-offs	(506)	(495)
Recoveries	33	36
Net (charge-offs)	(473)	(459)
Balance at end of period	4,198	5,973
Commercial [Member]
Schedule Of Allowance For Loan Losses [Line Items]
Balance, beginning of period	2,665	2,791
Provision (recovery) charged to operations	(245)	(268)
Charge-offs	(237)	(271)
Recoveries	9	5
Net (charge-offs)	(228)	(266)
Balance at end of period	2,192	2,257
Non-Commercial [Member]
Schedule Of Allowance For Loan Losses [Line Items]
Balance, beginning of period	2,430	4,010
Provision (recovery) charged to operations	(179)	(101)
Charge-offs	(269)	(224)
Recoveries	24	31
Net (charge-offs)	(245)	(193)
Balance at end of period	$ 2,006	$ 3,716

XML

Investment Securities - Additional Information (Detail) (USD $)	3 Months Ended	12 Months Ended
	Mar. 31, 2014 Security	Dec. 31, 2013 Security
Schedule of Available-for-sale Securities [Line Items]
Federal Reserve stock owned by Company	$ 532,000	$ 467,000
Federal Home Loan Bank stock	506,000	717,000
Securities available for sale pledged as collateral on public deposits	61,200,000	63,100,000
Number of treasury note related to unrealized losses	1	1
Number of mortgage backed securities related to unrealized losses	9	11
Number of Government agency bond	11	10
Mortgage-Backed Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Number of mortgage backed securities	2	2
Available for sale securities	$ 0

XML

Troubled Debt Restructures - Additional Information (Detail) (USD $)	3 Months Ended
	Mar. 31, 2014	Mar. 31, 2013
Debt Disclosure [Abstract]
Troubled debt restructure is defined as being past due	90 days
Allowance for loan loss on TDR	$ 363,000	$ 708,000

XML

Allowance for Loan Losses - Summary of Risk Grades of Portfolio by Class (Detail) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2014	Dec. 31, 2013
Financing Receivable, Recorded Investment [Line Items]
Loans	$ 304,735	$ 307,348
Commercial [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	48,512	47,436
Real Estate - Commercial [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	92,718	95,922
Other Real Estate Construction [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	17,743	17,583
Real Estate 1 - 4 Family Construction [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	3,849	3,418
Real Estate - Residential [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	88,247	87,523
Home Equity [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	44,486	45,231
Consumer Loans [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	8,604	9,623
Other Loans [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	576	612
Pass [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	267,251	267,580
Pass [Member] | Commercial [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	47,794	46,520
Pass [Member] | Real Estate - Commercial [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	79,742	80,679
Pass [Member] | Other Real Estate Construction [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	13,194	12,898
Pass [Member] | Real Estate 1 - 4 Family Construction [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	3,849	3,418
Pass [Member] | Real Estate - Residential [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	70,878	70,407
Pass [Member] | Home Equity [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	42,997	43,830
Pass [Member] | Consumer Loans [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	8,221	9,216
Pass [Member] | Other Loans [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	576	612
Watch [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	24,549	26,773
Watch [Member] | Commercial [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	580	635
Watch [Member] | Real Estate - Commercial [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	7,928	9,396
Watch [Member] | Other Real Estate Construction [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	2,245	2,465
Watch [Member] | Real Estate 1 - 4 Family Construction [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans
Watch [Member] | Real Estate - Residential [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	12,367	12,911
Watch [Member] | Home Equity [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	1,097	1,005
Watch [Member] | Consumer Loans [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	332	361
Watch [Member] | Other Loans [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans
Sub-standard [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	12,100	12,160
Sub-standard [Member] | Commercial [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	138	281
Sub-standard [Member] | Real Estate - Commercial [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	5,048	5,847
Sub-standard [Member] | Other Real Estate Construction [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	1,469	1,385
Sub-standard [Member] | Real Estate 1 - 4 Family Construction [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans
Sub-standard [Member] | Real Estate - Residential [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	5,002	4,205
Sub-standard [Member] | Home Equity [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	392	396
Sub-standard [Member] | Consumer Loans [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	51	46
Sub-standard [Member] | Other Loans [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans
Doubtful [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	835	835
Doubtful [Member] | Commercial [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans
Doubtful [Member] | Real Estate - Commercial [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans
Doubtful [Member] | Other Real Estate Construction [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	835	835
Doubtful [Member] | Real Estate 1 - 4 Family Construction [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans
Doubtful [Member] | Real Estate - Residential [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans
Doubtful [Member] | Home Equity [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans
Doubtful [Member] | Consumer Loans [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans
Doubtful [Member] | Other Loans [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans

XML

Basis of Presentation

3 Months Ended

Mar. 31, 2014

Accounting Policies [Abstract]

Basis of Presentation

Note 1 – Basis of Presentation

The financial statements and accompanying notes are presented on a consolidated basis including Uwharrie Capital Corp (the “Company”) and its subsidiaries, Uwharrie Bank (the “Bank”), Strategic Investment Advisors, Inc. (“SIA”), and Uwharrie Mortgage Inc. The Bank consolidates its subsidiaries, the Strategic Alliance Corporation, BOS Agency, Inc. and Gateway Mortgage, Inc., each of which is wholly-owned by the Bank.

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 in the United States of America (“GAAP”) and material adjustments necessary for a fair presentation of results of interim periods, all of which are of a normal recurring nature, have been made. The results of operations for the interim periods are not necessarily indicative of the results that 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.

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 2013 Annual Report on Form 10-K. This Quarterly Report should be read in conjunction with such Annual Report.

XML

Allowance for Loan Losses - Schedule of Loans and Reserve Balances by Loan Segment Both Individually and Collectively Evaluated for Impairment (Detail) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2014	Dec. 31, 2013	Mar. 31, 2013	Dec. 31, 2012
Schedule Of Loans And Allowance For Loan By Class Individually And Collectively Evaluated For Impairment [Line Items]
Reserve	$ 4,198	$ 5,095	$ 5,973	$ 6,801
Loans	304,735	307,348
All Commercial [Member]
Schedule Of Loans And Allowance For Loan By Class Individually And Collectively Evaluated For Impairment [Line Items]
Reserve	2,192	2,665
Loans	158,973	160,941
Non-Commercial [Member]
Schedule Of Loans And Allowance For Loan By Class Individually And Collectively Evaluated For Impairment [Line Items]
Reserve	2,006	2,430	3,716	4,010
Loans	145,762	146,407
Individually Evaluated [Member]
Schedule Of Loans And Allowance For Loan By Class Individually And Collectively Evaluated For Impairment [Line Items]
Reserve	1,738	2,387
Loans	15,576	17,553
Individually Evaluated [Member] | All Commercial [Member]
Schedule Of Loans And Allowance For Loan By Class Individually And Collectively Evaluated For Impairment [Line Items]
Reserve	1,163	1,519
Loans	7,513	8,700
Individually Evaluated [Member] | Non-Commercial [Member]
Schedule Of Loans And Allowance For Loan By Class Individually And Collectively Evaluated For Impairment [Line Items]
Reserve	575	868
Loans	8,063	8,853
Collectively Evaluated [Member]
Schedule Of Loans And Allowance For Loan By Class Individually And Collectively Evaluated For Impairment [Line Items]
Reserve	2,460	2,708
Loans	289,159	289,795
Collectively Evaluated [Member] | All Commercial [Member]
Schedule Of Loans And Allowance For Loan By Class Individually And Collectively Evaluated For Impairment [Line Items]
Reserve	1,029	1,146
Loans	151,460	152,241
Collectively Evaluated [Member] | Non-Commercial [Member]
Schedule Of Loans And Allowance For Loan By Class Individually And Collectively Evaluated For Impairment [Line Items]
Reserve	1,431	1,562
Loans	$ 137,699	$ 137,554

XML

Fair Value Disclosures (Tables)

3 Months Ended

Mar. 31, 2014

Fair Value Disclosures [Abstract]

Fair Value Information for Assets and Liabilities Measured at Fair Value on Recurring Basis

The following table provides fair value information for assets and liabilities measured at fair value on a recurring basis as of March 31, 2014 and December 31, 2013:

	March 31, 2014
	(dollars in thousands)
	Total		Level 1		Level 2		Level 3
Securities available for sale:
US Treasury	$	21,250	$	21,250	$	—	$	—
US Government Agencies		44,405		—		44,405		—
GSE - Mortgage-backed securities and CMO’s		35,433		—		35,433		—
State and political subdivisions		10,420		—		10,420		—
Total assets at fair value	$	111,508	$	21,250	$	90,258	$	—
Total liabilities at fair value	$	—	$	—	$	—	$	—

	December 31, 2013
	(dollars in thousands)
	Total		Level 1		Level 2		Level 3
Securities available for sale:
US Treasury	$	21,286	$	21,286	$	—	$	—
US Gov’t		34,300		—		34,300		—
Mortgage-backed securities and CMO’s		37,006		—		37,006		—
State and political subdivisions		7,688		—		7,688		—
Total assets at fair value	$	100,280	$	21,286	$	78,994	$	—
Total liabilities at fair value	$	—	$	—	$	—	$	—

Assets Measured at Fair Value on Nonrecurring Basis

Assets measured at fair value on a nonrecurring basis are included in the table below as of March 31, 2014 and December 31, 2013:

	March 31, 2014
	(dollars in thousands)
	Total		Level 1		Level 2		Level 3
Impaired loans	$	4,248	$	—	$	—	$	4,248
Loans held for sale		364		—		364		—
Other real estate owned		3,174		—		—		3,174
Total assets at fair value	$	7,786	$	—	$	364	$	7,422
Total liabilities at fair value	$	—	$	—	$	—	$	—

	December 31, 2013
	(dollars in thousands)
	Total		Level 1		Level 2		Level 3
Impaired loans	$	5,903	$	—	$	—	$	5,903
Loans held for sale		1,139		—		1,139		—
Other real estate owned		3,533		—		—		3,533
Total assets at fair value	$	10,575	$	—	$	1,139	$	9,436
Total liabilities at fair value	$	—	$	—	$	—	$	—

Quantitative Information about Level 3 Fair Value Measurements

Quantitative Information about Level 3 Fair Value Measurements

	Valuation Technique		Unobservable Input	General Range
Nonrecurring measurements:
Impaired loans		Discounted appraisals	Collateral discounts and Estimated costs to sell	0 – 30%
OREO		Discounted appraisals	Collateral discounts and Estimated costs to sell	0 – 10%

XML

Commitments and Contingencies (Tables)

3 Months Ended

Mar. 31, 2014

Commitments And Contingencies Disclosure [Abstract]

Outstanding Financial Instruments Whose Contract Amounts Represent Credit Risk

At March 31, 2014, outstanding financial instruments whose contract amounts represent credit risk were approximately:

	(dollars in thousands)
Commitments to extend credit	$	82,263
Credit card commitments		8,474
Standby letters of credit		1,328
Total commitments	$	92,065

XML

Fair Value Disclosures - Assets Measured at Fair Value on Nonrecurring Basis (Detail) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2014	Dec. 31, 2013
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total assets at fair value	$ 111,508	$ 100,280
Level 1 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total assets at fair value	21,250	21,286
Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total assets at fair value	90,258	78,994
Fair Value on a Nonrecurring Basis [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Impaired loans	4,248	5,903
Loans held for sale	364	1,139
Other real estate owned	3,174	3,533
Total assets at fair value	7,786	10,575
Total liabilities at fair value
Fair Value on a Nonrecurring Basis [Member] | Level 1 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Impaired loans
Loans held for sale
Other real estate owned
Total assets at fair value
Total liabilities at fair value
Fair Value on a Nonrecurring Basis [Member] | Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Impaired loans
Loans held for sale	364	1,139
Other real estate owned
Total assets at fair value	364	1,139
Total liabilities at fair value
Fair Value on a Nonrecurring Basis [Member] | Level 3 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Impaired loans	4,248	5,903
Loans held for sale
Other real estate owned	3,174	3,533
Total assets at fair value	7,422	9,436
Total liabilities at fair value

XML

Allowance for Loan Losses - Past Due Information of the Loan Portfolio by Class (Detail) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2014	Dec. 31, 2013
Financing Receivable, Impaired [Line Items]
Loans 30-89 Days Past Due	$ 2,066	$ 2,141
Loans 90 Days or More Past Due	3,611	4,717
Total Past Due Loans	5,677	6,858
Current Loans	299,058	300,490
Net loans held for investment	304,735	307,348
Accruing Loans 90 or More Days Past Due
Commercial [Member]
Financing Receivable, Impaired [Line Items]
Loans 30-89 Days Past Due	89	143
Loans 90 Days or More Past Due		204
Total Past Due Loans	89	347
Current Loans	48,423	47,089
Net loans held for investment	48,512	47,436
Accruing Loans 90 or More Days Past Due
Real Estate - Commercial [Member]
Financing Receivable, Impaired [Line Items]
Loans 30-89 Days Past Due	112	165
Loans 90 Days or More Past Due	1,364	1,064
Total Past Due Loans	1,476	1,229
Current Loans	91,242	94,693
Net loans held for investment	92,718	95,922
Accruing Loans 90 or More Days Past Due
Other Real Estate Construction [Member]
Financing Receivable, Impaired [Line Items]
Loans 30-89 Days Past Due	35	145
Loans 90 Days or More Past Due	1,685	1,637
Total Past Due Loans	1,720	1,782
Current Loans	16,023	15,801
Net loans held for investment	17,743	17,583
Accruing Loans 90 or More Days Past Due
Real Estate Construction [Member]
Financing Receivable, Impaired [Line Items]
Current Loans	3,849	3,418
Net loans held for investment	3,849	3,418
Accruing Loans 90 or More Days Past Due
Real Estate - Residential [Member]
Financing Receivable, Impaired [Line Items]
Loans 30-89 Days Past Due	1,575	1,426
Loans 90 Days or More Past Due	562	1,564
Total Past Due Loans	2,137	2,990
Current Loans	86,110	84,533
Net loans held for investment	88,247	87,523
Accruing Loans 90 or More Days Past Due
Home Equity [Member]
Financing Receivable, Impaired [Line Items]
Loans 30-89 Days Past Due	133	207
Loans 90 Days or More Past Due		248
Total Past Due Loans	133	455
Current Loans	44,353	44,776
Net loans held for investment	44,486	45,231
Accruing Loans 90 or More Days Past Due
Consumer Loans [Member]
Financing Receivable, Impaired [Line Items]
Loans 30-89 Days Past Due	122	55
Loans 90 Days or More Past Due
Total Past Due Loans	122	55
Current Loans	8,482	9,568
Net loans held for investment	8,604	9,623
Accruing Loans 90 or More Days Past Due
Other Loans [Member]
Financing Receivable, Impaired [Line Items]
Loans 90 Days or More Past Due
Current Loans	576	612
Net loans held for investment	576	612
Accruing Loans 90 or More Days Past Due

XML

Fair Values of Financial Instruments and Interest Rate Risk (Tables)

3 Months Ended

Mar. 31, 2014

Fair Value Disclosures [Abstract]

Comparison of Carrying Amounts and the Estimated Fair Value of the Financial Instruments

The following table reflects a comparison of carrying amounts and the estimated fair value of the financial instruments as of March 31, 2014 and December 31, 2013:

March 31, 2014

	Carrying Value		Estimated Fair Value		Level 1		Level 2		Level 3
	(dollars in thousands)
FINANCIAL ASSETS
Cash and cash equivalents	$	60,874	$	60,874	$	60,874	$	—	$	—
Securities available for sale		111,508		111,508		21,250		90,258		—
Loans held for investment, net		300,537		306,947		—		—		306,947
Loans held for sale		364		364		—		364		—
Restricted stock		1,038		1,038		1,038		—		—
Bank-owned life insurance		6,557		6,557		—		—		6,557
Mortgage servicing rights		2,250		3,060		—		—		3,060
Accrued interest receivable		1,651		1,651		—		—		1,651
FINANCIAL LIABILITIES
Deposits	$	452,209	$	439,542	$	—	$	—	$	439,542
Short-term borrowings		5,887		5,892		—		5,892		—
Long-term borrowings		33		33		—		33		—
Junior subordinated debt		9,534		9,711		—		—		9,711
Accrued interest payable		193		193		—		—		193

December 31, 2013

	Carrying Value		Estimated Fair Value		Level 1		Level 2		Level 3
	(dollars in thousands)
FINANCIAL ASSETS
Cash and cash equivalents	$	72,394	$	72,394	$	72,394	$	—	$	—
Securities available for sale		100,280		100,280		21,286		78,994		—
Loans held for investment, net		302,253		308,112		—		—		308,112
Loans held for sale		1,139		1,139		—		1,139		—
Restricted stock		1,184		1,184		1,184		—		—
Bank-owned life insurance		6,516		6,516		—		—		6,516
Mortgage servicing rights		2,356		3,085		—		—		3,085
Accrued interest receivable		1,747		1,747		—		—		1,747
FINANCIAL LIABILITIES
Deposits	$	453,708	$	438,593	$	—	$	—	$	438,593
Short-term borrowings		5,509		5,509		—		5,509		—
Long-term borrowings		36		36		—		36		—
Junior subordinated debt		11,127		11,271		—		—		11,271
Accrued interest payable		224		224		—		—		224

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Comprehensive Income - Accumulated Other Comprehensive Income (Detail) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2014	Mar. 31, 2013
Equity [Abstract]
Beginning Balance	$ (562)	$ 1,487
Other comprehensive income (loss) before reclassifications, net of $177,000 and $43,000 tax effect, respectively	341	(82)
Amounts reclassified from accumulated other Comprehensive income, net of $8,000 and $5,000 tax effect	(13)	(9)
Net current-period other comprehensive loss	328	(91)
Ending Balance	$ (234)	$ 1,396

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Consolidated Statements of Cash Flows (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2014	Mar. 31, 2013
Cash flows from operating activities
Net income	$ 537	$ 763
Adjustments to reconcile net income to net cash Provided by (used in) operating activities:
Depreciation	218	236
Net amortization of security premiums/discounts	231	430
Net amortization of mortgage servicing rights	170	237
Impairment of foreclosed real estate	9	30
Recovery of loan losses provisions	(424)	(369)
Net realized gain on sales / calls available for sales securities	(21)	(14)
Income from mortgage loan sales	(162)	(840)
Proceeds from sales of loans held for sale	6,369	31,214
Origination of loans held for sale	(5,432)	(26,046)
Gain on sale of premises, equipment and other assets		(229)
Increase in cash surrender value of life insurance	(41)	(32)
Gain on sales of foreclosed real estate	(1)	(18)
Release and write-off of ESOP shares	30	11
Net change in interest receivable	96	107
Net change in other assets	360	1,415
Net change in interest payable	(31)	(8)
Net change in other liabilities	264	866
Net cash provided by operating activities	2,172	7,753
Cash flows from investing activities
Proceeds from sales, maturities and calls of securities available for sale	1,849	4,748
Purchase of securities available for sale	(12,790)	(25,734)
Net decrease in loans	1,644	2,721
Proceeds from sales of premises, equipment and other assets		949
Purchase of premises and equipment	(1,793)	(154)
Proceeds from sales of foreclosed real estate	211	18
Investment in other assets	(96)	(267)
Net decrease in restricted stock	146	327
Net cash used in investing activities	(10,829)	(17,392)
Cash flows from financing activities
Net increase (decrease) in deposit accounts	(1,499)	6,863
Net increase (decrease) in short-term borrowed funds	378	(6,563)
Net decrease in long-term debt	(1,596)	(2)
Proceeds from preferred stock series B issued by subsidiaries		366
Repurchase of common stock		(52)
Dividends on preferred stock		(136)
Dividend on noncontrolling interest	(146)	(103)
Net cash provided (used in) in financing activities	(2,863)	373
Decrease in cash and cash equivalents	(11,520)	(9,266)
Cash and cash equivalents, beginning of period	72,394	81,728
Cash and cash equivalents, end of period	60,874	72,462
Supplemental Disclosures of Cash Flow Information
Interest paid	579	804
Income taxes paid		280
Supplemental Schedule of Non-Cash Activities
Net change in fair value securities available for sale, net of tax	328	(91)
Loans transferred to foreclosed real estate	496	2,239
Company financed sales of other real estate owned
Net change in ESOP liability	148	55
Funds moved from escrow liability to noncontrolling interest, subsidiary issued series B preferred stock net of cost		7,376
Redemption of preferred stock series A to other liabilities		(7,742)
Exchange of unearned ESOP shares for ESOP debt	$ 964

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Comprehensive Income - Accumulated Other Comprehensive Income (Parenthetical) (Detail) (USD $)	3 Months Ended
	Mar. 31, 2014	Mar. 31, 2013
Equity [Abstract]
Tax effect on other comprehensive income before reclassifications	$ 177,000	$ 43,000
Tax effect on amount reclassified from accumulated other comprehensive income	$ 8,000	$ 5,000

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Investment Securities - Amortized Cost and Fair Value of the Available for Sale Securities Portfolio (Detail) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2014	Dec. 31, 2013
Schedule of Available-for-sale Securities [Line Items]
Due within twelve months, Amortized Cost	$ 5,479
Due after one but within five years, Amortized Cost	48,639
Due after five but within ten years, Amortized Cost	24,627
Due after ten years, Amortized Cost	33,117
Total securities available for sale, Amortized Cost	111,862
Due within twelve months, Estimated Fair Value	5,599
Due after one but within five years, Estimated Fair Value	48,929
Due after five but within ten years, Estimated Fair Value	24,298
Due after ten years, Estimated Fair Value	32,682
Fair Value	111,508	100,280
Due within twelve months, Book Yield	2.96%
Due after one but within five years, Book Yield	1.67%
Due after five but within ten years, Book Yield	2.09%
Due after ten years, Book Yield	2.39%
Total securities available for sale, Book Yield	2.04%
U.S. Treasury [Member]
Schedule of Available-for-sale Securities [Line Items]
Due after one but within five years, Amortized Cost	16,018
Due after five but within ten years, Amortized Cost	4,932
Total securities available for sale, Amortized Cost	20,950
Due after one but within five years, Estimated Fair Value	16,486
Due after five but within ten years, Estimated Fair Value	4,764
Fair Value	21,250	21,286
Due after one but within five years, Book Yield	1.91%
Due after five but within ten years, Book Yield	1.37%
Total securities available for sale, Book Yield	1.79%
U.S. Government Agencies [Member]
Schedule of Available-for-sale Securities [Line Items]
Due within twelve months, Amortized Cost	4,999
Due after one but within five years, Amortized Cost	26,034
Due after five but within ten years, Amortized Cost	13,877
Total securities available for sale, Amortized Cost	44,910
Due within twelve months, Estimated Fair Value	5,117
Due after one but within five years, Estimated Fair Value	25,834
Due after five but within ten years, Estimated Fair Value	13,454
Fair Value	44,405	34,300
Due within twelve months, Book Yield	2.77%
Due after one but within five years, Book Yield	1.31%
Due after five but within ten years, Book Yield	1.45%
Total securities available for sale, Book Yield	1.52%
Mortgage-Backed Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Due after one but within five years, Amortized Cost	5,119
Due after five but within ten years, Amortized Cost	1,463
Due after ten years, Amortized Cost	29,374
Total securities available for sale, Amortized Cost	35,956
Due after one but within five years, Estimated Fair Value	5,021
Due after five but within ten years, Estimated Fair Value	1,507
Due after ten years, Estimated Fair Value	28,905
Fair Value	35,433	37,006
Due after one but within five years, Book Yield	1.58%
Due after five but within ten years, Book Yield	3.01%
Due after ten years, Book Yield	2.04%
Total securities available for sale, Book Yield	2.01%
State and Political Subdivisions [Member]
Schedule of Available-for-sale Securities [Line Items]
Due within twelve months, Amortized Cost	480
Due after one but within five years, Amortized Cost	1,468
Due after five but within ten years, Amortized Cost	4,355
Due after ten years, Amortized Cost	3,743
Total securities available for sale, Amortized Cost	10,046
Due within twelve months, Estimated Fair Value	482
Due after one but within five years, Estimated Fair Value	1,588
Due after five but within ten years, Estimated Fair Value	4,573
Due after ten years, Estimated Fair Value	3,777
Fair Value	$ 10,420	$ 7,688
Due within twelve months, Book Yield	4.97%
Due after one but within five years, Book Yield	5.73%
Due after five but within ten years, Book Yield	4.64%
Due after ten years, Book Yield	5.14%
Total securities available for sale, Book Yield	5.00%

XML

Troubled Debt Restructures - Schedule of Successes and Failures of Types of Debt Restructuring (Detail) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2014 Loans	Mar. 31, 2013 Loans
Paid In Full [Member]
Financing Receivable, Modifications [Line Items]
Number of Loans
Recorded Investments
Paid In Full [Member] | Extend Payment Terms [Member]
Financing Receivable, Modifications [Line Items]
Number of Loans
Recorded Investments
Paid In Full [Member] | Other Loans [Member]
Financing Receivable, Modifications [Line Items]
Number of Loans
Recorded Investments
Paying as Restructured [Member]
Financing Receivable, Modifications [Line Items]
Number of Loans	11	6
Recorded Investments	1,556	514
Paying as Restructured [Member] | Extend Payment Terms [Member]
Financing Receivable, Modifications [Line Items]
Number of Loans	1
Recorded Investments	34
Paying as Restructured [Member] | Other Loans [Member]
Financing Receivable, Modifications [Line Items]
Number of Loans	10	6
Recorded Investments	1,522	514
Converted to Nonaccrual [Member]
Financing Receivable, Modifications [Line Items]
Number of Loans		2
Recorded Investments		244
Converted to Nonaccrual [Member] | Extend Payment Terms [Member]
Financing Receivable, Modifications [Line Items]
Number of Loans
Recorded Investments
Converted to Nonaccrual [Member] | Other Loans [Member]
Financing Receivable, Modifications [Line Items]
Number of Loans		2
Recorded Investments		244
Foreclosure/ Default [Member]
Financing Receivable, Modifications [Line Items]
Number of Loans		9
Recorded Investments		924
Foreclosure/ Default [Member] | Extend Payment Terms [Member]
Financing Receivable, Modifications [Line Items]
Number of Loans		1
Recorded Investments		207
Foreclosure/ Default [Member] | Other Loans [Member]
Financing Receivable, Modifications [Line Items]
Number of Loans		8
Recorded Investments		$ 717

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Consolidated Balance Sheets (USD $) In Thousands, unless otherwise specified	Mar. 31, 2014	Dec. 31, 2013
ASSETS
Cash and due from banks	$ 6,607	$ 7,947
Interest-earning deposits with banks	54,267	64,447
Securities available for sale, at fair value	111,508	100,280
Loans held for sale	364	1,139
Loans:
Loans held for investment	304,735	307,348
Less allowance for loan losses	(4,198)	(5,095)
Net loans held for investment	300,537	302,253
Premises and equipment, net	15,356	13,781
Interest receivable	1,651	1,747
Restricted stock	1,038	1,184
Bank owned life insurance	6,557	6,516
Other real estate owned	7,447	7,170
Other assets	10,260	10,856
Total assets	515,592	517,320
Deposits:
Demand noninterest-bearing	80,139	74,493
Interest checking and money market accounts	227,737	228,933
Savings deposits	38,654	41,512
Time deposits, $100,000 and over	44,176	44,690
Other time deposits	61,503	64,080
Total deposits	452,209	453,708
Short-term borrowed funds	5,887	5,509
Long-term debt	9,567	11,163
Interest payable	193	224
Other liabilities	4,755	4,491
Total liabilities	472,611	475,095
Off balance sheet items, commitments and contingencies (Note 9)
SHAREHOLDERS' EQUITY
Common stock, $1.25 par value: 20,000,000 shares authorized; shares issued and outstanding 7,193,485 and 7,445,931 shares, respectively	8,992	9,307
Additional paid-in capital	11,130	11,922
Unearned ESOP compensation		(989)
Undivided profits	10,680	10,289
Accumulated other comprehensive loss	(234)	(562)
Total Uwharrie Capital shareholders' equity	30,568	29,967
Noncontrolling interest	10,549	10,542
Total shareholders' equity	41,117	40,509
Total liabilities and shareholders' equity	515,592	517,320
Common Stock [Member]
SHAREHOLDERS' EQUITY
Total shareholders' equity	8,992	9,307
Common Stock [Member] | Employee Stock Ownership Plan [Member]
Deposits:
Redeemable common stock held by the Employee Stock Ownership Plan (ESOP)	$ 1,864	$ 1,716

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Allowance for Loan Losses - Additional Information (Detail) (USD $)	3 Months Ended
	Mar. 31, 2014	Dec. 31, 2013
Receivables [Abstract]
Financing receivable recorded investment number of days past due	90 days
Non-performing loans	$ 0	$ 0

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Consolidated Statements of Comprehensive Income (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2014	Mar. 31, 2013
Statement Of Income And Comprehensive Income [Abstract]
Net income	$ 537	$ 763
Unrealized gain (loss) on available for sale securities	518	(124)
Related tax effect	(177)	42
Reclassification of gain recognized in net income	(21)	(14)
Related tax effect	8	5
Total other comprehensive income (loss)	328	(91)
Comprehensive income	865	672
Less: Comprehensive income attributable to noncontrolling interest	(146)	(103)
Comprehensive income attributable to Uwharrie Capital	$ 719	$ 569

XML

Fair Values of Financial Instruments and Interest Rate Risk - Additional Information (Detail) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2014
Fair Value Assets And Liabilities Measured On Recurring Basis [Abstract]
Short term borrowings due period	1 year
Current fair value of off-balance sheet financial instruments	$ 0

XML

Per Share Data - Computation of Basic and Dilutive Earnings Per Share (Detail)	3 Months Ended
	Mar. 31, 2014	Mar. 31, 2013
Earnings Per Share [Abstract]
Weighted average number of common shares outstanding	7,358,977	7,502,496
Effect of unreleased ESOP shares	(168,363)	(194,584)
Adjusted weighted average number of common shares used in computing basic net income per common share	7,190,614	7,307,912
Effect of dilutive stock options
Weighted average number of common shares and dilutive potential common shares used in computing diluted net income per common share	7,190,614	7,307,912

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Comprehensive Income (Tables)

3 Months Ended

Mar. 31, 2014

Equity [Abstract]

Accumulated Other Comprehensive Income

The following table presents the changes in accumulated other comprehensive income for the three months ended March 31, 2014 and 2013:

	Unrealized holding gains on available-for-sale Securities (net)
	Three months ended March 31, 2014			Three months ended March 31, 2013
	(dollars in thousands)
Beginning Balance	$	(562	)	$	1,487
Other comprehensive income (loss) before reclassifications, net of $177,000 and $43,000 tax effect, respectively		341			(82	)
Amounts reclassified from accumulated other Comprehensive income, net of $8,000 and $5,000 tax effect		(13	)		(9	)
Net current-period other comprehensive loss		328			(91	)
Ending Balance	$	(234	)	$	1,396

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Investment Securities - Carrying Amounts and Fair Values of Securities Available for Sale (Detail) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2014	Dec. 31, 2013
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	$ 111,862	$ 101,131
Gross Unrealized Gains	999	1,119
Gross Unrealized Losses	1,353	1,970
Fair Value	111,508	100,280
U.S. Treasury [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	20,950	20,992
Gross Unrealized Gains	468	502
Gross Unrealized Losses	168	208
Fair Value	21,250	21,286
U.S. Government Agencies [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	44,910	34,931
Gross Unrealized Gains	118	145
Gross Unrealized Losses	623	776
Fair Value	44,405	34,300
Mortgage-Backed Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	35,956	37,871
Gross Unrealized Gains	39	121
Gross Unrealized Losses	562	986
Fair Value	35,433	37,006
State and Political Subdivisions [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	10,046	7,337
Gross Unrealized Gains	374	351
Gross Unrealized Losses
Fair Value	$ 10,420	$ 7,688

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Investment Securities (Tables)

3 Months Ended

Mar. 31, 2014

Investments Debt And Equity Securities [Abstract]

Carrying Amounts and Fair Values of Securities Available for Sale

Carrying amounts and fair values of securities available for sale are summarized below:

March 31, 2014	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
	(dollars in thousands)
U.S. Treasury	$	20,950	$	468	$	168	$	21,250
U.S. Government agencies		44,910		118		623		44,405
GSE - Mortgage-backed securities and CMO’s		35,956		39		562		35,433
State and political subdivisions		10,046		374		—		10,420
Total securities available for sale	$	111,862	$	999	$	1,353	$	111,508

December 31, 2013	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
	(dollars in thousands)
U.S. Treasury	$	20,992	$	502	$	208	$	21,286
U.S. Government agencies		34,931		145		776		34,300
GSE - Mortgage-backed securities and CMO’s		37,871		121		986		37,006
State and political subdivisions		7,337		351		—		7,688
Total securities available for sale	$	101,131	$	1,119	$	1,970	$	100,280

Sales of Securities Available for Sale

Results from sales of securities available for sale for the three month period ended March 31, 2014 and March 31, 2013 are as follows:

	Three Months Ended March 31,
	2014		2013
	(dollars in thousands)
Gross proceeds from sales	$	328	$	426
Gross realized gains from sales	$	21	$	14
Gross realized losses from sales		—		—
Net realized gains	$	21	$	14

Gross Unrealized Losses and Fair Value of Investments

At December 31, 2013, the unrealized losses less than twelve months related to one United States Treasury note, ten government agency bonds and eleven government sponsored enterprise (GSE) mortgage backed securities. The Company had two GSE mortgage backed securities that had been in a loss position for more than twelve months at December 31, 2013.

	Less than 12 Months				12 Months or More				Total
March 31, 2014	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
	(dollars in thousands)
Securities available for sale temporary impairment
U.S. Treasury	$	4,764	$	168	$	—	$	—	$	4,764	$	168
U.S. Gov’t agencies		39,288		623		—		—		39,288		623
GSE-Mortgage-backed securities and CMO’s		16,157		441		3,710		121		19,867		562
State and political subdivisions		—		—		—		—		—		—
	$	60,209	$	1,232	$	3,710	$	121	$	63,919	$	1,353

	Less than 12 Months				12 Months or More				Total
December 31, 2013	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
	(dollars in thousands)
Securities available for sale temporary impairment
U.S. Treasury	$	4,722	$	208	$	—	$	—	$	4,722	$	208
U.S. Gov’t agencies		29,147		776		—		—		29,147		776
GSE-Mortgage-backed securities and CMO’s		22,206		842		3,849		144		26,055		986
State and political subdivisions		—		—		—		—		—		—
	$	56,075	$	1,826	$	3,849	$	144	$	59,924	$	1,970

Amortized Cost and Fair Value of the Available for Sale Securities Portfolio

The aggregate amortized cost and fair value of the available for sale securities portfolio at March 31, 2014 by remaining contractual maturity are as follows:

	March 31, 2014
	Amortized Cost		Estimated Fair Value		Book Yield
	(dollars in thousands)
Securities available for sale
U. S. Treasury
Due after one but within five years		16,018		16,486		1.91	%
Due after five but within ten years		4,932		4,764		1.37	%
		20,950		21,250		1.79	%
U.S. Government agencies
Due within twelve months		4,999		5,117		2.77	%
Due after one but within five years		26,034		25,834		1.31	%
Due after five but within ten years		13,877		13,454		1.45	%
		44,910		44,405		1.52	%
Mortgage-backed securities
Due after one but within five years		5,119		5,021		1.58	%
Due after five but within ten years		1,463		1,507		3.01	%
Due after ten years		29,374		28,905		2.04	%
		35,956		35,433		2.01	%
State and political subdivisions
Due within twelve months		480		482		4.97	%
Due after one but within five years		1,468		1,588		5.73	%
Due after five but within ten years		4,355		4,573		4.64	%
Due after ten years		3,743		3,777		5.14	%
		10,046		10,420		5.00	%
Total Securities available for sale
Due within twelve months		5,479		5,599		2.96	%
Due after one but within five years		48,639		48,929		1.67	%
Due after five but within ten years		24,627		24,298		2.09	%
Due after ten years		33,117		32,682		2.39	%
	$	111,862	$	111,508		2.04	%

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Consolidated Statements of Changes in Shareholders' Equity (USD $) In Thousands, except Share data	Total USD ($)	Preferred Stock Series B [Member] USD ($)	Preferred Stock Series C [Member] USD ($)	Number of Common Shares Issued [Member]	Common Stock [Member] USD ($)	Additional Paid-in Capital [Member] USD ($)	Unearned ESOP Compensation [Member] USD ($)	Undivided Profits [Member] USD ($)	Accumulated Other Comprehensive Income (Loss) [Member] USD ($)	Noncontrolling Interest [Member] USD ($)	Noncontrolling Interest [Member] Preferred Stock Series B [Member] USD ($)	Noncontrolling Interest [Member] Preferred Stock Series C [Member] USD ($)
Beginning balance at Dec. 31, 2013	$ 40,509				$ 9,307	$ 11,922	$ (989)	$ 10,289	$ (562)	$ 10,542
Beginning balance, shares at Dec. 31, 2013	7,445,931			7,445,931
Net income	537							391		146
Other comprehensive Income	328								328
Release of ESOP shares	30					5	16
Repayment of ESOP notes receivable	9				(315)	(649)	973
Repayment of ESOP notes receivable, shares				(252,446)
Reclass to mezzanine capital	(148)					(148)
Record preferred stock dividend (noncontrolling interest)		(103)	(36)								(103)	(36)
Ending balance at Mar. 31, 2014	$ 41,117				$ 8,992	$ 11,130		$ 10,680	$ (234)	$ 10,549
Ending balance, shares at Mar. 31, 2014	7,193,485			7,193,485

XML

Consolidated Balance Sheets (Parenthetical) (USD $)	Mar. 31, 2014	Dec. 31, 2013
Statement Of Financial Position [Abstract]
Common stock, par value	$ 1.25	$ 1.25
Common stock, shares authorized	20,000,000	20,000,000
Common stock, shares issued	7,193,485	7,445,931
Common stock, shares outstanding	7,193,485	7,445,931

XML

Commitments and Contingencies

3 Months Ended

Mar. 31, 2014

Commitments And Contingencies Disclosure [Abstract]

Commitments and Contingencies

Note 9 – Commitments and Contingencies

The subsidiary bank is party 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.

The bank’s risk of loss with the unfunded loans and lines of credit or standby letters of credit is represented by the contractual amount of these instruments. The bank uses 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 March 31, 2014, outstanding financial instruments whose contract amounts represent credit risk were approximately:

	(dollars in thousands)
Commitments to extend credit	$	82,263
Credit card commitments		8,474
Standby letters of credit		1,328
Total commitments	$	92,065

XML

Document and Entity Information	3 Months Ended
	Mar. 31, 2014	Apr. 30, 2014
Document And Entity Information [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Mar. 31, 2014
Document Fiscal Year Focus	2014
Document Fiscal Period Focus	Q1
Entity Registrant Name	UWHARRIE CAPITAL CORP
Entity Central Index Key	0000898171
Current Fiscal Year End Date	--12-31
Entity Filer Category	Smaller Reporting Company
Entity Common Stock, Shares Outstanding		7,193,485

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Fair Value Disclosures

3 Months Ended

Mar. 31, 2014

Fair Value Disclosures [Abstract]

Fair Value Disclosures

Note 10 – Fair Value Disclosures

Accounting Standards Codification (ASC) 820 defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. ASC 820 does not require any new fair value measurements, but clarifies and standardizes some divergent practices that have emerged since prior guidance was issued. ASC 820 creates a three-level hierarchy under which individual fair value estimates are to be ranked based on the relative reliability of the inputs used in the valuation.

ASC 820 defines fair value as the price that would be received to sell an asset or transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities, the Company considers the principal or most advantageous market in which those assets or liabilities are sold and considers assumptions that market participants would use when pricing those assets or liabilities. Fair values determined using Level 1 inputs rely on active and observable markets to price identical assets or liabilities. In situations where identical assets and liabilities are not traded in active markets, fair values may be determined based on Level 2 inputs, which exist when observable data exists for similar assets and liabilities. Fair values for assets and liabilities for which identical or similar assets and liabilities are not actively traded in observable markets are based on Level 3 inputs, which are considered to be unobservable.

Among the Company’s assets and liabilities, investment securities available for sale are reported at their fair values on a recurring basis. Certain other assets are adjusted to their fair value on a nonrecurring basis, including other real estate owned, impaired loans, loans held for sale, which are carried at the lower of cost or market; loan servicing rights, where fair value is determined using similar assets with similar characteristics, when available, or based upon discounted cash flows using market-based assumptions; and goodwill, which is periodically tested for impairment. Deposits, short-term borrowings and long-term obligations are not reported at fair value.

Prices for US Treasury securities are readily available in the active markets in which those securities are traded, and the resulting fair values are shown in the ‘Level 1 input’ column. Prices for government agency securities, mortgage-backed securities and for state, county and municipal securities are obtained for similar securities, and the resulting fair values are shown in the ‘Level 2 input’ column. Prices for all other non-marketable investments are determined based on various assumptions that are not observable. The fair values for these investment securities are shown in the ‘Level 3 input’ column. Non-marketable investment securities, which are carried at their purchase price, include those that may only be redeemed by the issuer. The changes in securities between Level 1 and Level 2 were related to the purchase and sale of several securities and not the migration of securities between levels.

The Company does not record loans at fair value on a recurring basis. However, from time to time, a loan is considered impaired and an allowance for loan losses is established. Loans for which it is probable that payment of interest and principal will not be made in accordance with the contractual terms of the loan agreement are considered impaired. Once a loan is identified as individually impaired, management measures impairment by using one of several methods including collateral value, fair value of similar debt and discounted cash flows. Those impaired loans not requiring an allowance represent loans for which the present value of the expected repayments or fair value of collateral exceed the recorded investments in such loans. At March 31, 2014, substantially all of the total impaired loans were evaluated based on the fair value of the underlying collateral. When the fair value of the collateral is based on an observable market price or a current appraised value, the Company records the impaired loan as nonrecurring Level 2. When an internal assessment of fair value based upon market data issued or management determines the fair value of the underlying collateral is further impaired below the appraised value, the Company records the impaired loan as nonrecurring Level 3.

Foreclosed assets are adjusted to fair value upon transfer of the loans to other real estate owned. Real estate acquired in settlement of loans is recorded initially at estimated fair value of the property less estimated selling costs at the date of foreclosure. The initial recorded value may be subsequently reduced by additional allowances, which are charged to earnings if the estimated fair value of the property less estimated selling costs declines below the initial recorded value. Fair value is based upon independent market prices, appraised values of the collateral or management’s estimation of the value of the collateral. When the fair value of the collateral is based on an observable market price or a current appraised value, the Company records the foreclosed asset as nonrecurring Level 2. When an internal assessment of fair value based upon market data is used or management determines the fair value of the underlying collateral is further impaired below the appraised value, the Company records the impaired loan as nonrecurring Level 3.

Loans originated and intended for sale in the secondary market are carried at the lower of cost or estimated fair value in the aggregate, based on secondary market prices. Net unrealized losses, if any, are recognized through a valuation allowance by charges to income.

Servicing assets are evaluated for impairment based upon the fair value. Fair value is determined based upon discounted cash flows using market-based assumptions.

The following table provides fair value information for assets and liabilities measured at fair value on a recurring basis as of March 31, 2014 and December 31, 2013:

	March 31, 2014
	(dollars in thousands)
	Total		Level 1		Level 2		Level 3
Securities available for sale:
US Treasury	$	21,250	$	21,250	$	—	$	—
US Government Agencies		44,405		—		44,405		—
GSE - Mortgage-backed securities and CMO’s		35,433		—		35,433		—
State and political subdivisions		10,420		—		10,420		—
Total assets at fair value	$	111,508	$	21,250	$	90,258	$	—
Total liabilities at fair value	$	—	$	—	$	—	$	—

	December 31, 2013
	(dollars in thousands)
	Total		Level 1		Level 2		Level 3
Securities available for sale:
US Treasury	$	21,286	$	21,286	$	—	$	—
US Gov’t		34,300		—		34,300		—
Mortgage-backed securities and CMO’s		37,006		—		37,006		—
State and political subdivisions		7,688		—		7,688		—
Total assets at fair value	$	100,280	$	21,286	$	78,994	$	—
Total liabilities at fair value	$	—	$	—	$	—	$	—

The Company may be required, from time to time, to measure certain assets at fair value on a nonrecurring basis in accordance with U.S. GAAP. These include assets that are measured at the lower of cost or market that were recognized at fair value below cost at the end of the period. Assets measured at fair value on a nonrecurring basis are included in the table below as of March 31, 2014 and December 31, 2013:

	March 31, 2014
	(dollars in thousands)
	Total		Level 1		Level 2		Level 3
Impaired loans	$	4,248	$	—	$	—	$	4,248
Loans held for sale		364		—		364		—
Other real estate owned		3,174		—		—		3,174
Total assets at fair value	$	7,786	$	—	$	364	$	7,422
Total liabilities at fair value	$	—	$	—	$	—	$	—

	December 31, 2013
	(dollars in thousands)
	Total		Level 1		Level 2		Level 3
Impaired loans	$	5,903	$	—	$	—	$	5,903
Loans held for sale		1,139		—		1,139		—
Other real estate owned		3,533		—		—		3,533
Total assets at fair value	$	10,575	$	—	$	1,139	$	9,436
Total liabilities at fair value	$	—	$	—	$	—	$	—

Quantitative Information about Level 3 Fair Value Measurements

	Valuation Technique		Unobservable Input	General Range
Nonrecurring measurements:
Impaired loans		Discounted appraisals	Collateral discounts and Estimated costs to sell	0 – 30%
OREO		Discounted appraisals	Collateral discounts and Estimated costs to sell	0 – 10%

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Consolidated Statements of Income (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended
	Mar. 31, 2014	Mar. 31, 2013
Interest Income
Loans, including fees	$ 4,059	$ 4,427
Investment securities
US Treasury	93	93
US Government agencies and corporations	317	179
State and political subdivisions	65	66
Interest-earning deposits with banks and federal funds sold	45	55
Total Interest income	4,579	4,820
Interest Expense
Interest checking and money market accounts	85	116
Savings deposits	25	42
Time deposits, $100,000 and over	121	174
Other time deposits	142	213
Short-term borrowed funds	18	80
Long-term debt	157	171
Total interest expense	548	796
Net interest income	4,031	4,024
Provision for (recovery of) loan losses	(424)	(369)
Net interest income after provision (recovery of) for loan losses	4,455	4,393
Noninterest Income
Service charges on deposit accounts	378	405
Other service fees and commissions	937	793
Gain on sale of securities (includes reclassification of $21,000 and $14,000 from accumulated other comprehensive income)	21	14
Gain on sale of other assets	1	247
Income from mortgage loan sales	162	840
Other income	97	115
Total noninterest income	1,596	2,414
Noninterest Expense
Salaries and employee benefits	3,006	3,092
Net occupancy expense	286	274
Equipment expense	170	168
Data processing costs	179	200
Office supplies and printing	65	63
Foreclosed real estate expense	228	175
Professional fees and services	157	238
Marketing and donations	146	173
Electronic banking expense	239	222
Software amortization and maintenance	118	144
FDIC insurance	112	171
Other noninterest expense	540	709
Total noninterest expenses	5,246	5,629
Income before income taxes	805	1,178
Income taxes (includes reclassification of $8,000 and $5,000 from accumulated other comprehensive income)	268	415
Net income	537	763
Less: Net Income attributable to noncontrolling interest	(146)	(103)
Net income attributable to Uwharrie Capital	391	660
Dividends - preferred stock		(161)
Net income available to common shareholders	$ 391	$ 499
Net income per common share
Basic	$ 0.05	$ 0.07
Diluted	$ 0.05	$ 0.07
Weighted average common shares outstanding
Basic	7,190,614	7,307,912
Diluted	7,190,614	7,307,912

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Per Share Data

3 Months Ended

Mar. 31, 2014

Earnings Per Share [Abstract]

Per Share Data

Note 4 – Per Share Data

Basic and diluted net income per common share is computed based on the weighted average number of shares outstanding during each period after retroactively adjusting for stock dividends. Diluted net income per common share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the net income of the Company. For both the three months ended March 31, 2014 and 2013, the Company’s 92,491 stock options outstanding did not have a dilutive effect on per share results because the exercise prices exceeded the share values for each period. The Employee Stock Ownership Plan, (“ESOP”) effect is the average of the unallocated ESOP shares.

Basic and diluted net income per common share have been computed based upon net income available to common shareholders as presented in the accompanying consolidated statements of income divided by the weighted average number of common shares outstanding or assumed to be outstanding. The computation of basic and dilutive earnings per share is summarized below:

	Three Months Ended March 31,
	2014			2013
Weighted average number of common shares outstanding		7,358,977			7,502,496
Effect of unreleased ESOP shares		(168,363	)		(194,584	)
Adjusted weighted average number of common shares used in computing basic net income per common share		7,190,614			7,307,912
Effect of dilutive stock options		—			—
Weighted average number of common shares and dilutive potential common shares used in computing diluted net income per common share		7,190,614			7,307,912

During the first quarter of 2014, the board of directors of the Company voted to terminate the ESOP effective March 1, 2014. As of February 28, 2014, the ESOP held 740,530 shares, or 9.95% of the Company’s total outstanding shares of common stock, of which 252,446 shares were unallocated to participants in the ESOP.

The Company had made a term loan to the ESOP in 1999. In addition, the Company established a $500,000 line of credit to the ESOP in 2010 and established a second $500,000 line of credit to the ESOP in 2013. The ESOP used the proceeds of the term loan and lines of credit to purchase shares of the Company’s common stock for the benefit of qualified employees. The unallocated shares of stock held by the ESOP were pledged as collateral for the term loan and lines of credit. As debt payments were made on the term loan and lines of credit, unallocated shares associated with those debt payments were released to the ESOP and allocated among participants.

In connection with the termination of the ESOP, the ESOP trustees transferred the 252,446 remaining unallocated shares to the Company in partial satisfaction of the outstanding balance on the term loan and lines of credit. The fair value of these unallocated shares was insufficient to repay the term loan and lines of credit in full. As a result, the Company forgave the remaining balance. Upon the transfer of the unallocated shares to the Company, these shares were cancelled and returned to the Company’s pool of authorized but unissued shares of common stock.

The Company has filed a request for a favorable determination letter from the Internal Revenue Service as to the tax-qualified status of the ESOP on its termination. Upon receipt of a favorable determination letter, all shares allocated to participant accounts will be distributed to the participants.

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Noncontrolling Interest

3 Months Ended

Mar. 31, 2014

Noncontrolling Interest [Abstract]

Noncontrolling Interest

Note 3 – Noncontrolling Interest

In January 2013 each of the Company’s subsidiary banks issued $7.9 million of Fixed Rate Noncumulative Perpetual Preferred Stock, Series B. The preferred stock qualified as Tier 1 capital at each bank and pays dividends at an annual rate of 5.30%. The preferred stock has no voting rights. This capital is presented as noncontrolling interest in the consolidated balance sheets. Dividends declared on this preferred stock are presented as earnings allocated to the noncontrolling interest in the consolidated statements of income. Effective September 1, 2013, the Fixed Rate Noncumulative Perpetual Preferred Stock, Series B was rolled into one issue under Uwharrie Bank in connection with the consolidation and name change.

During 2013, the Company’s subsidiary bank, Uwharrie Bank, Raised $2.8 million of Fixed Rate Noncumulative Perpetual Preferred Stock, Series C. The preferred stock qualifies as Tier 1 capital at the bank and pays dividends at an annual rate of 5.30%. The preferred stock has no voting rights.

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Per Share Data (Tables)

3 Months Ended

Mar. 31, 2014

Earnings Per Share [Abstract]

Computation of Basic and Dilutive Earnings Per Share

The computation of basic and dilutive earnings per share is summarized below:

	Three Months Ended March 31,
	2014			2013
Weighted average number of common shares outstanding		7,358,977			7,502,496
Effect of unreleased ESOP shares		(168,363	)		(194,584	)
Adjusted weighted average number of common shares used in computing basic net income per common share		7,190,614			7,307,912
Effect of dilutive stock options		—			—
Weighted average number of common shares and dilutive potential common shares used in computing diluted net income per common share		7,190,614			7,307,912

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Fair Values of Financial Instruments and Interest Rate Risk

3 Months Ended

Mar. 31, 2014

Fair Value Disclosures [Abstract]

Fair Values of Financial Instruments and Interest Rate Risk

Note 11 – Fair Values of Financial Instruments and Interest Rate Risk

ASC 825, “Disclosures about Fair Value of Financial Instruments,” requires disclosure of the fair value of financial assets and financial liabilities, including those that are not measured and reported at fair value on a recurring basis or non-recurring basis.

The fair value estimates presented at March 31, 2014 and December 31, 2013, are based on relevant market information and information about the financial instruments. Fair value estimates are intended to represent the price an asset could be sold at or the price at which a liability could be settled. However, given there is no active market or observable market transactions for many of the Company’s financial instruments, the Company has made estimates of many of these fair values which are subjective in nature, involve uncertainties and matters of significant judgment and therefore cannot be determined with precision. Changes in assumptions could significantly affect the estimated values. The estimated fair values disclosed in the following table do not represent market values of all assets and liabilities of the Company and should not be interpreted to represent the underlying value of the Company. The following table reflects a comparison of carrying amounts and the estimated fair value of the financial instruments as of March 31, 2014 and December 31, 2013:

March 31, 2014

	Carrying Value		Estimated Fair Value		Level 1		Level 2		Level 3
	(dollars in thousands)
FINANCIAL ASSETS
Cash and cash equivalents	$	60,874	$	60,874	$	60,874	$	—	$	—
Securities available for sale		111,508		111,508		21,250		90,258		—
Loans held for investment, net		300,537		306,947		—		—		306,947
Loans held for sale		364		364		—		364		—
Restricted stock		1,038		1,038		1,038		—		—
Bank-owned life insurance		6,557		6,557		—		—		6,557
Mortgage servicing rights		2,250		3,060		—		—		3,060
Accrued interest receivable		1,651		1,651		—		—		1,651
FINANCIAL LIABILITIES
Deposits	$	452,209	$	439,542	$	—	$	—	$	439,542
Short-term borrowings		5,887		5,892		—		5,892		—
Long-term borrowings		33		33		—		33		—
Junior subordinated debt		9,534		9,711		—		—		9,711
Accrued interest payable		193		193		—		—		193

December 31, 2013

	Carrying Value		Estimated Fair Value		Level 1		Level 2		Level 3
	(dollars in thousands)
FINANCIAL ASSETS
Cash and cash equivalents	$	72,394	$	72,394	$	72,394	$	—	$	—
Securities available for sale		100,280		100,280		21,286		78,994		—
Loans held for investment, net		302,253		308,112		—		—		308,112
Loans held for sale		1,139		1,139		—		1,139		—
Restricted stock		1,184		1,184		1,184		—		—
Bank-owned life insurance		6,516		6,516		—		—		6,516
Mortgage servicing rights		2,356		3,085		—		—		3,085
Accrued interest receivable		1,747		1,747		—		—		1,747
FINANCIAL LIABILITIES
Deposits	$	453,708	$	438,593	$	—	$	—	$	438,593
Short-term borrowings		5,509		5,509		—		5,509		—
Long-term borrowings		36		36		—		36		—
Junior subordinated debt		11,127		11,271		—		—		11,271
Accrued interest payable		224		224		—		—		224

The following methods and assumptions were used by the Company in estimating the fair value of financial instruments:

• Cash and cash equivalents – The carrying amount of cash and cash equivalents approximate their fair values due to the short period of time until their expected realization and are recorded in Level 1.

• Securities available for sale – Securities available for sale are carried at fair value based on quoted and observable market prices and are recorded in Levels 1 and 2. Also see discussion in Note 5.

• Loans – The fair value of loans is estimated based on discounted expected cash flows using the current interest rates at which similar loans would be made and carried in level 3. Loans held for sale, which represent current mortgage production forward sales not yet delivered, are valued based on secondary market prices. The fair value of loans does not consider the lack of liquidity and uncertainty in the market that would affect the valuation. Loans held for sale are recorded in Level 2.

• Restricted stock – It is not practicable to determine fair value of restricted stock which is comprised of Federal Home Loan Bank and Federal Reserve Bank stock due to restrictions placed on its transferability and it is presented at its carrying value and is recorded in Level 1 due to the redemption provisions of the Federal Home Loan Bank and the Federal Reserve Bank.

• Bank-owned life insurance – The carrying amount of bank-owned life insurance is the current cash surrender value and is recorded in level 3.

• Mortgage serving rights – Fair value is determined based upon discounted cash flows using market-based assumptions and is recorded in Level 3.

• Accrued interest receivable and payable – Both accrued interest receivable and payable are recorded in Level 3, as there are not active markets for these.

• Deposits – The fair value of deposits is estimated based on discounted cash flow analyses using offered market rates and is recorded in Level 3. The fair value of deposits does not consider any customer related intangibles.

• Borrowings – The fair value disclosed for short-term borrowings, which are composed of overnight borrowings and debt due within one year approximate the carrying value for such debt and is recorded in Level 2. The estimated fair value for long-term borrowings are estimated based on discounted cash flow analyses using offered market rates. Total borrowings are carried in Level 2. Junior subordinated debt is fair valued based on discounted cash flow analyses and is recorded in Level 3.

At March 31, 2014, the subsidiary bank had outstanding standby letters of credit and commitments to extend credit. These off-balance sheet financial instruments are generally exercisable at the market rate prevailing at the date the underlying transaction will be completed; therefore, they were deemed to have no current fair value. See Note 9.

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Allowance for Loan Losses

3 Months Ended

Mar. 31, 2014

Text Block [Abstract]

Allowance for Loan Losses

Note 7 – Allowance for Loan Losses

The following table shows the change in the allowance for loss losses by loan segment for the three month period ended March 31, 2014 and 2013, respectively:

Commercial	Three Months Ended March 31,
	2014			2013
	(dollars in thousands)
Balance, beginning of period	$	2,665		$	2,791
Provision (recovery) charged to operations		(245	)		(268	)
Charge-offs		(237	)		(271	)
Recoveries		9			5
Net (charge-offs)		(228	)		(266	)
Balance at end of period	$	2,192		$	2,257

Non-Commercial	Three Months Ended March 31,
	2014			2013
	(dollars in thousands)
Balance, beginning of period	$	2,430		$	4,010
Provision (recovery) charged to operations		(179	)		(101	)
Charge-offs		(269	)		(224	)
Recoveries		24			31
Net (charge-offs)		(245	)		(193	)
Balance at end of period	$	2,006		$	3,716

Total	Three Months Ended March 31,
	2014			2013
	(dollars in thousands)
Balance, beginning of period	$	5,095		$	6,801
Provision (recovery) charged to operations		(424	)		(369	)
Charge-offs		(506	)		(495	)
Recoveries		33			36
Net (charge-offs)		(473	)		(459	)
Balance at end of period	$	4,198		$	5,973

The following table shows period-end loans and reserve balances by loan segment both individually and collectively evaluated for impairment at March 31, 2014 and December 31, 2013:

March 31, 2014

	Individually Evaluated				Collectively Evaluated				Total
	Reserve		Loans		Reserve		Loans		Reserve		Loans
	(dollars in thousands)
Commercial	$	1,163	$	7,513	$	1,029	$	151,460	$	2,192	$	158,973
Non-Commercial		575		8,063		1,431		137,699		2,006		145,762
Total	$	1,738	$	15,576	$	2,460	$	289,159	$	4,198	$	304,735

December 31, 2013

	Individually Evaluated				Collectively Evaluated				Total
	Reserve		Loans		Reserve		Loans		Reserve		Loans
	(dollars in thousands)
Commercial	$	1,519	$	8,700	$	1,146	$	152,241	$	2,665	$	160,941
Non-Commercial		868		8,853		1,562		137,554		2,430		146,407
Total	$	2,387	$	17,553	$	2,708	$	289,795	$	5,095	$	307,348

Past due loan information is used by management when assessing the adequacy of the allowance for loan losses. The following table summarizes the past due information of the loan portfolio by class:

March 31, 2014

	Loans 30-89 Days Past Due		Loans 90 Days or More Past due		Total Past Due Loans		Current Loans		Total Loans		Accruing Loans 90 or More Days Past Due
	(dollars in thousands)
Commercial	$	89	$	—	$	89	$	48,423	$	48,512	$	—
Real estate - commercial		112		1,364		1,476		91,242		92,718		—
Other real estate construction		35		1,685		1,720		16,023		17,743		—
Real estate 1 - 4 family construction		—		—		—		3,849		3,849		—
Real estate - residential		1,575		562		2,137		86,110		88,247		—
Home equity		133		—		133		44,353		44,486		—
Consumer loans		122		—		122		8,482		8,604		—
Other loans		—		—		—		576		576		—
Total	$	2,066	$	3,611	$	5,677	$	299,058	$	304,735	$	—

December 31, 2013

	Loans 30-89 Days Past Due		Loans 90 Days or More Past due		Total Past Due Loans		Current Loans		Total Loans		Accruing Loans 90 or More Days Past Due
	(dollars in thousands)
Commercial	$	143	$	204	$	347	$	47,089	$	47,436	$	—
Real estate - commercial		165		1,064		1,229		94,693		95,922		—
Other real estate construction		145		1,637		1,782		15,801		17,583		—
Real estate construction		—		—		—		3,418		3,418		—
Real estate - residential		1,426		1,564		2,990		84,533		87,523		—
Home equity		207		248		455		44,776		45,231		—
Consumer loan		55		—		55		9,568		9,623		—
Other loans		—		—		—		612		612		—
Total	$	2,141	$	4,717	$	6,858	$	300,490	$	307,348	$	—

Once a loan becomes 90 days past due, the loan is automatically transferred to a nonaccrual status. The exception to this policy is credit card loans that remain in accruing 90 days or more until they are paid current or charged off. Also, mortgage loans that were originated for sale but were not sold and are being held in the loan portfolio remain in an accruing status until they are foreclosed.

The composition of nonaccrual loans by class as of March 31, 2014 and December 31, 2013 is as follows:

	March 31, 2014		December 31, 2013
	(dollars in thousands)
Commercial	$	—	$	204
Real estate - commercial		1,364		1,064
Other real estate construction		1,685		1,637
Real estate 1 - 4 family construction		—		—
Real estate - residential		562		1,564
Home equity		—		248
Consumer loans		—		—
Other loans		—		—
	$	3,611	$	4,717

Management uses a risk-grading program to facilitate the evaluation of probable inherent loan losses and to measure the adequacy of the allowance for loan losses. In this program, risk grades are initially assigned by the loan officers and reviewed and monitored by the lenders and credit administration. The program has eight risk grades summarized in five categories as follows:

Pass: Loans that are pass grade credits include loans that are fundamentally sound and risk factors are reasonable and acceptable. They generally conform to policy with only minor exceptions and any major exceptions are clearly mitigated by other economic factors.

Watch: Loans that are watch credits include loans on management’s watch list where a risk concern may be anticipated in the near future.

Substandard: Loans that are considered substandard are loans that are inadequately protected by current sound net worth, paying capacity of the obligor or the value of the collateral pledged. All nonaccrual loans are graded as substandard.

Doubtful: Loans that are considered to be doubtful have all weaknesses inherent in loans classified substandard, plus the added characteristic that the weaknesses make the collection or liquidation in full on the basis of current existing facts, conditions and values highly questionable and improbable.

Loss: Loans that are considered to be a loss are considered to be uncollectible and of such little value that their continuance as bankable assets is not warranted.

The tables below summarize risk grades of the loan portfolio by class at March 31, 2014 and December 31, 2013:

March 31, 2014

	Pass		Watch		Sub- standard		Doubtful		Total
	(dollars in thousands)
Commercial	$	47,794	$	580	$	138	$	—	$	48,512
Real estate - commercial		79,742		7,928		5,048		—		92,718
Other real estate construction		13,194		2,245		1,469		835		17,743
Real estate 1 - 4 family construction		3,849		—		—		—		3,849
Real estate - residential		70,878		12,367		5,002		—		88,247
Home equity		42,997		1,097		392		—		44,486
Consumer loans		8,221		332		51		—		8,604
Other loans		576		—		—		—		576
Total	$	267,251	$	24,549	$	12,100	$	835	$	304,735

December 31, 2013

	Pass		Watch		Sub- standard		Doubtful		Total
	(dollars in thousands)
Commercial	$	46,520	$	635	$	281	$	—	$	47,436
Real estate - commercial		80,679		9,396		5,847		—		95,922
Other real estate construction		12,898		2,465		1,385		835		17,583
Real estate 1 - 4 family construction		3,418		—		—		—		3,418
Real estate - residential		70,407		12,911		4,205		—		87,523
Home equity		43,830		1,005		396		—		45,231
Consumer loans		9,216		361		46		—		9,623
Other loans		612		—		—		—		612
Total	$	267,580	$	26,773	$	12,160	$	835	$	307,348

Loans that are in nonaccrual status or 90 days past due and still accruing are considered to be nonperforming. At both March 31, 2014 and December 31, 2013 there were no loans 90 days past due and still accruing. The following tables show the breakdown between performing and nonperforming loans by class at March 31, 2014 and December 31, 2013:

March 31, 2014

	Performing		Non- Performing		Total
	(dollars in thousands)
Commercial	$	48,512	$	—	$	48,512
Real estate - commercial		91,354		1,364		92,718
Other real estate construction		16,058		1,685		17,743
Real estate 1 - 4 family construction		3,849		—		3,849
Real estate - residential		87,685		562		88,247
Home equity		44,486		—		44,486
Consumer loans		8,604		—		8,604
Other loans		576		—		576
Total	$	301,124	$	3,611	$	304,735

December 31, 2013

	Performing		Non- Performing		Total
	(dollars in thousands)
Commercial	$	47,232	$	204	$	47,436
Real estate - commercial		94,858		1,064		95,922
Other real estate construction		15,946		1,637		17,583
Real estate 1 - 4 family construction		3,418		—		3,418
Real estate - residential		85,959		1,564		87,523
Home equity		44,983		248		45,231
Consumer loans		9,623		—		9,623
Other loans		612		—		612
Total	$	302,631	$	4,717	$	307,348

Loans are considered impaired when, based on current information and events it is probable the Company will be unable to collect all amounts due in accordance with the original contractual terms of the loan agreement. If a loan is deemed impaired, a specific calculation is performed and a specific reserve is allocated, if necessary. The tables below summarize the loans deemed impaired and the amount of specific reserves allocated by class at March 31, 2014 and December 31, 2013.

March 31, 2014

	Unpaid Principal Balance		Recorded Investment With No Allowance		Recorded Investment With Allowance		Related Allowance
	(dollars in thousands)
Commercial	$	166	$	86	$	80	$	62
Real estate - commercial		5,898		4,643		784		204
Other real estate construction		1,968		257		1,663		897
Real estate 1 - 4 family construction		372		23		349		16
Real estate - residential		7,651		4,478		2,924		458
Home equity		181		47		134		59
Consumer loans		108		56		52		42
Other loans		—		—		—		—
Total	$	16,344	$	9,590	$	5,986	$	1,738

December 31, 2013

	Unpaid Principal Balance		Recorded Investment With No Allowance		Recorded Investment With Allowance		Related Allowance
	(dollars in thousands)
Commercial	$	377	$	291	$	86	$	67
Real estate - commercial		6,808		3,962		2,375		507
Other real estate construction		2,034		247		1,739		945
Real estate 1 - 4 family construction		374		25		349		16
Real estate - residential		8,197		4,619		3,329		530
Home equity		415		58		357		279
Consumer loans		116		61		55		43
Other loans		—		—		—		—
Total	$	18,321	$	9,263	$	8,290	$	2,387

	Three Months ended March 31, 2014				Three Months ended March 31, 2013
	Average Recorded Investment		Interest Income		Average Recorded Investment		Interest Income
	(dollars in thousands)
Commercial	$	271	$	2	$	1,504	$	11
Real estate - commercial		5,882		54		8,651		75
Other real estate construction		1,953		3		3,014		6
Real estate 1- 4 family construction		373		5		617		5
Real estate - residential		7,675		78		8,806		89
Home equity		298		2		1,056		5
Consumer loans		112		2		223		3
Other loans		—		—		—		—
Total	$	16,564	$	146	$	23,871	$	194

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Investment Securities

3 Months Ended

Mar. 31, 2014

Investments Debt And Equity Securities [Abstract]

Investment Securities

Note 5 – Investment Securities

Carrying amounts and fair values of securities available for sale are summarized below:

March 31, 2014	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
	(dollars in thousands)
U.S. Treasury	$	20,950	$	468	$	168	$	21,250
U.S. Government agencies		44,910		118		623		44,405
GSE - Mortgage-backed securities and CMO’s		35,956		39		562		35,433
State and political subdivisions		10,046		374		—		10,420
Total securities available for sale	$	111,862	$	999	$	1,353	$	111,508

December 31, 2013	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
	(dollars in thousands)
U.S. Treasury	$	20,992	$	502	$	208	$	21,286
U.S. Government agencies		34,931		145		776		34,300
GSE - Mortgage-backed securities and CMO’s		37,871		121		986		37,006
State and political subdivisions		7,337		351		—		7,688
Total securities available for sale	$	101,131	$	1,119	$	1,970	$	100,280

At both March 31, 2014 and December 31, 2013 the Company owned Federal Reserve Bank stock reported at cost of $532,000 and $467,000, respectively that is included in other assets. Also at March 31, 2014 and December 31, 2013, the Company owned Federal Home Loan Bank Stock (FHLB) of $506,000 and $717,000, respectively. The investments in Federal Reserve stock and FHLB stock are required investments related to the Company’s membership in, and borrowings with, these banks. These investments are carried at cost since there is no ready market and redemption has historically been made at par value. The Company estimated that the fair value approximated cost and that these investments were not impaired at March 31, 2014.

Results from sales of securities available for sale for the three month period ended March 31, 2014 and March 31, 2013 are as follows:

	Three Months Ended March 31,
	2014		2013
	(dollars in thousands)
Gross proceeds from sales	$	328	$	426
Gross realized gains from sales	$	21	$	14
Gross realized losses from sales		—		—
Net realized gains	$	21	$	14

At March 31, 2014 and December 31, 2013, securities available for sale with a carrying amount of $61.2 million and $63.1 million, respectively, were pledged as collateral on public deposits and for other purposes as required or permitted by law.

The following tables show the gross unrealized losses and fair value of investments, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, at March 31, 2014 and December 31, 2013. These unrealized losses on investment securities are a result of temporary fluctuations in market prices due to a rise in interest rates, which will adjust if rates decline, and in a volatile market. Management does not believe these fluctuations are a reflection of the quality of the investments. At March 31, 2014, the unrealized losses for securities less than twelve months related to one United States Treasury note, eleven government agency bonds and nine government sponsored enterprise (GSE) mortgage backed securities. The Company had two GSE mortgage backed securities that had been in a loss position for more than twelve months. At December 31, 2013, the unrealized losses less than twelve months related to one United States Treasury note, ten government agency bonds and eleven government sponsored enterprise (GSE) mortgage backed securities. The Company had two GSE mortgage backed securities that had been in a loss position for more than twelve months at December 31, 2013.

	Less than 12 Months				12 Months or More				Total
March 31, 2014	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
	(dollars in thousands)
Securities available for sale temporary impairment
U.S. Treasury	$	4,764	$	168	$	—	$	—	$	4,764	$	168
U.S. Gov’t agencies		39,288		623		—		—		39,288		623
GSE-Mortgage-backed securities and CMO’s		16,157		441		3,710		121		19,867		562
State and political subdivisions		—		—		—		—		—		—
	$	60,209	$	1,232	$	3,710	$	121	$	63,919	$	1,353

	Less than 12 Months				12 Months or More				Total
December 31, 2013	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
	(dollars in thousands)
Securities available for sale temporary impairment
U.S. Treasury	$	4,722	$	208	$	—	$	—	$	4,722	$	208
U.S. Gov’t agencies		29,147		776		—		—		29,147		776
GSE-Mortgage-backed securities and CMO’s		22,206		842		3,849		144		26,055		986
State and political subdivisions		—		—		—		—		—		—
	$	56,075	$	1,826	$	3,849	$	144	$	59,924	$	1,970

Declines in the fair value of the investment portfolio are believed by management to be temporary in nature. When evaluating an investment for other-than-temporary impairment losses, management considers among other things, the length of time and the extent to which the fair value has been in a loss position, the financial condition of the issuer and the intent and the ability the Company has to hold the investment until the loss position is recovered.

At March 31, 2014, the Company had two GSE mortgage backed securities that had been in a loss position for twelve months or more. The unrealized losses are not likely to reverse unless market interest rates decline to the levels that existed when the securities were purchased. None of the unrealized losses relate to the marketability of the securities or the issuer’s ability to honor redemption obligations. The fair value is expected to recover as the bonds approach their maturity date or market yields for such investments decline. At March 31, 2014, the Company had no intent to sell and was not more likely than not to be required to sell the available for sale securities that were in a loss position prior to full recovery. For the three months ended March 31, 2014, there were no available for sale securities deemed to be other than temporarily impaired.

The aggregate amortized cost and fair value of the available for sale securities portfolio at March 31, 2014 by remaining contractual maturity are as follows:

	March 31, 2014
	Amortized Cost		Estimated Fair Value		Book Yield
	(dollars in thousands)
Securities available for sale
U. S. Treasury
Due after one but within five years		16,018		16,486		1.91	%
Due after five but within ten years		4,932		4,764		1.37	%
		20,950		21,250		1.79	%
U.S. Government agencies
Due within twelve months		4,999		5,117		2.77	%
Due after one but within five years		26,034		25,834		1.31	%
Due after five but within ten years		13,877		13,454		1.45	%
		44,910		44,405		1.52	%
Mortgage-backed securities
Due after one but within five years		5,119		5,021		1.58	%
Due after five but within ten years		1,463		1,507		3.01	%
Due after ten years		29,374		28,905		2.04	%
		35,956		35,433		2.01	%
State and political subdivisions
Due within twelve months		480		482		4.97	%
Due after one but within five years		1,468		1,588		5.73	%
Due after five but within ten years		4,355		4,573		4.64	%
Due after ten years		3,743		3,777		5.14	%
		10,046		10,420		5.00	%
Total Securities available for sale
Due within twelve months		5,479		5,599		2.96	%
Due after one but within five years		48,639		48,929		1.67	%
Due after five but within ten years		24,627		24,298		2.09	%
Due after ten years		33,117		32,682		2.39	%
	$	111,862	$	111,508		2.04	%

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Loans Held for Investment

3 Months Ended

Mar. 31, 2014

Receivables [Abstract]

Loans Held for Investment

Note 6 – Loans Held for Investment

The composition of net loans held for investment by class as of March 31, 2014 and December 31, 2013 are as follows:

	March 31, 2014			December 31, 2013
	(dollars in thousands)
Commercial
Commercial	$	48,512		$	47,436
Real estate - commercial		92,718			95,922
Other real estate construction loans		17,743			17,583
Noncommercial
Real estate 1-4 family construction		3,849			3,418
Real estate - residential		88,216			87,463
Home equity		44,486			45,231
Consumer loans		8,604			9,623
Other loans		576			612
		304,704			307,288
Less:
Allowance for loan losses		(4,198	)		(5,095	)
Deferred loan (fees) costs, net		31			60
Loans held for investment, net	$	300,537		$	302,253

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Troubled Debt Restructures

3 Months Ended

Mar. 31, 2014

Receivables [Abstract]

Troubled Debt Restructures

Note 8 – Troubled Debt Restructures

A modification of a loan constitutes a troubled debt restructuring (“TDR”) when a borrower is experiencing financial difficulty and the modification involves providing a concession to the existing loan contract. The Company offers various types of concessions when modifying loans to troubled borrowers, however, forgiveness of principal is rarely granted. Concessions offered are term extensions, capitalizing accrued interest, reducing interest rates to below current market rates or a combination of any of these. Combinations from time to time may include allowing a customer to be placed on interest-only payments. The presentations below in the “other” category are TDR’s with a combination of concessions. At the time of a TDR, additional collateral or a guarantor may be requested.

Loans modified as TDRs are typically already on nonaccrual status and in some cases, partial chargeoffs may have already been taken against the outstanding loan balance. The Company classifies TDR loans as impaired loans and evaluates the need for an allowance for loan loss on a loan-by-loan basis. An allowance is based on either the present value of expected future cash flows discounted at the loan’s effective interest rate, the loan’s observable market price or the estimated fair value of the underlying collateral less any selling costs, if the loan is deemed to be collateral dependent.

For the three months ended March 31, 2014 and 2013, the following table presents a breakdown of the types of concessions made by loan class:

	For the three months ended March 31, 2014
	Number of Contracts		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
	(dollars in thousands)
Extend payment terms:
Commercial		—	$	—	$	—
Real estate - commercial		—		—		—
Other real estate construction		—		—		—
Real estate 1 - 4 family construction		—		—		—
Real estate - residential		—		—		—
Home equity		—		—		—
Consumer loans		1		39		34
Other loans		—		—		—
		1	$	39	$	34
Other:
Commercial		—	$	—	$	—
Real estate - commercial		1		344		269
Other real estate construction		—		—		—
Real estate 1 - 4 family construction		—		—		—
Real estate - residential		9		1,287		1,253
Home equity		—		—		—
Consumer loans		—		—		—
Other loans		—		—		—
		10	$	1,631	$	1,522
Total		11	$	1,670	$	1,556

	For the three months March 31, 2013
	Number of Contracts		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
	(dollars in thousands)
Extend payment terms:
Commercial		—	$	—	$	—
Real estate - commercial		—		—		—
Other real estate construction		—		—		—
Real estate 1 - 4 family construction		—		—		—
Real estate - residential		2		65		65
Home equity		—		—		—
Consumer loans		—		—		—
Other loans		—		—		—
		2	$	65	$	65
Other:
Commercial		1	$	10	$	9
Real estate - commercial		2		619		618
Other real estate construction		—		—		—
Real estate 1 - 4 family construction		—		—		—
Real estate - residential		1		24		24
Home equity		—		—		—
Consumer loans		1		52		51
Other loans		—		—		—
		5	$	705	$	702
Total		7	$	770	$	767

The following table presents loans that were modified as TDRs within the previous twelve months and for which there was a payment default during the twelve months ended March 31, 2014 and March 31, 2013:

	Twelve months ended March 31, 2014				Twelve months ended March 31, 2013
	Number of Loans		Recorded Investment		Number of Loans		Recorded Investment
	(dollars in thousands)
Extend payment terms:
Commercial		—	$	—		—	$	—
Real estate - commercial		—		—		—		—
Other real estate construction		—		—		—		—
Real estate 1 - 4 family construction		—		—		—		—
Real estate - residential		—		—		3		266
Home equity		—		—		—		—
Consumer loans		—		—		—		—
Other loans		—		—		—		—
		—	$	—		3	$	266
Forgiveness of principal:
Commercial		—	$	—		—	$	—
Real estate - commercial		—		—		—		—
Other real estate construction		—		—		—		—
Real estate 1 - 4 family construction		—		—		—		—
Real estate - residential		—		—		1		25
Home equity		—		—		—		—
Consumer loans		—		—		—		—
Other loans		—		—		—		—
		—	$	—		1	$	25
Other:
Commercial		—	$	—		—	$	—
Real estate - commercial		—		—		—		—
Other real estate construction		—		—		—		—
Real estate 1 - 4 family construction		—		—		—		—
Real estate - residential		—		—		1		238
Home equity		—		—		—		—
Consumer loans		—		—		1		17
Other loans		—		—		—		—
		—	$	—		2	$	255
Total		—	$	—		6	$	546

A default on a TDR is defined as being past due 90 days or being out of compliance with the modification agreement. As previously mentioned, the Company considers TDRs to be impaired loans and has $363,000 in the allowance for loan loss as of March 31, 2014, as a direct result of these TDRs. At March 31, 2013, there was $708,000 in the allowance for loan loss related to TDRs.

The following table presents the successes and failures of the types of modifications within the previous twelve months as of March 31, 2014 and 2013:

	Paid In Full				Paying as restructured				Converted to nonaccrual				Foreclosure/ Default
	Number of Loans		Recorded Investments		Number of Loans		Recorded Investments		Number of Loans		Recorded Investments		Number of Loans		Recorded Investments
	(dollars in thousands)
March 31, 2014
Extended payment terms		—	$	—		1	$	34		—	$	—		—	$	—
Other		—		—		10		1,522		—		—		—		—
Total		—	$	—		11	$	1,556		—	$	—		—	$	—
March 31, 2013
Extended payment terms		—	$	—		—	$	—		—	$	—		1	$	207
Other		—		—		6		514		2		244		8		717
Total		—	$	—		6	$	514		2	$	244		9	$	924

The Company has not committed to fund any additional disbursements for TDRs.

XML

Per Share Data - Additional Information (Detail) (USD $)	3 Months Ended
	Mar. 31, 2014	Mar. 31, 2013	Feb. 28, 2014	Dec. 31, 2013 Employee Stock Ownership Plan [Member] Line of Credit [Member]	Dec. 31, 2010 Employee Stock Ownership Plan [Member] Line of Credit [Member]
Earnings Per Share Basic And Dilutive [Line Items]
Stock outstanding options not included in the computation of EPS	92,491	92,491
Shares held by ESOP			740,530
Shares held by ESOP, Percentage			9.95%
Shares unallocated to participants in the ESOP			252,446
Line of credit				$ 500,000	$ 500,000
Remaining unallocated share	252,446

XML

Troubled Debt Restructures - Loans Modified as Troubled Debt Restructurings Within Previous Twelve Months for which there was Payment Default (Detail) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2014 Loans	Mar. 31, 2013 Loans
Financing Receivable, Modifications [Line Items]
Number of Loans		6
Recorded Investment		$ 546
Extend Payment Terms [Member]
Financing Receivable, Modifications [Line Items]
Number of Loans		3
Recorded Investment		266
Extend Payment Terms [Member] | Commercial [Member]
Financing Receivable, Modifications [Line Items]
Number of Loans
Recorded Investment
Extend Payment Terms [Member] | Real Estate - Commercial [Member]
Financing Receivable, Modifications [Line Items]
Number of Loans
Recorded Investment
Extend Payment Terms [Member] | Other Real Estate Construction [Member]
Financing Receivable, Modifications [Line Items]
Number of Loans
Recorded Investment
Extend Payment Terms [Member] | Real Estate 1 - 4 Family Construction [Member]
Financing Receivable, Modifications [Line Items]
Number of Loans
Recorded Investment
Extend Payment Terms [Member] | Real Estate - Residential [Member]
Financing Receivable, Modifications [Line Items]
Number of Loans		3
Recorded Investment		266
Extend Payment Terms [Member] | Home Equity [Member]
Financing Receivable, Modifications [Line Items]
Number of Loans
Recorded Investment
Extend Payment Terms [Member] | Consumer Loans [Member]
Financing Receivable, Modifications [Line Items]
Number of Loans
Recorded Investment
Extend Payment Terms [Member] | Other Loans [Member]
Financing Receivable, Modifications [Line Items]
Number of Loans
Recorded Investment
Forgiveness of Principal [Member]
Financing Receivable, Modifications [Line Items]
Number of Loans		1
Recorded Investment		25
Forgiveness of Principal [Member] | Commercial [Member]
Financing Receivable, Modifications [Line Items]
Number of Loans
Recorded Investment
Forgiveness of Principal [Member] | Real Estate - Commercial [Member]
Financing Receivable, Modifications [Line Items]
Number of Loans
Recorded Investment
Forgiveness of Principal [Member] | Other Real Estate Construction [Member]
Financing Receivable, Modifications [Line Items]
Number of Loans
Recorded Investment
Forgiveness of Principal [Member] | Real Estate 1 - 4 Family Construction [Member]
Financing Receivable, Modifications [Line Items]
Number of Loans
Recorded Investment
Forgiveness of Principal [Member] | Real Estate - Residential [Member]
Financing Receivable, Modifications [Line Items]
Number of Loans		1
Recorded Investment		25
Forgiveness of Principal [Member] | Home Equity [Member]
Financing Receivable, Modifications [Line Items]
Number of Loans
Recorded Investment
Forgiveness of Principal [Member] | Consumer Loans [Member]
Financing Receivable, Modifications [Line Items]
Number of Loans
Recorded Investment
Forgiveness of Principal [Member] | Other Loans [Member]
Financing Receivable, Modifications [Line Items]
Number of Loans
Recorded Investment
Other [Member]
Financing Receivable, Modifications [Line Items]
Number of Loans		2
Recorded Investment		255
Other [Member] | Commercial [Member]
Financing Receivable, Modifications [Line Items]
Number of Loans
Recorded Investment
Other [Member] | Real Estate - Commercial [Member]
Financing Receivable, Modifications [Line Items]
Number of Loans
Recorded Investment
Other [Member] | Other Real Estate Construction [Member]
Financing Receivable, Modifications [Line Items]
Number of Loans
Recorded Investment
Other [Member] | Real Estate 1 - 4 Family Construction [Member]
Financing Receivable, Modifications [Line Items]
Number of Loans
Recorded Investment
Other [Member] | Real Estate - Residential [Member]
Financing Receivable, Modifications [Line Items]
Number of Loans		1
Recorded Investment		238
Other [Member] | Home Equity [Member]
Financing Receivable, Modifications [Line Items]
Number of Loans
Recorded Investment
Other [Member] | Consumer Loans [Member]
Financing Receivable, Modifications [Line Items]
Number of Loans		1
Recorded Investment		17
Other [Member] | Other Loans [Member]
Financing Receivable, Modifications [Line Items]
Number of Loans
Recorded Investment

XML

Fair Value Disclosures (Policies)

3 Months Ended

Mar. 31, 2014

Fair Value Disclosures [Abstract]

Fair Value Policy

Accounting Standards Codification (ASC) 820 defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. ASC 820 does not require any new fair value measurements, but clarifies and standardizes some divergent practices that have emerged since prior guidance was issued. ASC 820 creates a three-level hierarchy under which individual fair value estimates are to be ranked based on the relative reliability of the inputs used in the valuation.

ASC 820 defines fair value as the price that would be received to sell an asset or transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities, the Company considers the principal or most advantageous market in which those assets or liabilities are sold and considers assumptions that market participants would use when pricing those assets or liabilities. Fair values determined using Level 1 inputs rely on active and observable markets to price identical assets or liabilities. In situations where identical assets and liabilities are not traded in active markets, fair values may be determined based on Level 2 inputs, which exist when observable data exists for similar assets and liabilities. Fair values for assets and liabilities for which identical or similar assets and liabilities are not actively traded in observable markets are based on Level 3 inputs, which are considered to be unobservable.

Fair Value of Financial Instruments

ASC 825, “Disclosures about Fair Value of Financial Instruments,” requires disclosure of the fair value of financial assets and financial liabilities, including those that are not measured and reported at fair value on a recurring basis or non-recurring basis.

Receivables - Troubled Debt Restructurings by Creditors

In January 2014, the FASB issued ASU 2014-04, an update to ASC 310 “Receivables – Troubled Debt Restructurings by Creditors”. The amendments in this update clarify that if an in substance repossession or foreclosure occurs, and a creditor is considered to have received physical possession of residential real estate property collateralizing a consumer mortgage loan, upon either (1) the creditor obtaining legal title to the residential real estate property upon completion of a foreclosure or (2) the borrower conveying all interest in the residential real estate property to the creditor to satisfy that loan through completion of a deed in lieu of foreclosure or through a similar legal agreement. Additionally, the amendments require interim and annual disclosure of both (1) the amount of foreclosed residential real estate property held by the creditor and (2) the recorded investment in consumer mortgage loans collateralized by residential real estate property that are in the process of foreclosure according to local requirements of the applicable jurisdiction. The update is effective for reporting periods beginning after December 15, 2014. The adoption of this update will not have a significant impact on the Company’s financial statements except for added disclosures.

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Allowance for Loan Losses (Tables)

3 Months Ended

Mar. 31, 2014

Text Block [Abstract]

Changes in the Allowance for Loan Losses

The following table shows the change in the allowance for loss losses by loan segment for the three month period ended March 31, 2014 and 2013, respectively:

Commercial	Three Months Ended March 31,
	2014			2013
	(dollars in thousands)
Balance, beginning of period	$	2,665		$	2,791
Provision (recovery) charged to operations		(245	)		(268	)
Charge-offs		(237	)		(271	)
Recoveries		9			5
Net (charge-offs)		(228	)		(266	)
Balance at end of period	$	2,192		$	2,257

Non-Commercial	Three Months Ended March 31,
	2014			2013
	(dollars in thousands)
Balance, beginning of period	$	2,430		$	4,010
Provision (recovery) charged to operations		(179	)		(101	)
Charge-offs		(269	)		(224	)
Recoveries		24			31
Net (charge-offs)		(245	)		(193	)
Balance at end of period	$	2,006		$	3,716

Total	Three Months Ended March 31,
	2014			2013
	(dollars in thousands)
Balance, beginning of period	$	5,095		$	6,801
Provision (recovery) charged to operations		(424	)		(369	)
Charge-offs		(506	)		(495	)
Recoveries		33			36
Net (charge-offs)		(473	)		(459	)
Balance at end of period	$	4,198		$	5,973

Schedule of Loans and Reserve Balances by Loan Segment Both Individually and Collectively Evaluated for Impairment

The following table shows period-end loans and reserve balances by loan segment both individually and collectively evaluated for impairment at March 31, 2014 and December 31, 2013:

March 31, 2014

	Individually Evaluated				Collectively Evaluated				Total
	Reserve		Loans		Reserve		Loans		Reserve		Loans
	(dollars in thousands)
Commercial	$	1,163	$	7,513	$	1,029	$	151,460	$	2,192	$	158,973
Non-Commercial		575		8,063		1,431		137,699		2,006		145,762
Total	$	1,738	$	15,576	$	2,460	$	289,159	$	4,198	$	304,735

December 31, 2013

	Individually Evaluated				Collectively Evaluated				Total
	Reserve		Loans		Reserve		Loans		Reserve		Loans
	(dollars in thousands)
Commercial	$	1,519	$	8,700	$	1,146	$	152,241	$	2,665	$	160,941
Non-Commercial		868		8,853		1,562		137,554		2,430		146,407
Total	$	2,387	$	17,553	$	2,708	$	289,795	$	5,095	$	307,348

Past Due Information of the Loan Portfolio by Class

The following table summarizes the past due information of the loan portfolio by class:

March 31, 2014

	Loans 30-89 Days Past Due		Loans 90 Days or More Past due		Total Past Due Loans		Current Loans		Total Loans		Accruing Loans 90 or More Days Past Due
	(dollars in thousands)
Commercial	$	89	$	—	$	89	$	48,423	$	48,512	$	—
Real estate - commercial		112		1,364		1,476		91,242		92,718		—
Other real estate construction		35		1,685		1,720		16,023		17,743		—
Real estate 1 - 4 family construction		—		—		—		3,849		3,849		—
Real estate - residential		1,575		562		2,137		86,110		88,247		—
Home equity		133		—		133		44,353		44,486		—
Consumer loans		122		—		122		8,482		8,604		—
Other loans		—		—		—		576		576		—
Total	$	2,066	$	3,611	$	5,677	$	299,058	$	304,735	$	—

December 31, 2013

	Loans 30-89 Days Past Due		Loans 90 Days or More Past due		Total Past Due Loans		Current Loans		Total Loans		Accruing Loans 90 or More Days Past Due
	(dollars in thousands)
Commercial	$	143	$	204	$	347	$	47,089	$	47,436	$	—
Real estate - commercial		165		1,064		1,229		94,693		95,922		—
Other real estate construction		145		1,637		1,782		15,801		17,583		—
Real estate construction		—		—		—		3,418		3,418		—
Real estate - residential		1,426		1,564		2,990		84,533		87,523		—
Home equity		207		248		455		44,776		45,231		—
Consumer loan		55		—		55		9,568		9,623		—
Other loans		—		—		—		612		612		—
Total	$	2,141	$	4,717	$	6,858	$	300,490	$	307,348	$	—

Composition of Nonaccrual Loans by Class

The composition of nonaccrual loans by class as of March 31, 2014 and December 31, 2013 is as follows:

	March 31, 2014		December 31, 2013
	(dollars in thousands)
Commercial	$	—	$	204
Real estate - commercial		1,364		1,064
Other real estate construction		1,685		1,637
Real estate 1 - 4 family construction		—		—
Real estate - residential		562		1,564
Home equity		—		248
Consumer loans		—		—
Other loans		—		—
	$	3,611	$	4,717

Summary of Risk Grades of Portfolio by Class

The tables below summarize risk grades of the loan portfolio by class at March 31, 2014 and December 31, 2013:

March 31, 2014

	Pass		Watch		Sub- standard		Doubtful		Total
	(dollars in thousands)
Commercial	$	47,794	$	580	$	138	$	—	$	48,512
Real estate - commercial		79,742		7,928		5,048		—		92,718
Other real estate construction		13,194		2,245		1,469		835		17,743
Real estate 1 - 4 family construction		3,849		—		—		—		3,849
Real estate - residential		70,878		12,367		5,002		—		88,247
Home equity		42,997		1,097		392		—		44,486
Consumer loans		8,221		332		51		—		8,604
Other loans		576		—		—		—		576
Total	$	267,251	$	24,549	$	12,100	$	835	$	304,735

December 31, 2013

	Pass		Watch		Sub- standard		Doubtful		Total
	(dollars in thousands)
Commercial	$	46,520	$	635	$	281	$	—	$	47,436
Real estate - commercial		80,679		9,396		5,847		—		95,922
Other real estate construction		12,898		2,465		1,385		835		17,583
Real estate 1 - 4 family construction		3,418		—		—		—		3,418
Real estate - residential		70,407		12,911		4,205		—		87,523
Home equity		43,830		1,005		396		—		45,231
Consumer loans		9,216		361		46		—		9,623
Other loans		612		—		—		—		612
Total	$	267,580	$	26,773	$	12,160	$	835	$	307,348

Summary of Performing and Nonperforming Loans by Class

The following tables show the breakdown between performing and nonperforming loans by class at March 31, 2014 and December 31, 2013:

March 31, 2014

	Performing		Non- Performing		Total
	(dollars in thousands)
Commercial	$	48,512	$	—	$	48,512
Real estate - commercial		91,354		1,364		92,718
Other real estate construction		16,058		1,685		17,743
Real estate 1 - 4 family construction		3,849		—		3,849
Real estate - residential		87,685		562		88,247
Home equity		44,486		—		44,486
Consumer loans		8,604		—		8,604
Other loans		576		—		576
Total	$	301,124	$	3,611	$	304,735

December 31, 2013

	Performing		Non- Performing		Total
	(dollars in thousands)
Commercial	$	47,232	$	204	$	47,436
Real estate - commercial		94,858		1,064		95,922
Other real estate construction		15,946		1,637		17,583
Real estate 1 - 4 family construction		3,418		—		3,418
Real estate - residential		85,959		1,564		87,523
Home equity		44,983		248		45,231
Consumer loans		9,623		—		9,623
Other loans		612		—		612
Total	$	302,631	$	4,717	$	307,348

Summary of Loans Deemed Impaired and Specific Reserves Allocated by Class

The tables below summarize the loans deemed impaired and the amount of specific reserves allocated by class at March 31, 2014 and December 31, 2013.

March 31, 2014

	Unpaid Principal Balance		Recorded Investment With No Allowance		Recorded Investment With Allowance		Related Allowance
	(dollars in thousands)
Commercial	$	166	$	86	$	80	$	62
Real estate - commercial		5,898		4,643		784		204
Other real estate construction		1,968		257		1,663		897
Real estate 1 - 4 family construction		372		23		349		16
Real estate - residential		7,651		4,478		2,924		458
Home equity		181		47		134		59
Consumer loans		108		56		52		42
Other loans		—		—		—		—
Total	$	16,344	$	9,590	$	5,986	$	1,738

December 31, 2013

	Unpaid Principal Balance		Recorded Investment With No Allowance		Recorded Investment With Allowance		Related Allowance
	(dollars in thousands)
Commercial	$	377	$	291	$	86	$	67
Real estate - commercial		6,808		3,962		2,375		507
Other real estate construction		2,034		247		1,739		945
Real estate 1 - 4 family construction		374		25		349		16
Real estate - residential		8,197		4,619		3,329		530
Home equity		415		58		357		279
Consumer loans		116		61		55		43
Other loans		—		—		—		—
Total	$	18,321	$	9,263	$	8,290	$	2,387

	Three Months ended March 31, 2014				Three Months ended March 31, 2013
	Average Recorded Investment		Interest Income		Average Recorded Investment		Interest Income
	(dollars in thousands)
Commercial	$	271	$	2	$	1,504	$	11
Real estate - commercial		5,882		54		8,651		75
Other real estate construction		1,953		3		3,014		6
Real estate 1- 4 family construction		373		5		617		5
Real estate - residential		7,675		78		8,806		89
Home equity		298		2		1,056		5
Consumer loans		112		2		223		3
Other loans		—		—		—		—
Total	$	16,564	$	146	$	23,871	$	194

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Allowance for Loan Losses - Summary of Loans Deemed Impaired and Specific Reserves Allocated by Class (Detail) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2014	Mar. 31, 2013	Dec. 31, 2013
Financing Receivable, Impaired [Line Items]
Unpaid Principal Balance	$ 16,344		$ 18,321
Recorded Investment With No Allowance	9,590		9,263
Recorded Investment With Allowance	5,986		8,290
Related Allowance	1,738		2,387
Average Recorded Investment	16,564	23,871
Interest Income	146	194
Commercial [Member]
Financing Receivable, Impaired [Line Items]
Unpaid Principal Balance	166		377
Recorded Investment With No Allowance	86		291
Recorded Investment With Allowance	80		86
Related Allowance	62		67
Average Recorded Investment	271	1,504
Interest Income	2	11
Real Estate - Commercial [Member]
Financing Receivable, Impaired [Line Items]
Unpaid Principal Balance	5,898		6,808
Recorded Investment With No Allowance	4,643		3,962
Recorded Investment With Allowance	784		2,375
Related Allowance	204		507
Average Recorded Investment	5,882	8,651
Interest Income	54	75
Other Real Estate Construction [Member]
Financing Receivable, Impaired [Line Items]
Unpaid Principal Balance	1,968		2,034
Recorded Investment With No Allowance	257		247
Recorded Investment With Allowance	1,663		1,739
Related Allowance	897		945
Average Recorded Investment	1,953	3,014
Interest Income	3	6
Real Estate 1 - 4 Family Construction [Member]
Financing Receivable, Impaired [Line Items]
Unpaid Principal Balance	372		374
Recorded Investment With No Allowance	23		25
Recorded Investment With Allowance	349		349
Related Allowance	16		16
Average Recorded Investment	373	617
Interest Income	5	5
Real Estate - Residential [Member]
Financing Receivable, Impaired [Line Items]
Unpaid Principal Balance	7,651		8,197
Recorded Investment With No Allowance	4,478		4,619
Recorded Investment With Allowance	2,924		3,329
Related Allowance	458		530
Average Recorded Investment	7,675	8,806
Interest Income	78	89
Home Equity [Member]
Financing Receivable, Impaired [Line Items]
Unpaid Principal Balance	181		415
Recorded Investment With No Allowance	47		58
Recorded Investment With Allowance	134		357
Related Allowance	59		279
Average Recorded Investment	298	1,056
Interest Income	2	5
Consumer Loans [Member]
Financing Receivable, Impaired [Line Items]
Unpaid Principal Balance	108		116
Recorded Investment With No Allowance	56		61
Recorded Investment With Allowance	52		55
Related Allowance	42		43
Average Recorded Investment	112	223
Interest Income	2	3
Other Loans [Member]
Financing Receivable, Impaired [Line Items]
Unpaid Principal Balance
Recorded Investment With No Allowance
Recorded Investment With Allowance
Related Allowance
Average Recorded Investment
Interest Income

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Loans Held for Investment - Composition of Net Loans Held for Investment by Class (Detail) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2014	Dec. 31, 2013	Mar. 31, 2013	Dec. 31, 2012
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans, Total	$ 304,704	$ 307,288
Less:
Allowance for loan losses	(4,198)	(5,095)	(5,973)	(6,801)
Deferred loan (fees) costs, net	31	60
Net loans held for investment	300,537	302,253
Commercial Loan [Member] | Commercial [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans, Total	48,512	47,436
Real Estate - Commercial [Member] | Commercial [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans, Total	92,718	95,922
Other Real Estate Construction [Member] | Commercial [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans, Total	17,743	17,583
Real Estate 1 - 4 Family Construction [Member] | Non-Commercial [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans, Total	3,849	3,418
Real Estate - Residential [Member] | Non-Commercial [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans, Total	88,216	87,463
Home Equity [Member] | Non-Commercial [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans, Total	44,486	45,231
Consumer Loans [Member] | Non-Commercial [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans, Total	8,604	9,623
Other Loans [Member] | Non-Commercial [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans, Total	$ 576	$ 612

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Consolidated Statements of Income (Parenthetical) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2014	Mar. 31, 2013
Income Statement [Abstract]
Gain on sale of securities includes reclassification of accumulated other comprehensive income	$ 21	$ 14
Amounts reclassified from accumulated other comprehensive income, net of tax	$ 8	$ 5

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Comprehensive Income

3 Months Ended

Mar. 31, 2014

Equity [Abstract]

Comprehensive Income

Note 2 – Comprehensive Income

The Company reports as comprehensive income all changes in shareholders’ equity during the year from sources other than shareholders. Other accumulated comprehensive income refers to all components (revenues, expenses, gains, and losses) of comprehensive income that are excluded from net income. The Company’s only component of accumulated other comprehensive income is unrealized gains and losses, net of income tax, on investment securities available for sale. The following table presents the changes in accumulated other comprehensive income for the three months ended March 31, 2014 and 2013:

	Unrealized holding gains on available-for-sale Securities (net)
	Three months ended March 31, 2014			Three months ended March 31, 2013
	(dollars in thousands)
Beginning Balance	$	(562	)	$	1,487
Other comprehensive income (loss) before reclassifications, net of $177,000 and $43,000 tax effect, respectively		341			(82	)
Amounts reclassified from accumulated other Comprehensive income, net of $8,000 and $5,000 tax effect		(13	)		(9	)
Net current-period other comprehensive loss		328			(91	)
Ending Balance	$	(234	)	$	1,396

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Fair Values of Financial Instruments and Interest Rate Risk - Comparison of Carrying Amounts and the Estimated Fair Value of the Financial Instruments (Detail) (USD $)	Mar. 31, 2014	Dec. 31, 2013
FINANCIAL ASSETS
Securities available for sale	$ 111,508,000	$ 100,280,000
Loans held for investment, net	300,537,000	302,253,000
Loans held for sale	364,000	1,139,000
Restricted stock	506,000	717,000
Bank-owned life insurance	6,557,000	6,516,000
Accrued interest receivable	1,651,000	1,747,000
FINANCIAL LIABILITIES
Deposits	452,209,000	453,708,000
Short-term borrowings	5,887,000	5,509,000
Accrued interest payable	193,000	224,000
Carrying Value [Member]
FINANCIAL ASSETS
Cash and cash equivalents	60,874,000	72,394,000
Securities available for sale	111,508,000	100,280,000
Loans held for investment, net	300,537,000	302,253,000
Loans held for sale	364,000	1,139,000
Restricted stock	1,038,000	1,184,000
Bank-owned life insurance	6,557,000	6,516,000
Mortgage servicing rights	2,250,000	2,356,000
Accrued interest receivable	1,651,000	1,747,000
FINANCIAL LIABILITIES
Deposits	452,209,000	453,708,000
Short-term borrowings	5,887,000	5,509,000
Long-term borrowings	33,000	36,000
Junior subordinated debt	9,534,000	11,127,000
Accrued interest payable	193,000	224,000
Estimated Fair Value [Member]
FINANCIAL ASSETS
Cash and cash equivalents	60,874,000	72,394,000
Securities available for sale	111,508,000	100,280,000
Loans held for investment, net	306,947,000	308,112,000
Loans held for sale	364,000	1,139,000
Restricted stock	1,038,000	1,184,000
Bank-owned life insurance	6,557,000	6,516,000
Mortgage servicing rights	3,060,000	3,085,000
Accrued interest receivable	1,651,000	1,747,000
FINANCIAL LIABILITIES
Deposits	439,542,000	438,593,000
Short-term borrowings	5,892,000	5,509,000
Long-term borrowings	33,000	36,000
Junior subordinated debt	9,711,000	11,271,000
Accrued interest payable	193,000	224,000
Level 1 [Member]
FINANCIAL ASSETS
Cash and cash equivalents	60,874,000	72,394,000
Securities available for sale	21,250,000	21,286,000
Restricted stock	1,038,000	1,184,000
Level 2 [Member]
FINANCIAL ASSETS
Securities available for sale	90,258,000	78,994,000
Loans held for sale	364,000	1,139,000
FINANCIAL LIABILITIES
Short-term borrowings	5,892,000	5,509,000
Long-term borrowings	33,000	36,000
Level 3 [Member]
FINANCIAL ASSETS
Loans held for investment, net	306,947,000	308,112,000
Bank-owned life insurance	6,557,000	6,516,000
Mortgage servicing rights	3,060,000	3,085,000
Accrued interest receivable	1,651,000	1,747,000
FINANCIAL LIABILITIES
Deposits	439,542,000	438,593,000
Junior subordinated debt	9,711,000	11,271,000
Accrued interest payable	$ 193,000	$ 224,000

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Troubled Debt Restructures (Tables)

3 Months Ended

Mar. 31, 2014

Receivables [Abstract]

Breakdown of Types of Concessions Made by Loan Class

For the three months ended March 31, 2014 and 2013, the following table presents a breakdown of the types of concessions made by loan class:

	For the three months ended March 31, 2014
	Number of Contracts		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
	(dollars in thousands)
Extend payment terms:
Commercial		—	$	—	$	—
Real estate - commercial		—		—		—
Other real estate construction		—		—		—
Real estate 1 - 4 family construction		—		—		—
Real estate - residential		—		—		—
Home equity		—		—		—
Consumer loans		1		39		34
Other loans		—		—		—
		1	$	39	$	34
Other:
Commercial		—	$	—	$	—
Real estate - commercial		1		344		269
Other real estate construction		—		—		—
Real estate 1 - 4 family construction		—		—		—
Real estate - residential		9		1,287		1,253
Home equity		—		—		—
Consumer loans		—		—		—
Other loans		—		—		—
		10	$	1,631	$	1,522
Total		11	$	1,670	$	1,556

	For the three months March 31, 2013
	Number of Contracts		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
	(dollars in thousands)
Extend payment terms:
Commercial		—	$	—	$	—
Real estate - commercial		—		—		—
Other real estate construction		—		—		—
Real estate 1 - 4 family construction		—		—		—
Real estate - residential		2		65		65
Home equity		—		—		—
Consumer loans		—		—		—
Other loans		—		—		—
		2	$	65	$	65
Other:
Commercial		1	$	10	$	9
Real estate - commercial		2		619		618
Other real estate construction		—		—		—
Real estate 1 - 4 family construction		—		—		—
Real estate - residential		1		24		24
Home equity		—		—		—
Consumer loans		1		52		51
Other loans		—		—		—
		5	$	705	$	702
Total		7	$	770	$	767

Loans Modified as Troubled Debt Restructurings Within Previous Twelve Months for which there was Payment Default

The following table presents loans that were modified as TDRs within the previous twelve months and for which there was a payment default during the twelve months ended March 31, 2014 and March 31, 2013:

	Twelve months ended March 31, 2014				Twelve months ended March 31, 2013
	Number of Loans		Recorded Investment		Number of Loans		Recorded Investment
	(dollars in thousands)
Extend payment terms:
Commercial		—	$	—		—	$	—
Real estate - commercial		—		—		—		—
Other real estate construction		—		—		—		—
Real estate 1 - 4 family construction		—		—		—		—
Real estate - residential		—		—		3		266
Home equity		—		—		—		—
Consumer loans		—		—		—		—
Other loans		—		—		—		—
		—	$	—		3	$	266
Forgiveness of principal:
Commercial		—	$	—		—	$	—
Real estate - commercial		—		—		—		—
Other real estate construction		—		—		—		—
Real estate 1 - 4 family construction		—		—		—		—
Real estate - residential		—		—		1		25
Home equity		—		—		—		—
Consumer loans		—		—		—		—
Other loans		—		—		—		—
		—	$	—		1	$	25
Other:
Commercial		—	$	—		—	$	—
Real estate - commercial		—		—		—		—
Other real estate construction		—		—		—		—
Real estate 1 - 4 family construction		—		—		—		—
Real estate - residential		—		—		1		238
Home equity		—		—		—		—
Consumer loans		—		—		1		17
Other loans		—		—		—		—
		—	$	—		2	$	255
Total		—	$	—		6	$	546

Schedule of Successes and Failures of Types of Debt Restructuring

The following table presents the successes and failures of the types of modifications within the previous twelve months as of March 31, 2014 and 2013:

	Paid In Full				Paying as restructured				Converted to nonaccrual				Foreclosure/ Default
	Number of Loans		Recorded Investments		Number of Loans		Recorded Investments		Number of Loans		Recorded Investments		Number of Loans		Recorded Investments
	(dollars in thousands)
March 31, 2014
Extended payment terms		—	$	—		1	$	34		—	$	—		—	$	—
Other		—		—		10		1,522		—		—		—		—
Total		—	$	—		11	$	1,556		—	$	—		—	$	—
March 31, 2013
Extended payment terms		—	$	—		—	$	—		—	$	—		1	$	207
Other		—		—		6		514		2		244		8		717
Total		—	$	—		6	$	514		2	$	244		9	$	924

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Investment Securities - Sales of Securities Available for Sale (Detail) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2014	Mar. 31, 2013
Investments Debt And Equity Securities [Abstract]
Gross proceeds from sales	$ 328	$ 426
Gross realized gains from sales	21	14
Gross realized losses from sales
Net realized gains	$ 21	$ 14

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Recent Accounting Pronouncements

3 Months Ended

Mar. 31, 2014

Accounting Changes And Error Corrections [Abstract]

Recent Accounting Pronouncements

Note 12 – Recent Accounting Pronouncements

In January 2014, the FASB issued ASU 2014-04, an update to ASC 310 “Receivables – Troubled Debt Restructurings by Creditors”. The amendments in this update clarify that if an in substance repossession or foreclosure occurs, and a creditor is considered to have received physical possession of residential real estate property collateralizing a consumer mortgage loan, upon either (1) the creditor obtaining legal title to the residential real estate property upon completion of a foreclosure or (2) the borrower conveying all interest in the residential real estate property to the creditor to satisfy that loan through completion of a deed in lieu of foreclosure or through a similar legal agreement. Additionally, the amendments require interim and annual disclosure of both (1) the amount of foreclosed residential real estate property held by the creditor and (2) the recorded investment in consumer mortgage loans collateralized by residential real estate property that are in the process of foreclosure according to local requirements of the applicable jurisdiction. The update is effective for reporting periods beginning after December 15, 2014. The adoption of this update will not have a significant impact on the Company’s financial statements except for added disclosures.

From time to time the FASB issues exposure drafts of proposed statements of financial accounting standards. Such exposure drafts are subject to comment from the public, to revisions by the FASB and to final issuance by the FASB as statements of financial accounting standards. Management considers the effect of the proposed statements on the consolidated financial statements of the Company and monitors the status of changes to and proposed effective dates of exposure drafts.