Caution Regarding Forward-Looking Statements

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 that could cause actual results to differ materially from these
estimates. These factors include, but are not limited to: the impact of the
novel Coronavirus disease, or COVID-19, and its variants on our borrowers'
ability to meet their financial obligations to us; increases in our past due
loans and provisions for loan losses that may result from COVID-19 and its
broader economic effects, including labor shortages, supply chain issues, and
inflation that may impact our borrowers; declines in general economic
conditions, including increased stress in the financial markets due to COVID-19;
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 the financial situation at March 31, 2022 and December 31, 2021.

In the three months ended March 31, 2022the Company’s total assets increased $34.1 millionfrom $939.7 million for $973.7 million.

Cash and cash equivalents increased $21.3 million in the three months ended
March 31, 2022. The increase is related to the growth of deposits.

Investment securities consist of securities available for sale and securities
held to maturity. Investment securities decreased $8.1 million to $353.0 million
for the three-month period ended March 31, 2022. At March 31, 2022, the Company
had unrealized losses on securities available for sale of $19.7 million,
compared to unrealized losses of $1.5 million at December 31, 2021. The
significant decline in fair value is directly related to the increase in market
interest rates at March 31, 2022 compared to December 31, 2021, as the market
prepares for the anticipated increase in overnight rates by the Federal Reserve.

At March 31, 2022, equity securities declined slightly in value from $392,000 at
December 31, 2021 to $383,000 as a result of the decline in value in the equity
market.

Loans held for sale decreased 45.1%, or $9.8 million, as many of the loans
produced near the December 31, 2021 quarter-end date were not sold on the
secondary market until 2022. Loans held for investment increased from $420.8
million to $445.9 million, an increase of $25.1 million for the three-month
period ended March 31, 2022. The Company experienced a net increase in all loan
sectors with the exception of consumer loans, other loans and SBA PPP loans. SBA
PPP loans were issued during 2020 and 2021 as a result of the Federal
Government's response to helping small businesses due to COVID-related issues.
These loans are unsecured commercial loans, but are 100% guaranteed by the SBA
if the loans comply with PPP requirements.

The allowance for loan losses was $4.2 million at March 31, 2022, which
represented 0.93% of the total loans held for investment, compared to $4.0
million or 0.96% of the total loans held for investment at December 31, 2021.
Additional discussion regarding the allowance is included in the Asset Quality
section below.

Other changes in our consolidated assets are primarily related to other assets,
which increased $4.6 million from $9.5 million as of December 31, 2021 to $14.1
million at March 31, 2022 as a result of the increase in deferred tax assets
from the significant decline in value of the available for sale security
portfolio. Additionally, restricted stock increased $507,000 for the same period
mainly due to the increase in FRB stock required to be held from increased
common equity.

Customer deposits, our primary funding source, experienced a $46.7 million
increase during the three-month period ended March 31, 2022, increasing from
$836.8 million to $883.5 million, a 5.6% increase. In addition to receipt of
government grant funding by some depositors, a large portion of this increase is
related to the overall growth in the number of deposit accounts and relationship
sizes. As the banking subsidiary of the Company operates in a primarily rural
market, many competitors have exited the markets where we remain, which has
driven deposit growth in our current markets. Demand noninterest-bearing
checking accounts increased $29.2 million, interest checking and money market
accounts increased $13.5 million and savings deposits increased $6.2 million
during the three months ended March 31, 2022. Time deposits decreased by $2.1
million during the same period as customers transitioned to liquid accounts.

Total short-term borrowings increased $263,000 for the three-month period. At
March 31, 2022, the Company had $29.5 million in long-term debt outstanding,
which consists solely of its junior subordinated debt securities. During the
third quarter of 2019, the Company issued $10.0 million in subordinated debt
securities with a final maturity date of September 30, 2029 that may be redeemed
on or after September 30, 2024. This junior subordinated debt pays interest
quarterly at an annual fixed rate of 5.25%. During the third

                                      -28-
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quarter of 2021, the Company issued $12.0 million and $8.0 million of 10-year
and 15-year fixed-to-floating rate subordinated debt securities, respectively.
The 10-year subordinated notes mature on September 3, 2031, though redeemable on
or after September 3, 2026, and initially pay interest quarterly at an annual
rate of 3.5%. From and including September 3, 2026 to but excluding September 3,
2031, or up to an early redemption date, the interest rate on the 10-year
subordinated notes will reset quarterly to an annual rate equal to the
then-current three-month secured overnight financing rate ("SOFR"), plus 283
basis points payable quarterly in arrears. The 15-year subordinated notes mature
on September 3, 2036, though redeemable on or after September 3, 2031, and
initially pay interest quarterly at an annual rate of 4.0%. From and including
September 3, 2031 to but excluding September 3, 2036, or up to an early
redemption date, the interest rate on the 15-year subordinated notes will reset
quarterly to an annual rate equal to the then-current three-month SOFR plus 292
basis points payable quarterly in arrears. The subordinated debt has been
structured to qualify as and is included in the calculation of the Company's
Tier 2 capital. The Company also has a $3.0 million line of credit of which $3.0
million was available to use at March 31, 2022.

Other changes in consolidated liabilities are primarily related to increases in
accruals for bonuses, donations and income taxes totaling $711,000. These
increases are offset by a decline in the mortgage forward sales commitments
liability. Mortgage forward sales commitments decreased $50,000 from $50,000 at
December 31, 2021 to $0 at March 31, 2022, because of the rise in interest rates
since year-end. As rates rise, the value of the mandatory commitment
deteriorates, and the price required to exit out of the commitment decreases.
At March 31, 2022, total shareholders' equity was $47.2 million, a decrease of
$13.6 million from December 31, 2021. Net income for the three-month period
ended March 31, 2022 was $801,000. Unrealized losses on investment securities,
net of tax, increased by $14.0 million as the yield curve continues to steepen.
The Company repurchased 28,839 shares of common stock at a total cost of
$254,000 during the first three months of 2022. The Company paid $139,000 in
dividends attributable to noncontrolling interest during the first three months
of 2022. See Note 3 (Noncontrolling Interest) to the Company's Notes to
Consolidated Financial Statements for additional discussion of the
noncontrolling interest.

Results of operations for the three months ended March 31, 2022 and 2021.

Net profit and net profit available to ordinary shareholders

Uwharrie Capital Corp reported net income of $801,000 for the three months ended
March 31, 2022, as compared to $4.6 million for the three months ended March 31,
2021, a decrease of $3.8 million. Net income available to common shareholders
was $662,000, or $0.10 per common share, for the three months ended March 31,
2022, compared to $4.4 million, or $0.61 per common share, at March 31, 2021.
Net income available to common shareholders is net income less dividends on the
aforementioned noncontrolling interest.

Net interest income

Net interest income for the three months ended March 31, 2022 was $6.0 million,
compared to $6.8 million for the three months ended March 31, 2021, a decrease
of $777,000. During the first quarter of 2022, the average yield on our
interest-earning assets decreased eighty-four basis points to 2.96% from the
same period in 2021, and the average rate we paid for our interest-bearing
liabilities increased five basis points to 0.32%. These changes resulted in a
lower interest rate spread of 2.65% as of March 31, 2022, compared to 3.53% as
of March 31, 2021. Our net interest margin was 2.74% and 3.62% for the
comparable periods in 2022 and 2021, respectively.

                                      -29-
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The following table presents the average balance sheet and an analysis of net interest income for the three months ended March 31, 2022 and 2021:

             Average Balance Sheet and Net Interest Income Analysis
                      For the Three Months Ended March 31,
(dollars in thousands)
                                     Average Balance           Income/Expenses            Rate/Yield
                                   2022          2021          2022        2021        2022        2021
Interest-earning assets:
Taxable securities               $ 296,892     $ 193,755     $  1,015     $   826        1.39 %      1.73 %
Nontaxable securities (1)           65,181        39,490          358         253        2.80 %      3.26 %
Short-term investments              88,426        58,384           40          16        0.18 %      0.11 %
Equity Securities                      392           721            5           -        5.17 %      0.00 %
Taxable loans                      449,205       471,456        5,057       6,004        4.57 %      5.16 %
Non-taxable loans (1)                7,604         8,197           50      

58 3.36% 3.60% Total interest-earning assets 907,700 772,003 6,525 7,157 2.96% 3.80%

Interest-bearing liabilities:
Interest-bearing deposits          597,942       510,486          177         211        0.12 %      0.17 %
Short-term borrowed funds            1,092         1,621            1           1        0.37 %      0.25 %
Long-term debt                      29,541        12,004          315         136        4.32 %      4.56 %
Total interest-bearing
liabilities                        628,575       524,111          493         348        0.32 %      0.27 %

Net interest spread              $ 279,125     $ 247,892     $  6,032     $ 6,809        2.65 %      3.53 %

Net interest margin (1) (% of
earning assets)                                                                          2.74 %      3.62 %


(1) Returns related to securities and loans exempt from income tax are

on a fully equivalent to tax basis, assuming an effective tax rate of 21%.

Allowance (recovery) and allowance for loan losses

The provision for loan losses was $118,000 for the three months ended March 31,
2022, compared to a recovery of $34,000 for the same period in 2021. There were
net loan recoveries of $12,000 for the three months ended March 31, 2022, as
compared to net loan charge-offs of $116,000 during the same period of 2021.
Refer to the Asset Quality section below for further information.

Non-interest income

The Company generates most of its revenue from net interest income; however,
diversification of our revenue sources is important as well. Total noninterest
income decreased by $4.5 million for the three-month period ended March 31,
2022, as compared to the same period in 2021. The gain on sale of securities
decreased $1.0 million to a loss of $91,000 at March 31, 2022 compared to a gain
of $940,000 at March 31, 2021 as the Company worked to reduce the duration of
the investment portfolio in an attempt to protect capital as long-term interest
rates rise.

The primary factor contributing to the overall decline in noninterest income was
a decrease of $3.8 million in income from mortgage loan sales. This decrease is
due to the significant reduction in production, particularly mortgage
refinancing activity, as interest rates have risen quickly during the first
three months of 2022.

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

                                                  Three Months Ended March 31,
                                                   2022                  2021
                                                         (in thousands)

Income from debit card transactions            $         505         $      

492

Income from credit card transactions                     145                

114

Gross interchange and transaction fee income             650                   606
Network costs - debit card                               254                   251
Network costs - credit card                              158                   136
Total                                          $         238         $         219


                                      -30-
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Non-interest expenses

Noninterest expense for the three months ended March 31, 2022 decreased by
$571,000 from the same period in 2021, to $7.6 million. Salaries and benefits,
the largest component of noninterest expense, decreased $373,000 due to
decreased commissions from reduced production in the mortgage division. As a
result of production declines in the mortgage division, loan costs decreased by
$137,000 to $169,000 for the three months ended March 31, 2022 and marketing and
donations decreased $287,000 to $334,000 for the same time period.

Total other noninterest expense increased $115,000 for the three months ended
March 31, 2022, compared to the same period in 2021. This change was due to
market valuation adjustments that increased the expense associated with
supplemental executive retirement plans by $135,000, included in "Other" line
item below. The table below reflects the composition of other noninterest
expense.

                                   Three Months Ended March 31,
                                    2022                  2021
                                          (in thousands)

Postage                         $          64         $          46
Telephone and data lines                   57                    49
Office supplies and printing               24                    26
Shareholder relations expense              37                    33
Dues and subscriptions                     76                   109
Other                                     324                   204
Total                           $         582         $         467


Income Tax Expense

The Company had income tax expense of $168,000 for the three months ended March
31, 2022 at an effective tax rate of 17.3% compared to income tax expense of
$1.2 million with an effective tax rate of 21.1% in the comparable 2021 period.
Income taxes computed at the statutory rate are primarily affected by the state
income tax expense offset by the eligible amount of interest earned on state and
municipal securities, tax free municipal loans and income earned on bank-owned
life insurance. For the three months ended March 31, 2022, the effective tax
rate decreased due to the increase in tax-exempt security holdings.

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 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 designed to evaluate the credit risk in
the loan portfolio. In this program, risk grades are initially assigned by loan
officers and then reviewed and monitored by credit administration. This process
includes the maintenance of an internally classified loan list that is designed
to help management assess the overall quality of the loan portfolio and the
adequacy of the allowance for 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 to be impaired and evaluated
as an impaired loan.

The portion of the Company's allowance for loan loss model related to general
reserves captures the mean loss of individual loans within the loan portfolio
and adds additional loss based on economic uncertainty and specific indicators
of potential issues in the market. Specifically, the Company calculates probable
losses on loans by computing a probability of loss and multiplying that by a
loss given default derived from historical experience. An additional calculation
based on economic uncertainty is added to the probable losses, thus deriving the
estimated loss scenario by FDIC call report codes. Together, these expected
components, as well as

                                      -31-
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a reserve for qualitative factors based on economic conditions determined at
management's discretion, 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 derived from the Company's internal historical
data, representing a one-year loss horizon for each obligor. Credit scores are
used within the model to determine the probability of default. The Company
updates the credit scores for individuals that either have a loan, or are
financially responsible for the loan, semi-annually, during the first and third
quarters. During the first three months of 2022, the average effective credit
score of the portfolio, excluding loans in default, increased slightly from 767
to 771. The probability of default associated with each credit score is a major
driver in the allowance for loan losses.

The allowance for loan losses represents management's best estimate of an
appropriate amount to provide for probable credit risk inherent 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. Unexpected global events, such as the
unprecedented economic disruption due to COVID-19, are the type of future events
that often cause material adjustments to the allowance to be necessary. Any
material increase in the allowance for loan losses may adversely affect the
Company's financial condition, results of operations and the value of its
securities.

At March 31, 2022, the level of our impaired loans, which includes all loans in
non-accrual status, TDRs, and other loans deemed by management to be impaired,
was $4.1 million, compared to $4.7 million at December 31, 2021, a net decrease
of $617,000. The decrease is related to one large relationship paying off in the
first quarter of 2022 and another relationship with a large pay down due to
collateral sale. Total non-accrual loans, which are a component of impaired
loans, decreased from $972,000 at December 31, 2021 to $861,000 at March 31,
2022. During the first three months of 2022, one additional loan totaling
$18,000 was added to impaired loans; however, one loan totaling $169,000 was
paid off. We also had net pay downs of $466,000.

The allowance, expressed as a percentage of gross loans held for investment,
decreased three basis points from 0.96% at December 31, 2021 to 0.93% at March
31, 2022. The collectively evaluated allowance as a percentage of collectively
evaluated loans was 0.92% at December 31, 2021 and 0.89% at March 31, 2022. The
decrease is attributable to continued improvement in probability of defaults of
the portfolio. The individually evaluated allowance as a percentage of
individually evaluated loans increased from 4.54% to 5.93% for the same periods,
mainly due to one relationship with a large pay down and little reserves
associated due to collateral values.

The ratio of nonperforming loans, which consists of non-accrual loans and loans
past due 90 days and still accruing, to total loans decreased from 0.23% at
December 31, 2021 to 0.19% at March 31, 2022, and was related to the nonaccrual
relationship that was paid off in the first quarter.

Troubled debt restructured loans, included in impaired loans, totaled $3.3
million at March 31, 2022 and $3.8 million at December 31, 2021. At March 31,
2022, there was one troubled debt restructured loan in non-accrual status, which
had a balance of $38,000.

The other properties held remained at $0 by March 31, 2022as no loans were foreclosed in the first three months of 2022.

From March 31, 2022management believed that the level of the allowance for loan losses was appropriate given the risk inherent in the loan portfolio.

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The following table shows the comparison of nonperforming assets at March 31,
2022 and December 31, 2021:

Nonperforming Assets
(dollars in thousands)
                                                        March 31, 2022       December 31, 2021
Nonperforming assets:
Accruing loans past due 90 days or more                 $             -     $                 -
Non-accrual loans                                                   861                     972
Other real estate owned                                               -                       -
Total nonperforming assets                              $           861     $               972

Allowance for loans losses                              $         4,156     $             4,026
Nonaccrual loans to total loans                                    0.19 %                  0.23 %
Allowance for loan losses to total loans                           0.93 %                  0.96 %
Allowance for loan losses to nonaccrual loans                    482.69 %                414.20 %


Cash and capital resources

The objective of the Company's liquidity management policy is to ensure the
availability of sufficient cash flows to meet all financial commitments and to
capitalize on any opportunities for expansion. Liquidity management addresses
the ability to meet deposit withdrawals on demand or at contractual maturity, to
repay borrowings as they mature and to fund new loans and investments as
opportunities arise.

The Company's primary sources of internally generated funds are principal and
interest payments on loans, cash flows generated from operations and cash 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. At March 31, 2022, these sources
are the subsidiary bank's established federal funds lines with correspondent
banks aggregating $43.0 million, with available credit of $43.0 million; an
established borrowing relationship with the Federal Home Loan Bank, with
available credit of $95.1 million; access to borrowings from the Federal Reserve
Bank discount window, with available credit of $16.4 million and the issuance of
commercial paper. The Company also has a $3.0 million line of credit with TIB
The Independent BankersBank, N.A. The line is secured with 100% of the
outstanding common shares of the Company's subsidiary bank. As of March 31,
2022, $3.0 million remained available for use on the line of credit. The Company
has also secured long-term debt from other sources consisting of $29.5 million
of junior subordinated debt at both March 31, 2022 and December 31, 2021.

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

The Company continues to maintain capital ratios that support its asset growth.
The federal bank regulatory agencies have implemented regulatory capital rules
known as "Basel III." The Basel III rules require a common equity Tier 1 capital
to risk-weighted assets minimum ratio of 4.50%, a minimum ratio of Tier 1
capital to risk-weighted assets of 6.00%, a minimum ratio of total capital to
risk-weighted assets of 8.00%, and a minimum Tier 1 leverage ratio of 4.00%.
There is also a capital conservation buffer that requires banks to hold common
equity Tier 1 capital in excess of minimum risk-based capital ratios by at least
2.5% to avoid limits on capital distributions and certain discretionary bonus
payments to executive officers and similar employees.

From March 31, 2022the Company’s subsidiary bank continued to exceed minimum capital standards and remained well capitalized in accordance with applicable rules.

The Company's subsidiary bank has a net total of $10.6 million in outstanding
Fixed Rate Noncumulative Perpetual Preferred Stock. The preferred stock
qualifies as Tier 1 capital at the Bank and pays dividends at an annual rate of
5.30%. The net total of $10.6 million is presented as noncontrolling interest at
the Company level and qualifies as Tier 1 capital at the Company. At March 31,
2022, the Company had $29.5 million in subordinated debt outstanding, which
qualifies as Tier 2 capital at the Company level. The Company has made all
interest and dividend payments in a timely manner.

                                      -33-
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Off-balance sheet arrangements

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

Derivative financial instruments include futures contracts, forward contracts,
interest rate swaps, options contracts, and other financial instruments with
similar characteristics. We have not engaged in significant derivative
activities through March 31, 2022, with the exception of mortgage banking
derivatives. See Note 14 (Mortgage Banking Derivatives) to the Company's Notes
to Consolidated Financial Statements for additional discussion of mortgage
banking derivatives.

Contractual obligations

The timing and amount of our contractual obligations has not changed materially
since our 2021 Annual Report on Form 10-K, which was filed with the Securities
and Exchange Commission on March 9, 2022.
Item 3. Quantitative and Qualitative Disclosures about Market Risk.


Disclosure under this heading is not required for small reporting companies.

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