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Section 1: 8-K (FORM 8-K)

hmta20181031_8k.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549  

 


FORM 8-K  

 


CURRENT REPORT

 

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

 

Date of Report: October 31, 2018 

 


HOMETOWN BANKSHARES CORPORATION

(Exact name of registrant as specified in its charter)  

 


 

         

Virginia

 

333-158525

 

26-4549960

(State or other jurisdiction

of incorporation)

 

(Commission

File Number)

 

(I.R.S. Employer

Identification No.)

   

202 S. Jefferson Street

Roanoke, Virginia

 

24011

(Address of principal executive offices)

 

(Zip Code)

 

Registrant’s telephone number, including area code: (540) 345-6000

 

Not Applicable

(Former name or former address, if changed since last report)

 

 


Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

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

 

Emerging growth company     ☐

 

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

 

 

 

 

 

Item 2.02.

Results of Operations and Financial Condition.

 

HomeTown Bankshares Corporation (the “Company”) (NASDAQ:HMTA), the parent company for Roanoke, Virginia based HomeTown Bank, announced on October 31, 2018 its financial results for the quarter ended September 30, 2018 and continuation of quarterly cash dividend. The financial results and cash dividend are detailed in the Company’s Press Release dated October 31, 2018, which is attached as Exhibit 99.1 to this Form 8-K. The Company’s stock is traded on the NASDAQ Capital Market under the symbol “HMTA.”

 

The information in this Item 2.02, including Exhibit 99.1 to this Current Report, shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section or Sections 11 and 12(a)(2) of the Securities Act of 1933, as amended. The information contained in this Item 2.02 and in the accompanying Exhibit 99.1 shall not be incorporated by reference into any registration statement or other document filed by the Company with the Securities and Exchange Commission, whether made before or after the date of this Current Report, regardless of any general incorporation language in such filing (or any reference to this Current Report generally), except as shall be expressly set forth by specific reference in such filing.

 

Item 9.01

Financial Statements and Exhibits.

 

(c) Exhibits

 

Exhibit
No.

 

Description

     

99.1

 

Press Release

 

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 hereunto duly authorized.

 

         

 

 

HOMETOWN BANKSHARES CORPORATION

Date:  October 31, 2018

 

By:

 

 

/s/ Vance W. Adkins 

 

 

 

 

Vance W. Adkins

 

 

 

 

Executive Vice President and Chief Financial Officer

EXHIBIT INDEX

 

     

Exhibit
No.

  

Description

   

99.1

  

Press Release

 

(Back To Top)

Section 2: EX-99.1 (EXHIBIT 99.1)

ex_127240.htm

Exhibit 99.1

 

 

Wednesday, October 31, 2018

HomeTown Bankshares Corporation Reports Strong Third Quarter and Year-To-Date Earnings; Announces Quarterly Cash Dividend of $0.04 per Share

Q3 Earnings Up 45% and 65% YTD

 

NASDAQ Listing

HomeTown Bankshares Corporation is listed with the NASDAQ Capital Markets under the trading symbol “HMTA”. During Q3 of 2018, the stock closed as high as $16.50 with an average close of $13.40 and most recent closing price of $14.68 on October 30, 2018.

 

Operating Performance Highlights

 

Core Revenues were up over 9% in Q3 and 6% thru September 30, 2018

 

Net Interest Income was up 7% in Q3 2018 and 7% for the first nine months ended September 30, 2018 vs. 2017

 

Net Interest Margin increased 10 basis points in Q3 to 3.56% at September 30, 2018 from 3.46% at September 30, 2017, and up 7 basis points YTD at September 30, 2018 to 3.55% from 3.48% in 2017

 

Excluding non-recurring income, noninterest income for Q3 2018 was up 3% while YTD non-interest income for the first nine months of 2018 was down 8% due primarily to a YTD reduction in mortgage revenue

 

During the nine months ended September 30, 2018, non-recurring income from BOLI insurance proceeds of $642,000 was offset by a similar increase in certain non-recurring expenses.

 

Net Income Available to Shareholders was up 45% to $1.3 million in Q3 2018 and up 65% to $3.5 million for the first nine months of 2018 from $917,000 and $2.1 million, respectively, in 2017

 

Fully diluted Earnings per Share were up accordingly to $0.23 for the third quarter and $0.60 for the nine months of 2018 from $0.16 and $0.37, respectively, in 2017

 

Continued Strong Loan and Stable Deposits

 

Total Assets were $559 million at September 30, 2018, an $8 million increase or 2% for the nine months

 

Total Loans were $466 million at September 30, 2018, up $32 million or 7% in Q3 2018 vs. Q3 2017

 

Total Loans were up $22 million or 7% on an annualized basis since December 31, 2017

 

Core Deposits increased 1.4% in Q3 2018 over 2017 and up 3% annualized since December 31, 2017

 

Credit Quality Remains Sound

 

YTD net charge-offs were $182,000 or 0.05% of average loans and with net recoveries of $6,000 or (0.01)% for Q3 2018 vs. net charge-offs of $505,000 YTD or 0.16% of average loans and $34,000 or 0.03% for Q3 2017

 

Nonperforming assets were 0.83% of total assets at September 30, 2018 vs. 0.77% in 2017

 

Including performing, restructured loans, nonperforming assets amounted to 1.51% of assets at September 30, 2018 vs. 1.49% in Q3 2017

 

Nonaccrual loans remained low at 0.31% of total loans at September 30, 2018 vs. 0.16% of total loans at September 30, 2017

 

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News Release  

FOR IMMEDIATE RELEASE

For more information contact:

Susan K. Still, President and CEO, (540) 278-1705

Vance W. Adkins, Executive Vice President and CFO, (540) 278-1702

 

 

HomeTown Bankshares Corporation Reports Strong Third Quarter and Year-to-Date Earnings; Announces Quarterly Cash Dividend of $0.04 per Share

Q3 Earnings Up 45% and 65% YTD

 

The Board of Directors declared a cash dividend of $0.04 per common share, payable November 30, 2018, to shareholders of record as of November 15, 2018.

 

ROANOKE, VA, October 31, 2018 (GLOBE NEWSWIRE) - HomeTown Bankshares Corporation, (NASDAQ:   HMTA), the parent company of HomeTown Bank, reported strong growth in net income available to common shareholders of $1.3 million for the third quarter ended September 30, 2018 and $3.5 million for the nine months ended September 30, 2018 vs. $917,000 and $2.1 million for comparable periods in 2017.  Total assets were up slightly in Q3 2018 from the prior quarter to $559 million and up $7.3 million over the prior year from $551 million at September 30, 2017 with continued solid growth in loans and core deposits.  Earnings per share on a fully diluted basis were $0.23 for the third quarter and $0.60 per share for the first nine months of 2018, up nicely from $0.16 and $0.37 per share, respectively, for the third quarter and first nine months of 2017.

 

"We are very pleased with our continued, strong earnings growth during the third quarter and for the first nine months of 2018. Solid growth in loans and core deposits, increases in interest rates, an improved net interest margin, and a reduction in the provision for loan losses contributed to a 45% increase in net income for the quarter. Non-recurring income and an improvement in the corporate tax rate for both quarters, contributed to a 65% increase in net income for the first nine months of 2018," said Susan K. Still, President and CEO.  "With continued strength in the economy, strong credit quality, and control of non-interest expenses, we would anticipate a favorable lending environment and successful access to core deposits for the remainder of the year," she continued.

 

Revenue

 

Core revenues increased 9% during third quarter of 2018 and 6% for the first nine months of 2018 due to solid loan growth and rising interest rates. Core revenue amounted to $6.5 million during the third quarter and $18.9 million for the first nine months of 2018, before non-recurring income of $702,000, which compared to $6.0 million and $17.8 million, respectively, in 2017. Higher core revenues were generated predominantly from commercial lines and loans, commercial real estate loans, personal lines and loans, private banking loans as well as non-interest income from credit and debit card interchange, treasury, and merchant services. Year to date mortgage revenue of $587,000 trailed 2017 mortgage revenue by 19% due to the significant drop in refinancing mortgages due to a rising rate environment over the past year. 

 

Net Interest Income

 

Net interest income increased 7% or $331,000 for the third quarter while year-to-date in 2018 grew $879,000 to $14.0 million at September 30, 2018. Higher loan volume and an increase in interest rates, offset by a smaller increase in deposit costs, also resulted in a 10 basis point increase in the Net Interest Margin for the third quarter of 2018 over 2017 and a 7 basis point improvement for the first nine months of 2018 over 2017. Net interest income should continue to grow with higher loan volume and increasing interest rates along with the growth in lower-cost core deposits and controlled mix of deposits, resulting in continued improvement in the net interest margin.

 

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Noninterest Income

 

Total noninterest income amounted to $764,000 in Q3 2018 vs. $757,000 for the same period in 2017 due primarily to higher ATM and interchange income slightly offset by lower mortgage income.  Year-to-date noninterest income amounted to $2.9 million at September 30, 2018, up from $2.5 million for a comparable period in 2017 due primarily to non-recurring income from the recognition of a gain on bank owned life insurance.

 

New account growth, ATM and interchange income as well as credit card and merchant service income were the primary contributors to non-interest income for the first nine months of 2018.

 

Noninterest Expense

 

Noninterest expense during the nine months increased 3% over 2017 due primarily to an increase in OREO related expenses, and higher data processing costs. We also experienced increased personnel costs with the transition of a new Chief Credit Officer due to the retirement of our former Chief Credit Officer as well as the addition to staff of a new Chief Risk Officer.

 

Non-interest expense increases slowed to 1% during the third quarter of 2018 with strong improvement in our efficiency ratio to 69.7% at September 30, 2018 vs. 73.2% in 2017. A return to normalized overhead and core operating costs are anticipated for the remainder of 2018 following our core conversion and related expenses in 2017.

 

Net Income

 

Net Income was up $415,000 to $1.3 million or 45% for the third quarter and up $1.4 million or 65% to $3.5 million for the nine months ended September 30, 2018.  Return on average assets amounted to 0.94% and return on average shareholders' equity was 10.04% for the third quarter of 2018, compared to 0.84% and 9.03% for the nine months ended September 30, 2018. Improved profitability was due to a combination of increased loan volume at higher interest rates, controlled deposit mix and non-interest expenses as well as a lower provision for loan losses through the third quarter.

 

Core earnings were up $385,000 or 28% for the third quarter and up $302,000 or 7% for the first nine months over similar periods in 2017.  Core earnings consist of pre-tax earnings less non-recurring income plus non-recurring expenses.

 

Loans

 

Total loans were $466 million at September 30, 2018, up $32 million or 7% from the third quarter of 2017 and up $22 million or 7% on an annualized basis for the nine months since December 31, 2017.  Loan growth was driven by commercial real estate, commercial and industrial lines and term loans, consumer lines and loans as well as private client loans.

 

Deposits

 

Core deposit growth for the first nine months ended September 30, 2018 was up 2% and 3% on an annualized basis since September 30, 2017.  Total deposits were $483 million, up $4.6 million over Q3 2017. Stable core deposits maintained thus far in 2018 were supported by continued growth in new banking relationships and a 14% increase in non-interest bearing deposits since 2017.  In addition, liquidity from stable core deposit growth resulted in a continued year over year reduction in our wholesale funding to less than 1% of total deposits. Significantly lower interest expense associated with wholesale funding will continue to reduce the costs of growing core deposits.

 

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Capital

 

Capital levels remained sound during Q3 2018 with total stockholders’ equity increasing $2.3 million through September 30, 2018 over the same period in 2017.  HomeTown Bank common equity tier 1 capital, total risk-based capital, Tier 1 risk-based capital and Tier 1 leverage ratios were 11.7%, 12.5%, 11.7% and 10.9%, respectively. All ratios continue to exceed the current regulatory standards for well-capitalized institutions.  Fully diluted book value per common share amounted to $8.98 at September 30, 2018 vs. $8.66 at September 30, 2017.

 

Credit Quality

Credit quality improved and remained sound through September 30, 2018 with a lower provision for loan losses of $371,000 thru Q3 2018 vs. $575,000 through Q3 2017. The reduced provision was a result of continued improvement in loan quality and a reduction in charge-offs.

 

 

Nonperforming Assets

OREO balances decreased $366,000 or 10% from Q3 2017. Non-performing assets, excluding performing restructured loans, amounted to 0.83% of total assets at September 30, 2018 vs. 0.77% at September 30, 2017.  Non-performing assets, including performing restructured loans, amounted to 1.51% of total assets at September 30, 2017 vs. 1.49% at September 30, 2018. 

 

Past Due and Nonaccrual Loans

Past due accruing loans amounted to 0.41% at September 30, 2018 vs. 0.70% of total loans at Q3 2017. Nonaccruals were 0.31% of total loans at September 30, 2018 compared to 0.16% of total loans at September 30, 2017. 

 

Allowance for Loan Losses

The allowance for loan losses totaled $3.95 million at September 30, 2018 compared to $3.71 million at September 30, 2017.  Provision for credit losses was $24,000 for the Q3 2018 quarter vs. $40,000 for Q3 2017 with an improvement in overall credit quality and lower charge-offs during the fiscal year.  Charge-offs amounted to a net recovery of $6,000 in Q3 of 2018 vs. net charge-offs of $34,000 in Q3 2017 with net charge-offs of $182,000 for the nine months ended September 30, 2018, down from $505,000 in 2017.

 

*  *  *

Forward-Looking Statements:

Certain statements in this press release may be “forward-looking statements.”  Forward-looking statements are statements that include projections, predictions, expectations or beliefs about future events or results that are not statements of historical fact and that involve significant risks and uncertainties.  Although the Company believes that its expectations with regard to forward-looking statements are based upon reasonable assumptions within the bounds of its existing knowledge of its business and operations, there can be no assurance that actual results will not differ materially from any future results implied by the forward-looking statements.  Actual results may be materially different from past or anticipated results because of many factors, some of which may include changes in economic conditions, the interest rate environment, legislative and regulatory requirements, new products, and competition, changes in the stock and bond markets and technology.  The Company does not update any forward-looking statements that it may make.

 

(See Attached Financial Statements for quarter ended September 30, 2018)

 

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HomeTown Bankshares Corporation

Consolidated Condensed Balance Sheets

September 30, 2018; December 31, 2017; and September 30, 2017

 

   

September 30,

   

December 31,

   

September 30,

 

In Thousands

 

2018

   

2017

   

2017

 

Assets

 

(Unaudited)

           

(Unaudited)

 

Cash and due from banks

  $ 18,126     $ 21,714     $ 34,755  

Federal funds sold

    193       180       132  

Securities available for sale, at fair value

    45,704       55,344       53,594  

Restricted equity securities, at cost

    2,359       2,371       2,371  

Loans held for sale

    1,378       1,587       1,013  

Total loans

    466,343       444,195       434,810  

Allowance for loan losses

    (3,947 )     (3,758 )     (3,706 )

Net loans

    462,396       440,437       431,104  

Property and equipment, net

    13,096       12,937       13,098  

Other real estate owned, net

    3,196       3,249       3,562  

Other assets

    12,293       12,434       11,818  

Total assets

  $ 558,741     $ 550,253     $ 551,447  
                         

Liabilities and Stockholders’ Equity

                       

Deposits:

                       

Noninterest-bearing

  $ 121,598     $ 106,956     $ 110,249  

Interest-bearing

    361,899       370,364       368,695  

Total deposits

    483,497       477,320       478,944  

Federal Home Loan Bank borrowings

    10,728       11,028       11,361  

Subordinated notes

    7,277       7,254       7,247  

Other borrowings

    1,348       1,558       992  

Other liabilities

    2,921       2,201       2,225  

Total liabilities

    505,771       499,361       500,769  
                         

Stockholders’ Equity:

                       

Common stock

    28,836       28,777       28,776  

Surplus

    18,151       17,980       17,942  

Retained surplus

    6,798       3,767       3,363  

Accumulated other comprehensive (loss) income

    (1,158 )     (141 )     107  

Total HomeTown Bankshares Corporation stockholders’ equity

    52,627       50,383       50,188  

Noncontrolling interest in consolidated subsidiary

    343       509       490  

Total stockholders’ equity

    52,970       50,892       50,678  

Total liabilities and stockholders’ equity

  $ 558,741     $ 550,253     $ 551,447  

 

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HomeTown Bankshares Corporation

Consolidated Condensed Statements of Income

For the Three and Nine Months Ended September 30, 2018 and 2017

 

   

For the Three Months

   

For the Nine Months

 
   

Ended September 30,

   

Ended September 30,

 

In Thousands, Except Share and Per Share Data

 

2018

   

2017

   

2018

   

2017

 
   

(Unaudited)

   

(Unaudited)

   

(Unaudited)

   

(Unaudited)

 

Interest income:

                               

Loans and fees on loans

  $ 5,344     $ 4,797     $ 15,374     $ 14,123  

Taxable investment securities

    262       244       824       744  

Nontaxable investment securities

    56       75       172       239  

Other interest income

    86       101       249       258  

Total interest income

    5,748       5,217       16,619       15,364  

Interest expense:

                               

Deposits

    761       588       1,998       1,694  

Subordinated notes

    134       134       402       402  

Other borrowed funds

    85       58       243       171  

Total interest expense

    980       780       2,643       2,267  

Net interest income

    4,768       4,437       13,976       13,097  

Provision for loan losses

    24       40       371       575  

Net interest income after provision for loan losses

    4,744       4,397       13,605       12,522  

Noninterest income:

                               

Service charges on deposit accounts

    139       120       419       415  

ATM and interchange income

    265       206       754       612  

Mortgage banking

    195       263       587       725  

Gains on sales of investment securities

    -       18       60       60  

Income from life insurance benefit

    -       -       642       -  

Other income

    165       150       478       675  

Total noninterest income

    764       757       2,940       2,487  

Noninterest expense:

                               

Salaries and employee benefits

    2,113       2,099       6,465       6,153  

Occupancy and equipment expense

    416       391       1,253       1,245  

Advertising and marketing expense

    136       112       491       383  

Professional fees

    76       89       350       454  

Losses on sales, write-downs of other real estate owned, net

    2       -       160       380  

Other real estate owned expense

    44       28       249       66  

Merger-related expense

    65       -       65       -  

Other expense

    1,006       1,085       3,292       3,228  

Total noninterest expense

    3,858       3,804       12,325       11,909  

Net income before income taxes

    1,650       1,350       4,220       3,100  

Income tax expense

    308       413       687       930  

Net income

    1,342       937       3,533       2,170  

Less net income attributable to non-controlling interest

    10       20       38       54  

Net income available to common stockholders

  $ 1,332     $ 917     $ 3,495     $ 2,116  

Basic earnings per common share

  $ 0.23     $ 0.16     $ 0.60     $ 0.37  

Diluted earnings per common share

  $ 0.23     $ 0.16     $ 0.60     $ 0.37  

Weighted average common shares outstanding

    5,810,618       5,770,175       5,804,251       5,767,602  

Diluted average common shares outstanding

    5,861,082       5,794,777       5,854,715       5,792,204  

 

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HomeTown Bankshares Corporation

 

Three

   

Three

   

Nine

   

Nine

 

Financial Highlights

 

Months

   

Months

   

Months

   

Months

 

In Thousands, Except Share and Per Share Data

 

Ended

   

Ended

   

Ended

   

Ended

 
   

Sep 30

   

Sep 30

   

Sep 30

   

Sep 30

 
   

2018

   

2017

   

2018

   

2017

 

PER SHARE INFORMATION

 

(Unaudited)

   

(Unaudited)

   

(Unaudited)

   

(Unaudited)

 

Book value per share, basic

  $ 9.06     $ 8.70     $ 9.06     $ 8.70  

Book value per share, diluted

  $ 8.98     $ 8.66     $ 8.98     $ 8.66  

Earnings per share, basic

  $ 0.23     $ 0.16     $ 0.60     $ 0.37  

Earnings per share, diluted

  $ 0.23     $ 0.16     $ 0.60     $ 0.37  
                                 

PROFITABILITY

                               

Return on average assets

    0.94       0.67       0.84 %     0.53 %

Return on average shareholders' equity

    10.04 %     7.25 %     9.03 %     5.73 %

Net interest margin

    3.56 %     3.46 %     3.55 %     3.48 %

Efficiency

    69.74 %     73.24       72.86 %     76.41 %
                                 

BALANCE SHEET RATIOS

                               

Total loans to deposits

    96.5 %     90.8 %     96.5 %     90.8 %

Securities to total assets

    8.60 %     10.15 %     8.60 %     10.15 %

Common equity tier 1 ratio BANK ONLY

    11.7 %     11.8 %     11.7 %     11.8 %

Tier 1 capital ratio BANK ONLY

    11.7 %     11.8 %     11.7 %     11.8 %

Total capital ratio BANK ONLY

    12.5 %     12.5 %     12.5 %     12.5 %

Tier 1 leverage ratio BANK ONLY

    10.9 %     10.6 %     10.9 %     10.6 %
                                 

ASSET QUALITY

                               

Nonperforming assets to total assets

    0.83 %     0.77 %     0.83 %     0.77 %

Nonperforming assets, including restructured loans, to total assets

    1.51 %     1.49 %     1.51 %     1.49 %

Net charge-offs (recoveries) to average loans (annualized)

    (0.01 )%     0.03 %     0.05 %     0.16 %
                                 

Composition of risk assets: (in thousands)

                               

Nonperforming assets:

                               

Nonaccrual loans

  $ 1,454     $ 700     $ 1,454     $ 700  

Other real estate owned

    3,196       3,562       3,196       3,562  

Total nonperforming assets, excluding performing restructured loans

    4,650       4,262       4,650       4,262  

Restructured loans, performing in accordance with their modified terms

    3,796       3,930       3,796       3,930  

Total nonperforming assets, including performing restructured loans

  $ 8,446     $ 8,192     $ 8,446     $ 8,192  
                                 

Allowance for loan losses: (in thousands)

                               

Beginning balance

  $ 3,917     $ 3,700     $ 3,758     $ 3,636  

Provision for loan losses

    24       40       371       575  

Charge-offs

    (23 )     (37 )     (247 )     (563 )

Recoveries

    29       3       65       58  

Ending balance

  $ 3,947     $ 3,706     $ 3,947     $ 3,706  

  

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