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

hmta20190220_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: February 20, 2019

 


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 February 20, 2019 its financial results for the quarter and year ended December 31, 2018 and continuation of quarterly cash dividend. The financial results and cash dividend are detailed in the Company’s Press Release dated February 20, 2019, 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:  February 20, 2019

 

By:

 

 

/s/ Vance W. Adkins 

 

 

 

 

 

Vance W. Adkins

 

 

 

 

Executive Vice President and Chief Financial Officer

EXHIBIT INDEX

 

     

Exhibit
No.

  

Description

   

99.1

  

Press Release

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Section 2: EX-99.1 (EXHIBIT 99.1)

ex_135420.htm

 

Exhibit 99.1

 

 

Wednesday, February 20, 2019

HomeTown Bankshares Corporation Reports Record Earnings and Solid Growth for 2018; Announces Quarterly Cash Dividend of $0.04 per Share

Net Income up 21% for Q4 and 58% for the 2018 Fiscal Year

 

NASDAQ Listing

HomeTown Bankshares Corporation is listed with the NASDAQ Capital Markets under the trading symbol “HMTA”. During Q4 of 2018, the stock traded as high as $15.38 with an average close of $14.15 and most recent closing price of $14.30 on February 19, 2019.

 

Operating Performance Highlights

Core Revenues were up 9% in Q4 and 7% for the year ended December 31, 2018

Net Interest Income was up 6% in Q4 2018 vs. Q4 2017 and 7% for the year ended December 31, 2018 vs. 2017

Net Interest Margin increased 12 basis points to 3.57% for the quarter ended December 31, 2018 compared to 3.45% at December 31, 2017; and, up 8 basis points YTD at December 31, 2018 to 3.55% from 3.47% in 2017

Excluding non-recurring income, noninterest income for Q4 2018 was down 4% while non-interest income for the 2018 fiscal year was down 2% due to a reduction in mortgage revenue from a year-over-year decrease in re-financings and softness in the housing market

During the fiscal year ended December 31, 2018, non-recurring income from BOLI insurance proceeds of $642,000 was more than offset by a similar increase in certain non-recurring merger-related expenses of $788,000

Net Income Available to Shareholders was up 21% to $459,000 in Q4 2018 and up 58% to $4.0 million for the fiscal year of 2018 from $380,000 and $2.5 million, respectively, in 2017

Fully diluted Earnings per Share were up accordingly to $0.08 for the fourth quarter and $0.68 for the fiscal year of 2018 vs. $0.07 and $0.43, respectively, in 2017

 

Continued Solid Loan and Core Deposit Growth

Total Assets were $565 million at December 31, 2018, a $15 million increase for the fiscal year

Total Loans were up $27 million or 6% to $471 million for the fiscal year ended December 31, 2018 over prior year; and, up $5 million or 4% annualized in Q4 2018 vs. Q3 2018

Core Deposits increased $20 million or 4.3% over 2017 to fund loans and curtail wholesale deposits

 

Credit Quality Improved and Remains Sound

YTD net charge-offs were $327,000 or 0.07% of average loans for 2018 and $145,000 or 0.12% for Q4 2018 vs. net charge-offs of $1.0 million or 0.24% and $515,000 or 0.46% for 2017

Nonperforming assets were 0.63% of total assets at December 31, 2018 vs. 0.80% in 2017

Including performing, restructured loans, nonperforming assets amounted to 1.30% of assets at December 31, 2018 vs. 1.51% at December 31, 2017

Nonaccrual loans remained low at 0.36% of total loans at December 31, 2018 vs. 0.26% in 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 Record Earnings and Solid Growth for 2018; Announces Quarterly Cash Dividend of $0.04 per Share

Net Income up 21% for Q4 and 58% for 2018 Fiscal Year

 

The Board of Directors declared a cash dividend of $0.04 per common share, payable March 15, 2019, to shareholders of record as of February 28, 2019.

 

ROANOKE, VA, February 20, 2019 (GLOBE NEWSWIRE) - HomeTown Bankshares Corporation, (NASDAQ: HMTA), the parent company of HomeTown Bank, reported strong growth in net income available to common shareholders of $4.0 million for the 2018 fiscal year ended December 31, and $459,000 for the fourth quarter, which included $723,000 in merger related expenses. This compares to $2.5 million and $380,000, respectively, for comparable periods in 2017. Total assets were up $15 million to $565 million at December 31, 2018 over the prior year and up slightly in Q4 2018 from the prior quarter. Total assets were up year-over-year due to continued solid loan growth supported by solid growth in core deposits. Earnings per share on a fully diluted basis were $0.08 per share for the fourth quarter and $0.68 per share for the 2018 fiscal year, up from $0.07 and $0.43 per share, respectively, for the fourth quarter and fiscal year 2017.

 

"2018 was a record year of earnings for the Company which was accompanied by continued solid growth in both loans and core deposits," said Susan K. Still, President and CEO. "This growth in profitability as well as loans and core deposits was achieved in spite of merger related expenses following our announced plan on October 1, 2018 to merge with American National Bank at the end of March, 2019," she continued. "An improved net interest margin, a lower provision for loan losses, and controlled core operating expense all contributed to a 21% increase in net income for the fourth quarter and a 58%. increase in net income in 2018 over the prior year," said Still.

 

Revenue

 

Core revenues increased 9% during the fourth quarter of 2018 and 7% for the 2018 fiscal year due to solid loan growth and rising interest rates. Core revenue amounted to $6.6 million during the fourth quarter and $25.5 million for the twelve months of fiscal year 2018, excluding non-recurring income of $702,000, comparing to $6.1 million in Q4 and $23.7 million for the 2017 fiscal year, respectively. 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 $712,000 for 2018 trailed 2017 mortgage revenue of $959,000 due to a significant drop mortgage refinancing in a rising rate environment and a lower inventory of homes available for sale from the prior year.

 

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Net Interest Income

 

Net interest income increased 6% or $288,000 to $4.8 million in the fourth quarter in 2018 and increased 7% or $1.2 million to $18.8 million for the 2018 fiscal year ended December 31. Higher loan volume and an increase in interest rates, offset a growing increase in deposit costs, which resulted in a 12 basis point increase in the net interest margin for the fourth quarter of 2018 and an 8 basis point improvement for the fiscal year of 2018 over 2017. Net interest income and the net interest margin should continue to grow with higher loan volume that offsets potential increases in deposit costs as well as a controlled mix of deposits.

  

Noninterest Income

 

Total noninterest income amounted to $758,000 in Q4 2018 vs. $796,000 for the same period in 2017 due primarily to lower mortgage income of $109,000. Year-to-date noninterest income amounted to $3.7 million at December 31, 2018, up from $3.3 million for a comparable period in 2017 due primarily to non-recurring income during Q1 2018 of $642,000 from the recognition of a gain on bank owned life insurance.

 

New account growth, ATM and interchange income, mortgage income as well as credit card and merchant service income were the primary contributors to non-interest income for the fiscal year 2018.

 

Noninterest Expense

 

Non-interest expenses, net of merger related costs, dropped to $4.0 million in the fourth quarter from $4.1 million in 2017. Noninterest expense during the 2018 fiscal year increased only $329,000 or 2% to $16.3 million in 2018, excluding the $788,000 in merger-related expenses. The increase of 2% was due primarily to increased personnel costs during 2018 with the transition of a new Chief Credit Officer, the addition of a new Chief Risk Officer, higher data processing costs as well as incentive payouts due to stronger growth and profitability throughout 2018.

 

Net Income

 

Net income before merger-related expenses was up $756,000 to $1.1 million or 199% higher than the fourth quarter of 2017.  For the 2018 fiscal year, net income before merger-related expenses was $4.7 million, up $2.2 million - 88% or almost double the $2.5 million realized in 2017.  The corresponding return on average assets amounted to 0.79% and return on average HometTown Bankshares shareholders' equity was 8.51% for the fourth quarter of 2018 and 0.84% and 9.02%, respectively, for the fiscal year ended December 31, 2018. Improved profitability was due to a combination of increased loan volume at higher interest rates, controlled deposit costs/mix and non-interest expenses as well as a lower provision for loan losses throughout the fiscal year.

 

Core earnings were up $245,000 or 16.4% for the fourth quarter of 2018 vs. 2017 and up $719,000 or 13.4% for the fiscal year 2018 over 2017. Core earnings consist of pre-tax earnings less non-recurring income plus non-recurring expenses.

 

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Loans

 

Total loans were $471 million at December 31, 2018, up $5 million or 4% on an annualized basis over the fourth quarter of 2017 and up $27 million or 6% over the 2017 fiscal year. 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

 

Total deposits were $493 million, up $9.7 million or 8% on an annualized basis from the previous quarter. Stable core deposits maintained in 2018 were supported by continued growth in new banking relationships and a 10% increase in non-interest bearing deposits since fiscal year 2017. In addition, liquidity from stable core deposit growth resulted in a continued year over year reduction in our wholesale funding to less than 1.5% of total deposits. Significantly lower interest expense associated with wholesale funding contributed to the reduction in the overall costs and improved mix of core deposits.

 

Capital

 

Capital levels remained sound during Q4 2018 with total HomeTown Bankshares stockholders’ equity increasing $2.8 million through December 31, 2018 over the prior year. 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 10.8%, respectively. All ratios continue to exceed the current regulatory standards for well-capitalized institutions. Fully diluted book value per common share amounted to $9.16 at December 31, 2018 vs. $8.71 at December 31, 2017.

 

Credit Quality

Credit quality improved and remained sound through December 31, 2018 with a lower provision for loan losses of $561,000 for the 2018 fiscal year vs. $1.14 million for fiscal year 2017. The reduced provision was a result of continued improvement in loan quality and a reduction in charge-offs.

 

Nonperforming Assets

OREO balances decreased $1.4 million to $1.9 million or 42% from the prior year. Non-performing assets, excluding performing restructured loans, improved to 0.63% of total assets at December 31, 2018 vs. 0.80% at December 31, 2017. Non-performing assets, including performing restructured loans, amounted to 1.30% of total assets at December 31, 2018 vs. 1.51% at December 31, 2017.

 

Past Due and Nonaccrual Loans

Past due accruing loans amounted to 0.41% at December 31, 2018 vs. 0.35% of total loans the prior year. Nonaccruals amounted to 0.36% of total loans at December 31, 2018 vs. 0.26% of total loans at December 31, 2017.

 

Allowance for Loan Losses

The allowance for loan losses totaled $3.99 million at December 31, 2018 compared to $3.76 million at December 31, 2017. Provision for credit losses was $190,000 for the Q4 2018 quarter vs. $567,000 for Q4 2017 with an improvement in overall credit quality and lower charge-offs during the fiscal year. Net charge-offs amounted to $145,000 in Q4 of 2018 vs. net charge-offs of $515,000 in Q4 2017 with net charge-offs of $327,000 for the 2018 fiscal year ended December 31, 2018, down from $1.02 million in fiscal year 2017.

 

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*   *   *

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 and year ended December 31, 2018)

 

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HomeTown Bankshares Corporation

Consolidated Condensed Balance Sheets

December 31, 2018; and December 31, 2017

 

   

December 31

   

December 31

 

In Thousands

 

2018

   

2017

 
   

(Unaudited)

         
Assets                

Cash and due from banks

  $ 22,771     $ 21,714  

Federal funds sold

    194       180  
                 

Securities available for sale, at fair value

    44,976       55,344  

Restricted equity securities, at cost

    2,241       2,371  

Loans held for sale

    85       1,587  

Total loans

    471,462       444,195  

Allowance for loan losses

    (3,992 )     (3,758 )

Net loans

    467,470       440,437  

Property and equipment, net

    12,943       12,937  

Other real estate owned, net

    1,893       3,249  

Other assets

    12,405       12,434  

Total assets

  $ 564,978     $ 550,253  
                 

Liabilities and Stockholders’ Equity

               

Deposits:

               

Noninterest-bearing

  $ 117,544     $ 106,956  

Interest-bearing

    375,629       370,364  

Total deposits

    493,173       477,320  

Federal Home Loan Bank borrowings

    7,944       11,028  

Subordinated notes

    7,285       7,254  

Other borrowings

    83       1,558  

Other liabilities

    2,794       2,201  

Total liabilities

    511,279       499,361  
                 

Stockholders’ Equity:

               

Common stock

    28,909       28,777  

Surplus

    18,228       17,980  

Retained surplus

    7,024       3,767  

Accumulated other comprehensive loss

    (811 )     (141 )

Total HomeTown Bankshares Corporation stockholders’ equity

    53,350       50,383  

Noncontrolling interest in consolidated subsidiary

    349       509  

Total stockholders’ equity

    53,699       50,892  

Total liabilities and stockholders’ equity

  $ 564,978     $ 550,253  

 

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HomeTown Bankshares Corporation

Consolidated Condensed Statements of Income

For the Three and Twelve Months Ended December 31, 2018 and 2017

 

   

For the Three Months

   

For the Twelve Months

 
   

Ended December 31,

   

Ended December 31,

 

In Thousands, Except Share and Per Share Data

 

2018

   

2017

   

2018

   

2017

 
   

(Unaudited)

   

(Unaudited)

   

(Unaudited)

         

Interest income:

                               

Loans and fees on loans

  $ 5,446     $ 4,850     $ 20,820     $ 18,973  

Taxable investment securities

    278       287       1,102       1,031  

Nontaxable investment securities

    57       69       229       308  

Other interest income

    90       99       339       357  

Total interest and dividend income

    5,871       5,305       22,490       20,669  

Interest expense:

                               

Deposits

    843       588       2,841       2,282  

Subordinated notes

    134       135       536       537  

Other borrowed funds

    80       56       323       227  

Total interest expense

    1,057       779       3,700       3,046  

Net interest income

    4,814       4,526       18,790       17,623  

Provision for loan losses

    190       567       561       1,142  

Net interest income after provision for loan losses

    4,624       3,959       18,229       16,481  

Noninterest income:

                               

Service charges on deposit accounts

    159       129       578       544  

ATM and interchange income

    301       225       1,055       837  

Mortgage banking

    125       234       712       959  

Gains on sales of investment securities, net

          9       60       69  

Income from life insurance benefit

                642        

Other income

    173       199       651       874  

Total noninterest income

    758       796       3,698       3,283  

Noninterest expense:

                               

Salaries and employee benefits

    2,183       1,945       8,648       8,098  

Occupancy and equipment expense

    423       405       1,676       1,650  

Advertising and marketing expense

    115       154       606       537  

Professional fees

    71       134       421       588  

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

    174       201       334       581  

Other real estate owned expense

    31       40       280       106  

Merger-related expenses

    723             788        

Other expense

    1,039       1,179       4,331       4,407  

Total noninterest expense

    4,759       4,058       17,084       15,967  

Net income before income taxes

    623       697       4,843       3,797  

Income tax expense

    158       298       845       1,228  

Net income

    465       399       3,998       2,569  

Less net income attributable to non-controlling interest

    6       19       44       73  

Net income attributable to HomeTown Bankshares Corporation

  $ 459     $ 380     $ 3,954     $ 2,496  

Basic earnings per common share

  $ 0.08     $ 0.07     $ 0.68     $ 0.43  

Diluted earnings per common share

  $ 0.08     $ 0.07     $ 0.68     $ 0.43  

Weighted average common shares outstanding

    5,809,817       5,776,130       5,805,654       5,769,752  

Diluted average common shares outstanding

    5,857,440       5,810,760       5,853,277       5,804,382  

 

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HomeTown Bankshares Corporation

 

Three

   

Three

   

Twelve

   

Twelve

 

Financial Highlights

 

Months

   

Months

   

Months

   

Months

 

In Thousands, Except Share and Per Share Data

 

Ended

   

Ended

   

Ended

   

Ended

 
   

Dec 31

   

Dec 31

   

Dec 31

   

Dec 31

 
   

2018

   

2017

   

2018

   

2017

 

 

 

(Unaudited)

   

(Unaudited)

   

(Unaudited)

   

(Unaudited)

 
PER SHARE INFORMATION                                

Book value per share, basic

  $ 9.18     $ 8.72     $ 9.18     $ 8.72  

Book value per share, diluted

  $ 9.16     $ 8.71     $ 9.16     $ 8.71  

Earnings per share, basic

  $ 0.08     $ 0.07     $ 0.68     $ 0.43  

Earnings per share, diluted

  $ 0.08     $ 0.07     $ 0.68     $ 0.43  
                                 

PROFITABILITY

                               

Return on average assets

    0.32 %     0.27 %     0.71 %     0.46 %

Return on average shareholders' equity

    3.43 %     2.97 %     7.60 %     5.02 %

Net interest margin

    3.57 %     3.45 %     3.55 %     3.47 %

Efficiency

    68.78 %     71.83 %     71.98 %     73.33 %
                                 

BALANCE SHEET RATIOS

                               

Total loans to deposits

    95.60 %     93.06 %     95.60 %     93.06 %

Securities to total assets

    8.36 %     10.49 %     8.36 %     10.49 %

Common equity tier 1 ratio BANK ONLY

    11.7 %     11.7 %     11.7 %     11.7 %

Tier 1 capital ratio BANK ONLY

    11.7 %     11.7 %     11.7 %     11.7 %

Total capital ratio BANK ONLY

    12.5 %     12.5 %     12.5 %     12.5 %

Tier 1 leverage ratio BANK ONLY

    10.8 %     10.4 %     10.8 %     10.4 %
                                 

ASSET QUALITY

                               

Nonperforming assets to total assets

    0.63 %     0.80 %     0.63 %     0.80 %

Nonperforming assets, including restructured loans, to total assets

    1.30 %     1.51 %     1.30 %     1.51 %

Net charge-offs to average loans (annualized)

    0.12 %     0.46 %     0.07 %     0.24 %
                                 

Composition of risk assets: (in thousands)

                               

Nonperforming assets:

                               

Nonaccrual loans

  $ 1,683       1,144     $ 1,683     $ 1,144  

Other real estate owned

    1,893       3,249       1,893       3,249  

Total nonperforming assets, excluding performing restructured loans

    3,576       4,393       3,576       4,393  

Restructured loans, performing in accordance with their modified terms

    3,765       3,889       3,765       3,889  

Total nonperforming assets, including performing restructured loans

  $ 7,341     $ 8,282     $ 7,341     $ 8,282  
                                 

Allowance for loan losses: (in thousands)

                               

Beginning balance

  $ 3,947     $ 3,706     $ 3,758     $ 3,636  

Provision for loan losses

    190       567       561       1,142  

Charge-offs

    (170 )     (515 )     (417 )     (1,078 )

Recoveries

    25       -       90       58  

Ending balance

  $ 3,992     $ 3,758     $ 3,992     $ 3,758  

 

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