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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
Continued Solid Loan and Core Deposit Growth
Credit Quality Improved and Remains Sound
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., Feb. 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.
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.
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.
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.
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 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.
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.
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 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 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.
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 $1.02 million in fiscal year 2017.
Certain statements in this press release may be “forward-looking statements.” Forward-looking statements are statements that include projections, predictions, expectations or beliefs about future events or results that are not statements of historical fact and that involve significant risks and uncertainties. Although the Company believes that its expectations with regard to forward-looking statements are based upon reasonable assumptions within the bounds of its existing knowledge of its business and operations, there can be no assurance that actual results will not differ materially from any future results implied by the forward-looking statements. Actual results may be materially different from past or anticipated results because of many factors, some of which may include changes in economic conditions, the interest rate environment, legislative and regulatory requirements, new products, and competition, changes in the stock and bond markets and technology. The Company does not update any forward-looking statements that it may make.
(See Attached Financial Statements for year ended December 31, 2018)
|HomeTown Bankshares Corporation|
|Consolidated Condensed Balance Sheets|
|December 31, 2018; and December 31, 2017|
|December 31||December 31|
|Cash and due from banks||$||22,771||$||21,714|
|Federal funds sold||194||180|
|Securities available for sale, at fair value||44,976||55,344|
|Restricted equity securities, at cost||2,241||2,371|
|Loans held for sale||85||1,587|
|Allowance for loan losses||(3,992)||(3,758)|
|Property and equipment, net||12,943||12,937|
|Other real estate owned, net||1,893||3,249|
|Liabilities and Stockholders’ Equity|
|Federal Home Loan Bank borrowings||7,944||11,028|
|Accumulated other comprehensive loss||(811)||(141)|
|Total HomeTown Bankshares Corporation stockholders’ equity||53,350||50,383|
|Noncontrolling interest in consolidated subsidiary||349||509|
|Total stockholders’ equity||53,699||50,892|
|Total liabilities and stockholders’ equity||$||564,978||$||550,253|
|HomeTown Bankshares Corporation|
|Consolidated Condensed Statements of Income|
|For the Three and Twelve Months Ended December 31, 2018 and 2017|
|For the Three Months||For the Twelve Months|
|Ended December 31,||Ended December 31,|
|In Thousands, Except Share and Per Share Data||2018||2017||2018||2017|
|Loans and fees on loans||$||5,446||$||4,850||$||20,820||$||18,973|
|Taxable investment securities||278||287||1,102||1,031|
|Nontaxable investment securities||57||69||229||308|
|Other interest income||90||99||339||357|
|Total interest and dividend income||5,871||5,305||22,490||20,669|
|Other borrowed funds||80||56||323||227|
|Total interest expense||1,057||779||3,700||3,046|
|Net interest income||4,814||4,526||18,790||17,623|
|Provision for loan losses||190||567||561||1,142|
|Net interest income after provision for loan losses||4,624||3,959||18,229||16,481|
|Service charges on deposit accounts||159||129||578||544|
|ATM and interchange income||301||225||1,055||837|
|Gains on sales of investment securities, net||–||9||60||69|
|Income from life insurance benefit||–||–||642||–|
|Total noninterest income||758||796||3,698||3,283|
|Salaries and employee benefits||2,183||1,945||8,648||8,098|
|Occupancy and equipment expense||423||405||1,676||1,650|
|Advertising and marketing expense||115||154||606||537|
|Losses on sales, write-downs of other real estate owned, net||174||201||334||581|
|Other real estate owned expense||31||40||280||106|
|Total noninterest expense||4,759||4,058||17,084||15,967|
|Net income before income taxes||623||697||4,843||3,797|
|Income tax expense||158||298||845||1,228|
|Less net income attributable to non-controlling interest||6||19||44||73|
|Net income attributable to HomeTown Bankshares Corporation||$||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||$||0.43|
|Weighted average common shares outstanding||5,809,817||5,776,130||5,805,654||5,769,752|
|Diluted average common shares outstanding||5,857,440||5,810,760||5,853,277||5,804,382|
|HomeTown Bankshares Corporation||Three||Three||Twelve||Twelve|
|In Thousands, Except Share and Per Share Data||Ended||Ended||Ended||Ended|
|Dec 31||Dec 31||Dec 31||Dec 31|
|PER SHARE INFORMATION||(Unaudited)||(Unaudited)||(Unaudited)||(Unaudited)|
|Book value per share, basic||$||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||$||0.43|
|Return on average assets||0.32%||0.27%||0.71%||0.46%|
|Return on average shareholders' equity||3.43%||2.97%||7.60%||5.02%|
|Net interest margin||3.57%||3.45%||3.55%||3.47%|
|BALANCE SHEET RATIOS|
|Total loans to deposits||95.60%||93.06%||95.60%||93.06%|
|Securities to total assets||8.36%||10.49%||8.36%||10.49%|
|Common equity tier 1 ratio BANK ONLY||11.7%||11.7%||11.7%||11.7%|
|Tier 1 capital ratio BANK ONLY||11.7%||11.7%||11.7%||11.7%|
|Total capital ratio BANK ONLY||12.5%||12.5%||12.5%||12.5%|
|Tier 1 leverage ratio BANK ONLY||10.8%||10.4%||10.8%||10.4%|
|Nonperforming assets to total assets||0.63%||0.80%||0.63%||0.80%|
|Nonperforming assets, including restructured loans, to total assets||1.30%||1.51%||1.30%||1.51%|
|Net charge-offs to average loans (annualized)||0.12%||0.46%||0.07%||0.24%|
|Composition of risk assets: (in thousands)|
|Other real estate owned||1,893||3,249||1,893||3,249|
|Total nonperforming assets, excluding performing restructured loans||3,576||4,393||3,576||4,393|
|Restructured loans, performing in accordance with their modified terms||3,765||3,889||3,765||
|Total nonperforming assets, including performing restructured loans||$||7,341||$||8,282||$||7,341||$||8,282|
|Allowance for loan losses: (in thousands)|
|Provision for loan losses||190||567||561||1,142|
For more information contact:
Susan K. Still, President and CEO, (540) 278-1705
Vance W. Adkins, Executive Vice President and CFO, (540) 278-1702