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CST: 26/05/2019 09:54:28   

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

94 Days ago

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

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.

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. 

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.

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.


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 year ended December 31, 2018)

 
 
 
HomeTown Bankshares Corporation 
Consolidated Condensed Balance Sheets
December 31, 2018; and December 31, 2017
    December 31     December 31
In Thousands   2018     2017
Assets   (Unaudited)      
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


 
 
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



                       
                       
                       
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
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
                           
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


For more information contact:
Susan K. Still, President and CEO, (540) 278-1705
Vance W. Adkins, Executive Vice President and CFO, (540) 278-1702

 

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