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Q2 Core Revenues Up 3% and over 4% YTD
HomeTown Bankshares Corporation is listed with the NASDAQ Capital Markets under the trading symbol “HMTA”. During Q2 of 2018, the stock closed as high as $15.79 with an average close of $12.71 and most recent closing price of $13.60 on July 30, 2018.
Operating Performance Highlights
Continued Strong Loan and Stable Deposits
Credit Quality Remains Sound
The Board of Directors declared a cash dividend of $0.04 per common share, payable August 31, 2018, to shareholders of record as of August 15, 2018.
ROANOKE, Va., July 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 $973,000 for the second quarter ended June 30, 2018 and $2.2 million for the six months ended June 30, 2018 vs. $434,000 and $1.2 million for comparable periods in 2017. The Company grew total assets $8 million in Q2 2018 and $10 million over the prior year to $558 million at June 30, 2018 with continued solid growth in loans on stable core deposits. Earnings per share on a fully diluted basis were $0.17 for the second quarter and $0.37 per share for the first half of 2018 and $0.08 and $0.21 per share, respectively, for the second quarter and first six months of 2017.
"We are very pleased with our strong earnings growth during the second quarter and for the first six months of 2018. Continued solid growth in loans, stable core deposits, increases in interest rates, improved net interest margin, and reduction in non—recurring expenses contributed to a 117% increase in net income for the quarter. Non-recurring income in the first quarter and an improvement in the corporate tax rate for both quarters, contributed to a 78% increase in net income for the first six months of 2018," said Susan K. Still, President and CEO. "We anticipate that the strong economy will continue to provide a favorable lending environment as well as continued competition for core deposits during the second half of the year," she continued.
Core revenues increased 3% during second quarter of 2018 and over 4% for the first six months of 2018 due to solid loan growth and stable core deposits system-wide. Core revenue amounted to $6.3 million during the second quarter and $12.4 million for the first half of 2018, before non-recurring income of $690,000 in Q1, which compared to $6.1 million and $11.8 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.
Net Interest Income
For the second quarter 2018, net interest income increased 6% or $276,000 to $4.7 million from the second quarter of 2017. Higher loan volume and an increase in interest rates, offset by a smaller increase in deposit costs, resulted in a 6 basis point increase in the Net Interest Margin at June 30, 2018. Net interest income should continue to grow with higher loan volume and increasing interest rates along with the growth in lower-cost core deposits while continuing to control deposit costs and an improved net interest margin.
Total noninterest income amounted to $789,000 in Q2 2018, down from $1.0 million for the same period in 2017 due to lower mortgage and brokerage income. Year-to-date noninterest income amounted to $2.2 million at June 30, 2018, up from $1.7 million for a comparable period in 2017 due primarily to non-recurring income during Q1 2018 from the recognition of the gain on bank owned life insurance.
Continued new account growth, ATM and interchange income as well as merchant services income contributed to the increase in non-interest income for the first six months of 2018.
Non-recurring non-interest income was offset by an increase in noninterest expense during the first half of 2018 vs. 2017 due to an increase in OREO related expenses, higher data processing costs and professional fees. 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. We also anticipate a return to normalized overhead and a favorable comparison to peers and core operating costs for the remainder of 2018 following our core conversion related expenses in 2017.
Total loans were $461 million at June 30, 2018, up $26 million or 6% from the second quarter of 2017 and up $17 million or 8% on an annualized basis over the prior year ended 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.
Core deposit growth for Q2 2018 was up 2% over a similar period in 2017. Total deposits were $481 million and $4.7 million over Q2 2017. Stable core deposits maintained thus far in 2018 were supported by continued growth in new banking relationships, in spite of a significant increase in customers' use of deposits for working capital and purchases associated with a stronger economy. In addition, liquidity from stable core deposit growth resulted in a continued year over year reduction in wholesale funding and the higher interest expense associated with wholesale funding.
Capital levels remained sound during Q2 2018 with total stockholders’ equity increasing $2.2 million through June 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 11.6%, 12.4%, 11.6% and 10.7%, respectively. All ratios continue to exceed the current regulatory standards for well-capitalized institutions. Book value per common share amounted to $8.90 at June 30, 2018 vs. $8.72 at December 31, 2017 and $8.56 at June 30, 2017.
Credit quality remained sound through June 30, 2018 with a lower provision for loan losses of $110,000 in Q2 2018 vs. $465,000 in Q2 2017. The reduced provision was a result of continued improvement in loan quality and a net reduction in charge-offs.
OREO balances increased by $646,000 over Q2 2017. Non-performing assets, excluding performing restructured loans, decreased to 0.91% of total assets at June 30, 2018 vs. 1.12% at June 30, 2017. Non-performing assets, including restructured loans, also decreased from 1.84% of total assets at June 30, 2017 to 1.59% at June 30, 2018.
Past Due and Nonaccrual Loans
Past due accruing loans improved from 0.65% in Q2 2017 to 0.35% of total loans in Q2 2018. Nonaccruals improved to 0.36% of total loans at June 30, 2018 from 0.77% of total loans at June 30, 2017.
Allowance for Loan Losses
The allowance for loan losses totaled $3.92 million at June 30, 2018 compared to $3.70 million at June 30, 2017. Provisions for credit losses were $110,000 for the Q2 2018 quarter vs. $465,000 for Q2 2017 due to an improvement in overall credit quality and lower charge-offs during the fiscal year.
Certain statements in this press release may be “forward-looking statements.” Forward-looking statements are statements that include projections, predictions, expectations or beliefs about future events or results that are not statements of historical fact and that involve significant risks and uncertainties. Although the Company believes that its expectations with regard to forward-looking statements are based upon reasonable assumptions within the bounds of its existing knowledge of its business and operations, there can be no assurance that actual results will not differ materially from any future results implied by the forward-looking statements. Actual results may be materially different from past or anticipated results because of many factors, some of which may include changes in economic conditions, the interest rate environment, legislative and regulatory requirements, new products, and competition, changes in the stock and bond markets and technology. The Company does not update any forward-looking statements that it may make.
(See Attached Financial Statements for quarter ended June 30, 2018)
|HomeTown Bankshares Corporation|
|Consolidated Condensed Balance Sheets|
|June 30, 2018; December 31, 2017; and June 30, 2017|
|June 30,||December 31,||June 30,|
|Cash and due from banks||$||20,689||$||21,714||$||37,618|
|Federal funds sold||319||180||93|
|Securities available for sale, at fair value||47,915||55,344||48,665|
|Restricted equity securities, at cost||2,546||2,371||2,371|
|Loans held for sale||280||1,587||1,108|
|Allowance for loan losses||(3,917||)||(3,758||)||(3,700||)|
|Property and equipment, net||13,144||12,937||13,177|
|Other real estate owned, net||3,414||3,249||2,768|
|Liabilities and Stockholders’ Equity|
|Federal Home Loan Bank borrowings||15,116||11,028||11,694|
|Accumulated other comprehensive (loss) income||(916||)||(141||)||252|
|Total HomeTown Bankshares Corporation stockholders’ equity||51,744||50,383||49,365|
|Noncontrolling interest in consolidated subsidiary||333||509||470|
|Total stockholders’ equity||52,077||50,892||49,835|
|Total liabilities and stockholders’ equity||$||558,108||$||550,253||$||547,950|
|HomeTown Bankshares Corporation|
|Consolidated Condensed Statements of Income|
|For the Three and Six Months Ended June 30, 2018 and 2017|
|For the Three Months||For the Six Months|
|Ended June 30,||Ended June 30,|
|In Thousands, Except Share and Per Share Data||2018||2017||2018||2017|
|Loans and fees on loans||$||5,126||$||4,703||$||10,030||$||9,327|
|Taxable investment securities||271||260||562||500|
|Nontaxable investment securities||57||76||116||164|
|Other interest income||78||83||163||157|
|Total interest income||5,532||5,122||10,871||10,148|
|Other borrowed funds||86||60||158||114|
|Total interest expense||880||746||1,663||1,488|
|Net interest income||4,652||4,376||9,208||8,660|
|Provision for loan losses||110||465||347||535|
|Net interest income after provision for loan losses||4,542||3,911||8,861||8,125|
|Service charges on deposit accounts||147||146||280||296|
|ATM and interchange income||262||228||489||406|
|Gains on sales of investment securities||-||29||60||42|
|Income from life insurance benefit||12||-||642||-|
|Total noninterest income||789||1,033||2,176||1,731|
|Salaries and employee benefits||2,133||2,064||4,352||4,053|
|Occupancy and equipment expense||407||439||837||854|
|Advertising and marketing expense||174||142||355||272|
|Losses on sales, write-downs of other real estate owned, net||-||380||158||380|
|Other real estate owned expense||64||24||205||37|
|Total noninterest expense||4,110||4,312||8,467||8,105|
|Net income before income taxes||1,221||632||2,570||1,751|
|Income tax expense||232||176||379||518|
|Less net income attributable to non-controlling interest||16||22||28||34|
|Net income available to common stockholders||$||973||$||434||$||2,163||$||1,199|
|Basic earnings per common share||$||0.17||$||0.08||$||0.37||$||0.21|
|Diluted earnings per common share||$||0.17||$||0.08||$||0.37||$||0.21|
|Weighted average common shares outstanding||5,806,960||5,768,670||5,801,016||5,766,041|
|Diluted average common shares outstanding||5,852,758||5,789,905||5,846,814||5,787,276|
|HomeTown Bankshares Corporation||Three||Three||Six||Six|
|In Thousands, Except Share and Per Share Data||Ended||Ended||Ended||Ended|
|Jun 30||Jun 30||Jun 30||Jun 30|
|PER SHARE INFORMATION||(Unaudited)||(Unaudited)||(Unaudited)||(Unaudited)|
|Book value per share, basic||$||8.90||$||8.56||$||8.90||$||8.56|
|Book value per share, diluted||$||8.83||$||8.53||$||8.83||$||8.53|
|Earnings (loss) per share, basic||$||0.17||$||0.08||$||0.37||$||0.21|
|Earnings (loss) per share, diluted||$||0.17||$||0.08||$||0.37||$||0.21|
|Return on average assets||0.70||0.32||0.79||%||0.45||%|
|Return on average shareholders' equity||7.55||%||3.52||%||8.50||%||4.94||%|
|Net interest margin||3.54||%||3.48||%||3.54||%||3.49||%|
|BALANCE SHEET RATIOS|
|Total loans to deposits||95.9||%||91.2||%||95.9||%||91.2||%|
|Securities to total assets||9.04||%||9.31||%||9.04||%||9.31||%|
|Common equity tier 1 ratio BANK ONLY||11.6||%||11.4||%||11.6||%||11.4||%|
|Tier 1 capital ratio BANK ONLY||11.6||%||11.4||%||11.6||%||11.4||%|
|Total capital ratio BANK ONLY||12.4||%||12.2||%||12.4||%||12.2||%|
|Tier 1 leverage ratio BANK ONLY||10.7||%||10.5||%||10.7||%||10.5||%|
|Nonperforming assets to total assets||0.91||%||1.12||%||0.91||%||1.12||%|
|Nonperforming assets, including restructured loans, to total assets||1.59||%||1.84||%||1.59||%||1.84||%|
|Net charge-offs to average loans (annualized)||0.05||%||0.46||%||0.08||%||0.22||%|
|Composition of risk assets: (in thousands)|
|Other real estate owned||3,414||2,768||3,414||2,768|
|Total nonperforming assets, excluding performing restructured loans||5,053||6,120||5,053||6,120|
|Restructured loans, performing in accordance with their modified terms||3,830||3,953||3,830||
|Total nonperforming assets, including performing restructured loans||$||8,883||$||10,073||$||8,883||$||10,073|
|Allowance for loan losses: (in thousands)|
|Provision for loan losses||110||465||347||535|
For more information contact: Susan K. Still, President and CEO, (540) 278-1705 Vance W. Adkins, Executive Vice President and CFO, (540) 278-1702