Market Overview

HomeTown Bankshares Reports Strong Growth on Increased Earnings for Second Quarter

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NASDAQ Listing
HomeTown Bankshares Corporation listed with the NASDAQ Capital Markets under the trading symbol "HMTA" on October 12, 2016 when the stock price closed at $8.95. Since listing, the Company's stock has received enhanced exposure, increased trading volume, and higher closing prices with a high of $11.25, an average close of $9.83, and most recent closing price of $10.75 as of August 2, 2017.

Continued Strong Loan and Core Deposit Growth

  • Total assets grew 6% to $548 million at June 30, 2017
  • Loans were $435 Million at June 30, 2017
    - Up $15.5 million or 8% on an annualized basis for the first half of 2017, and
    - Up $40.8 million or 10% since June 30, 2016
  • Core Deposits were $433 Million at June 30, 2017
    - Increased $20.1 million or 10% annualized for the first half of 2017
    - Increased $49.8 million or 13% since June 30, 2016

Operating Performance Highlights

  • Q2 core revenue of $6 million, up 10% or $588,000 over second quarter of 2016
  • YTD core revenue of $11.7 million, an increase of $1.1 million or 10% over 2016
  • Net Income of $434,000 for second quarter of 2017 vs. $224,000 for second quarter of 2016
  • YTD Earnings of $1.2 million vs. $1.02 million in 2016
  • EPS on a fully diluted basis of $0.08 for the second quarter of 2017 and $0.21 YTD vs. $0.00 and $0.11, respectively, in 2016

Credit Quality Remains Sound

  • Non-performing assets improved to 1.19% of total assets at June 30, 2017 vs. 1.30% at June 30, 2016
  • OREO balances improved $1.0 million or 27% thru the first six months of 2017 and $1.57 million or 36% since June 30, 2016
  • Past due accruing loans amounted to .65% of total loans at June 30, 2017 vs. 0.24% at June 30, 2016
  • Q2 net charge-offs amounted to 0.46% of average loans vs. 0.74% for second quarter of 2016; YTD net charge-offs thru June 30, 2017 were 0.22% vs. 0.38% for 2016
  • Q2 nonaccrual loans amounted to 0.77% of total loans at June 30, 2017 vs. 0.57% of total loans at June 30, 2016

Well Capitalized with Solid Capital Ratios

  • Common Equity Tier 1 Capital amounted to 11.4% at June 30, 2017
  • Total Risk-Based Capital amounted to 12.2% at June 30, 2017
  • Tier 1 Risk-Based Capital amounted to 11.4% at June 30, 2017
  • Tier 1 Leverage Ratio for HomeTown Bank increased to 10.5% at June 30, 2017 vs. 10.6% at June 30, 2016

ROANOKE, Va., Aug. 03, 2017 (GLOBE NEWSWIRE) -- HomeTown Bankshares Corporation, (NASDAQ:HMTA), the parent company of HomeTown Bank, reached $548 million in assets with strong growth in both loans and core deposits.  The Company reported net income of $434,000 for the second quarter ended June 30, 2017 vs. $224,000 in net income for the comparative period in 2016.  Net Income for the first six months of 2017 was $1.2 million vs. $1.0 million for the first six months of 2016.  Earnings per share on a fully diluted basis were $0.08 for the second quarter of 2017 and $0.21 per share for the six months ended June 30, 2017 vs. $0.00 and $0.11 per share, respectively, for similar periods in 2016. 

Profitability, excluding non-recurring income, was higher in the second quarter of 2017 and the first six months of 2017 vs. 2016.  The increased profitability in 2017 was due to double digit growth in net interest income (11%) and non-interest income (25%) as well as a reduction ($343,000) in the provision for loan losses.  Non-interest expenses were higher due to continued reduction in the OREO portfolio ($380,000), higher professional fees, data processing costs and software expenses due to an increased customer base and a core upgrade.  The provision for loan losses and the OREO expenses were offset by a $173,000 non-recurring gain realized in the second quarter of 2017 while the tax expense was lower due to the additional tax expense ($240,000) incurred in the second quarter of 2016 from the expiration of stock options.

"During the second quarter and the first six months of 2017, we continued to experience strong balance sheet growth in both loans and core deposits that resulted in a solid increase in core revenues," said President and CEO Susan Still. "We realized solid gains in market share for another quarter in both loans and deposits while maintaining a sound loan portfolio and reducing our OREO portfolio by 27% during Q2 and 36% since the first half of 2016," she said. 

Revenue
Total core revenue for the six months ended June 30, 2017 was $11.7 million, up $1.1 million or 10% over 2016, which included $5.9 million in core revenues realized during the second quarter of 2017, 11% higher than 2016. Higher core revenues reflected increases in both net interest income and non-interest income and excludes gains on sales of investments and other non-recurring income during the first half of 2017. Growth in commercial lines and loans, commercial real estate loans, personal lines and loans, as well as in non-interest income from treasury and merchant services, title insurance, mortgage, brokerage, and credit card/interchange services contributed to the increase in total revenue.

Net Interest Income
Net interest income in the second quarter 2017 increased $415,000 or 10.5% to $4.4 million from the second quarter of 2016.  Net interest income was up $820,000 to $8.7 million or 10.5% for the first half of 2017 vs. $7.8 million over a comparable period in 2016.  Higher loan volume helped to offset lower interest rates on loans which resulted in higher net interest income, facilitated by a reduction in total interest expense for the first half of 2017.  Due to the continued growth in competitors in our market(s), our net interest margin experienced a 6-basis point year-over-year decline at June 30, 2017 from 3.55% for the first half of 2016 to 3.49% at June 30, 2017. 

Noninterest Income
Noninterest income increased 25% to $831,000, net of securities gains and non-recurring income, in the second quarter 2017 while noninterest income of $1.5 million was realized for the first half of 2017, up 19% from $1.3 million realized for the second half of 2016. The primary increase for 2017 was strong growth in ATM and interchange income as well as mortgage income, title insurance fees, and merchant income.

Noninterest Expense
Noninterest expense increased $938,000 in the second quarter of 2017 over the second quarter of 2016 due primarily to a loss of $380,000 on the sale of a foreclosed property, contributing to a 27% or $1.0 million reduction in the OREO portfolio during 2017. Noninterest expense also increased during the first half of 2017 compared to 2016 due to higher professional fees, higher mortgage commissions and incentive accruals, data processing costs and software expenses due to an increased customer base and core upgrade.

Loans
Total loans were $435 million at June 30, 2017, up $15.9 million or 8% on an annualized basis for the first half of 2017 and up $41.3 million or 10% over the prior year ended June 30, 2016.  Loan growth was driven by commercial real estate, commercial and industrial lines and term loans as well as private banking and consumer lines and loans.

Deposits
Core deposits were up $20.1 million or 10% on an annualized basis for the first half of 2017 while core deposit growth was up $49.8 million or 13% over June 30, 2016. Strong core deposit growth continued by increased market share growth in both commercial, private banking and consumer banking relationships. 

Capital
Capital levels remained strong in the second quarter, with total stockholders' equity increasing $2.4 million through June 30, 2017 over the previous year.  HomeTown Bank Common equity tier 1 capital, Total risk-based capital, Tier 1 risk-based capital and Tier 1 leverage ratios were 11.4%, 12.2%, 11.4% and 10.5%, respectively, at June 30, 2017. All ratios continue to exceed the current regulatory standards for well-capitalized institutions.  Book value per common share amounted to $8.56 at June 30, 2017 vs. $8.36 at June 30, 2016.

Credit Quality
Credit quality improved over the prior year and remained sound thru June 30, 2017.         

Nonperforming Assets
OREO balances decreased significantly - $1.0 million or 27% during the first half of 2017 and $1.6 million or 36% since June 30, 2016.  Non-performing loans increased $2.1 million in the second quarter, pending a third quarter settlement of a $2.43 million non-performing loan.  Non-performing assets, excluding performing restructured loans, amounted to 1.07% of total assets at June 30, 2017 vs. 1.30% at June 30, 2016.  Non-performing assets, including restructured loans, also improved from 2.55% of total assets at June 30, 2016 to 1.95% at June 30, 2017. 

Past Due and Nonaccrual Loans
Due to the settlement of the non-performing loan in Q3, past due accruing loans increased to 0.65% of total loans at June 30, 2017 vs. 0.24% in 2016 while nonaccruals increased to 0.77% of total loans during the second quarter of 2017 from 0.57% of total loans at June 30, 2016. 

Allowance for Loan Losses
The allowance for loan losses totaled $3.7 million at June 30, 2017 compared to $3.4 million at June 30, 2016.  Provisions for loan losses were $465,000 for the second quarter of 2017 vs. $808,000 for the second quarter of 2016. Year-to-date provisions for loan losses were $535,000 for the six months ended June 30, 2017 vs. $868,000 at June 30, 2016.

About HomeTown Bankshares Corporation
HomeTown Bankshares Corporation is the parent company of HomeTown Bank, which officially opened for business on November 14, 2005.  HomeTown Bank offers a full range of banking services to small and medium-size businesses, real estate investors and developers, private investors, professionals and individuals.  The Bank serves three markets including the Roanoke Valley, the New River Valley and Smith Mountain Lake through six branches, seven ATMs, HomeTown Mortgage and HomeTown Investments.  A high level of responsive and personal service coupled with local decision-making is the hallmark of its banking strategy. For more information, please visit www.hometownbank.com.

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 ending June 30, 2017)

HomeTown Bankshares Corporation 
Consolidated Condensed Balance Sheets
June 30, 2017; December 31, 2016; and June 30, 2016
    June 30,     December 31     June 30,
In Thousands   2017       2016       2016  
Assets   (Unaudited)           (Unaudited)
Cash and due from banks $ 37,618     $ 18,229     $ 28,101  
Federal funds sold   93       42       954  
Securities available for sale, at fair value   48,665       52,975       54,498  
Restricted equity securities, at cost   2,371       2,213       2,479  
Loans held for sale   1,108       678       915  
Total loans   434,501       418,991       393,668  
Allowance for loan losses   (3,700 )     (3,636 )     (3,449 )
Net loans   430,801       415,355       390,219  
Property and equipment, net   13,177       13,371       13,726  
Other real estate owned   2,768       3,794       4,337  
Other assets   11,349       10,633       10,160  
Total assets $ 547,950     $ 517,290     $ 505,389  
                 
Liabilities and Stockholders' Equity                
Deposits:                
Noninterest-bearing $ 116,538     $ 91,354     $ 83,414  
Interest-bearing   359,818       359,494       349,861  
Total deposits   476,356       450,848
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