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Market Overview

HomeTown Bankshares Corporation Reports Solid Growth


HomeTown Bankshares Corporation is listed with the NASDAQ Capital Markets under the trading symbol "HMTA". During Q4 of 2017, the stock closed as high as $11.36 with an average close of $11.01 and most recent closing price of $11.50 on February 15, 2018.

Continued Solid Loan and Core Deposit Growth for Q4 and Fiscal Year 2017

  • Total assets were $550 million at December 31, 2017
  • Loans increased $25 million or 6% to $444 Million at December 31, 2017
    • Increased $9 Million or 2% during Q4 2017
  • Core Deposits increased $24 million or 6% to $436 Million at December 31, 2017
  • Strong core deposit growth resulted in wholesale funding decrease and a 5-basis point improvement in cost of funds for 2017

Operating Performance Highlights   

  • Core revenues for Q4 of $6.1 million in 2017, up 6% or $341,000 over Q4 2016
  • YTD core revenue of $23.9 million, an increase of $1.9 Million or 8% over 2016
  • Net income attributable to HomeTown Bankshares of $380,000 for Q4 2017 vs. $591,000 for Q4 2016 due to certain non-recurring expenses
  • YTD Earnings available to common shareholders of $2.50 million in 2017 vs. $2.11 million in 2016 after a $408,000 preferred stock dividend in 2016 and certain non-recurring expenses in 2017
  • EPS on a fully diluted basis of $0.07 for Q4 2017 and $0.43 for 2017 fiscal year vs. $0.10 and $0.37, respectively, in 2016

Credit Quality Improved and Remains Sound

  • Non-performing assets improved to 0.80% of total assets at December 31, 2017 vs. 0.91% at December 31, 2016
  • OREO balances of $3.2 million at December 31, 2017 were $545 thousand or 14% less than December 31, 2016
  • Past due accruing loans amounted to 0.67% of total loans at December 31, 2017 vs. 0.29% at December 31, 2016, while non-accruals increased slightly to 0.26% in 2017 vs. 0.22% in 2016
  • Net charge-offs were 0.24% for the 2017 fiscal year compared to 0.19% in 2016

Well Capitalized with Solid Capital Ratios

  • Common Equity Tier 1 Capital amounted to 11.7% at December 31, 2017
  • Total Risk-Based Capital amounted to 12.5% at December 31, 2017
  • Tier 1 Risk-Based Capital amounted to 11.7% at December 31, 2017
  • Tier 1 Leverage Ratio amounted to 10.4% at December 31, 2017

ROANOKE, Va., Feb. 16, 2018 (GLOBE NEWSWIRE) -- HomeTown Bankshares Corporation, (NASDAQ:HMTA), the parent company of HomeTown Bank, grew assets $33 million in 2017 to $550 million at December 31, 2017 with solid growth in both loans and core deposits.  The Company reported net income available to common shareholders of $380,000 for the fourth quarter ended December 31, 2017 vs. $591,000 for the fourth quarter of 2016.  Net Income available to common shareholders for the 2017 fiscal year was $2.5 million vs. $2.1 million for the 2016 fiscal year after a $408,000 preferred stock dividend. Earnings per share on a fully diluted basis were $0.07 for the fourth quarter of 2017 and $0.43 per share for the fiscal year ended December 31, 2017 vs. $0.10 and $0.37 per share, respectively, for similar periods in 2016. 

Profitability in 2017 was impacted due predominantly to non-recurring expenses from the successful completion of a core conversion during the third quarter of 2017 as well as professional fees related to the outsourcing of internal audit activities prior to bringing this function in-house. Income tax expense for 2017 included an adjustment to net deferred tax assets in the amount of $100,000, as a result of the enactment of the Tax Cuts and Jobs Act on December 22, 2017.  The Act reduced the corporate Federal tax rate from 34% to 21% effective January 1, 2018 and will benefit future years. 

"2017 was a year of transition for HomeTown Bank with a major conversion to a new core processor, the continued reduction in our OREO portfolio and a charge to earnings due to the Tax Cuts and Jobs Act at year end," said Susan Still, President and CEO.  "In spite of these adjustments, our core banking business was solid with an 8% increase in core revenues, 6% increase in loans, and core deposit growth of 6% for the year."

Record core revenue of $23.9 million was realized for the year ended December 31, 2017, up $1.9 million or 8% over 2016, which included $6.1 million in core revenues realized during the fourth quarter of 2017 - 6% higher than 2016. Higher core revenues were generated from commercial lines and loans, commercial real estate loans, personal lines and loans, private banking loans as well as non-interest income from treasury and merchant services, mortgages and brokerage services.

Net Interest Income
Net interest income in the fourth quarter 2017 increased $323,000 to $4.5 million from the fourth quarter of 2016 with a $1.5 million increase or 9% to $17.6 million for the 2017 fiscal year vs. $16.2 million earned for the 2016 fiscal year.  Higher loan volume helped to offset the income from maturing, higher rate loans and the competitive interest rate environment that continued during 2017. The more competitive marketplace ultimately led to an 8 basis point decline in the net interest margin during 2017 in spite of a 5 basis point improvement in the cost of funds.

Noninterest Income
Noninterest income, net of security gains, increased slightly to $787,000 in the fourth quarter of 2017 while core noninterest income of $3.2 million was realized for the fiscal year 2017, up 13% from $2.8 million realized for 2016.  The primary increase for 2017 was continued, double-digit growth in ATM and interchange income, mortgage income, and merchant services income.

Noninterest Expense
Noninterest expense increased only slightly in the fourth quarter 2017 vs. Q4 of 2016 while noninterest expense during the 2017 fiscal year increased 13% compared to 2016 due primarily to the core conversion, increased operations staffing and data processing costs to support the transition as well as costs associated with additional consulting fees and OREO write-downs for the 2017 fiscal year. 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 of a new Chief Risk Officer.  We anticipate a return to normal overhead and a favorable comparison to peers and core operating costs during 2018.

Total loans were $444 million at December 31, 2017, up $9 million or 2% for the fourth quarter of 2017 and up $25 million or 6% over the prior year ended December 31, 2016.  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 the 2017 fiscal year was up $24 million and was 6% over the 2016 fiscal year. Solid core deposit growth was achieved in 2017 by continued growth in new banking relationships as well as growth in existing commercial and consumer accounts.  Conversely, increased liquidity from strong core deposit growth resulted in a 45% reduction in wholesale funding and the associated interest expense.

Capital levels remained sound during 2017 with total stockholders' equity increasing $2.7 million through December 31, 2017.  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 10.4%, respectively. All ratios continue to exceed the current regulatory standards for well-capitalized institutions.  Book value per common share amounted to $8.72 at December 31, 2017 vs. $8.30 at December 31, 2016.

Credit Quality
Credit quality remained sound thru December 31, 2017 with a slight increase in the provision for loan losses to $1.14 million vs. $1.08 million in 2016. The increased provision was a result of a combination of increased charge-offs and additional provision from increased loan production.

Nonperforming Assets
OREO balances continued to decrease during 2017 – down $545,000 or 14%. Non-performing assets, excluding performing restructured loans, improved to 0.80% of total assets at December 31, 2017 vs. 0.91% at December 31, 2016.  Non-performing assets, including restructured loans, also improved from 2.10% of total assets at December 31, 2016 to 1.51% at December 31, 2017. 

Past Due and Nonaccrual Loans
Past due accruing loans amounted to 0.67% of total loans at December 31, 2017 vs. 0.29% in 2017 while nonaccruals amounted to 0.26% of total loans at December 31, 2017 vs. 0.22% of total loans at December 31, 2016. 

Allowance for Loan Losses
The allowance for loan losses totaled $3.8 million at December 31, 2017 compared to $3.6 million at December 31, 2016.  Provisions for credit losses were $1.14 million for the fiscal year 2017 vs. $1.08 million for 2016 due to solid loan growth as well as charge-offs during the fiscal year.

"Solid balance sheet growth in both loans and core deposits as well as continued double-digit growth in core non-interest income resulted in record core revenues during 2017," said Still.  "Our credit quality is sound and we remain well-capitalized," continued Still. "Our brand recognition is strong as evidenced by our growth and we continue to benefit from being the largest bank headquartered in the Roanoke Valley," she said.

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 ending December 31, 2017)

HomeTown Bankshares Corporation 
Consolidated Condensed Balance Sheets
December 31, 2017; and December 31, 2016
   December 31
   December 31
In Thousands  2017     2016 
Assets  (Unaudited)
Cash and due from banks $ 21,714     $ 18,229  
Federal funds sold   180       42  
Securities available for sale, at fair value   55,344       52,975  
Restricted equity securities, at cost   2,371       2,213  
Loans held for sale   1,587       678  
Total loans   444,195       418,991  
Allowance for loan losses     (3,758 )     (3,636 )
Net loans   440,437       415,355  
Property and equipment, net   12,937       13,371  
Other real estate owned   3,249       3,794  
Other assets   12,434       10,633  
Total assets $ 550,253     $ 517,290  
Liabilities and Stockholders' Equity          
Noninterest-bearing $ 106,956     $ 91,354  
Interest-bearing   370,364       359,494  
Total deposits   477,320       450,848  
Federal Home Loan Bank borrowings   11,028       8,000  
Subordinated notes   7,254       7,224  
Other borrowings   1,558       1,117  
Other liabilities   2,201       1,876  
Total liabilities   499,361       469,065  
Stockholders' Equity:          
Common stock   28,777       28,765  
Surplus   17,980       17,833  
Retained surplus   3,767       1,247  
Accumulated other comprehensive income   (141 )     (56 )
Total HomeTown Bankshares Corporation stockholders' equity   50,383       47,789  
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