8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

Date of Report: October 25, 2013

HOMETOWN BANKSHARES CORPORATION

(Exact name of registrant as specified in its charter)

Virginia	333-158525	26-4549960
(State or other jurisdiction of incorporation)	(Commission File Number)	(I.R.S. Employer Identification No.)
202 S. Jefferson Street Roanoke, Virginia		24011
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: (540) 345-6000

Not Applicable

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 2.02. Results of Operations and Financial Condition.

HomeTown Bankshares Corporation (the “Company”), the holding company for Roanoke, Virginia based HomeTown Bank, announced on October 25, 2013 its financial results for the three months and nine months ended September 30, 2013. The financial results are detailed in the Company’s Press Release dated October 25, 2013, which is attached as Exhibit 99.1 to this Form 8-K.

The information in this Item 2.02, including Exhibit 99.1 to this Current Report, shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section or Sections 11 and 12(a)(2) of the Securities Act of 1933, as amended. The information contained in this Item 2.02 and in the accompanying Exhibit 99.1 shall not be incorporated by reference into any registration statement or other document filed by the Company with the Securities and Exchange Commission, whether made before or after the date of this Current Report, regardless of any general incorporation language in such filing (or any reference to this Current Report generally), except as shall be expressly set forth by specific reference in such filing.

Item 8.01 Other Events

On October 24, 2013, HomeTown Bankshares Corporation (the Company) declared a 6% quarterly dividend on its Series C Non-Cumulative Perpetual Convertible Preferred Stock, payable December 15, 2013 to shareholders of record on November 30, 2013.

Item 9.01 Financial Statements and Exhibits.

(c) Exhibits

Exhibit No.	Description
99.1	Press Release

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	HOMETOWN BANKSHARES CORPORATION
Date: October 25, 2013	By:	/s/ Charles W. Maness, Jr.
		Charles W. Maness, Jr.,
		Executive Vice President and Chief Financial Officer

EXHIBIT INDEX

Exhibit No.	Description
99.1	Press Release

EX-99

Exhibit 99.1

News Release

FOR IMMEDIATE RELEASE

For more information contact:

Susan K. Still, President and CEO, (540) 278-1705

Charles W. Maness, Jr., Executive Vice President & CFO, (540) 278-1702

HomeTown Bankshares Corporation Reports Record Earnings through the Third Quarter of 2013

Roanoke, VA (October 25, 2013) – HomeTown Bankshares Corporation, the parent company of HomeTown Bank, generated record earnings for the third quarter ended September 30, 2013 contributing to a 74% increase in earnings from operations for the first nine months of 2013.

A net profit of $772,000 or $0.09 per diluted common share was realized for the third quarter of 2013 compared to a net profit of $584,000 or $0.13 per diluted common share for the third quarter of 2012. Net income for the first nine months of 2013 grew 74% to $1.94 million or $0.33 per diluted common share vs. net income of $1.11 million or $0.20 per diluted common share earned during the first nine months of 2012. For comparison purposes, the 2012 results exclude the one-time deferred tax benefit of $2.93 million realized on January 1, 2012. Deferred tax assets represent future potential tax deductions that result from timing differences between tax laws and generally accepted accounting principles (GAAP). The recognition of deferred tax assets added $.90 per share for total earnings of $1.10 per common share for the nine months ended September 30, 2012.

Non-interest income increased to $318,000 in the 3rd quarter of 2013 and $1.09 million for the nine months ended September 30, 2013 vs. $311,000 and $979,000, respectively, during the same periods of 2012. The primary growth in non-interest income was from revenue generated from a significant increase in core checking account growth during 2013. This growth in revenue was reduced somewhat by a decrease in mortgage income during the third quarter and year-to-date – a nationwide trend due to an uptick in interest rates during the quarter and a corresponding drop in the mortgage refinancing business.

“We are very pleased with the strong growth in our earnings for the first nine months of 2013, stated Susan Still, President and CEO. In spite of a sluggish economic recovery, we have grown our loan portfolio very competitively during the year and maintained a strong net interest margin during a protracted period of low interest rates,” she continued. “In addition, a meaningful reduction in our loan loss provision due to stronger loan quality also contributed to core earnings growth during 2013,” stated Still.

Balance Sheet

Total assets grew to $385.1 million at September 30, 2013 from $370.5 million at December 31, 2012. Loan growth continued to improve during the first nine months of 2013, increasing from $274.9 million at December 31, 2012 to $287.3 million at September 30, 2013. Total Deposits also grew during the same period from $310.0 million at December 31, 2012 to $325.4 million at September 30, 2013. Total non-interest bearing deposits increased 33% from $32.6 million to $43.4 million during the first nine months of 2013 while higher cost interest bearing deposits increased from $277.4 million to $282.0 million. Strong checking account growth and lower cost funding were major contributors to the improved earnings and net interest margin for the first nine months of 2013.

With the Company’s $14 million capital raise that closed on June 28, 2013, $10.4 million of the proceeds were used to repay TARP in full during the 3^rd quarter of 2013. The capital ratios improved, accordingly, and remained well above regulatory standards for well-capitalized banks through September 30, 2013.

Asset Quality

Loan quality continued to improve significantly during the first nine months of 2013 with the level of nonperforming loans dropping from $1.09 million or 0.41% of Total Loans at September 30, 2012 to $801,000 or 0.28% of Total Loans at September 30, 2013. Other Real Estate Owned (OREO) also decreased 17% or $1.7 million from $10.1 million at September 30, 2012 to $8.4 million at September 30, 2013. Nonperforming assets, including OREO, to total assets improved from 3.03% at September 30, 2012 to 2.39% at September 30, 2013.

In addition, net charge-offs thru September 30, 2013 dropped over 80% to $231,000 or 0.09% of Total Loans from $1.5 million or .56% of Total Loans during the first nine months of 2012. The Company’s Allowance for Loan Losses dropped accordingly at September 30, 2013 and totaled $3.68 million or 1.28% of Total Loans vs. $3.9 million and 1.46% of Total Loans at September 30, 2012.

“Strong progress has been made in improving and stabilizing our asset quality,” stated Still. “With a significant reduction in non-performing loans during the first nine months of 2013, our continued emphasis will be on prudently reducing the level of bank owned real estate,” she continued.

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 the Roanoke and New River Valleys and Smith Mountain Lake through five branches and a loan production office. A high level of responsive and professional service coupled with local decision-making is the hallmark of its banking strategy.

* * *

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, 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 September 30, 2013)

HOMETOWN BANKSHARES CORPORATION

Condensed Consolidated Balance Sheets

September 30, 2013 and December 31, 2012

In Thousands, Except Share and Per Share Data	September 30, 2013			December 31, 2012
	(Unaudited)
Assets
Cash and due from banks	$	14,464		$	9,812
Federal funds sold		1,420			196
Securities available for sale, at fair value		59,609			63,466
Restricted equity securities, at cost		2,414			2,591
Loans, net of allowance for loan losses of $3,684 in 2013 and $3,790 in 2012		283,640			271,147
Property and equipment, net		11,371			9,754
Other real estate owned, net		8,400			8,938
Other assets		3,734			4,547
Total assets	$	385,052		$	370,451
Liabilities and Stockholders’ Equity
Deposits:
Noninterest-bearing	$	43,363		$	32,627
Interest-bearing		282,005			277,370
Total deposits		325,368			309,997
Short term borrowings		522			216
Federal Home Loan Bank borrowings		19,000			22,000
Other liabilities		924			1,519
Total liabilities		345,814			333,732
Stockholders’ Equity:
Preferred stock		13,300			10,232
Common stock		16,351			16,167
Surplus		15,330			15,487
Retained deficit		(5,427	)		(6,587	)
Accumulated other comprehensive (loss) income		(316	)		1,420
Total stockholders’ equity		39,238			36,719
Total liabilities and stockholders’ equity	$	385,052		$	370,451

HOMETOWN BANKSHARES CORPORATION

Condensed Consolidated Statements of Income

For the Three and Nine Months Ended September 30, 2013 and 2012             

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
In Thousands, Except Share and Per Share Data	2013		2012		2013		2012
Interest income:	(Unaudited)		(Unaudited)		(Unaudited)		(Unaudited)
Loans and fees on loans	$	3,637	$	3,471	$	10,687	$	10,280
Taxable investment securities		288		371		979		1,282
Nontaxable investment securities		58		18		121		30
Other interest income		37		36		106		102
Total interest income		4,020		3,896		11,893		11,694
Interest expense:
Deposits		459		558		1,402		1,779
Preferred stock dividends		-		-		-		38
Other borrowed funds		94		94		281		306
Total interest expense		553		652		1,683		2,123
Net interest income		3,467		3,244		10,210		9,571
Provision for loan losses		-		130		125		1,408
Net interest income after provision for loan losses		3,467		3,114		10,085		8,163
Noninterest income:
Service charges on deposit accounts		77		68		227		206
ATM and interchange income		80		55		233		165
Mortgage loan brokerage fees		62		110		225		262
Gains on sales of investment securities		8		-		116		127
Other income		91		78		287		219
Total noninterest income		318		311		1,088		979
Noninterest expense:
Salaries and employee benefits		1,355		1,264		4,072		3,629
Occupancy and equipment expense		331		307		972		942
Advertising and marketing expense		99		100		364		297
Professional fees		58		77		355		271
Loss on sales and writedowns of other real estate owned		-		111		351		146
Other real estate owned expense		91		72		192		249
Other expense		703		618		1,970		1,935
Total noninterest expense		2,637		2,549		8,276		7,469
Net income before income taxes		1,148		876		2,897		1,673
Income tax expense (benefit)		376		292		958		(2,366	)
Net income		772		584		1,939		4,039
Dividends declared on preferred stock		372		133		639		400
Accretion of discount on preferred stock		102		19		142		56
Net income available to common shareholders	$	298	$	432	$	1,158	$	3,583
Basic earnings per common share	$	0.09	$	0.13	$	0.35	$	1.10
Diluted earnings per common share	$	0.09	$	0.13	$	0.33	$	1.10
Weighted average common shares outstanding		3,270,299		3,262,518		3,268,646		3,258,385
Diluted average common shares outstanding		5,510,299		3,262,518		4,048,133		3,258,385

HOMETOWN BANKSHARES CORPORATION
Financial Highlights		Three			Three			Nine			Nine
(Unaudited)		Months			Months			Months			Months
		Ended Sep. 30 2013			Ended Sep. 30 2012			Ended Sep. 30 2013			Ended Sep. 30 2012
PER COMMON SHARE
Earnings per share, basic	$	0.09		$	0.13		$	0.35		$	1.10
Earnings per share, diluted	$	0.09		$	0.13		$	0.33		$	1.10
Book value							$	7.93		$	8.00
FINANCIAL RATIOS
Return on average assets		0.78	%		0.63	%		0.68	%		1.47	%
Return on average shareholders' equity		6.27	%		6.64	%		6.28	%		15.60	%
Net interest margin (tax equivalent)		3.91	%		3.80	%		3.91	%		3.81	%
Efficiency		67.38	%		66.59	%		69.16	%		67.88	%
Net charge-offs (recoveries) to average loans (annualized)		(0.03	)%		0.37	%		0.11	%		0.77	%
Loans to deposits								88.31	%		85.61	%
ALLOWANCE FOR LOAN LOSSES (in thousands)
Beginning balance	$	3,660		$	4,019		$	3,790		$	3,979
Provision for loan losses		-			130			125			1,408
Charge-offs		(1	)		(248	)		(564	)		(1,487	)
Recoveries		25			-			333			1
Ending balance	$	3,684		$	3,901		$	3,684		$	3,901
ASSET QUALITY RATIOS
Nonperforming assets to total assets								2.39	%		3.03	%
Nonperforming loans to total loans								0.28	%		0.41	%
Allowance for loan losses to total loans								1.28	%		1.46	%
Allowance for loan losses to nonaccrual loans								459.8	%		356.4	%
COMPOSITION OF RISK ASSETS (in thousands)
Nonperforming assets:
90 days past due and accruing							$	-		$	-
Nonaccrual loans								801			1,094
Other real estate owned								8,400			10,090
Total nonperforming assets							$	9,201		$	11,184
Performing restructured loans							$	6,309		$	6,362
Non-performing restructured loans included in nonaccrual loans above								39			202
Total restructured loans							$	6,348		$	6,564