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: July 24, 2014
HOMETOWN BANKSHARES CORPORATION
(Exact name of registrant as specified in its charter)
Virginia |
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333-158525 |
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26-4549960 |
(State or other jurisdiction of incorporation) |
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(Commission File Number) |
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(I.R.S. Employer Identification No.) |
202 S. Jefferson Street Roanoke, Virginia |
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24011 | ||
(Address of principal executive offices) |
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(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 parent company for Roanoke, Virginia based HomeTown Bank, announced on July 24, 2014 its financial results for the three months and six months ended June 30, 2014. The financial results are detailed in the Company’s Press Release dated July 24, 2014, 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 July 24, 2014, HomeTown Bankshares Corporation declared a 6% per annum quarterly dividend on its Series C Non-Cumulative Perpetual Convertible Preferred Stock, payable September 15, 2014 to shareholders of record on August 31, 2014.
Item 9.01. |
Financial Statements and Exhibits. |
(c) Exhibits
Exhibit |
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Description |
99.1 |
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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.
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HOMETOWN BANKSHARES CORPORATION | ||
Date: July 24, 2014 |
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By: |
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/s/ Charles W. Maness, Jr. |
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Charles W. Maness, Jr., | ||
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Executive Vice President and Chief Financial Officer |
EXHIBIT INDEX
Exhibit |
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Description |
99.1 |
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Press Release |
Exhibit 99.1
Thursday, July 24, 2014
HomeTown Bankshares Corporation Reports Record Operating Performance
YTD Earnings up 40% over 2013
● |
Continued Strong Operating Performance |
o |
Net Income of $833,000, up 30% from second quarter 2013 |
o |
EPS of $0.15 for the second quarter of 2014 and 2013 in spite of over 2.2 million in additional common shares outstanding |
o |
YTD Earnings of $1.64 million, up 40% from 2013 |
o |
Second quarter revenue of $4.7 million, up $256,000 over first quarter 2013 |
o |
YTD revenue of $9.1 million, up $465,000 or 5% increase over 2013 |
o |
Noninterest Income up 20% over prior quarter and 9% over prior year |
o |
Noninterest Expense thru second quarter down 3% over prior year 2013 |
● |
Strong Loan and Deposit Growth |
o |
Loans of $318 Million at June 30, 2014 |
■ |
Up $20.0 million or 7% for the first half of 2014, and |
■ |
Up $35.3 million or 13% since June 30, 2013 |
o |
Total Deposits of $348 Million at June 30, 2014 |
■ |
Increased $8.7 million or 3% for the first half of 2014 |
■ |
Increased $26.7 million or 8% since June 30, 2013 |
● |
Credit Quality Remains Strong |
o |
YTD net charge-offs of $307,000 remained low at .20% of total loans compared to .18% of total loans for 2013 |
o |
Non-performing assets were 2.36% of total assets at June 30, 2014 vs. 2.47% at June 30, 2013 |
o |
Nonaccrual loans increased to .77% of total loans at June 30, 2014 from .43% of total loans at June 30, 2013 |
o |
Past due accruing loans were at historical lows of 0.16% of total loans at June 30, 2014 vs. 0.32% at June 30, 2013 |
● |
Well Capitalized with Solid Capital Ratios |
o |
Excellent deployment of $14 million in capital raised to repay TARP and support new loan growth |
o |
Total Risk-Based Capital amounted to 13.7% at June 30, 2014 |
o |
Tier 1 Risk-Based Capital amounted to 12.6% at June 30, 2014 |
o |
Tier 1 Leverage Ratio increased to 10.1% |
o |
Return on Assets (ROA) of 0.81% for first six months vs. 0.62% for 2013 |
o |
Return on Equity (ROE) of 8.08% for first six month vs. 6.29% for 2013 |
o |
Efficiency Ratio of 67.33% for the first six months vs. 70.06% for 2013 |
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 and CFO, 540-278-1702
HomeTown Bankshares Reports Record Operating Performance
Year-to-Date Net Income Up 40% Over 2013
ROANOKE, Va., July 24, 2014 - HomeTown Bankshares Corporation (the "Company"), the parent company of HomeTown Bank, reported record earnings of $833,000 for the second quarter ended June 30, 2014, a 30% or $191,000 increase over the $642,000 in net income reported for the comparative period in 2013. Net Income for the first six months of 2014 was $1.64 million, up 40% or $469,000 increase over the first six months of 2013.
Net income of $623,000, or $0.15 per diluted common share, for the second quarter ended June 30, 2014 was realized, up from $488,000, or $0.15 per share, for the second quarter of 2013. For the first six months of 2014, net income was $1.22 million, or $0.30 per share, up from $860,000, or $0.26 per share, for the same period of 2013.
“Our results reflect the continued, strong growth in our customer base during the first half of 2014 and our ongoing commitment to deliver an increased return for our shareholders, said President & CEO Susan Still. “Our double-digit annualized growth in both loans and new deposit relationships are also representative of our continued success in the markets we serve. We are very pleased with our ability to effectively deploy the capital raised a year ago, and we remain optimistic about our continued ability to strongly grow market share and profitability and meet the financial needs of our customers.”
In addition to strong loan and deposit growth, other key drivers in earnings growth in the second quarter and the first half of 2014 were a strong net interest margin, double-digit, annualized growth in non-interest income, a reduction in non-interest expense as well as continued improvement in credit quality.
Revenue
Total revenue was $4.68 million for the second quarter, up $256,000 from $4.43 million in the first quarter 2014 which reflected increases in both net interest income and non-interest income. Growth in commercial lines and loans, commercial real estate loans, personal lines and loans, merchant services, title insurance and retail brokerage contributed to the increase in total revenue.
Net Interest Income
Net interest income in the second quarter 2014 increased $77,000 to $3.64 million from the first quarter of 2014, and up $188,000 from $3.56 million earned for the comparative 2013 second quarter. The net interest margin experienced a 7 basis point decline to 3.86% for the 2014 second quarter, down from the 3.93% for the second quarter of 2013; however, the net interest margin was up 2 basis points to 3.92% for the first six months of 2014 vs. 3.90% for comparable 2013. Lower funding costs were partially offset by a decline in market interest rates that resulted in lower yields in the Company’s loan portfolio. We will continue to grow our lower cost core deposits while taking steps to protect our balance sheet from exposure to lower loan and investment rates and preserve our strong net interest margin during the remainder of 2014.
Noninterest Income
Noninterest income excluding securities gains increased to $398,000 in the second quarter 2014, up 20% from the prior quarter with noninterest income of $839,000 for the first half of 2014, up 9% from $770,000 realized for the second half of 2013. The primary increase for 2014 was a 32% increase in service charges on deposit accounts, ATM and interchange income which offset a decline in mortgage loan brokerage fees. Other contributors to the increase in noninterest income were retail brokerage, title insurance and merchant income.
Noninterest Expense
Noninterest expense increased $140,000 in the second quarter 2014 from the prior quarter due to higher revenue-based incentive, annual merit increases and the impact of an additional day during the quarter. However, noninterest expense declined in the second quarter of 2014 and the six months ended June 30, 2014 compared to 2013 due to deferred compensation costs associated with the increase in loan volume. The efficiency ratio was 67.9% for the second quarter 2014 vs. 66.97% for 2013 while the year-to-date efficiency ratio improved to 67.33% for the six months ended June 30, 2014 vs. 70.06% during the first half of 2013.
Loans
Total loans were $318.0 million at June 30, 2014, up $6.2 million from the prior quarter, up 13.5% on an annualized basis for the first six months and up 12.5% over the prior year. Loan growth was driven by commercial real estate, commercial and industrial lines and term loans as well as consumer lines and loans.
Deposits
Total average deposits for the second quarter 2014 were up $715,000 to $346.0 million from the prior quarter. Total deposits increased $8.7 million at June 30, 2014, up 5.1% on an annualized basis for the first six months of 2014 and up 8.3% over the prior year. Deposit growth was achieved by solid commercial and consumer growth during 2014. The average deposit cost for the second quarter was 51 basis points, which improved 1 basis point in the second quarter 2014 over the prior quarter and 2 basis points for the first six months 2014 with a 7 basis point improvement from a year ago. Year-to-date deposit account openings increased 55% for the first half of 2013 and are up 122% thus far in 2014.
Capital
Capital levels remained strong in the second quarter, with total stockholders’ equity increasing $896,000 from the prior quarter. Total risk-based capital, Tier 1 risk-based capital and Tier 1 leverage ratios were 13.7%, 12.6% and 10.1%, respectively. All ratios continue to exceed the current regulatory standards for well-capitalized institutions. Book value per common share increased to $8.60 at June 30, 2014, up from $8.32 at March 31, 2014 and $7.93 at June 30, 2013.
Credit Quality
Credit quality continued to improve overall during the second quarter. Non-performing assets amounted to 2.36% of total assets at June 30, 2014, down from 2.47% at June 30, 2013. Non-performing assets, including restructured loans, were also down from 4.08% of total assets at June 30, 2013 to 3.83% at June 30, 2014. Net charge-offs increased during the second quarter from the prior quarter but remained at historically low levels for the first half of 2014 ending June 30, 2014.
Net Loan Charge-Offs
Net loan charge-offs were $307,000, or 0.20% (annualized) for the first six months ended June 30, 2014 with $-0- in net loan charge-offs in the first quarter of 2014.
Nonperforming Assets
During the second quarter of 2014, non-performing assets increased $1.72 million over the prior quarter due to two previously classified loan reaching non-accrual status. At June 30, 2014, non-performing assets increased $173,000 to $9.84 million from $9.34 million the prior year. Foreclosed assets increased $219,000 during the second quarter but decreased $1.05 million to $7.39 million at June 30, 2014 from $8.44 million at June 30, 2013.
Past Due and Nonaccrual Loans
Total past due and non-accrual loans were $2.97 million or 0.93% of total loans at June 30, 2014, down from $3.43 million or 1.10% the prior quarter. Past due accruing loans decreased $1.95 million to $523,800 at June 30, 2014 or 0.16% of total loans. Nonaccruals increased $1.49 million to $2.44 million or 0.77% of total loans during the second quarter of 2014 from $937,000 or .31% the prior quarter and $1,223,700 or 0.43% of total loans at June 30, 2013.
Allowance for Loan Losses
The allowance for loan losses totaled $3.62 million at June 30, 2014 compared to $3.79 million at March 31, 2014. The allowance coverage to total loans was 1.14% vs. 1.22% at March 31, 2014. The allowance covered 5.9 times annualized net charge-offs for the first half of 2014, compared with 7.2 times annualized net charge-offs for the first half of 2013. Provisions for credit losses were $202,000 for the first half of 2014 vs. $125,000 for the first half of 2013 due primarily to the strong loan growth realized in 2014.
Key Performance Ratios
The key performance ratios are the return on average assets (ROA), the return on average equity (ROE) and the efficiency ratio. The ROA improved to 0.81% for the second quarter and the first half of 2014, up from 0.67% for the second quarter and 0.62% for the first half of 2013. The ROE improved as well and increased to 8.07% for the second quarter and 8.08% for the first half of 2014 compared to 6.82% and 6.29%, respectively, for comparable periods in 2013. The efficiency ratio, which measures the proportion of net operating revenues that are absorbed by overhead expenses, improved as well in 2014 and amounted to 67.90% for the second quarter and 67.33% for the first half of 2014 vs. 66.97% and 70.06%, respectively, for the comparable periods of 2013.
* * *
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 June 30, 2014)
HomeTown Bankshares Corporation |
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Consolidated Condensed Balance Sheets |
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June 30, 2014, December 31, 2013 |
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and June 30, 2013 |
June 30, |
December 31, |
June 30, |
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In Thousands, Except Share and Per Share Data |
2014 |
2013 |
2013 |
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(Unaudited) |
(Unaudited) |
|||||||||||
Assets | ||||||||||||
Cash and due from banks |
$ | 17,112 | $ | 19,537 | $ | 27,665 | ||||||
Federal funds sold |
495 | 738 | 56 | |||||||||
Securities available for sale, at fair value |
56,022 | 57,922 | 59,406 | |||||||||
Restricted equity securities, at cost |
2,718 | 2,564 | 2,386 | |||||||||
Loans held for sale |
162 | - | - | |||||||||
Total loans |
317,968 | 297,933 | 282,650 | |||||||||
Allowance for loan losses |
(3,616 | ) | (3,721 | ) | (3,660 | ) | ||||||
Net loans |
314,352 | 294,212 | 278,990 | |||||||||
Property and equipment, net |
12,799 | 12,155 | 10,756 | |||||||||
Other real estate owned |
7,394 | 8,143 | 8,440 | |||||||||
Other assets |
6,307 | 7,166 | 4,162 | |||||||||
Total assets |
$ | 417,361 | $ | 402,437 | $ | 391,861 | ||||||
Liabilities and Stockholders’ Equity |
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Deposits: |
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Noninterest-bearing |
$ | 43,300 | $ | 46,232 | $ | 35,725 | ||||||
Interest-bearing |
305,133 | 293,538 | 285,960 | |||||||||
Total deposits |
348,433 | 339,770 | 321,685 | |||||||||
Short term borrowings |
573 | 258 | 361 | |||||||||
Federal Home Loan Bank borrowings |
26,000 | 22,000 | 19,000 | |||||||||
Other liabilities |
800 | 871 | 1,321 | |||||||||
Total liabilities |
375,806 | 362,899 | 342,367 | |||||||||
Stockholders’ Equity: |
||||||||||||
Preferred stock |
13,293 | 13,293 | 23,572 | |||||||||
Common stock |
16,438 | 16,351 | 16,351 | |||||||||
Surplus |
15,278 | 15,339 | 15,320 | |||||||||
Retained deficit |
(3,630 | ) | (4,846 | ) | (5,727 | ) | ||||||
Accumulated other comprehensive (loss) income |
176 | (599 | ) | (22 | ) | |||||||
Total stockholders’ equity |
41,555 | 39,538 | 49,494 | |||||||||
Total liabilities and stockholders’ equity |
$ | 417,361 | $ | 402,437 | $ | 391,861 |
HomeTown Bankshares Corporation |
Consolidated Condensed Statements of Income |
For the Three Months and Six Months Ended June 30, 2014 and 2013 |
For the Three Months |
For the Six Months |
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Ended June 30, |
Ended June 30, |
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In Thousands, Except Share and Per Share Data |
2014 |
2013 |
2014 |
2013 |
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(Unaudited) |
(Unaudited) |
(Unaudited) |
(Unaudited) |
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Interest income: |
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Loans and fees on loans |
$ | 3,774 | $ | 3,575 | $ | 7,469 | $ | 7,050 | ||||||||
Taxable investment securities |
267 | 359 | 530 | 691 | ||||||||||||
Nontaxable investment securities |
93 | 40 | 187 | 63 | ||||||||||||
Other interest income |
42 | 34 | 83 | 69 | ||||||||||||
Total interest income |
4,176 | 4,008 | 8,269 | 7,873 | ||||||||||||
Interest expense: |
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Deposits |
442 | 467 | 882 | 943 | ||||||||||||
Other borrowed funds |
98 | 93 | 192 | 187 | ||||||||||||
Total interest expense |
540 | 560 | 1,074 | 1,130 | ||||||||||||
Net interest income |
3,636 | 3,448 | 7,195 | 6,743 | ||||||||||||
Provision for loan losses |
132 | - | 202 | 125 | ||||||||||||
Net interest income after provision for loan losses |
3,504 | 3,448 | 6,993 | 6,618 | ||||||||||||
Noninterest income: |
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Service charges on deposit accounts |
117 | 82 | 208 | 150 | ||||||||||||
ATM and interchange income |
109 | 84 | 203 | 161 | ||||||||||||
Mortgage loan brokerage fees |
17 | 83 | 47 | 163 | ||||||||||||
Gains on sales of investment securities |
108 | 106 | 108 | 108 | ||||||||||||
Other income |
155 | 98 | 273 | 188 | ||||||||||||
Total noninterest income |
506 | 453 | 839 | 770 | ||||||||||||
Noninterest expense: |
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Salaries and employee benefits |
1,381 | 1,341 | 2,793 | 2,717 | ||||||||||||
Occupancy and equipment expense |
364 | 321 | 730 | 641 | ||||||||||||
Advertising and marketing expense |
132 | 125 | 235 | 265 | ||||||||||||
Professional fees |
114 | 161 | 187 | 297 | ||||||||||||
(Gains), losses on sales, writedowns of |
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other real estate owned, net |
- | 349 | (5 | ) | 351 | |||||||||||
Other real estate owned expense |
59 | 49 | 123 | 101 | ||||||||||||
Other expense |
747 | 593 | 1,391 | 1,267 | ||||||||||||
Total noninterest expense |
2,797 | 2,939 | 5,454 | 5,639 | ||||||||||||
Net income before income taxes |
1,213 | 962 | 2,378 | 1,749 | ||||||||||||
Income tax expense |
380 | 320 | 742 | 582 | ||||||||||||
Net income |
833 | 642 | 1,636 | 1,167 | ||||||||||||
Effective dividends on preferred stock |
210 | 134 | 420 | 267 | ||||||||||||
Accretion of discount on preferred stock |
- | 20 | - | 40 | ||||||||||||
Net income available to common stockholders |
$ | 623 | $ | 488 | $ | 1,216 | $ | 860 | ||||||||
Basic earnings per common share |
$ | 0.19 | $ | 0.15 | $ | 0.37 | $ | 0.26 | ||||||||
Diluted earnings per common share |
$ | 0.15 | $ | 0.15 | $ | 0.30 | $ | 0.26 | ||||||||
Weighted average common shares outstanding |
3,287,567 | 3,270,299 | 3,282,129 | 3,267,806 | ||||||||||||
Diluted average common shares outstanding |
5,527,567 | 3,344,145 | 5,522,129 | 3,304,933 |
HomeTown Bankshares Corporation |
Three |
Three |
Six |
Six |
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Financial Highlights |
Months |
Months |
Months |
Months |
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(Unaudited) |
Ended |
Ended |
Ended |
Ended |
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June 30 |
June 30 |
June 30 |
June 30 |
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2014 |
2013 |
2014 |
2013 |
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PER SHARE INFORMATION |
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Book value |
$ | 8.60 | $ | 7.93 | $ | 8.60 | $ | 7.93 | ||||||||||
Earnings per share, basic |
$ | 0.19 | $ | 0.15 | $ | 0.37 | $ | 0.26 | ||||||||||
Earnings per share, diluted |
$ | 0.15 | $ | 0.15 | $ | 0.30 | $ | 0.26 | ||||||||||
PROFITABILITY |
||||||||||||||||||
Return on average assets |
0.81 | % | 0.67 | % | 0.81 | % | 0.62 | % | ||||||||||
Return on average shareholders' equity |
8.07 | % | 6.82 | % | 8.08 | % | 6.29 | % | ||||||||||
Net interest margin |
3.86 | % | 3.93 | % | 3.92 | % | 3.90 | % | ||||||||||
Efficiency |
67.90 | % | 66.97 | % | 67.33 | % | 70.06 | % | ||||||||||
BALANCE SHEET RATIOS |
||||||||||||||||||
Total loans to deposits |
91.26 | % | 87.87 | % | 91.26 | % | 87.87 | % | ||||||||||
Securities to total assets |
14.07 | % | 15.77 | % | 14.07 | % | 15.77 | % | ||||||||||
Tier 1 leverage ratio |
10.1 | % | 12.9 | % | 10.1 | % | 12.9 | % | ||||||||||
ASSET QUALITY |
||||||||||||||||||
Nonperforming assets to total assets |
2.36 | % | 2.47 | % | 2.36 | % | 2.47 | % | ||||||||||
Nonperforming assets, including restructured loans, to total assets |
3.83 | % | 4.08 | % | 3.83 | % | 4.08 | % | ||||||||||
Net charge-offs to average loans (annualized) |
0.39 | % | 0.20 | % | 0.20 | % | 0.18 | % | ||||||||||
Composition of risk assets: (in thousands) |
||||||||||||||||||
Nonperforming assets: |
||||||||||||||||||
Nonaccrual loans |
$ | 2,442 | $ | 1,223 | $ | 2,442 | $ | 1,223 | ||||||||||
Other real estate owned |
7,394 | 8,440 | 7,394 | 8,440 | ||||||||||||||
Total nonperforming assets, excluding performing restructured loans |
$ | 9,836 | $ | 9,663 | $ | 9,836 | $ | 9,663 | ||||||||||
Restructured loans, performing in accordance with their modified terms |
6,144 | 6,321 | 6,144 | 6,321 | ||||||||||||||
Total nonperforming assets, including performing restructured loans |
$ | 15,980 | $ | 15,984 | $ | 15,980 | $ | 15,984 | ||||||||||
Allowance for loan losses: (in thousands) |
||||||||||||||||||
Beginning balance |
$ | 3,789 | $ | 3,799 | $ | 3,721 | $ | 3,790 | ||||||||||
Provision for loan losses |
132 | - | 202 | 125 | ||||||||||||||
Charge-offs |
(306 | ) | (284 | ) | (342 | ) | (563 | ) | ||||||||||
Recoveries |
1 | 145 | 35 | 308 | ||||||||||||||
Ending balance |
$ | 3,616 | $ | 3,660 | $ | 3,616 | $ | 3,660 |
8