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: February 6, 2015

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 parent company for Roanoke, Virginia based HomeTown Bank, announced on February 6, 2015 its financial results for the three months and year ended December 31, 2014. The financial results are detailed in the Company’s Press Release dated February 6, 2015, 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 February 5, 2015, HomeTown Bankshares Corporation declared a 6% per annum quarterly dividend on its Series C Non-Cumulative Perpetual Convertible Preferred Stock, payable March 15, 2015 to shareholders of record on February 28, 2015.

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: February 6, 2015	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

Friday, February 6, 2015

HomeTown Bankshares Corporation Reports Record Performance

2014 Earnings up 25% over 2013

● Continued Strong Operating Performance

o Net Income of $1.0 million for fourth quarter 2014, up 27% over $790,000 in 2013

o EPS of $0.18 for fourth quarter of 2014, up 29% over $.14 per share for fourth quarter of 2013 (fully diluted)

o YTD Earnings of $3.42 million, up 25% from $2.73 million in 2013

o Fourth quarter revenue of $4.8 million, up $350,000 or 8% over 2013

o YTD revenue of $18.7 million, up $1.2 million or 7% increase over 2013

o Noninterest Income for fourth quarter 2014 up 53% over prior year

o YTD Noninterest Income for 2014 up 31% over prior year 2013

● Strong Loan and Deposit Growth

o Total Loans of $332 Million at December 31, 2014

■ Up $34 million or 11% for the 2014 fiscal year over 2013

o Total Deposits of $363 Million at December 31, 2014

■ Up $23 million or 7% for the 2014 fiscal year over 2013

● Non-Interest Bearing Checking Deposits up 11%

● Interest Bearing Checking Deposits up 25%

● Credit Quality Remains Strong

o YTD net charge-offs of $389,000 remained low at .12% of average total loans and .07% of average total loans for 2013

o Non-performing assets were 1.92% of total assets at December 31, 2014 vs. 2.27% in 2013

o Nonaccrual loans remained low at .38% of total loans at December 31, 2014 and .33% of total loans at December 31, 2013

o Past due accruing loans remained at historically low levels of 0.15% of total loans at December 31, 2014 and 0.21% at December 31, 2013

● Well-Capitalized with Solid Capital Ratios

o Total Risk-Based Capital amounted to 13.1% at December 31, 2014

o Tier 1 Risk-Based Capital amounted to 12.2% at December 31, 2014

o Tier 1 Leverage Ratio amounted to 10.1% at December 31, 2014

o Return on Assets (ROA) of 0.82% for 2014 fiscal year vs. 0.71% for 2013

o Return on Equity (ROE) of 8.20% for 2014 fiscal year vs. 6.68% for 2013

o Efficiency Ratio of 69.04% for the 2014 fiscal year vs. 67.72% for 2013

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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 Operating Performance for 2014

Roanoke, VA (February 6, 2015) – HomeTown Bankshares Corporation, the parent company of HomeTown Bank, generated earnings of $1.0 million for the fourth quarter ended December 31, 2014. This contributed to a 25% increase in earnings for the 2014 fiscal year over 2013.

A net profit of $1.0 million or $0.18 per diluted common share was realized for the fourth quarter of 2014, up 27% from the net profit of $790,000 or $0.14 per diluted common share for the fourth quarter of 2013. Net income for 2014 fiscal year also remained strong, increasing 25% to $3.42 million or $0.62 per diluted common share vs. $2.73 million and $0.48, respectively, during the 2013 fiscal year.

Non-interest income increased 53% to $546,000 in the fourth quarter of 2014 and amounted to $1.89 million for the 2014 fiscal year. This compares to $356,000 and $1.44 million, respectively, during 2013. The primary growth in non-interest income during 2014 was from revenues generated from a significant increase in core checking account deposits as well as increases in brokerage income and a resurgence in mortgage lending.

“We are extremely pleased with our strong growth and record operating performance during 2014,” stated Susan Still, President and CEO. “Excellent growth in both our loan and core deposit portfolios, coupled with a strong interest margin and a significant increase in non-interest income, were the major contributors to the record earnings in 2014,” she continued. “The performance of our new branch in the New River Valley that opened at the end of 2013 was particularly strong, while our new branch in Salem that opened in July, 2014 also exceeded expectations,” she continued.

Balance Sheet

Total loan growth for 2014 was $34 million or 11% and was the major contributor to the $26 million increase in total assets to $428 million at December 31, 2014. Growth in total deposits was also strong with a 7% overall increase to $363 million at December 31, 2014. Core deposit growth remained particularly strong during 2014 with a 11% increase in non-interest bearing checking deposits and a 25% increase in interest bearing checking deposits.

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Tier One Capital increased 6.6% during 2014, and the capital ratios remained well above regulatory standards for well-capitalized banks during 2014.

Asset Quality

Loan quality improved and remained strong during 2014 with nonperforming assets, excluding performing, restructured loans, of 1.92% of total loans at December 31, 2014 vs. 2.27% at December 31, 2013. Net charge-offs remained at historically low levels at 0.12% of average total loans during 2014 and 0.07% in net charge-offs during 2013.

Past due and nonaccrual loans also remained at historically low levels. Past due accruing loans were 0.15% of total loans with nonaccrual loans of 0.38% of total loans at December 31, 2014. This compares to 0.21% and 0.33%, respectively, at December 31, 2013. The Company’s Allowance for Loan Losses dropped to $3.3 million and 1.00% of Total Loans at December 31, 2014 vs. $3.72 million and 1.25% of Total Loans at December 31, 2013.

“Maintaining strong loan quality continues to be a major focus of our Company,” stated Still. “We will also continue to prudently reduce the level of foreclosed property as the economy continues to improve in 2015 and beyond,” she said.

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 six full-service branches and seven ATM’s. 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 and fiscal year ending December 31, 2014)

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HomeTown Bankshares Corporation

Consolidated Condensed Balance Sheets

December 31, 2014, and December 31, 2013

	December 31,			December 31
In Thousands	2014			2013
	(Unaudited)
Assets
Cash and due from banks	$	13,795		$	19,537
Federal funds sold		649			738
Securities available for sale, at fair value		54,603			57,922
Restricted equity securities, at cost		2,476			2,564
Loans held for sale		242			-
Total loans		331,679			297,933
Allowance for loan losses		(3,332	)		(3,721	)
Net loans		328,347			294,212
Property and equipment, net		14,900			12,155
Other real estate owned		6,986			8,143
Other assets		6,211			7,166
Total assets	$	428,209		$	402,437
Liabilities and Stockholders’ Equity
Deposits:
Noninterest-bearing	$	51,226		$	46,232
Interest-bearing		311,369			293,538
Total deposits		362,595			339,770
Short term borrowings		422			258
Federal Home Loan Bank borrowings		20,000			22,000
Other liabilities		1,967			871
Total liabilities		384,984			362,899
Stockholders’ Equity:
Preferred stock		13,293			13,293
Common stock		16,438			16,351
Surplus		15,310			15,339
Retained deficit		(2,271	)		(4,846	)
Accumulated other comprehensive income (loss)		455			(599	)
Total stockholders’ equity		43,225			39,538
Total liabilities and stockholders’ equity	$	428,209		$	402,437

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HomeTown Bankshares Corporation

Consolidated Condensed Statements of Income

For the Three Months and Twelve Months Ended December 31, 2014 and 2013

	For the Three Months					For the Twelve Months
	Ended December 31,					Ended December 31,
In Thousands, Except Share and Per Share Data	2014			2013		2014			2013
	(Unaudited)			(Unaudited)		(Unaudited)
Interest income:
Loans and fees on loans	$	3,916		$	3,716	$	15,230		$	14,403
Taxable investment securities		230			298		1,000			1,277
Nontaxable investment securities		107			85		400			206
Other interest income		44			38		168			144
Total interest income		4,297			4,137		16,798			16,030
Interest expense:
Deposits		438			443		1,746			1,845
Other borrowed funds		86			96		372			377
Total interest expense		524			539		2,118			2,222
Net interest income		3,773			3,598		14,680			13,808
Provision for loan losses		(202	)		-		-			125
Net interest income after provision for loan losses		3,975			3,598		14,680			13,683
Noninterest income:
Service charges on deposit accounts		126			87		452			314
ATM and interchange income		127			82		443			327
Mortgage loan brokerage fees		82			57		231			282
Gains on sales of investment securities		20			36		128			152
Other income		191			94		632			369
Total noninterest income		546			356		1,886			1,444
Noninterest expense:
Salaries and employee benefits		1,499			1,170		5,802			5,242
Occupancy and equipment expense		407			345		1,535			1,317
Advertising and marketing expense		167			93		598			457
Professional fees		149			110		581			495
(Gains), losses on sales, writedowns of
other real estate owned, net		(5	)		231		(10	)		582
Other real estate owned expense		51			58		224			250
Other expense		750			775		2,834			2,715
Total noninterest expense		3,018			2,782		11,564			11,058
Net income before income taxes		1,503			1,172		5,002			4,069
Income tax expense		501			382		1,587			1,340
Net income		1,002			790		3,415			2,729
Effective dividends on preferred stock		210			207		840			846
Accretion of discount on preferred stock		-			-		-			142
Net income available to common stockholders	$	792		$	583	$	2,575		$	1,741
Basic earnings per common share	$	0.24		$	0.18	$	0.78		$	0.53
Diluted earnings per common share	$	0.18		$	0.14	$	0.62		$	0.48
Weighted average common shares outstanding		3,287,567			3,270,299		3,284,870			3,269,063
Diluted average common shares outstanding		5,527,567			5,510,299		5,524,870			4,416,679

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HomeTown Bankshares Corporation

Financial Highlights

	Three			Three			Twelve			Twelve
	Months			Months			Months			Months
	Ended			Ended			Ended			Ended
	Dec 31			Dec 31			Dec 31			Dec 31
	2014			2013			2014			2013
	((Unaudited))			(Unaudited)			(Unaudited)
PER SHARE INFORMATION
Book value	$	9.10		$	8.03		$	9.10		$	8.03
Earnings per share, basic	$	0.24		$	0.18		$	0.78		$	0.53
Earnings per share, diluted	$	0.18		$	0.14		$	0.62		$	0.48
PROFITABILITY
Return on average assets		0.94	%		0.80	%		0.82	%		0.71	%
Return on average shareholders' equity		9.28	%		7.89	%		8.20	%		6.68	%
Net interest margin		3.91	%		3.97	%		3.90	%		3.92	%
Efficiency		69.10	%		63.62	%		69.04	%		67.72	%
BALANCE SHEET RATIOS
Total loans to deposits		91.47	%		87.69	%		91.47	%		87.69	%
Securities to total assets		13.33	%		15.03	%		13.33	%		15.03	%
Tier 1 leverage ratio		10.1	%		10.2	%		10.1	%		10.2	%
ASSET QUALITY
Nonperforming assets to total assets		1.92	%		2.27	%		1.92	%		2.27	%
Nonperforming assets, including restructured loans, to total assets		3.34	%		3.83	%		3.34	%		3.83	%
Net (recoveries) charge-offs to average loans (annualized)		(0.01	)%		(0.05	)%		0.12	%		0.07	%
Composition of risk assets: (in thousands)
Nonperforming assets:
Nonaccrual loans	$	1,254		$	989		$	1,254		$	989
Other real estate owned		6,986			8,143			6,986			8,143
Total nonperforming assets, excluding performing restructured loans	$	8,240		$	9,132		$	8,240		$	9,132
Restructured loans, performing in accordance with their modified terms		6,052			6,278			6,052			6,278
Total nonperforming assets, including performing restructured loans	$	14,292		$	15,410		$	14,292		$	15,410
Allowance for loan losses: (in thousands)
Beginning balance	$	3,522		$	3,684		$	3,721		$	3,790
Provision for loan losses		(202	)		-			-			125
Charge-offs		(18	)		(11	)		(464	)		(575	)
Recoveries		30			48			75			381
Ending balance	$	3,332		$	3,721		$	3,332		$	3,721

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