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 Strong Earnings through the Third Quarter of 2012
Roanoke, VA (November 1, 2012) – HomeTown Bankshares Corporation, the parent company of HomeTown Bank, reported pre-tax earnings from operations for the third quarter ended September 30, 2012 of $876,000 compared to a pre-tax profit of $637,000 for the third quarter of 2011. The recognition of deferred tax assets added a net income tax benefit of $2.4 million to the pre-tax operating profit of $1.7 million for total income of $4.0 million for the first nine months of 2012 vs. $1.5 million in 2011. After net accumulated dividends on preferred stock of $152 thousand for the quarter and $456 thousand year-to-date, net income available to common shareholders of $3.6 million was realized for the nine month period ended September 30, 2012 vs. $1.0 million during the same period last year. The Company had net income available to common shareholders of $.13 per share for the quarter and $1.10 per share for the nine month period ended September 30, 2012, compared to $.15 per share for the quarter in 2011 and $.32 per share for the first nine months of 2011
Core earnings from operations remained strong with $1.1 million realized in the third quarter of 2012 and $3.1 million realized for the nine months ended September 30, 2012. This compares to $998,000 and $2.3 million, respectively, for similar periods in 2011. Net interest income increased to $3.2 million in the 3rd quarter of 2012 and $9.6 million year-to-date thru September 30, 2012 - a 9% and 11% increase, respectively, over the same periods of 2011. A slight decrease in interest income from loans and investments due to a declining interest rate environment was offset by a 38% reduction in funding costs through the 3rd quarter of 2012. Reduced funding costs also resulted in a significantly higher net interest margin of 3.80% in the 3rd quarter of 2012 vs. 3.53% for the 3rd quarter of 2011.
Non-interest income increased to $311,000 in the 3rd quarter of 2012 and $979,000 for the nine months ended September 30, 2012 vs. $301,000 and $779,000, respectively, during the same periods of 2011. A sizable increase in mortgage loan brokerage fees were the primary contributor to the growth in non-interest income for the quarter and the first nine months of 2012.
“We are very pleased with our operating performance for the first nine months of 2012 and the continued improvement in our net interest margin in spite of a declining interest rate environment and a sluggish economy,” stated Susan Still, President and CEO. “Our focus will remain on growing core deposits, maintaining net interest margins and enhancing credit quality while continuing to increase the level and sources of non-interest income,” she continued.
Balance Sheet
Total assets grew to $368.9 million at September 30, 2012 from $361.2 million at December 31, 2011. Loan demand improved during the first nine months of 2012, increasing 7% from $245.1 million at December 31, 2011 to $262.9 million at September 30, 2012. Total Deposits also grew during the same period from $307.6 million at December 31, 2011 to $311.6 million at September 30, 2012. Total non-interest bearing deposits increased significantly from $26.8 million to $34.7 million or 29% during the first nine months of 2012 while higher cost interest bearing deposits declined slightly. “Strong growth in demand deposit accounts and effective management of our funding costs have been the major contributors to our improved earnings and net interest margin for the first nine months of 2012,” said Ms. Still. HomeTown Bankshares’ risk-based and tangible capital ratios continued to improve through September 30, 2012 with the Company remaining well above regulatory standards for well-capitalized banks.
Asset Quality
Loan quality continued to stabilize through the first nine months of 2012 with the level of nonperforming loans decreasing 39% to $1.1 million or .41% of Total Loans at September 30, 2012 vs. $1.8 million or .72% of Total Loans at September 30, 2011. Other Real Estate Owned (OREO) increased $528,000 or 5.5% during the first nine months to $10.1 million at September 30, 2012. Net charge-offs thru September 30, 2012 amounted to $1.5 million or .56% of Total Loans vs. $1.7 million or .67% of Total Loans during a comparable period in 2011. The Company’s Allowance for Loan Losses at September 30, 2012 totaled $3.9 million or 1.46% of Total Loans vs. $4.4 million and 1.75% of Total Loans at September 30, 2011. Total Past Due Loans also decreased at September 30, 2012 to $2.0 million or .75% of total loans compared to $2.4 million or .92% of total loans at September 30, 2011, continuing to compare favorably to peer banks.
“We are pleased with the continued progress that we have made in improving our asset quality through the first nine months of 2012,” stated Still. “With continued reductions in non-performing loans, our emphasis will be on steadily 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 professionalized service coupled with local decision-making is the hallmark of its banking strategy.
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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.
HOMETOWN BANKSHARES CORPORATION
Consolidated Balance Sheets
September 30, 2012 and December 31, 2011
September 30, 2012 | December 31, 2011 | |||||||
In Thousands, Except Share and Per Share Data | (Unaudited) | |||||||
| Assets | ||||||||
| Cash and due from banks | $ | 11,049 | $ | 12,529 | ||||
| Federal funds sold | 1,550 | 10,363 | ||||||
| Securities available for sale, at fair value | 66,790 | 69,207 | ||||||
| Restricted equity securities, at cost | 2,418 | 2,390 | ||||||
| Loans, net of allowance for loan losses of $3,901 in 2012 and $3,979 in 2011 | 262,863 | 245,100 | ||||||
| Property and equipment, net | 9,671 | 9,582 | ||||||
| Other real estate owned, net of valuation allowance of $256 in 2012 and $331 in 2011 | 10,090 | 9,562 | ||||||
| Deferred tax asset, net | 2,189 | — | ||||||
| Accrued income | 1,471 | 1,372 | ||||||
| Prepaid FDIC insurance | 121 | 473 | ||||||
| Other assets | 682 | 597 | ||||||
| Total assets | $ | 368,894 | $ | 361,175 | ||||
| Liabilities and Stockholders’ Equity | ||||||||
| Deposits: | ||||||||
| Noninterest-bearing | $ | 34,666 | $ | 26,822 | ||||
| Interest-bearing | 276,923 | 280,814 | ||||||
| Total deposits | 311,589 | 307,636 | ||||||
| Short term borrowings | 667 | 449 | ||||||
| Federal Home Loan Bank borrowings | 19,000 | 19,000 | ||||||
| Accrued interest payable | 382 | 435 | ||||||
| Other liabilities | 958 | 567 | ||||||
| Total liabilities | 332,596 | 328,087 | ||||||
| Commitments and contingencies | — | — | ||||||
| Stockholders’ Equity: | ||||||||
| Preferred stock, $1,000 par value; 10,000 shares of series A and 374 shares of series B authorized, issued and outstanding at September 30, 2012 and December 31, 2011 | 10,374 | 10,374 | ||||||
| Discount on preferred stock | (160 | ) | (217 | ) | ||||
| Common stock, $5 par value; authorized 10,000,000 shares, issued and outstanding 3,262,518 (includes 29,178 restricted shares) at September 30, 2012 and 3,241,547(includes 8,207 restricted shares) at December 31, 2011 | 16,167 | 16,167 | ||||||
| Surplus | 15,479 | 15,458 | ||||||
| Retained deficit | (6,991 | ) | (9,773 | ) | ||||
| Accumulated other comprehensive income | 1,429 | 1,079 | ||||||
| Total stockholders’ equity | 36,298 | 33,088 | ||||||
| Total liabilities and stockholders’ equity | $ | 368,894 | $ | 361,175 | ||||
HOMETOWN BANKSHARES CORPORATION
Consolidated Statements of Income
For the Three and Nine months ended September 30, 2012 and 2011
For the Three Months Ended September 30, | For the Nine Months Ended September 30, | |||||||||||||||
| 2012 | 2011 | 2012 | 2011 | |||||||||||||
| In Thousands, Except Share and Per Share Data | (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | ||||||||||||
| Interest income: | ||||||||||||||||
| Loans and fees on loans | $ | 3,471 | $ | 3,518 | $ | 10,280 | $ | 10,583 | ||||||||
| Taxable investment securities | 371 | 480 | 1,282 | 1,416 | ||||||||||||
| Nontaxable investment securities | 18 | — | 30 | — | ||||||||||||
| Federal funds sold | 2 | 7 | 8 | 23 | ||||||||||||
| Dividends on restricted stock | 25 | 15 | 64 | 47 | ||||||||||||
| Other interest income | 9 | 3 | 30 | 7 | ||||||||||||
| Total interest income | 3,896 | 4,023 | 11,694 | 12,076 | ||||||||||||
| Interest expense: | ||||||||||||||||
| Deposits | 558 | 929 | 1,779 | 3,048 | ||||||||||||
| Preferred stock dividends | — | — | 38 | — | ||||||||||||
| Other borrowed funds | 94 | 122 | 306 | 387 | ||||||||||||
| Total interest expense | 652 | 1,051 | 2,123 | 3,435 | ||||||||||||
| Net interest income | 3,244 | 2,972 | 9,571 | 8,641 | ||||||||||||
| Provision for loan losses | 130 | 349 | 1,408 | 863 | ||||||||||||
| Net interest income after provision for loan losses | 3,114 | 2,623 | 8,163 | 7,778 | ||||||||||||
| Noninterest income: | ||||||||||||||||
| Service charges on deposit accounts | 68 | 60 | 206 | 185 | ||||||||||||
| ATM and interchange income | 55 | 50 | 165 | 129 | ||||||||||||
| Mortgage loan brokerage fees | 110 | 35 | 262 | 70 | ||||||||||||
| Gain on sales of investment securities | — | 67 | 127 | 196 | ||||||||||||
| Other income | 78 | 89 | 219 | 199 | ||||||||||||
| Total noninterest income | 311 | 301 | 979 | 779 | ||||||||||||
| Noninterest expense: | ||||||||||||||||
| Salaries and employee benefits | 1,264 | 1,116 | 3,629 | 3,587 | ||||||||||||
| Occupancy and equipment expense | 307 | 323 | 942 | 978 | ||||||||||||
| Data processing expense | 171 | 168 | 506 | 451 | ||||||||||||
| Advertising and marketing expense | 100 | 53 | 297 | 189 | ||||||||||||
| Professional fees | 77 | 95 | 271 | 264 | ||||||||||||
| Bank franchise taxes | 34 | 48 | 103 | 150 | ||||||||||||
| FDIC insurance expense | 126 | 99 | 369 | 451 | ||||||||||||
| Loss on sales and writedowns of other real estate owned | 111 | 79 | 146 | 114 | ||||||||||||
| Other real estate owned expense | 72 | 59 | 249 | 170 | ||||||||||||
| Directors’ fees | 51 | — | 168 | — | ||||||||||||
| Other expense | 236 | 247 | 789 | 717 | ||||||||||||
| Total noninterest expense | 2,549 | 2,287 | 7,469 | 7,068 | ||||||||||||
| Net income before income taxes | 876 | 637 | 1,673 | 1,489 | ||||||||||||
| Income tax expense (benefit) | 292 | — | (2,366 | ) | — | |||||||||||
| Net income | 584 | 637 | 4,039 | 1,489 | ||||||||||||
| Dividends accumulated on preferred stock | 133 | 134 | 400 | 400 | ||||||||||||
| Accretion of discount on preferred stock | 19 | 18 | 56 | 53 | ||||||||||||
| Net income available to common shareholders | $ | 432 | $ | 485 | $ | 3,583 | $ | 1,036 | ||||||||
| Earnings per common share, basic and diluted | $ | 0.13 | $ | 0.15 | $ | 1.10 | $ | 0.32 | ||||||||
| Weighted average common shares outstanding, basic and diluted | 3,262,518 | 3,241,547 | 3,258,385 | 3,241,547 | ||||||||||||
| HOMETOWN BANKSHARES CORPORATION | ||||||||||||||||
| Financial Highlights | ||||||||||||||||
| (Unaudited) | ||||||||||||||||
Three Months | Three Months | Nine Months | Nine Months | |||||||||||||
| 2012 | 2011 | 2012 | 2011 | |||||||||||||
| PER COMMON SHARE | ||||||||||||||||
| Earnings per share, basic and diluted | $ | 0.13 | $ | 0.15 | $ | 1.10 | $ | 0.32 | ||||||||
| Book value | $ | 8.00 | $ | 6.95 | ||||||||||||
| FINANCIAL RATIOS | ||||||||||||||||
| Return on average assets | 0.63 | % | 0.70 | % | 1.47 | % | 0.56 | % | ||||||||
| Return on average shareholders' equity | 6.64 | % | 8.45 | % | 15.60 | % | 6.92 | % | ||||||||
| Net interest margin, tax equivalent | 3.80 | % | 3.53 | % | 3.81 | % | 3.43 | % | ||||||||
| Efficiency | 66.59 | % | 67.04 | % | 67.88 | % | 73.56 | % | ||||||||
| Net charge-off to average loans (annualized) | 0.37 | % | 0.43 | % | 0.77 | % | 0.87 | % | ||||||||
| Loans to deposits | 85.61 | % | 82.24 | % | ||||||||||||
| ALLOWANCE FOR LOAN LOSSES | ||||||||||||||||
| (in thousands) | ||||||||||||||||
| Beginning balance | $ | 4,019 | $ | 4,320 | $ | 3,979 | $ | 5,228 | ||||||||
| Provision for loan losses | 130 | 349 | 1,408 | 863 | ||||||||||||
| Charge-offs | (248 | ) | (276 | ) | (1,487 | ) | (1,701 | ) | ||||||||
| Recoveries | - | - | 1 | 3 | ||||||||||||
| Ending balance | $ | 3,901 | $ | 4,393 | $ | 3,901 | $ | 4,393 | ||||||||
| ASSET QUALITY RATIOS | ||||||||||||||||
| Nonperforming assets to total assets | 3.03 | % | 2.53 | % | ||||||||||||
| Nonperforming loans to total loans | 0.41 | % | 0.72 | % | ||||||||||||
| Allowance for loan losses to total loans | 1.46 | % | 1.75 | % | ||||||||||||
| Allowance for loan losses to nonaccrual loans | 356.4 | % | 243.8 | % | ||||||||||||
| COMPOSITION OF RISK ASSETS | ||||||||||||||||
| (in thousands) | ||||||||||||||||
| Nonperforming assets: | ||||||||||||||||
| 90 days past due and accruing | $ | - | $ | - | ||||||||||||
| Nonaccrual loans | 1,094 | 1,802 | ||||||||||||||
| Other real estate owned | 10,090 | 7,295 | ||||||||||||||
| Total nonperforming assets | $ | 11,184 | $ | 9,097 | ||||||||||||
| Performing restructured loans | $ | 6,362 | $ | 4,688 | ||||||||||||
| Restructured loans included in non-accrual loans above | 202 | - | ||||||||||||||
| Total restructured loans | $ | 6,564 | $ | 4,688 | ||||||||||||