HomeTown Bankshares (HMTA) 8-K HomeTown Bankshares Reaches a Milestone in Asset Growth and Reports a 63% Increase in Earnings in 2013

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 Reaches a Milestone in Asset Growth and Reports a 63% Increase in Earnings in 2013

Roanoke, VA (February 7, 2014)– HomeTown Bankshares Corporation, the parent company of HomeTown Bank, surpassed $400 Million in assets and achieved a third consecutive year of record earnings in 2013.

Net income from operations increased 63% to $2.7 million in 2013 vs. $1.7 million in 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).

Profitability

A net profit of $790,000 or $0.14 per diluted common share was realized for the fourth quarter of 2013 compared to a net profit of $557,000 or $0.12 per diluted common share for the fourth quarter of 2012. Net income for the fiscal year ended December 31, 2013 grew 63% to $2.73 million or $0.48 per diluted common share vs. net income of $1.67 million or $0.32 per diluted common share earned during the 2012 fiscal year. The recognition of deferred tax assets added $.90 per share for total earnings of $1.22 per common share for the twelve months ended December 31, 2012.

“A strong net interest margin coupled with continued control of non-interest expenses and improved asset quality were the major contributors to our third consecutive year of record earnings,” cited Susan K. Still, President and CEO of HomeTown Bankshares Corporation.

The net interest margin increased during the year from 3.82% in 2012 to 3.92% in 2013. Maintaining an above average asset yield coupled with a 29% annual increase in average non-interest bearing deposits resulted in the continued improvement in the net interest margin during 2013. A corresponding increase of 34% in ATM and interchange revenue was also an important contributor to the record earnings for 2013 and offset a reduction in mortgage revenue due to a softer mortgage market during the second half of the year.

Balance Sheet Growth

Total assets grew $31.9 million to a record level of $402.4 million at December 31, 2013 from $370.5 million at December 31, 2012. Total loans alone grew 8.4% to $297.9 million from $274.9 million at December 31, 2012. Total Deposits grew 9.6% to $339.8 million from $310.0 million at December 31, 2012 with total non-interest bearing deposits increasing 42% to $46.2 million at December 31, 2013. Interest bearing deposits grew 5.8% to $293.5 million at December 31, 2013 vs. $277.4 million at December 31, 2012.

Total Equity increased $2.8 million during the year to $39.5 million at December 31, 2013. HomeTown Bankshares’ Tier 1 leverage ratio amounted to 10.21% at December 31, 2013 vs. 9.49% at December 31, 2012, remaining consistently above regulatory standards for well-capitalized banks.

“We are very pleased with the overall growth in both loans and core deposits during 2013,” stated Still. “We are particularly pleased with the significant increase in loan and deposit activity associated with the opening of our new branch in the New River Valley during the 4^th quarter of 2013,” she continued.

Asset Quality

Asset quality continued to improve significantly with non-performing assets to Total Assets decreasing from 3.14% in 2012 to 2.27% during 2013. Loan quality also continued to stabilize during 2013 with the level of nonperforming loans amounting to .54% of total loans at December 31, 2013 vs. 0.98% of total loans at December 31, 2012. The Bank’s Other Real Estate Owned (OREO) portfolio decreased an additional $795 thousand during 2013. Net charge-offs amounted to only $194 thousand or 0.07% of average loans for the year ending December 31, 2013 vs. $1.6 million or .61% of average loans for the year ended December 31, 2012. The Company’s Allowance for Loan Losses at December 31, 2013 amounted to $3.72 million or 1.25% of Total Loans vs. $3.79 million and 1.38% of Total Loans at December 31, 2012.

“Significant progress was made with our asset quality throughout 2013,” stated Still. “Strong asset quality coupled with solid loan and deposit growth at acceptable margins will continue to be our focus during 2014 as we proactively serve our growing customer base and the needs of our communities,” Still 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.

* * *

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 the year-to-date and quarter ending December 31, 2013)

HomeTown Bankshares Corporation

Consolidated Condensed Balance Sheets

December 31, 2013 and December 31, 2012

	Unaudited
In Thousands, Except Share and Per Share Data	12/31/2013			12/31/2012
Assets
Cash and due from banks	$	19,537		$	9,812
Federal funds sold		738			196
Securities available for sale, at fair value		57,922			63,466
Restricted equity securities, at cost		2,564			2,591
Loans, net of allowance for loan losses
of $3,721 in 2013 and $3,790 in 2012		294,212			271,147
Property and equipment, net		12,155			9,754
Other real estate owned, net of valuation
allowance of $935 in 2013 and $575 in 2012		8,143			8,938
Other assets		7,166			4,547
Total assets	$	402,437		$	370,451
Liabilities and Stockholders’ Equity
Deposits:
Noninterest-bearing	$	46,232		$	32,627
Interest-bearing		293,538			277,370
Total deposits		339,770			309,997
Short term borrowings		258			216
Federal Home Loan Bank borrowings		22,000			22,000
Other liabilities		871			1,519
Total liabilities		362,899			333,732
Stockholders’ Equity:
Preferred stock		13,293			10,232
Common stock		16,351			16,167
Surplus		15,339			15,487
Retained deficit		(4,846	)		(6,587	)
Accumulated other comprehensive (loss) income		(599	)		1,420
Total stockholders’ equity		39,538			36,719
Total liabilities and stockholders’ equity	$	402,437		$	370,451

HomeTown Bankshares Corporation

Consolidated Condensed Statements of Income

For the Three and Twelve Months Ended December 31, 2013 and 2012

	For the Three Months				For the Twelve Months
	Ended December 31,				Ended December 31,
In Thousands, Except Share and Per Share Data	2013		2012		2013		2012
	(Unaudited)		(Unaudited)		(Unaudited)
Interest income:
Loans and fees on loans	$	3,716	$	3,517	$	14,403	$	13,797
Taxable investment securities		298		349		1,277		1,631
Nontaxable investment securities		85		20		206		50
Other interest income		38		39		144		141
Total interest income		4,137		3,925		16,030		15,619
Interest expense:
Deposits		443		520		1,845		2,299
Preferred stock dividends		-		-		-		38
Other borrowed funds		96		96		377		402
Total interest expense		539		616		2,222		2,739
Net interest income		3,598		3,309		13,808		12,880
Provision for loan losses		-		-		125		1,408
Net interest income after provision for loan losses		3,598		3,309		13,683		11,472
Noninterest income:
Service charges on deposit accounts		87		77		314		283
ATM and interchange income		77		66		310		231
Mortgage loan brokerage fees		57		106		282		368
Gains on sales of investment securities		36		4		152		131
Other income		99		170		386		389
Total noninterest income		356		423		1,444		1,402
Noninterest expense:
Salaries and employee benefits		1,170		1,265		5,242		4,894
Occupancy and equipment expense		345		317		1,317		1,259
Advertising and marketing expense		93		95		457		392
Professional fees		103		72		458		343
Loss on sales and writedowns of other real estate owned		231		420		582		566
Other real estate owned expense		58		65		250		314
Other expense		782		648		2,752		2,583
Total noninterest expense		2,782		2,882		11,058		10,351
Net income before income taxes		1,172		850		4,069		2,523
Income tax expense (benefit)		382		293		1,340		(2,073	)
Net income		790		557		2,729		4,596
Effective dividends on preferred stock		207		134		846		534
Accretion of discount on preferred stock		-		19		142		75
Net income available to common stockholders	$	583	$	404	$	1,741	$	3,987
Basic earnings per common share	$	0.18	$	0.12	$	0.53	$	1.22
Diluted earnings per common share	$	0.14	$	0.12	$	0.48	$	1.22
Weighted average common shares outstanding		3,270,299		3,262,518		3,269,063		3,259,424
Diluted average common shares outstanding		5,510,299		3,262,518		4,416,679		3,259,424

HOMETOWN BANKSHARES CORPORATION

Financial Highlights

(Unaudited)	Three			Three			Twelve			Twelve
	Months			Months			Months			Months
	Ended			Ended			Ended			Ended
	December 31			December 31			December 31			December 31
	2013			2012			2013			2012
PER SHARE INFORMATION
Book value							$	8.03		$	8.12
Earnings per share, basic	$	0.18		$	0.12		$	0.53		$	1.22
Earnings per share, diluted	$	0.14		$	0.12		$	0.48		$	1.22
PROFITABILITY
Return on average assets		0.80	%		0.59	%		0.71	%		1.25	%
Return on average shareholders' equity		7.89	%		6.04	%		6.68	%		12.69	%
Net interest margin		3.97	%		3.84	%		3.92	%		3.82	%
Efficiency		63.62	%		64.29	%		67.72	%		66.93	%
BALANCE SHEET RATIOS
Loans to deposits								87.69	%		88.69	%
Securities total assets								15.03	%		17.83	%
Tier 1 leverage ratio								10.21	%		9.49	%
ASSET QUALITY
Nonperforming assets to total assets								2.27	%		3.14	%
Nonperforming assets, including restructured loans,to total assets								3.83	%		4.90	%
Net charge-offs to average loans (annualized)		-0.05	%		0.16	%		0.07	%		0.61	%
Composition of risk assets:(in thousands)
Nonperforming assets:
Nonaccrual loans							$	989		$	2,689
Other real estate owned								8,143			8,938
Total nonperforming assets, excludingperforming restructured loans							$	9,132		$	11,627
Performing restructured loans								6,278			6,543
Total nonperforming assets, including restructured loans							$	15,410		$	18,170
Allowance for loan losses:(in thousands)
Beginning balance	$	3,684		$	3,901		$	3,790		$	3,979
Provision for loan losses		-			-			125			1,408
Charge-offs		(11	)		(129	)		(575	)		(1,616	)
Recoveries		48			18			381			19
Ending balance	$	3,721		$	3,790		$	3,721		$	3,790