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      &lt;font style="FONT-FAMILY: Times New Roman, Times, serif; FONT-SIZE: 10pt"&gt;&lt;b&gt;Note

      8.&amp;#160;&lt;/b&gt;&lt;/font&gt;&lt;font style="FONT-FAMILY: Times New Roman, Times, serif; FONT-SIZE: 10pt"&gt;&lt;strong&gt;Capital

      Transaction&lt;/strong&gt;&lt;/font&gt;

    &lt;/p&gt;&lt;br/&gt;&lt;p style="TEXT-ALIGN: left; LINE-HEIGHT: 1.25; MARGIN: 0pt" id="PARA18514"&gt;

      &lt;font style="FONT-FAMILY: Times New Roman, Times, serif; FONT-SIZE: 10pt"&gt;On

      June 28, 2013 HomeTown Bankshares Corporation completed a

      $14,000,000 private placement of its convertible preferred

      stock. Pursuant to the terms of the Private Placement

      Memorandum, dated April 17, 2013, the Company sold 14,000

      shares of its 6.0% Series C NonCumulative Perpetual

      Convertible Preferred Stock at a price of $1,000 per share.

      The convertible preferred stock pays quarterly dividends

      equivalent to six percent (6%) per annum, and is convertible

      into shares of common stock of the Company based on a

      conversion price of $6.25 per share, subject to

      adjustment.&lt;/font&gt;

    &lt;/p&gt;&lt;br/&gt;&lt;p style="TEXT-ALIGN: left; LINE-HEIGHT: 1.25; MARGIN: 0pt" id="PARA18516"&gt;

      &lt;font style="FONT-FAMILY: Times New Roman, Times, serif; FONT-SIZE: 10pt"&gt;The

      Company plans to use the net proceeds from this offering to

      redeem the $10,374,000 of its Fixed Rate Cumulative Perpetual

      Preferred Stock, Series A and Series B and to support future

      growth and for general corporate purposes.&lt;/font&gt;

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 -Publisher SEC

 -Name Regulation S-K (SK)

 -Number 229

 -Section 303

 -Paragraph a

 -Subparagraph 1



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