MCKENNEY, Va., April 19, 2011 /PRNewswire/ -- Bank of McKenney (OTCBB: BOMK) today announced earnings of $314,000 for the three-month period ending March 31, 2011, a 29.91% decrease when compared to net income of $448,000 for the same period in 2010. Basic and diluted earnings per share of $0.17 were recorded for the three months ended March 31, 2011 representing a $0.07 per share decline over those recorded for the three months ended March 31, 2010. There were 1,893,546 weighted average common shares outstanding during both the first quarter of 2011 and 2010. The decrease in earnings is directly attributable to the certain gains realized in the first quarter of 2010 as the Bank shifted its investing strategies away from longer maturities in favor of short term placements and loan portfolio growth. Return on average equity on an annualized basis during the first quarter of 2011 was 6.46% as compared to 10.25% for the first quarter of 2010. Return on average assets during the first quarter of 2011, on an annualized basis, decreased 43 basis points to 0.66% from the prior year level of 1.09%.
At the end of the first quarter, total assets were $197.2 million, representing a $5.1 million or 2.65% increase over the December 31, 2010 level of $192.1 million. Total deposits amounted to $173.3 million as of March 31, 2011, which represents a $5.3 million or 3.15% increase from the $168.0 million level as of December 31, 2010. On an annualized basis, deposits grew during the first quarter at a rate of 12.62%. During the same period, total loans expanded by 2.07% or $2.8 million to the March 31, 2011 balance of $137.8 million. Loans, on an annualized basis, grew at a rate of 8.30%. At March 31, 2011, the investment portfolio, including time deposits in other banks, was $29.0 million, a $0.3 million or 1.02% decrease in comparison to the December 31, 2010 $29.3 million level. Overnight federal funds sold increased 24.42% from $8.6 million on December 31, 2010 to $10.7 million on March 31, 2011. Cumulatively, earning assets grew $4.6 million for the first quarter or 10.64% on an annualized basis and represent 90.01% of total assets. The Bank continues to focus on delinquencies and nonperforming loans within the portfolio; however, the delinquency and nonperforming ratios have risen to 0.59% and 3.03%, respectively. These ratios, at December 31, 2010, stood at 0.47% and 2.01%, respectively. While these ratios have again elevated, management is diligently monitoring struggling credits, adding additional collateral where available and working with borrowers to allow them time to work their way out of troubled debts whenever practical. Management continues to feel comfortable that losses will be minimized by collateral positions as evidenced by a slowing in write downs and write offs. Nevertheless, the Bank has continued to make historically higher provisions to reserves in case unforeseen charges occur in the future as a result of increases in nonperforming assets. On March 31, 2011, loan loss reserves had risen to 1.60% of total loans, an increase of 8 basis points over that of December 31, 2010.
Net interest income increased 19.94% or $319,000 to $1,919,000 in the first quarter of 2011 from $1,600,000 in the comparable period in 2010. Average loans during the first quarter of 2011, when compared to the same period in 2010, grew to $136.7 million from $122.9 million, an increase of 11.23%. The average investment portfolio including time balances with banks increased from a first quarter 2010 average balance of $26.9 million to a $29.0 million average during the first quarter of 2011, or an increase of 7.81%. Average deposit balances have increased 7.17% or $11.4 million from the first quarter 2010 level of $159.0 million to an average 2011 first quarter level of $170.4 million. Time deposits experienced the strongest average growth climbing 6.34% or $6.0 million when comparing the two periods. Other interest bearing deposits experienced robust expansion with an average increase of $3.9 million or 10.26% while average non-interest bearing deposits grew 6.08% or $1.6 million when comparing March 31, 2011 to March 31, 2010. The Bank's prime based loan portfolio yields increased 6 basis points when comparing the first quarter of 2011 to that period in 2010 while the investment portfolio in the same periods fell 90 basis points. Cumulatively, yields on earning assets increased 6 basis points from a 2010 first-quarter average of 5.66% to an average of 5.72% for the current year's first quarter. On the liability side of the balance sheet, the cost of funds plummeted to 1.43% for the first quarter of 2011 representing a decrease of 55 basis points below the first quarter 2010 level of 1.98%. The resulting net interest margin was increased by 53 basis points to 4.53% when comparing it to the 4.00% margin recorded for the first three months of 2010. The strengthening of the overall margin is reflective of a continued drop in the cost of funds, considerable loan growth and the use of floors within the majority of the Bank's variable rate loan portfolio.
Noninterest income, exclusive of securities transactions, decreased 7.16% from $405,000 in the first quarter of 2010 to $376,000 for the same period in 2011. Service charges grew $8,000 or 3.77% when comparing the first quarter of 2011 to the first quarter of 2010. A decline in mortgage demand in the first quarter of 2011 resulted in a decrease in the mortgage originations department of $34,000 or 33.66% when compared to the revenue of $101,000 recognized during the first quarter in 2010. Other non-interest products and services, including those of the insurance and investment departments and holdings in bank owned life insurance, decreased $3,000 to $89,000, or 3.26% when comparing the first quarter of 2011 to the same period in 2010. Noninterest expense increased $110,000 or 6.71% to $1,750,000 during the first quarter 2011 from $1,640,000 for the same period in 2010. Salaries and benefits rose 4.24% or $41,000 on while occupancy and furniture equipment expenses increased $11,000 or 4.82%. Other operating expenses increased $58,000 or 13.00% to $504,000 during the first quarter of 2011. The major contributing factor in this increase was the costs associated with data processing.
Richard M. Liles, President and Chief Executive Officer, stated, "We have begun 2011 with another quarter of very solid results. While the economy remains soft, we continue seeing signs of improvement within a growing number of sectors. During the first quarter, we launched our latest endeavor -- a loan production office in the Rivers Bend area of Chesterfield County. Further, we have added two seasoned commercial lenders to our staff to better serve our expanding market area. As the economic recovery gains traction, we are now better positioned to capitalize on increasing opportunities. This can already be seen through expanding margins. Delinquency and nonperforming ratios remain higher than normal, but we continue to work with customers whenever possible, and the pace of write downs/offs has slowed dramatically. We anticipate further improvement in the portfolio going forward but remain proactive in increasing reserves in case unforeseen charge offs are required."
Bank of McKenney is a full-service community bank headquartered in McKenney, Virginia with six branches and one loan production office serving Southeastern Virginia and assets totaling $197.2 million.
Certain statements in this document are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act. These statements are based on management's current expectations and are subject to uncertainty and changes in circumstances. Actual results may differ materially from those included in these statements due to a variety of factors. More information about these factors is contained in Bank of McKenney's filings with the Board of Governors of the Federal Reserve.
BANK OF MCKENNEY AND SUBSIDIARY
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BANK OF MCKENNEY AND SUBSIDIARY
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SOURCE Bank of McKenney