Bank of McKenney Reports Double Digit Annualized Growth, Solid Earnings And Opens Permanent Rivers Bend Branch During The First Quarter 2013

Apr 09, 2013, 16:05 ET from Bank of McKenney

MCKENNEY, Va., April 9, 2013 /PRNewswire/ -- Bank of McKenney (OTCBB: BOMK) today announced earnings of $370,000 for the three-month period ending March 31, 2013, a 3.65% decrease when compared to net income of $384,000 for the same period in 2012.  Basic and diluted earnings per share of $0.20 were recorded for the three months ended March 31, 2013 equaling those recorded for the three months ended March 31, 2012.  There were 1,894,002 weighted average common shares outstanding during the first quarter of 2013 and 1,893,812 weighted average common shares outstanding during the first quarter of 2012.  Return on average equity on an annualized basis during the first quarter of 2013 was 7.00% as compared to 7.57% for the first quarter of 2012.  Return on average assets during the first quarter of 2013, on an annualized basis, decreased 6 basis points to 0.69% from the prior year level of 0.75%.

At the end of the first quarter, total assets were $220.1 million, representing a $8.2 million or 3.87% increase over the December 31, 2012 level of $211.9 million.  Total deposits amounted to $194.8 million as of March 31, 2013, which represents a $7.6 million or 4.06% increase from the $187.2 million level as of December 31, 2012.  On an annualized basis, deposits grew during the first quarter at a rate of 16.24%.  During the same period, total loans expanded by 0.99% or $1.5 million to the March 31, 2013 balance of $153.4 million.  Loans, on an annualized basis, grew at a rate of 3.95%.  At March 31, 2013, the investment portfolio, including time deposits in other banks, was $23.5 million, a $0.5 million or 2.17% increase in comparison to the December 31, 2012 $23.0 million level.  Overnight federal funds sold increased 35.77% from $13.7 million on December 31, 2012 to $18.6 million on March 31, 2013.  Cumulatively, earning assets grew $6.9 million for the first quarter or 14.63% on an annualized basis and represent 88.82% of total assets.  The Bank continues to focus on delinquent and nonperforming loans within the portfolio.  On March 31, 2013, the delinquency and nonperforming ratios as a percentage of total assets stood at 0.91% and 1.42%, respectively.  These ratios, at December 31, 2012, stood at 0.72% and 1.87%, respectively.  Delinquency ratios, while up slightly, remained below 1% and substantial improvement was recorded in the nonperforming factor.  Management expects further decreases in nonperforming assets during the second and third quarters with minimal further losses.  As such, provision allocations have returned to more normal levels.

The allowance for loan losses was $2,340,000 as of March 31, 2013, or 1.53% of loans outstanding, compared to $2,300,000 as of December 31, 2012 or 1.51% of outstanding loans.  Net charges to the reserve account for loan losses amounted to $35,000 as of March 31, 2013 or 0.02% of average outstanding loans for 2013.  For the first quarter of 2012, net charges to the reserve of $174,000 were taken representing 0.12% of average loans outstanding for the period.  Allocations to the reserve account of $75,000 were provisioned for the first quarter of 2013 compared to provision allocations of $490,000 for the same period of 2012. 

Net interest income increased 2.12% or $45,000 to $2,164,000 in the first quarter of 2013 from $2,119,000 in the comparable period in 2012.  Average loans during the first quarter of 2013, when compared to the same period in 2012, grew to $152.5 million from $149.8 million, an increase of 1.80%.  The average investment portfolio including time balances with banks decreased from a first quarter 2012 average balance of $26.5 million to a $23.4 million average during the first quarter of 2013, or a decrease of 11.70%.  Average deposit balances have increased 5.05% or $9.2 million from the first quarter 2012 level of $182.1 million to an average 2013 first quarter level of $191.3 million.  Non-interest bearing demand deposits jumped 15.06% or $4.7 million while interest bearing demand and savings deposits also grew a robust $9.3 million or 19.54% when comparing March 31, 2013 to March 31, 2012.  Time deposits on average experienced a decline of 4.55% or $4.7 million when comparing the two periods.  Yields on earning assets decreased 26 basis points from a 2012 first-quarter average of 5.59% to an average of 5.33% for the current year's first quarter.  On the liability side of the balance sheet, the cost of funds fell to 0.91% for the first quarter of 2013 representing a decrease of 23 basis points below the first quarter 2012 level of 1.14%.  The resulting net interest margin for the first quarter of 2013 was squeezed by 7 basis points to 4.59% when comparing it to the 4.66% margin recorded for the first three months of 2012.  The slight decline in margin strength is largely attributed to investment security maturities being reinvested in short durations with lower yields coupled with deposit growth that initially flows into low yielding overnight funds while investing opportunities are sought.

Noninterest income, exclusive of securities transactions, fell by 33.08% or $218,000 from $659,000 in the first quarter of 2012 to $441,000 for the same period in 2013.  Service charges declined $14,000 or 5.81% when comparing the first quarter of 2013 to the first quarter of 2012.  An increase in mortgage demand in the first quarter of 2013 resulted in growth in the mortgage originations department of $38,000 or 76.00% when comparing the $88,000 in revenue recognized during the first quarter of 2013 to the revenue of $50,000 recognized during the first quarter in 2012.  Other non-interest products and services, including those of the insurance and investment departments and holdings in bank owned life insurance, declined $242,000 or 252.08% to $126,000 when comparing the first quarter of 2013 to the same period in 2012.  This decline was a direct result of a $272,000 tax-free gain realized on a bank-owned life insurance death benefit on a deceased employee covered by the plan during the first quarter of 2012.  Noninterest expense increased $164,000 or 8.91% to $2,004,000 during the first quarter 2013 from $1,840,000 for the same period in 2012.  Salaries and benefits rose 9.17% or $98,000 on while occupancy and furniture equipment expenses increased $34,000 or 13.93%.  Other operating expenses increased $31,000 or 5.88% to $558,000 during the first quarter of 2013.  The major contributing factors in noninterest expenses were the costs associated the opening of the permanent, full service Rivers Bend Branch facility and transfer thereto from the temporary location previously occupied.

Richard M. Liles, President and Chief Executive Officer, stated, "Margins and earnings continue demonstrating strength.  We opened our Rivers Bend Branch permanent facility during the first quarter.  Our nonperforming assets continue to decline and delinquencies remain below 1%.  We are currently ahead of budget on both growth and earnings and remain optimistic that 2013 will be one of the best in our 107 year history.  I am extremely proud of our institution, its dedicated employees, loyal patrons and steadfast investors."

Bank of McKenney is a full-service community bank headquartered in McKenney, Virginia with seven branches and serving Southeastern Virginia and assets totaling $220.1 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.


Consolidated Balance Sheets Summary Data

March 31, 2013 (unaudited) and December 31, 2012

March 31,

December 31,




Cash and due from banks

$        9,604,290

$        6,931,416

Federal funds sold



Interest-bearing time deposits in banks



Securities available for sale, at fair market value



Restricted investments



Loans, net



Land, premises and equipment, net



Other assets



    Total Assets

$    220,149,795

$    211,932,356



$    194,793,553

$    187,172,274

Borrowed Funds



Other liabilities



    Total Liabilities

$    198,512,349

$    190,733,165


Total shareholders' equity

$      21,637,446

$      21,199,191

    Total Liabilities and Shareholders' Equity

$    220,149,795

$    211,932,356



Consolidated Statements of Income Summary Data


Three Months Ended

March 31,



Interest and dividend income

$        2,517,728

$        2,547,902

Interest expense



  Net interest income

$        2,163,708

$        2,119,293

 Provision for loan losses 



Net interest income after provision for loan losses

$        2,088,708

$        1,629,293

Non interest income

$           453,316

$           716,498

Non interest expense



  Net non interest expense

$        1,550,227

$        1,123,488

Net income before taxes

$           538,481

$           505,805

 Income taxes 



Net income

$           370,337

$           383,935

Basic & diluted earnings per common share

$                 0.20

$                 0.20

Weighted average common shares outstanding




SOURCE Bank of McKenney