Bank of McKenney Reports First Quarter Earnings

MCKENNEY, Va., May 19, 2017 /PRNewswire/ -- Bank of McKenney (OTCBB: BOMK) today announced earnings of $372,000 for the three-month period ending March 31, 2017, a $10,000 decrease compared to net income of $382,000 for the same period in 2016.  Basic and diluted earnings per share of $0.20 and $0.19 respectively were recorded for the three months ended March 31, 2017 compared to $0.20 and $0.20 per share respectively recorded for the three months ended March 31, 2016. 

Richard M. Liles, President and Chief Executive Officer, stated, "We achieved a reasonable first quarter with excellent loan and deposit growth. We are focused on improving our productivity, while maintaining modest growth expectations for 2017."

Return on average equity on an annualized basis during the first quarter of 2017 was 5.70% as compared to 6.08% for the first quarter of 2016.  Return on average assets during the first quarter of 2017, on an annualized basis, decreased to 0.66% from the prior year level of 0.68%.  For the rolling twelve month period ended March 31, 2017, return on average equity was 6.64% and return on average assets was 0.77%.

Tier 1 leverage capital was 11.72% and total regulatory capital was 15.33% as of March 31, 2017 compared to 11.58% and 15.92% respectively at December 31, 2016.

Balance Sheet

At the end of the first quarter, total assets were $230.9 million representing an $8.1 million or 3.63% increase over the December 31, 2016 level of $222.8 million.  Total loans increased by 5.36% or $8.4 million to the March 31, 2017 balance of $166.0 million.  At March 31, 2017, the investment portfolio was $26.3 million, a $0.6 million or 2.27% decrease in comparison to the December 31, 2016 level of $26.9 million.  Overnight federal funds sold increased from $5.6 million on December 31, 2016 to $7.6 million on March 31, 2017.  Cumulatively, earning assets grew $9.6 million for the first quarter or 4.80% and represent 90.44% of total assets. Total deposits amounted to $202.2 million as of March 31, 2017, which represents a $7.6 million or 3.88% increase from the $194.7 million level as of December 31, 2016.  Total time deposits decreased from $72.5 million to $70.2 million during the quarter while demand deposits increased $9.8 million to $132.0 million. Total capital at March 31, 2017 exceeded $26.2 million, an increase of 1.70% from the December 31, 2016 balance.

Allowance for Loan Losses

The allowance for loan losses was $1.7 million as of March 31, 2017, an increase of $91,000, or 5.80% from the balance at December 31, 2016. This balance represented 1.00% of total loans outstanding at March 31, 2017 and December 31, 2016 respectively. As of March 31, 2017 the allowance consisted of $105,000 in specific reserves on three impaired loans and $1.6 million in general reserves. 0.79% of the total loan portfolio was past due more than 30 days as of March 31, 2017 compared to 0.68% at December 31, 2016. Ten loans to two borrowers account for 70% of the past dues, with balances totaling $912,000, and have been nonperforming assets for almost two years.  Progress has been made on these two relationships as the outstanding balances have been reduced by $659,000 over the twelve month period ended 3-31-2017. One loan of $1.2 million was modified in the first quarter due to reduced cash flows in the business, however the loan is believed to be well collateralized and no current specific impairment allowance is deemed necessary.

Quarterly Results

Net interest income decreased 2.82% or $60,000 to $2.1 million in the first quarter of 2017 from the comparable period in 2016. Total interest income decreased during the quarter due to reductions in rates, but increased loan volume and lower interest expense due to fewer interest-bearing deposits helped offset the effect of lower rates. There was a provision for loan losses during the period of $90,000 compared to no provision for losses in the same period in 2016. The provision was entirely due to loan growth. Noninterest income was $3,000 greater than March 2016 and noninterest expense was $114,000 less for a total decrease in net noninterest expense of $117,000. Income taxes were $23,000 less in 2017 due to less income and lower effective tax rates.   

There were no sales of securities or other real estate owned during the period. There were no significant expenses or write downs related to other real estate owned as well. Service charges on deposits were relatively unchanged during the period compared to the same period in 2016.  Salaries and benefits decreased $107,000 to $1.1 million, while occupancy expenses decreased $10,000.  Other operating expenses increased $4,000 to $548,000 during the first quarter of 2017 compared to the same quarter last year.  Full-time equivalent employees have been reduced from 73 to 64 in the past 24 months.

Purchase of Building and Consolidation of Departments

As discussed in our press release dated May 10, 2017, the Bank has purchased a 26,000 sq. ft., two-story modern office building situated on 2.8 acres in Prince George County. Five of our 7 branches are within an 11 mile radius of this location.  The site is in close proximity to Colonial Heights, Hopewell, Petersburg and Chesterfield and is convenient to I-295.  The location will allow consolidation of management, operations, human resources and credit administration personnel currently located in 4 different facilities located in the southern end of our footprint. "We are very excited to have the opportunity to bring all of our operations and management personnel together for the first time in many years. This new facility will offer significant efficiencies as well as an enhanced work environment for our employees", stated Richard Liles, President and CEO. "We are also pleased to have room for future expansion, as we continue to pursue reasonable growth that is well supported by our excellent capital position."

Approximately 8,000 sq. ft. of the building is leased to the U.S. Government for support activities related to Fort Lee which is in very close proximity.  This lease effectively utilizes space the Bank does not currently need and covers a significant amount of the overall overhead of the facility.       

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

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.

SOURCE Bank of McKenney

Related Links

http://www.bankofmckenney.com