Bank of McKenney Reports Record Profits For 2013

MCKENNEY, Va., Feb. 3, 2014 /PRNewswire/ -- Bank of McKenney (the "Bank") (OTCBB: BOMK.OB) today announced record net income of $1.7 million, or $0.89 earnings per share, for the year ended December 31, 2013 compared to net income of $1.2 million, or $0.63 earnings per share, for the same period ended December 31, 2012.  That represents an improvement of $490,000, or $0.26 earnings per share when comparing the year ended December 31, 2013 and 2012.  The record profits were mainly driven by the Bank's core earnings; increased interest income from loans and a lowering of cost of funds. Return on average equity increased 201 basis points to 7.76% for the period ended December 31, 2013 when compared to 5.75% for the same period in 2012.  Return on average assets for the period ended December 31, 2013 was 0.78% compared to 0.58% in 2012. For the fourth quarter of 2013, the Bank recorded net income of $410,000 versus 499,000 recorded in the same period in 2012. 

"Due to the stabilizing of the economy in 2013, we were able turn our primary focus from problem assets management back to our earning assets, namely loans, and our costs of funds," said Richard M. Liles, President and CEO. "We are extremely pleased with the results and feel increasingly optimistic about continuing this trend in 2014", he continued.

2013 Results

Net interest income for the year ended December 31, 2013 was $9.2 million, a 6.98% increase when compared to the December 31, 2012 level of $8.6 million.  The average loan portfolio increased $7.5 million to $158.8 million for the current fiscal year, representing a 4.94% hike over the average loan portfolio assets of $151.3 million for the same period in 2012.  The related interest income from loans was $10.0 million in 2013, up 3.4% from the related interest income of $9.7 million in 2012.  The average yield on loans decreased ten basis points from 6.39% in 2012 to 6.29% in 2013.  The yield on earning assets was 5.40% in 2013 versus 5.50% in 2012.  Average demand deposits increased 13.9% during 2013 to $37.8 million when compared to $33.2 million for the same period in 2012.  Average interest-bearing deposits were $153.0 million through the year ended December 31, 2013, and represented an increase of $1.9 million or 1.3% over the average 2012 level of $151.0 million.  Cumulatively, average interest-bearing funding sources (deposit and purchased funds) grew to $154.7 million in 2013 which was $1.5 million or 0.96% greater than the 2012 level of $153.2 million.  Interest expense for all interest-bearing liabilities totaled $1.3 million in 2013 which was 19.9% or $318,000 less than the 2012 level of $1.6 million.  The Bank was able to favorably reprice its cost of funds resulting in an average yield on interest-bearing liabilities of 0.83% during 2013 or 21 basis points lower than the 2012 level of 1.04%.  The interest spread expanded for the twelve months of 2013 by 11 basis points to 4.57%.  Likewise, the net interest margin grew for the twelve months of 2013 to 4.74%, up nine basis points from the 4.65% margin recorded for the same period in 2012.  The increase in the net interest margin is due to continued cost of funds reductions that outpace reductions in earning asset yields.  Though a large segment of the loan portfolio is prime based, the Bank has prudently structured most of its loan relationships to include floors.  This has promoted stability in yields on earning assets during the abnormally low and lengthy rate cycle. 

The Bank had a downtick in non-interest income from $2.1 million recorded for the year ended December 31, 2012 to $1.8 million recorded in the same period in 2013.  The main driver for the decrease was a nonrecurring $272,000 death benefit received on bank-owned life insurance.  Noninterest expenses remained static, totaling $7.96 million for the 2013 calendar year, versus $7.80 million recorded for the year 2012.  Income tax expense was $752,000 in 2013 compared to $342,000 in 2012.

Balance Sheet

Total assets totaled $213.3 million at December 31, 2013, an increase of 0.7% or $1.4 million over the December 31, 2012 level of $211.9 million.  Total loans, as of December 31, 2013, grew $6.1 million, or 4.0%, to $158.0 million compared to $151.9 million as of December 31, 2012.  At year-end 2013, the investment portfolio stood at $24.6 million, which represents a $4.6 million or 22.7% increase when compared to the $20.0 million prior year-end balance.  Cumulatively, interest-earning assets grew $1.8 million or 1.0% during 2013 and represent 88.2% of total assets.  Total deposits remained virtually static at December 31, 2013 totaling $188.0 million, when compared to December 31, 2012's total of $187.2 million. Total noninterest-bearing demand deposits were $36.8 million as of December 31, 2013, an increase of $2.0 million or 5.86% from the December 31, 2012 $34.8 million level.  During this same period, interest-bearing deposits declined $1.3 million or 0.81% from $152.4 million to $151.1 million. 

Asset Quality and Allowance for Loan Losses

As a result of the Bank aggressively managing its problem assets and the stabilizing of the economy, nonperforming assets decreased $1.4 million, or 39.37% to $2.2 million during 2013.  Total nonperforming assets represented 1.03% and 1.81% of total assets at December 31, 2013 and 2012, respectively. Total other real estate owned was $1.5 million and $2.4 million at December 31, 2013 and 2012, respectively.  Nonaccrual loans decreased $606,000, or 47.8%, to $662,000 at December 31, 2013, when compared to a balance of $1.3 million at December 31, 2012.

The allowance for loan losses was $2.55 million as of December 31, 2013, or 1.61% of loans outstanding, compared to $2.3 million as of December 31, 2012 or 1.51% of outstanding loans.  Allocations to the reserve account of $600,000 were provisioned for 2013 compared to provision allocations of $1.43 million for the same period of 2012. 

Bank of McKenney is a full-service community bank headquartered in McKenney, Virginia with seven branches serving Southeastern Virginia and assets totaling $213.4 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.

SOURCE Bank of McKenney

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