MCKENNEY, Va., Jan. 22, 2008 (PRIME NEWSWIRE) -- Bank of McKenney (Nasdaq:BOMK) today announced solid fourth quarter earnings of $313,000. This is a $47,000 decrease over 2006 fourth quarter earnings of $360,000. Fourth quarter earnings per basic and diluted share for 2007 of $0.16 were reported as compared to $0.19 recorded during the 2006 fourth quarter. For the year ended December 31, 2007, the Bank reported earnings of $1,293,000, an increase of 2.05% compared to $1,267,000 for the prior year's end. Basic and diluted earnings per share of $0.67 were reported for the year ended December 31, 2007 on 1,926,656 weighted average shares outstanding, up a penny in comparison to the prior year-end earnings per basic and diluted share of $0.66 on an equal number of weighted average shares outstanding. Annualized returns on average assets and average equity for 2007 were 0.83% and 7.29%, respectively, compared to 0.86% and 7.64%, respectively, for the same period in 2006.
Total assets amounted to $161.2 million on December 31, 2007, an increase of 6.12% or $9.3 million over the December 31, 2006 level of $151.9 million. Total loans, as of December 31, 2007, grew to $107.0 million compared to $102.0 million as of December 31, 2006. The loan portfolio was up $5.0 million or 4.90% over the December 31, 2006 level. At year-end 2007, the investment portfolio stood at $30.1 million, which represents a 3.08% increase over the $29.2 million prior year-end balance. Overnight federal funds sold increased $2.3 million, or 43.40%, from $5.3 million on December 31, 2006 to $7.6 million on December 31, 2007. Cumulatively, these earning assets grew $8.2 million or 6.01% during 2007 and represent 89.76% of total assets. Total deposits amounted to $127.5 million as of December 31, 2007, which represents an $8.2 million or 6.87% increase from the $119.3 million level as of December 31, 2006. Total noninterest-bearing demand deposits were $24.3 million as of December 31, 2007, an increase of $0.4 million or 1.67% over the December 31, 2006 level. During this same period, interest-bearing deposits climbed $7.9 million or 8.28% from $95.4 million to $103.3 million. Total borrowings from the Federal Home Loan Bank of Atlanta (the "FHLB") decreased $0.3 million from $14.0 million on December 31, 2006 to $13.7 million as of December 30, 2007. The Bank did no additional borrowing through the FHLB during 2007.
The net interest income for the year ended December 31, 2007 was $5.8 million matching the results the same period in 2006. The average loan portfolio increased $4.2 million to $104.6 million for the current fiscal year representing a 4.18% hike over the average loan portfolio assets of $100.4 million for the same period in 2006. The related interest income from loans was $8.3 million in 2007 compared to $7.8 million in 2006. The average yield on loans increased from 7.73% in 2006 to 7.91% in 2007. Average investments climbed $0.5 million to $28.2 million for the current fiscal year representing a 1.81% rise over the prior year's average investment portfolio of $27.7 million. Investment securities and other earning assets (such as federal funds sold) contributed $1.6 million to the interest income level of $9.9 million in 2007. The yield on earning assets was 7.08% in 2007 and 6.90% in 2006. Consistent with asset growth the average interest-bearing funding sources (deposit and purchased funds) grew to $112.4 million in 2007, which was $5.1 million, or 4.75% greater than the 2006 level of $107.3 million. Interest expense for all interest-bearing liabilities amounted to $4.0 million in 2007, which was 21.21% or $0.7 million greater than the 2006 level of $3.3 million. Cost of interest-bearing liabilities was 3.58% during 2007 or 47 basis points higher than the 2006 level of 3.11%, and this increase is attributable to the volume growth in the higher rate time certificate products. The interest spread again narrowed for the twelve months of 2007 by 29 basis points to 3.50%. Accordingly, the net interest margin decreased for the twelve months of 2007 to 4.19% from 4.38% for the same period in 2006. The pace of the decrease in the net interest margin slowed greatly in the second half of 2007; however, the Federal Reserve has begun a series of cuts in the overnight funds rate to help avoid further collapse in credit markets and an economic recession. Most of the investment portfolio had completed its re-pricing cycle while the loan portfolio re-pricing is mid cycle. In the immediate near-term, a slight further erosion of the margin may occur. Nevertheless, the lower deposit rates will offset this effect rapidly, and the end of 2008 projects an expanding margin.
For the year ended December 31, 2007, noninterest income, exclusive of securities transactions, grew to $1.56 million, representing a $70,000 or 4.70% increase over the 2006 level of $1.49 million. Service charges on deposits grew 13.27% during the year and ended with a revenue increase of $97,000 to $828,000. Income generated on bank-owned life insurance increased $8,000 to $122,000 during 2007 while other income declined $40,000 from $646,000 on December 31, 2006 to $606,000 on December 31, 2007. This 6.19% dip in other income primarily reflects lower volume in mortgage applications experienced in the fixed rate mortgage department during the fourth quarter of 2007 as credit markets became unsettled over certain loan segments and housing concerns. The Bank is not in the sub-prime market nor does it invest in associated derivative instruments. The institution does not expect these effects to be long lived in our community. Noninterest expense in the 2007 fiscal year amounted to $5.51 million compared to the 2006 level of $5.38 million. The increase is directly related to expansionary activities occurring in the franchise. The largest component of noninterest expense is salaries and benefits. Salaries and benefits expense for the year ended December 31, 2007 grew only $40,000 or 1.19% to $3.39 million. Personnel expenses were contained in 2007 as the company implemented certain initiatives aimed at improving efficiencies that lower staffing requirements. Occupancy and furniture and equipment costs grew a modest $9,000 over the 2006 level to $763,000. Other overhead costs grew $90,000 or 7.09% during 2007 to $1.36 million. Other overhead costs grew in 2007 as a result of the opening of the permanent Prince George office as well as the development of certain new products and technologies scheduled to roll out in early 2008. Compliance and audit costs also remain higher due to the continued uncertainties surrounding the Sarbanes-Oxley section 404 implementation schedule for non-accelerated filers.
Richard M. Liles, President and Chief Executive Officer, stated, "This year has been a difficult period for the banking industry due to the unsound practices of primarily one segment of the industry. Many borrowers have been put into situations clearly beyond their repayment ability by this segment, and I believe it will now be the true banking community with the help of the Federal Reserve that pulls together to help right many of these wrongs. Unfortunately, the actions of a few have for the moment unjustly created this cloud over all banks. We have always held to the Bank's prudent lending and investing practices. We make no sub-prime loans and do not invest in any private label collateralized mortgage/debt obligations or similar derivative instruments. I am proud of our Bank and our team, and I am also very excited about our positioning entering 2008."
Bank of McKenney is a full-service community bank headquartered in McKenney, Virginia with six branches serving Southeastern Virginia and assets totaling $161 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
Consolidated Balance Sheets Summary Data
December 31, 2007 (unaudited) and December 31, 2006
December 31, December 31,
2007 2006
ASSETS ------------- -------------
Cash and due from banks $ 3,666,898 $ 4,179,157
Federal funds sold 7,557,000 5,265,000
Interest-bearing time deposits
in banks - -
Securities available for sale,
at fair market value 28,807,961 27,906,220
Restricted investments 1,274,025 1,285,125
Loans, net 106,102,635 100,901,504
Land, premises and equipment, net 8,361,377 6,864,254
Other assets 5,421,557 5,477,488
------------- -------------
Total Assets $ 161,191,453 $ 151,878,748
============= =============
LIABILITIES
Deposits $ 127,519,072 $ 119,261,603
Borrowed Funds 13,666,667 14,000,000
Other liabilities 1,937,013 1,699,492
------------- -------------
Total Liabilities $ 143,122,752 $ 134,961,095
------------- -------------
SHAREHOLDERS' EQUITY
Total shareholders' equity $ 18,068,701 $ 16,917,653
------------- -------------
Total Liabilities and
Shareholders' Equity $ 161,191,453 $ 151,878,748
============= =============
BANK OF MCKENNEY AND SUBSIDIARY
Consolidated Statements of Income Summary Data
(unaudited)
Three Months Ended Years Ended
December 31, December 31,
2007 2006 2007 2006
----------- ----------- ----------- -----------
Interest and
dividend income $ 2,532,140 $ 2,403,649 $ 9,853,380 $ 9,122,896
Interest expense 1,061,123 920,858 4,030,026 3,334,091
----------- ----------- ----------- -----------
Net interest
income $ 1,471,017 $ 1,482,791 $ 5,823,354 $ 5,788,805
Provision for
loan losses 31,819 25,781 81,819 45,781
----------- ----------- ----------- -----------
Net interest
income after
provision for
loan losses $ 1,439,198 $ 1,457,010 $ 5,741,535 $ 5,743,024
----------- ----------- ----------- -----------
Non interest income $ 365,264 $ 399,927 $ 1,623,126 $ 1,469,834
Non interest
expense 1,352,152 1,330,336 5,513,968 5,375,406
----------- ----------- ----------- -----------
Net non interest
expense $ 986,888 $ 930,409 $ 3,890,842 $ 3,905,572
----------- ----------- ----------- -----------
Net income before
taxes $ 452,310 $ 526,601 $ 1,850,693 $ 1,837,452
Income taxes 139,637 166,789 557,593 570,585
----------- ----------- ----------- -----------
Net income $ 312,673 $ 359,812 $ 1,293,100 $ 1,266,867
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Basic & diluted
earnings
per share $ 0.16 $ 0.19 $ 0.67 $ 0.66
=========== =========== =========== ===========
Weighted average
shares outstanding 1,926,656 1,926,656 1,926,656 1,926,656
=========== =========== =========== ===========