McKENNEY, Va., April 20 /PRNewswire-FirstCall/ -- Bank of McKenney today announced earnings of $349,000 for the three-month period ending March 31, 2007, a 2.65% increase when compared to net income of $340,000 for the same period in 2006. Basic and diluted earnings per share of $0.18 were recorded for both the three months ended March 31, 2007 and March 31, 2006 with 1,926,656 weighted average shares outstanding during each period. Return on average equity on an annualized basis during the first quarter of 2007 was 8.24% as compared to 8.58% for the first quarter of 2006. Return on average assets during the first quarter of 2007, on an annualized basis, decreased 3 basis points to 0.93% from the prior year level of 0.96%.
At the end of the first quarter, total assets were $155.4 million, representing a $3.5 million or 2.30% increase over the December 31, 2006 level of $151.9 million. Total deposits amounted to $122.8 million as of March 31, 2007, which represents a $3.5 million or 2.93% increase from the $119.3 million level as of December 31, 2006. During the same period, total loans expanded by 1.57% or $1.6 million to the March 31, 2007 balance of $103.6 million. On an annualized basis, loans and deposits grew during the first quarter at a rate of 6.27% and 11.74%, respectively. At March 31, 2007, the investment portfolio was lowered in preparation for the seasonally stronger lending period to $25.9 million, an 11.30% decline in comparison to the December 31, 2006 $29.2 million level. Correspondingly, overnight federal funds sold increased 88.68% from $5.3 million on December 31, 2006 to $10.0 million on March 31, 2007. Cumulatively, earning assets grew $3.0 million for the first quarter or 8.79% on an annualized basis and represent 89.77% of total assets.
Net interest income increased slightly to $1,457,000 in the first quarter of 2007 from $1,451,000 in the comparable period in 2006. Average loans during the first quarter of 2007, when compared to the same period in 2006, grew to $101.6 million from $96.7 million, an increase of 5.07%. The average investment portfolio climbed from a first quarter 2006 average balance of $25.4 million to a $27.6 million average during the first quarter of 2007, or an increase of 8.66%. Average deposit growth has increased 6.99% or $6.3 million from the first quarter 2006 level of $90.1 million to an average 2007 first quarter level of $96.4 million. Time deposits experienced the greatest average growth climbing 14.09% when comparing the two periods. Both the Bank's prime based loan portfolio and shorter positioned investment portfolio continue to see positive improvements from the current interest rate environment as yields on earning assets increased 27 basis points from a 2006 first-quarter average of 6.83% to an average of 7.10% for the current year's first quarter. Despite this jump, volume growth in the bank's interest bearing deposit products pressured the net interest margin downward by 26 basis points to 4.32% and held the net interest income to only a modest increase for the period. Nevertheless, this growth in liquidity going into the greater lending season coupled with an asset re-pricing cycle that is approximately twelve to fifteen months from completion bode well for an interest margin that is now expected to follow a strengthening pattern.
Noninterest income, exclusive of securities transactions, rose 2.61% from $345,000 in the first quarter of 2006 to $354,000 for the same period in 2007. Service charges grew $20,000 or 11.76% when comparing the first quarter of 2007 to the first quarter of 2006. However, slightly weaker showings by both the mortgage originations and appraisal departments (a combined decline of $17,000) limited the overall category gains. Other noninterest vehicles, including the insurance and investment subsidiary, increased by $6,000. Noninterest expense increased $85,000 or 6.55% to $1,382,000 during the first quarter 2007 from $1,297,000 for the same period in 2006. Salaries and benefits rose 3.43% or $28,000 while occupancy and furniture equipment expenses increased only $3,000 or 1.65%. Numerous projects aimed at improved efficiencies and growth are slated to be completed in 2007 including the centralization and combination of loan processing with all retail operations, the consolidation of the two southern Chesterfield offices, and the planning and preparation for the new Prince George branch. As a result of these implementation costs as well as ordinary increases associated with growth, other operating expenses were greater by $54,000 or 18.00%.
Richard M. Liles, President and Chief Executive Officer, stated, "We are pleased with first quarter earnings and the overall direction of the Bank. We are focusing our attention on centralizing operations, improving efficiencies, and growing our presence in the expanding trade area. In doing so, we will set the stage for the start of a second century of excellence."
Bank of McKenney is a full-service community bank headquartered in McKenney, Virginia with seven branches serving Southeastern Virginia and assets totaling $155.4 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.
BANK OF MCKENNEY AND SUBSIDIARY
Consolidated Balance Sheets Summary Data
March 31, 2007 (unaudited) and December 31, 2006
March 31, December 31,
ASSETS 2007 2006
Cash and due from banks $4,665,790 $4,179,157
Federal funds sold 10,013,000 5,265,000
Interest-bearing time deposits in
banks - -
Securities available for sale, at fair
market value 24,579,211 27,906,220
Restricted investments 1,274,025 1,285,125
Loans, net 102,587,331 100,901,504
Land, premises and equipment, net 6,860,040 6,864,254
Other assets 5,460,403 5,477,488
Total Assets $155,439,800 $151,878,748
LIABILITIES
Deposits $122,809,281 $119,261,603
Borrowed Funds 13,916,667 14,000,000
Other liabilities 1,420,579 1,699,492
Total Liabilities $138,146,527 $134,961,095
SHAREHOLDERS' EQUITY
Total shareholders' equity $17,293,273 $16,917,653
Total Liabilities and
Shareholders' Equity $155,439,800 $151,878,748
BANK OF MCKENNEY AND SUBSIDIARY
Consolidated Statements of Income Summary Data
(unaudited)
Three Months Ended
March 31,
2007 2006
Interest and dividend income $2,398,055 $2,164,955
Interest expense 941,397 713,732
Net interest income $1,456,658 $1,451,223
Provision for loan losses - 10,000
Net interest income after provision
for loan losses $1,456,658 $1,441,223
Net noninterest expense 959,596 947,884
Net income before taxes $497,062 $493,339
Income taxes 148,556 153,086
Net income $348,506 $340,253
Basic & diluted earnings per share $0.18 $0.18
Weighted average shares outstanding 1,926,656 1,926,656
