MCKENNEY, Va., July 13 /PRNewswire-FirstCall/ -- Bank of McKenney today announced second quarter earnings of $322,000, an increase of 10.65% over 2006 second quarter earnings of $291,000. Basic and diluted earnings per share of $0.17 were reported for the three months ended June 30, 2007, a $0.02 increase over the prior year's results for the same period. For the six-month period ended June 30, 2007, the Bank reported earnings of $671,000, an increase of 6.34% when compared to $631,000 through the first six months of 2006. For the first two quarters of 2007 and 2006, earnings per basic and diluted share of $0.35 and $0.33, respectively, were recorded. Annualized returns on average assets and average equity for the first six months of 2007 were 0.87. and 7.80%, respectively, compared to 0.86. and 7.88., respectively, for the same period in 2006. Higher cost of funds for deposits have pressured interest margins in recent periods; however, with a large segment of the investment and loan portfolio set to re-price in 2008 and 2009, the current margin squeeze is deemed only temporary and should gain a growth momentum as the present rate cycle plays out.
At the end of the second quarter, total assets were $154.1 million, representing a $2.2 million or 1.45% increase over the December 31, 2006 level of $151.9 million. Total deposits amounted to $121.5 million as of June 30, 2007, which represents a 1.84% increase from the $119.3 million level as of December 31, 2006. During the same period, total loans expanded by 2.55% or $2.6 million to the June 30, 2007 balance of $104.6 million. On an annualized basis, loans and deposits grew during the first half at a rate of 5.10% and 3.69%, respectively. At June 30, 2007, the investment portfolio stood at $28.8 million, a 1.37% decline in comparison to the December 31, 2006 $29.2 million level. Overnight federal funds sold decreased 26.42% from $5.3 million on December 31, 2006 to $3.9 million on June 30, 2007. Cumulatively, earning assets grew $0.8 million through the second quarter or 1.17% on an annualized basis and represent 89.10% of total assets.
Net interest income increased slightly to $1,419,000 in the second quarter of 2007 from $1,408,000 in the comparable period in 2006. Noninterest income, exclusive of securities transactions, climbed 20.16. from $372,000 in the second quarter of 2006 to $447,000 for the same period in 2007. Service charges grew 16.58% during the second quarter 2007 period to $218,000 when compared to the second quarter 2006 level of $187,000. The secondary market mortgage department and other noninterest vehicles, including the insurance and investment subsidiary, both decreased slightly by $3,000 and $1,000 respectively. Gains on the sale of fixed assets of $47,000 were posted during the second quarter of 2007 from the sale of the Ettrick location in June. Noninterest expense increased 2.82% to $1,387,000 during the quarter ended June 30, 2007 from $1,349,000 for the same period in 2006. Salaries and benefits rose 1.40% or $12,000 while occupancy and furniture equipment expenses declined $1,000 or 0.53%. Numerous projects aimed at improved efficiencies and growth are underway and slated to be completed in 2007 including the centralization and combination of loan processing with all retail operations, 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 for the second quarter of 2007 by $27,000 or 8.85%. For the first six months of 2007, net interest income increased to $2,876,000, up from $2,859,000 in the comparable period in 2006. Volume growth in the bank's interest bearing deposit products pressured the net interest margin downward by 19 basis points to 4.24% holding the net interest income to only a modest increase for the period. However, improvement is evident as the asset re-pricing cycle gains momentum. As these cycle through during 2008/2009, the interest margin is expected to follow a strengthening pattern.
Richard M. Liles, President and Chief Executive Officer, stated, "We are very pleased with the quarterly and year-to-date results outlined above. Our new Prince George permanent branch is well underway with construction likely completed by year's end. We continue to focus on growth opportunities and cost saving measures to successfully compete in the increasingly competitive marketplace."
Bank of McKenney is a full-service community bank headquartered in McKenney, Virginia with six 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.
BANK OF MCKENNEY AND SUBSIDIARY
Consolidated Balance Sheets Summary Data
June 30, 2007 (unaudited) and December 31, 2006
June 30, December 31,
ASSETS 2007 2006
Cash and due from
banks $5,212,438 $4,179,157
Federal funds sold 3,894,000 5,265,000
Securities available
for sale, at fair
market value 27,532,884 27,906,220
Restricted investments 1,274,025 1,285,125
Loans, net 103,716,846 100,901,504
Land, premises and
equipment, net 6,864,966 6,864,254
Other assets 5,607,041 5,477,488
Total Assets $154,102,200 $151,878,748
LIABILITIES
Deposits $121,462,785 $119,261,603
Borrowed Funds 13,833,333 14,000,000
Other liabilities 1,287,534 1,699,492
Total Liabilities $136,583,652 $134,961,095
SHAREHOLDERS' EQUITY
Total shareholders'
equity $17,518,548 $16,917,653
Total Liabilities
and Shareholders'
Equity $154,102,200 $151,878,748
BANK OF MCKENNEY AND SUBSIDIARY
Consolidated Statements of Income Summary Data
(unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
2007 2006 2007 2006
Interest and dividend
income $2,412,105 $2,230,114 $4,810,160 $4,395,070
Interest expense 992,739 821,841 1,934,136 1,535,573
Net interest income $1,419,366 $1,408,273 $2,876,024 $2,859,497
Provision for loan
losses 20,000 10,000 20,000 20,000
Net interest income
after provision for
loan losses $1,399,366 $1,398,273 $2,856,024 $2,839,497
Net noninterest
expense 940,378 977,972 1,899,973 1,925,856
Net income before
taxes $458,988 $420,301 $956,051 $913,641
Income taxes 136,858 129,361 285,414 282,448
Net income $322,130 $290,940 $670,637 $631,193
Basic & diluted
earnings per share $0.17 $0.15 $0.35 $0.33
Weighted average
shares outstanding 1,926,656 1,926,656 1,926,656 1,926,656
