MCKENNEY, Va., Oct. 8 /PRNewswire-FirstCall/ -- Bank of McKenney (OTC Bulletin Board: BOMK) today announced strong third quarter 2010 earnings of $316,000 as compared to a loss of $417,000 during the third quarter of 2009. The prior year's quarterly loss was due primarily to a $1.2 million provision charge to bolster the reserve for loan losses during September 2009. Basic and diluted earnings per share of $0.17 were recorded for the quarter ended September 30, 2010, compared to a prior year's basic and diluted loss per share of $0.22 for the same period. For the nine-month period ended September 30, 2010, the Bank reported earnings of $1,070,000, an increase of 777.05% when compared to earnings of $122,000 through the first nine months of 2009. Again, the 2009 reduced earnings were largely the result of provision charges to increase reserves. For the first three quarters of 2010 and 2009, earnings per basic and diluted share of $0.56 and $0.06, respectively, were recorded. Annualized returns on average assets and average equity for the first nine months of 2010 were 0.78% and 7.43%, respectively, compared to 0.04% and 0.42%, respectively, for the same period in 2009. Margins had contracted during the first two quarters as the Bank implemented a plan to raise its loan-to-deposit ratio to a projected target of 85% to 90%. Certain investments were liquidated in preparation thereof, and the short term placements of these funds put pressure on the margin. These pressures are already abating with solid loan growth to date contributing an additional 5 basis points to the targeted ratio. For the first three quarters of 2010, the net interest margin stood at 4.28%, a 24 basis point decline in comparison with the same period of 2009.
At the end of the third quarter, total assets were $187.8 million, representing a $3.9 million or 2.12% increase over the December 31, 2009 level of $183.9 million. Total deposits amounted to $163.6 million as of September 30, 2010, which represents a $3.2 million or 2.00% increase from the $160.4 million level as of December 31, 2009. On an annualized basis, deposits grew during the third quarter at a rate of 2.66%. During the same period, total loans expanded by 6.28% or $7.7 million to the September 30, 2010 balance of $130.4 million. Loans, on an annualized basis, grew at a rate of 8.37%. At September 30, 2010, the investment portfolio, including time deposits in other banks, was $26.3 million, a 15.16% decrease in comparison to the December 31, 2009 $31.0 million level. Overnight federal funds sold grew slightly to a September 30, 2010 level of $11.0 million, a 5.77% increase over the $10.4 million level reported on December 31, 2009. Cumulatively, earning assets grew $3.6 million for the first three quarters or 2.93% on an annualized basis and represent 89.30% of total assets. The Bank continues to focus on delinquencies and nonperforming loans within the portfolio. While these ratios remain elevated, improvement continued through the third quarter. On September 30, 2010, the delinquency and nonperforming ratios stood at 0.47% and 2.69%, respectively. These ratios, at December 31, 2009, were 1.25% and 3.01%, respectively. The severe economic conditions that resulted in increases in these categories seem to have begun moderating, and management continues to feel comfortable that losses will be minimized by collateral positions as well as the Bank's ability and willingness to work with the borrowers where possible. The Bank is committed to returning these levels to pre-recession norms of less than 1%.
The allowance for loan losses was $1,901,000 as of September 30, 2010, or 1.46% of loans outstanding, compared to $1,950,000 as of December 31, 2009 or 1.59% of outstanding loans. Charges to the Reserve account for loan losses amounted to $514,000 as of September 30, 2010 or 0.41% of average outstanding loans for 2010. For the first nine months of 2009, charges to the reserve of $575,000 were taken representing 0.49% of average loans outstanding for the period. Allocations to the reserve account of $465,000 were provisioned for the nine months of 2010 compared to provision allocations of $1,473,000 for the same period of 2009.
Net interest income increased 9.38% to $1,855,000 in the third quarter of 2010 from $1,696,000 in the comparable period in 2009. Noninterest income, exclusive of securities transactions, declined 8.28% or $42,000 in the third quarter of 2010 to $465,000 when compared to $507,000 for the same period in 2009. Service charges posted higher results with an $18,000 or 8.18% increase when comparing the third quarter of 2010 to the third quarter of 2009. The mortgage originations department experienced a decrease in revenue for the period. The department reported income for the 2010 third quarter of $142,000 which represents a $49,000 or 25.65% decline during the period when compared to the third quarter of 2009. Other noninterest products and services, including those of the insurance and investment departments, decreased to $85,000 for the third quarter of 2010, $11,000 below the $96,000 level recorded in the third quarter of 2009. Noninterest expense decreased $76,000 or 4.32% to $1,684,000 during the third quarter of 2010 from $1,760,000 for the same period in 2009. Salaries and benefits lowered 1.29% or $13,000 while occupancy and furniture & equipment expenses increased $11,000 or 5.07%. Other operating expenses for the third quarter of 2010 fell $74,000 or 13.73% to a level of $465,000 due primarily to lower accounting and legal expenses associated with being a private rather than public company.
For the first nine months of 2010, net interest income increased to $5,201,000 from $5,023,000 in the comparable period in 2009. Average loans through the third quarter of 2010, when compared to the same period in 2009, grew to $126.9 million from $116.0 million, an increase of 9.40%. The average investment portfolio declined from a 2009 nine-month average balance of $30.5 million to a $22.7 million average through the third quarter of 2010, or a decrease of 25.57%. Average deposit growth through the nine months of 2010 has increased 9.45% or $11.6 million to $134.4 million over the same prior year period's average of $122.8 million. The Bank's prime based loan portfolio yields decreased 30 basis points when comparing the first nine months of 2010 to that period in 2009 while the investment portfolio in the same periods lost 164 basis points. Cumulatively, yields on earning assets decreased 78 basis points from a 2009 nine-month average of 6.55% to an average of 5.77% for the current year's same period. The cost of funds has plummeted for the nine months ended September 30, 2010 as a result of the current and prolonged low rate environment to a level of 1.77% or 65 basis points below the 2.42% level reported for the same period in 2009.
Noninterest income, exclusive of securities transactions, declined 4.47% or $61,000 during the first nine months of 2010 to $1,303,000 when compared to $1,364,000 for the same period in 2009. Service charges posted higher results with a $22,000 or 3.35% increase when comparing the first nine months of 2010 to that of 2009. In comparing these same two periods, the mortgage originations department revenues dipped $53,000 or 12.71%. Other noninterest income decreased by $30,000 or 10.31% to $261,000 from the level recorded through the third quarter of 2009. Noninterest expense increased $65,000 or 1.32% to $4,988,000 during the first three quarters of 2010 from $4,923,000 for the same period in 2009. Separately within this category, salaries and benefits rose 2.37% or $68,000 for the nine months ended September 30, 2010 while occupancy and furniture & equipment expenses increased $22,000 or 3.34%. Other operating expenses through September 30, 2010 fell $24,000 or 1.72% to a level of $1,374,000, again a result of lower audit and legal expenses associated with being a private rather than public company.
Richard M. Liles, President and Chief Executive Officer, stated, "Last year, I had to report, post third quarter, our first quarterly loss in over twenty years. Today, I am very pleased with the current quarter's results as we are on track to set new record earnings for 2010. We have a committed, loyal, longstanding team as well as conservative, risk-balanced policies set forth by our Board to which we all adhere. We constantly monitor our loan portfolio for emerging issues, work with borrowers having problems where feasible, and immediately address unsolvable troubled debts as each is identified. With these two methodologies in place, we are successfully lending, growing deposits at a manageable pace, maintaining reserves, reducing non-performing assets and experiencing record earnings. This being said, I would be remiss in not acknowledging that there are many uncertainties remaining in our world as well as banking in general. Our local economy, while improving, is soft with a housing market still very sluggish. Moreover, we are in the early stages of new regulations being defined by the hundreds from the financial regulatory reforms passed earlier this year by congress. Nevertheless, we have come a long way from last year at this time, and I wish to express my thanks to our Board, employees, customers and shareholders for their dedication and support in both good and difficult times."
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 September 30, 2010 (unaudited) and December 31, 2009 September 30, December 31, ASSETS 2010 2009 ---- ---- Cash and due from banks $6,663,960 $5,942,984 Federal funds sold 10,997,000 10,418,000 Interest-bearing time deposits in banks 2,040,098 2,009,923 Securities available for sale, at fair market value 23,471,155 28,245,341 Restricted investments 771,025 794,725 Loans, net 128,470,176 120,753,227 Land, premises and equipment, net 7,796,845 8,006,392 Other real estate owned 504,879 375,000 Other assets 7,084,528 7,312,465 --------- --------- Total Assets $187,799,666 $183,858,057 ============ ============ LIABILITIES Deposits $163,642,890 $160,384,510 Borrowed Funds 2,750,000 3,000,000 Other liabilities 1,561,057 1,887,733 --------- --------- Total Liabilities $167,953,947 $165,272,243 ------------ ------------ SHAREHOLDERS' EQUITY Total shareholders' equity $19,845,719 $18,585,814 ----------- ----------- Total Liabilities and Shareholders' Equity $187,799,666 $183,858,057 ============ ============ BANK OF MCKENNEY AND SUBSIDIARY Consolidated Statements of Income Summary Data (unaudited) Three Months Ended Nine Months Ended September 30, September 30, 2010 2009 2010 2009 ---- ---- ---- ---- Interest and dividend income $2,412,567 $2,442,495 $7,018,456 $7,305,523 Interest expense 557,613 746,249 1,817,391 2,282,692 ------- ------- --------- --------- Net interest income $1,854,954 $1,696,246 $5,201,065 $5,022,831 Provision for loan losses 205,000 1,150,000 465,000 1,473,000 ------- --------- ------- --------- Net interest income after provision for loan losses $1,649,954 $546,246 $4,736,065 $3,549,831 ---------- -------- ---------- ---------- Noninterest income $473,218 $536,455 $1,760,613 $1,434,215 Noninterest expense 1,684,282 1,760,248 4,988,283 4,922,613 --------- --------- --------- --------- Net noninterest expense 1,211,064 1,223,793 3,227,670 3,488,398 --------- --------- --------- --------- Net income before taxes $438,890 $(677,547) $1,508,395 $61,433 Income taxes 122,866 (260,197) 438,796 (60,761) ------- -------- ------- ------- Net income (loss) $316,024 $(417,350) $1,069,599 $122,194 ======== ========= ========== ======== Basic & diluted earnings (loss) per share $0.17 $(0.22) $0.56 $0.06 ===== ====== ===== ===== Weighted average shares outstanding 1,894,053 1,926,656 1,894,053 1,926,656 ========= ========= ========= =========
Bank of McKenney
CONTACT: J. Bryant Neville, Jr., Executive Vice President and Chief
Financial Officer, Bank of McKenney, +1-804-478-4434,
bryant.neville@bankofmckenney.com
Web Site: http://www.bankofmckenney.com/
