MCKENNEY, Va., April 8, 2008 (PRIME NEWSWIRE) -- Bank of McKenney (Nasdaq:BOMK) today announced earnings of $294,000 for the three-month period ending March 31, 2008, a 15.76% decrease when compared to net income of $349,000 for the same period in 2007. Basic and diluted earnings per share of $0.15 were recorded for the three months ended March 31, 2008 representing a $0.03 per share decline over those recorded for the three months ended March 31, 2007. There were 1,926,656 weighted average shares outstanding during each of the two periods. Return on average equity on an annualized basis during the first quarter of 2008 was 6.40% as compared to 8.24% for the first quarter of 2007. Return on average assets during the first quarter of 2008, on an annualized basis, decreased 21 basis points to 0.72% from the prior year level of 0.93%.
At the end of the first quarter, total assets were $171.3 million, representing a $10.1 million or 6.23% increase over the December 31, 2007 level of $161.2 million. Total deposits amounted to $137.2 million as of March 31, 2008, which represents a $9.7 million or 7.61% increase from the $127.5 million level as of December 31, 2007. On an annualized basis, deposits grew during the first quarter at a rate of 30.43%. During the same period, total loans expanded by 1.31% or $1.4 million to the March 31, 2008 balance of $108.4 million. At March 31, 2008, the investment portfolio, including time deposits in other banks, was $37.8 million, a 25.58% increase in comparison to the December 31, 2007 $30.1 million level. Overnight federal funds sold decreased 27.63% from $7.6 million on December 31, 2007 to $5.5 million on March 31, 2008. Cumulatively, earning assets grew $7.0 million for the first quarter or 19.35% on an annualized basis and represent 88.56% of total assets.
Net interest income decreased slightly to $1,447,000 in the first quarter of 2008 from $1,457,000 in the comparable period in 2007. Average loans during the first quarter of 2008, when compared to the same period in 2007, grew to $108.9 million from $101.6 million, an increase of 7.19%. The average investment portfolio climbed from a first quarter 2007 average balance of $27.6 million to a $29.9 million average during the first quarter of 2008, or an increase of 8.33%. Average deposit growth has increased 10.05% or $9.8 million from the first quarter 2007 level of $96.4 million to an average 2008 first quarter level of $106.2 million. Time deposits experienced the greatest average growth climbing 16.019% when comparing the two periods. The Bank's prime based loan portfolio yields decreased 12 basis points when comparing the first quarter of 2008 to that period in 2007 while the investment portfolio in the same periods gained 18 basis points. Cumulatively, yields on earning assets decreased 17 basis points from a 2007 first-quarter average of 7.10% to an average of 6.93% for the current year's first quarter. Volume growth in the bank's interest bearing deposit products coupled with the negative short-term effects resulting from the recent and rapid monetary policy changes have pressured the net interest margin downward by 29 basis points to 4.03% and caused a corresponding slight decrease in net interest income for the period. Nevertheless, this growth in liquidity going into the greater lending season is welcomed. Moreover, the shorter-lived deposit rate cycle has now begun re-pricing at substantially lower rates and will quickly result in a much lower cost of funds.
Noninterest income, exclusive of securities transactions, rose 18.93% from $354,000 in the first quarter of 2007 to $421,000 for the same period in 2008. Service charges grew $15,000 or 7.94% when comparing the first quarter of 2008 to the first quarter of 2007. Lower mortgage rates in the first quarter of 2008 fueled the appetite of borrowers as the mortgage originations department experienced a $46,000 or 56.79% gain in the category over the first quarter in 2007. Other noninterest products and services, including those of the insurance and investment departments, increased by $5,000 over the $84,000 level recorded in the first quarter 2007. Noninterest expense increased $69,000 or 4.99% to $1,451,000 during the first quarter 2008 from $1,382,000 for the same period in 2007. Salaries and benefits rose 6.87% or $58,000 while occupancy and furniture equipment expenses increased $21,000 or 11.35%. Numerous projects aimed at improved efficiencies and accelerated growth begun in 2007 and continue being phased into our company model. Despite strong growth during the first quarter and a new branch having been opened near the end of the prior year, the efforts to transform our culture to both better service and improved efficiency have resulted in a reduction in other operating expenses of $11,000 or 3.12%.
Richard M. Liles, President and Chief Executive Officer, stated, "We are extremely excited over first quarter results. We have focused so much on the best customer experience in the most cost efficient manner, and it is such a pleasure to see core growth running at over 30% on an annualized basis. Certainly we understand this will pressure margins temporarily; however, a core deposit base is one of the cornerstones of future stability and liquidity."
Bank of McKenney is a full-service community bank headquartered in McKenney, Virginia with six branches serving Southeastern Virginia and assets totaling $171.3 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, 2008 (unaudited) and December 31, 2007
March 31, December 31,
ASSETS 2008 2007
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Cash and due from banks $ 6,654,996 $ 3,666,898
Federal funds sold 5,528,000 7,557,000
Interest-bearing time deposits in banks 1,500,000 --
Securities available for sale, at fair
market value 35,013,730 28,807,961
Restricted investments 1,290,825 1,274,025
Loans, net 107,456,278 106,102,635
Land, premises and equipment, net 8,300,525 8,361,377
Other assets 5,513,490 5,421,557
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Total Assets $ 171,257,844 $ 161,191,453
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LIABILITIES
Deposits $ 137,230,391 $ 127,519,072
Borrowed Funds 13,583,334 13,666,667
Other liabilities 1,713,008 1,937,013
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Total Liabilities $ 152,526,733 $ 143,122,752
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SHAREHOLDERS' EQUITY
Total shareholders' equity $ 18,731,111 $ 18,068,701
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Total Liabilities and Shareholders'
Equity $ 171,257,844 $ 161,191,453
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BANK OF MCKENNEY AND SUBSIDIARY
Consolidated Statements of Income Summary Data
(unaudited)
Three Months Ended
March 31,
2008 2007
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Interest and dividend income $ 2,519,960 $ 2,398,055
Interest expense 1,072,893 941,397
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Net interest income $ 1,447,067 $ 1,456,658
Provision for loan losses 30,000 --
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Net interest income after provision for
loan losses $ 1,417,067 $ 1,456,658
Net noninterest expense 1,006,247 959,596
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Net income before taxes $ 410,820 $ 497,062
Income taxes 116,616 148,556
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Net income $ 294,204 $ 348,506
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Basic & diluted earnings per share $ 0.15 $ 0.18
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Weighted average shares outstanding 1,926,656 1,926,656
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