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MCKENNEY, Va., April 22, 2014 /PRNewswire/ -- Bank of McKenney (OTCBB: BOMK) today announced earnings of $341,000 for the three-month period ending March 31, 2014, a 7.84% decrease when compared to net income of $370,000 for the same period in 2013.  Basic and diluted earnings per share of $0.18 were recorded for the three months ended March 31, 2014 compared to $0.20 per share recorded for the three months ended March 31, 2013. 

Richard M. Liles, President and Chief Executive Officer, stated, "We posted results reflecting a successful first quarter and feel that we are beginning to experience the end of the 'great recession'.  I am extremely proud of our institution, its dedicated employees, loyal patrons and steadfast investors."

Return on average equity on an annualized basis during the first quarter of 2014 was 6.20% as compared to 7.00% for the first quarter of 2013.  Return on average assets during the first quarter of 2014, on an annualized basis, decreased 5 basis points to 0.64% from the prior year level of 0.69%. 

Balance Sheet

At the end of the first quarter, total assets were $222.2 million, representing an $8.8 million or 4.12% increase over the December 31, 2013 level of $213.4 million.  Total deposits amounted to $196.3 million as of March 31, 2014, which represents an $8.3 million or 4.41% increase from the $188.0 million level as of December 31, 2013.  On an annualized basis, deposits grew during the first quarter at a rate of 17.66%.  During the same period, total loans declined by 0.32% or $0.5 million to the March 31, 2014 balance of $157.5 million.  Loans, on an annualized basis, tapered off at a rate of 1.27%.  At March 31, 2014, the investment portfolio, including time deposits in other banks, was $30.5 million, a $2.9 million or 10.51% increase in comparison to the December 31, 2013 $27.6 million level.  Overnight federal funds sold increased 138.46% from $5.2 million on December 31, 2013 to $12.4 million on March 31, 2014.  Cumulatively, earning assets grew $9.6 million for the first quarter or 20.13% on an annualized basis and represent 90.19% of total assets.

Allowance for Loan Losses

The allowance for loan losses was $2,677,000 as of March 31, 2014, or 1.70% of loans outstanding, compared to $2,550,000 as of December 31, 2013 or 1.61% of outstanding loans.  Net recoveries to the reserve account for loan losses amounted to $2,000 as of March 31, 2014.  For the first quarter of 2013, net charges to the reserve of $35,000 were taken representing 0.02% of average loans outstanding for the period.  Allocations to the reserve account of $125,000 were provisioned for the first quarter of 2014 compared to provision allocations of $75,000 for the same period of 2013. 

On March 31, 2014, the delinquency and nonperforming ratios as a percentage of total assets stood at 1.14% and 2.16%, respectively.  These ratios, at December 31, 2013, stood at 0.97% and 1.81%, respectively.  While these ratios are up slightly, Management expects decreases in nonperforming assets during the remainder of the year with minimal losses.  As such, provision allocations should be returning to pre-recession levels.

Quarterly Results

Net interest income increased 3.88% or $84,000 to $2,248,000 in the first quarter of 2014 from $2,164,000 in the comparable period in 2013.  Average loans during the first quarter of 2014, when compared to the same period in 2013, grew to $158.5 million from $152.5 million, an increase of 3.93%.  The average investment portfolio including time balances with banks increased from a first quarter 2013 average balance of $23.4 million to a $28.0 million average during the first quarter of 2014, or an increase of 19.66%.  Average deposit balances have increased 0.37% or $0.7 million from the first quarter 2013 level of $191.3 million to an average 2014 first quarter level of $192.0 million. 

Non-interest bearing demand deposits jumped 9.19% or $3.3 million while interest bearing demand and savings deposits also grew a robust $3.5 million or 6.15% when comparing March 31, 2014 to March 31, 2013.  Time deposits on average experienced a decline of 6.29% or $6.2 million when comparing the two periods.   Yields on earning assets decreased 11 basis points from a 2013 first-quarter average of 5.33% to an average of 5.22% for the current year's first quarter.  On the liability side of the balance sheet, the cost of funds fell to 0.72% for the first quarter of 2014 representing a decrease of 19 basis points below the first quarter 2013 level of 0.91%.  The resulting net interest margin for the first quarter of 2014 was expanded by 6 basis points to 4.65% when comparing it to the 4.59% margin recorded for the first three months of 2013.

Noninterest income, exclusive of securities transactions, stood at the $441,000 level in the first quarter of 2014 and the first quarter of 2013.  Service charges declined $5,000 or 2.20% when comparing the first quarter of 2014 to the first quarter of 2013.  A decline in mortgage demand in the first quarter of 2014 resulted in reductions in the mortgage originations department of 50.00% when comparing the $44,000 in revenue recognized during the first quarter of 2014 to the revenue of $88,000 recognized during the first quarter in 2013.  Other non-interest products and services, including those of the insurance and investment departments and holdings in bank owned life insurance, increased $49,000 or 38.89% to $175,000 when comparing the first quarter of 2014 to the same period in 2013.  Noninterest expense increased $108,000 or 5.39% to $2,112,000 during the first quarter 2014 from $2,004,000 for the same period in 2013.  Salaries and benefits rose 5.06% or $59,000 while occupancy and furniture equipment expenses increased $14,000 or 5.04%.  Other operating expenses increased $35,000 or 6.27% to $593,000 during the first quarter of 2014.  The major contributing factors in noninterest expenses were the costs associated with writing down certain OREO properties held along with expenses relating to the implementation and training on a host of new e-banking services that have already begun to roll out.

Bank of McKenney is a full-service community bank headquartered in McKenney, Virginia with seven 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.

SOURCE Bank of McKenney