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MCKENNEY, Va., June 2, 2015 /PRNewswire/ -- Bank of McKenney (OTCBB: BOMK) today announced earnings of $385,000 for the three-month period ending March 31, 2015, a 12.8% increase compared to net income of $340,000 for the same period in 2014.  Basic and diluted earnings per share of $0.20 were recorded for the three months ended March 31, 2015 compared to $0.18 per share recorded for the three months ended March 31, 2014. 

Richard M. Liles, President and Chief Executive Officer, stated, "We achieved a respectable first quarter with moderate loan and deposit growth. We are focused on improving our productivity and capital ratios, while maintaining modest growth expectations for 2015."

Return on average equity on an annualized basis during the first quarter of 2015 was 6.42% as compared to 6.20% for the first quarter of 2014.  Return on average assets during the first quarter of 2015, on an annualized basis, increased to 0.71% from the prior year level of 0.64%.  For the rolling twelve month period ended March 31, 2015, return on average equity was 8.18% and return on average assets was .88%.

Tier 1 leverage capital was 11.00% and total regulatory capital was 14.50% as of March 31, 2015 compared to 10.84% and 14.42% respectively at December 31, 2104.

Balance Sheet

At the end of the first quarter, total assets were $219.8 million representing a $3.7 million or 1.69% increase over the December 31, 2014 level of $216.1 million.  Total loans increased by 3.38% or $5.5 million to the March 31, 2015 balance of $166.5 million.  At March 31, 2015, the investment portfolio was $26.1 million, a $.9 million or 3.61% increase in comparison to the December 31, 2014 level of $25.2 million.  Overnight federal funds sold decreased from $8.8 million on December 31, 2014 to $6.1 million on March 31, 2015.  Cumulatively, earning assets grew $3.6 million for the first quarter or 1.86% and represent 90.66% of total assets. Total deposits amounted to $192.0 million as of March 31, 2015, which represents a $2.9 million or 1.54% increase from the $189.2 million level as of December 31, 2014.  Total time deposits decreased from $84.1 million to $81.9 million during the quarter while demand deposits increased $5.1 million to $110.1 million. Total capital at March 31, 2015 exceeded $24.1 million, an increase of 1.87% from the December 31, 2014 balance.

Allowance for Loan Losses

The allowance for loan losses was $2,303,000 as of March 31, 2015, unchanged from the balance at December 31, 2014. This balance represented 1.38% of total loans outstanding at March 31, 2015 compared to 1.45% of outstanding loans at 12-31-2014. During the quarter, a significant long-time customer in the real estate management and development business declared Chapter 11 bankruptcy very unexpectedly. All of this customer's loans were modified at that time to interest only and their rates were reduced, resulting in a significant increase in the level of TDRs at March 31, 2015 compared to December 31, 2014. Exposure to this customer is approximately $1.5 million secured by multiple residential rental properties and undeveloped commercial lots. Collateral value is being evaluated and we expect to take an impairment charge in the second quarter when sufficient information is available to make a reasonable estimate.  The loans were not past due 30 days as of March 31, 2015, but became past due greater than 30 days during May and were placed on non-accrual status at that time.  The Bank expects much greater clarity on the status of this bankruptcy proceeding by the end of July.   

On March 31, 2015, the delinquency and nonperforming ratios as a percentage of total assets stood at .77% and 3.63%, respectively.  These ratios at December 31, 2014, stood at 0.60% and 2.83%, respectively. Due to the customer discussed in the previous paragraph, the delinquency ratio is expected to increase substantially in the second quarter.

Quarterly Results

Net interest income decreased .77% or $17,000 to $2.2 million in the first quarter of 2015 from the comparable period in 2014. Interest income on loans and investments decreased during the quarter, but increased loan volume and lower interest expense due to rate changes and fewer interest-bearing deposits provided essentially level net interest income. There was no provision for loan losses during the quarter compared to a provision of $125,000 in the same period in 2014. Noninterest income was $18,500 less than March 2014 and noninterest expenses were $18,000 less for a total increase in net noninterest expense of $500. Income taxes returned to a normal level in 2015 after enjoying a one-time benefit in the first quarter of 2014.   

There were no sales of securities or other real estate owned during the period. There were no significant expenses or write downs related to other real estate owned as well. Service charges on deposits were relatively unchanged during the period compared to the same period in 2014. Origination fees for secondary market mortgages were up approximately $10,000. Income recognized from the Bank's investment in Bankers Insurance, LLC was lower by approximately $50,000 while income from sales of non-deposit investments increased by approximately $10,000.  Salaries and benefits increased $75,000 to $1.3 million, while occupancy expenses decreased $17,000.  Other operating expenses decreased $47,000 to $547,000 during the first quarter of 2015 compared to the same quarter last year.  Restructuring the Bank's technology infrastructure during 2014 contributed to the reduction in noninterest expenses in 2015.

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.

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SOURCE Bank of McKenney