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Bank Of McKenney Reports Another Successful Year

MCKENNEY, Va., Feb. 24, 2017 /PRNewswire/ -- Bank of McKenney (the "Bank") (OTCBB:BOMK.OB) today announced net income of $1.7 million, or $0.90 earnings per common share, for the year ended December 31, 2016 equal to net income and EPS reported for 2015. While the net results were comparable, certain income and expense amounts varied widely from 2015 to 2016. Net interest income for 2016 was lower by $712,000 due to lower average loan balances for the year, Provision for Loan Loss reflected a $264,000 recovery of the Allowance which was a $564,000 improvement over $300,000 expense in 2015, and Net Non-interest Expense was reduced by $157,000 in 2016 due to cost reductions in employee costs. Return on average equity was 6.74% for the year ended December 31, 2016 compared to 7.03% for the same period in 2015 and return on average assets was 0.78% compared to 0.79% in 2015. In the fourth quarter of 2016, the Bank recognized net income of $623,000 compared to $517,000 in the same period in 2015. 

Richard M. Liles, President and CEO stated, "2016 was a very unique but profitable year for the Bank. Competitive pressures in our markets resulted a loss of loans due to underwriting terms we were unwilling to match.  We were disciplined in our approach to lending and maintained excellent margin and credit quality even though average loans for the year declined. We recovered to end the year with $300,000 total reduction in gross loans and have added loans in the first 6 weeks of 2017 to bring total current loans to $163 million. Lowering our overhead costs in 2016 was a top priority and we achieved significant reductions in several areas. Improving our capital position in 2016 was achieved as total equity increased 4% and regulatory Total Capital increased almost 9%. We have initiatives in place for modest growth in 2017 with continued improvements in efficiency."

2016 Results

Net interest income for the year ended December 31, 2016 was $8.4 million, compared to $9.1 million in 2015. Average loan balances were $9 million lower in 2016 and many loans were refinanced at lower rates. We were willing to meet competitive pricing pressures but would not reduce our underwriting standards. We were able to recover the loan balances in the second half of 2016 and that momentum has carried over to 2017. Provision for loan losses decreased by $564,000 in 2016 compared to 2015 due to improved credit quality, lack of loan growth and a recovery in our Allowance for an impaired loan with a significant specific reserve that was paid out during the year. Noninterest income was $61,000 lower in 2016 primarily due to lower gains on the sale of Other Real Estate Owned and reduced income on secondary market mortgage originations. Noninterest expense was reduced by $220,000 predominantly in salaries and benefits. Full Time Equivalent employees have decreased from 78 to 65 in the past two years, primarily through attrition. Income tax expense was consistent with 2015.

Net interest margins declined slightly to 4.44% in 2016 from 4.60% in 2015. Yield to average earning assets was 4.87% for 2016 compared to 5.15% in 2015.

Asset Quality and Allowance for Loan Losses

Loan quality was an issue that continued to demand management's attention in 2016. As previously disclosed, a significant borrower unexpectedly declared bankruptcy in the first quarter of 2015 and the Bank has been working closely with the borrower attempting to minimize our losses. The borrower's loans at 12-31-2016 consisted of ten loans with a recorded balance of $690,000 compared to $1.25 million at 12-31-2015. Troubled Debt Restructurings, Nonaccruals and loans past due 90 days or more have all been reduced by equal amounts. All of the loans are secured by residential rental properties or undeveloped commercial lots. As of December 31, 2016 we had no impairment reserves relating to these loans, having charged off the reserves previously established. In addition to these loans, the Bank charged off virtually all of its remaining specific reserves on impaired loans and the remaining Allowance for Loan and Lease Losses is basically a General Reserve.  Total impaired loans at 12-31-2016 were $5.3 million with specific impairments of $105,500 compared to $6.8 million with specific impairments of $1 million as of 12-31-2015. Other Real Estate Owned decreased during the year by $460,000 to a year-end balance of $375,000.

The Allowance for Loan Losses was $1.6 million as of December 31, 2016, or 1.00% of loans outstanding, compared to $2.6 million as of December 31, 2015 or 1.65% of outstanding loans.  Additions (Recoveries) to the Allowance of ($264,000) were provided for in 2016 compared to provision charges of $300,000 for the same period of 2015. 

Balance Sheet

Total assets grew $4.5 million (2%) totaling $223 million at year end compared to $218 million at December 31, 2015. Net Loans increased 740,000 but this was due to the reduction in the ALLL. Significant personnel resources were reassigned to address loan growth in 2016. After losing loans in the last quarter of 2015 and the first quarter of 2016, the Bank added $5 million in loans in the last half of 2016 and has added another $4 million in the first 6 weeks of 2017.We are very competitive in our rate structures, but will not sacrifice prudent underwriting standards to achieve loan growth. Investment securities increased $3.5 million and investments in Certificates of Deposits with other banks and a demand deposit money market account increased $1 million to $8.5 million in 2016.

Total deposits grew $4 million or 2% in 2016. Noninterest bearing demand deposits grew $4.7 million (10%) to $50.5 million, interest bearing demand deposits were down $676,000 to $44.6 million, savings deposits grew $1.9 million while time deposits declined $1.9 million.  Borrowed funds were reduced $333,000 during the year in accordance with the borrowing agreement.

Total equity at the end of 2016 was $25.8 million, an increase of $954,000 or 4%. This increase was accomplished while maintaining the dividend payment of $.28 per share which amounted to $540,000 returned to our investors. One of the goals of 2016 was to increase capital ratios required for future growth.

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.

 









BANK OF MCKENNEY AND SUBSIDIARY

Consolidated Balance Sheets Summary Data

December 31, 2016 (unaudited) and December 31, 2015














December 31,


December 31,

ASSETS





2016


2015









Cash and due from banks





$   11,949,200


$     9,357,265

Federal funds sold





5,603,000


7,815,000

Interest-bearing time deposits in banks





3,472,000


3,472,000

Securities available for sale, at fair market value





26,944,603


23,369,100

Restricted investments





632,975


631,075

Loans, net





156,014,531


155,273,139

Land, premises and equipment, net





8,342,269


8,667,268

Other real estate owned





374,879


834,786

Other assets





9,484,998


8,886,837

    Total Assets





$ 222,818,455


$ 218,306,470









LIABILITIES
















Deposits





194,667,685


$ 190,667,814

Borrowed Funds





666,666


1,000,000

Other liabilities





1,692,865


1,801,030

    Total Liabilities





$ 197,027,216


$ 193,468,844









SHAREHOLDERS' EQUITY
















Total shareholders' equity





$   25,791,239


$   24,837,626

    Total Liabilities and Shareholders' Equity





$ 222,818,455


$ 218,306,470









 

 

BANK OF MCKENNEY AND SUBSIDIARY

Consolidated Statements of Income Summary Data

(All unaudited except December 31, 2016)










Three Months Ended


Years Ended


December 31,


December 31,


2016


2015


2016


2015









Interest and dividend income

$ 2,292,716


$ 2,442,281


$     9,192,819


$     9,971,646

Interest expense

198,603


214,058


814,776


881,688

  Net interest income

$ 2,094,113


$ 2,228,223


$     8,378,043


$     9,089,958

Provision for loan losses

(264,106)


-


(264,106)


299,500

Net interest income after provision for loan losses

$ 2,358,219


$ 2,228,223


$     8,642,149


$     8,790,458

Non interest income

$    472,923


$    546,988


$     1,807,710


$     1,868,759

Non interest expense

1,920,165


2,024,514


7,959,080


8,177,669

  Net non interest expense

$ 1,447,242


$ 1,477,526


$     6,151,370


$     6,308,910

Net income before taxes

$    910,977


$    750,697


$     2,490,779


$     2,481,548

Income taxes

287,816


233,127


765,878


762,687

Net income

$    623,161


$    517,570


$     1,724,901


$     1,718,861









Dividends declared on preferred shares

$        8,637


$        8,770


$            8,637


$            8,770

Income available to common shareholders

$    614,524


$    508,800


$     1,716,264


$     1,710,091









Basic earnings per common share

$          0.33


$          0.27


$              0.91


$              0.91

Diluted earnings per common share

$          0.32


$          0.27


$              0.90


$              0.89









 

 

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