BANK OF MCKENNEY PRESS RELEASE BANK OF MCKENNEY REPORTS SOLID EARNINGS ON DOUBLE DIGIT CORE LOAN GROWTH AND EXPANDING MARGINS January 20, 2012, McKenney, Virginia. Bank of McKenney (OTCBB: BOMK.OB) today announced fourth quarter

2011 earnings of $352,000. This is a $40,000 decrease over 2010 fourth quarter earnings of $392,000. Fourth quarter earnings per basic and diluted common share for 2011 of $0.18 were reported as compared to $0.20 recorded during the 2010 fourth quarter. For the year ended December 31, 2011, net income amounted to $1,396,000 compared to net income of $1,461,000 for the same period in the prior year. Basic and diluted earnings per common share were $0.73 for the year ended December 31, 2011 compared to the prior year earnings per share of $0.77 per common share. Weighted average shares outstanding for 2011 equaled
1,893,672 while weighted average shares outstanding during 2010 equaled 1,893,546. Annual net earnings declined 4.45%, and this is primarily attributable to the opening of our newest branch coupled with the continued efforts to write down or off problematic credits in a conservative manner. In 2009 and 2010, deteriorating markets prompted the write off of certain impaired
credits deemed uncollectable as well as a significant buildup of loss reserves for potential further borrower defaults. The Bank
continued throughout 2011 to address troubled debts aggressively and add fortification to loss reserves. Return on average equity for the period ended December 31, 2011 was 6.89% compared to 7.52% in 2010. Return on average assets for the period ended December 31, 2011 was 0.70% compared to 0.79% in 2010.
Total assets amounted to $205.0 million on December 31, 2011, an increase of 6.72% or $12.9 million over the December
31, 2010 level of $192.1 million. Total loans, as of December 31, 2011, grew to $149.1 million compared to $135.0 million as of December 31, 2010. The loan portfolio was up $14.1 million or 10.44% over the December 31, 2010 level. At year-end 2011, the investment portfolio stood at $24.8 million, which represents a 8.82% decrease when compared to the $27.2 million prior year-end
balance. On December 31, 2011, interest-bearing time deposits in other banks stood at $2.0 million representing a 4.76% decrease
over the $2.1 million interest-bearing time deposit investments as of December 31, 2010. Overnight federal funds sold grew $0.9 million or 10.47% from $8.6 million on December 31, 2010 to $9.5 million on December 31, 2011. Cumulatively, these earning assets grew $12.5 million or 7.23% during 2011 and represent 90.44% of total assets. Total deposits amounted to $180.4 million as of December 31, 2011, which represents a $12.4 million or 7.38% increase from the $168.0 million level as of December 31,
2010. Total noninterest-bearing demand deposits were $30.3 million as of December 31, 2011, an increase of $3.1 million or
11.4% from the December 31, 2010 $27.2 million level. During this same period, interest-bearing deposits climbed $9.3 million or 6.61% from $140.8 million to $150.1 million. Total borrowings from the Federal Home Loan Bank of Atlanta (the "FHLB") decreased $0.4 million from $2.7 million on December 31, 2010 to $2.3 million as of December 31, 2011. There was no
additional borrowing through the FHLB during 2011.
The Bank continues to focus on delinquencies and nonperforming loans within the portfolio. In 2010, these levels had dramatically improved from the highs of the prior year. In 2011, certain credits demonstrated further deterioration as the economy struggled to maintain the stability experienced in 2010. As a result, 2011 year-end past due and non-performing ratios of 1.84% and 2.94% respectively were recorded. These ratios, at December 31, 2010, stood at 0.47% and 2.01%, respectively. Management feels comfortable that further losses will continue to be minimized by collateral positions as well as the Bank's ability and willingness to work with the borrowers whenever and wherever possible. Nevertheless, there may be further credits that need to be written down or off, and management has elected to continue building loan reserves at a more tempered pace. After these additional allocations to reserves, the allowance for loan losses as a percentage of loans outstanding held steady with a decline of only 1 basis point from the December 31, 2010 level.
The allowance for loan losses was $2,250,000 as of December 31, 2011, or 1.51% of loans outstanding, compared to
$2,050,000 as of December 31, 2010 or 1.52% of outstanding loans. Net charges to the reserve account for loan losses amounted to $625,000 as of December 31, 2011 or 0.44% of average outstanding loans for 2011. For the 2010 period, net charges to the reserve of $601,000 were taken representing 0.47% of average loans outstanding for the period. Allocations to the reserve account
of $825,000 were provisioned for 2011 compared to provision allocations of $701,000 for the same period of 2010.
The net interest income for the year ended December 31, 2011 was $8.1 million, a 12.86% increase when compared to the December 31, 2010 level of $7.2 million. The average loan portfolio increased $13.8 million to $142.1 million for the current fiscal year, representing a 10.76% hike over the average loan portfolio assets of $128.3 million for the same period in 2010. The related interest income from loans was $9.3 million in 2011, up 8.14% from the related interest income of $8.6 million in 2010. The average yield on loans decreased from 6.74% in 2010 to 6.56% in 2011. Average investments dipped only $0.1 million to
$22.9 million for the current fiscal year, representing a 0.43% decrease below the average investment portfolio of $23.0 million in
2010. The investment securities and other earning assets (such as federal funds sold) contributed $0.9 million to the interest income level of $10.2 million in 2011. The yield on earning assets was 5.68% in 2011 and 5.82% in 2010. Average demand

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