Kentucky Bancshares (KTYB) 8-K Results of Operations and Financial Condition

Exhibit 99.1

October 30, 2019

Earnings Report – September 30, 2019

Dear Shareholders:

We are pleased to announce earnings for your company.  Year-to-date net income increased to $9.7 million for the period ending September 30, 2019 compared to $9.5 million for the period ending September 30, 2018.  Year-to-date diluted earnings per share was $1.62 and $1.59, for September 30, 2019 and 2018, respectively.  Total assets were $1.08 billion as of September 30, 2019 compared to $1.05 billion as of September 30, 2018.

The increase in year-to-date net income from prior year was driven by the following factors:  an increase in net interest income primarily due to higher average loan balances offset by higher provision expense due to loan growth, and higher non-interest income lifted by gains on securities and offset by higher non-interest expense due to increases in compensation expense and processing expense.

Our strategy of disciplined loan growth paired with the pursuit of incremental income continues to bear fruit as evidenced by the increase in year-to-date earnings.  We view our primary stakeholder groups to include shareholders, customers, employees, and communities.  In addition to funding expansion efforts, higher earnings have allowed us to increase dividends to shareholders, increase products and services to customers, increase benefits for employees, and increase corporate donations to non-profits serving our communities.

Some of our recent and upcoming growth efforts include the following:

· Certificate of deposit specials and a premium money market account to provide funding for loan growth.

· Continued conversion from traditional branch lobbies with tellers and customer service representatives to open-design lobbies with universal bankers, in order to more efficiently serve our customers. 

· New loan products to provide long-term fixed rate options for small farms, residential properties, and commercial borrowers.

· Continued construction on two new branches in Lexington. We expect one to open in early 2020 and the second to open in mid-2020.

· Expansion of our lending production staff to meet loan demand in the markets we serve.

While we are pleased with earnings to date, we recognize there are increasing global economic weaknesses which could ultimately negatively impact growth rates for the communities in which we operate.  The Federal Reserve has decreased rates recently and more rate reductions could be possible in the future.  The reduction of rates, combined with uncertain economic conditions, would likely put downward pressure on earnings.  We intend to focus on meeting our customers’ loan demand needs while paying attention to declining rates and economic uncertainties.  At the same time, we will continue to pursue opportunities for profitable growth, strategic expansion, and improved efficiency to accomplish what is in the long term best interest of our shareholders, customers, and employees. As always, thank you for your continued support.

/s/Louis Prichard

Louis Prichard

President, CEO

UNAUDITED

CONSOLIDATED BALANCE SHEET

(in thousands)

					Percentage
	9/30/2019		9/30/2018		Change
Assets
Cash & Due From Banks	$	25,063	$	25,911	(3.3)	%
Federal Funds Sold		227		186	22.0
Interest Bearing Time Deposits		2,375		2,275	4.4
Securities		246,542		278,575	(11.5)
Loans Held for Sale		5,232		3,699	41.4
Loans		732,267		685,738	6.8
Reserve for Loan Losses		8,266		8,199	0.8
Net Loans		724,001		677,539	6.9
Bank Owned Life Insurance		18,020		10,136	77.8
Other Assets		61,555		54,556	12.8
Total Assets	$	1,083,015	$	1,052,877	2.9	%
Liabilities & Stockholders' Equity
Deposits
Demand	$	241,427	$	244,155	(1.1)	%
Savings & Interest Checking		361,862		375,067	(3.5)
Certificates of Deposit		225,912		201,518	12.1
Total Deposits		829,201		820,740	1.0
Repurchase Agreements		6,037		8,248	(26.8)
Other Borrowed Funds		109,890		113,782	(3.4)
Other Liabilities		20,711		8,742	136.9
Total Liabilities		965,839		951,512	1.5
Stockholders' Equity		117,176		101,365	15.6
Total Liabilities & Stockholders' Equity	$	1,083,015	$	1,052,877	2.9	%

CONSOLIDATED INCOME STATEMENT

(in thousands)

	Nine Months Ending								Three Months Ending
							Percentage								Percentage
	9/30/2019			9/30/2018			Change		9/30/2019			9/30/2018			Change
Interest Income	$	34,051		$	31,511		8.1	%	$	11,512		$	10,741		7.2	%
Interest Expense		6,743			4,742		42.2			2,202			1,799		22.4
Net Interest Income		27,308			26,769		2.0			9,310			8,942		4.1
Loan Loss Provision		825			400		106.3			375			150		150.0
Net Interest Income After Provision		26,483			26,369		0.4			8,935			8,792		1.6
Other Income		10,395			9,991		4.0			4,060			3,517		15.4
Other Expenses		26,273			25,540		2.9			8,730			8,551		2.1
Income Before Taxes		10,605			10,820		(2.0)			4,265			3,758		13.5
Income Taxes		941			1,326		(29.0)			649			480		35.2
Net Income	$	9,664		$	9,494		1.8	%	$	3,616		$	3,278		10.3	%
Net Change in Unrealized Gain (Loss) on Securities		4,839			(5,886)		182.2			(92)			(1,523)		94.0
Comprehensive Income (Loss)	$	14,503		$	3,608		302.0	%	$	3,524		$	1,755		100.8	%
Selected Ratios
Return on Average Assets		1.19	%		1.21	%				1.34	%		1.25	%
Return on Average Equity		11.42			12.67					12.44			12.95
Earnings Per Share	$	1.62		$	1.59				$	0.61		$	0.55
Earnings Per Share - assuming dilution		1.62			1.59					0.61			0.55
Cash Dividends Per Share		0.510			0.465					0.170			0.155
Book Value Per Share		19.81			17.02
Tangible Book Value Per Share		17.42			14.63

Market Price	High		Low		Close
Third Quarter '19	$	24.60	$	23.03	$	23.30
Second Quarter '19	$	24.75	$	24.00	$	24.40