Exhibit 99.1
January 31, 2018
Earnings Report – December 31, 2017
Record Earnings and Record Assets
Dear Shareholders:
We are pleased to announce record earnings and record assets for your company. Year-to-date net income was $10.7 million for the period ending December 31, 2017 compared to $8.6 million for the period ending December 31, 2016, reflecting an increase of 25.1%. Year-to-date diluted earnings per share was $3.61 for the period ending December 31, 2017 compared to $2.87 for the same period last year, an increase of 25.8%. Net income and diluted earnings per share were the highest in our history.
Total assets were $1.05 billion as of December 31, 2017 compared to $1.03 billion as of December 31, 2016, reflecting growth of 2.4%. Total ending assets was at a record high.
The increase in year-to-date net income of $2.1 million from prior year was driven by the following factors: an increase in net interest income of $1.5 million primarily due to higher securities balances, a decrease in provision for loan loss expense of $650 thousand due to declining loan balances and stable asset quality, along with an increase in other income of $1.7 million primarily due to a $1.2 million gain on the sale of a building located in Winchester, Kentucky. These increases in income were partially offset by an increase in tax expense of $2.4 million due to higher income and the signing of the Tax Cuts and Jobs Act on December 22, 2017. The new tax bill resulted in a deferred tax asset adjustment of approximately $460,000. There was also an adjustment to the tax credit investment of approximately $200,000. Both of those adjustments resulted in lower net income for 2017. Going forward, the tax bill, as it is currently written, will reduce our effective tax rate starting in 2018.
We are pleased with the 2017 results and believe we are well positioned for 2018. However, we recognize the banking industry continues to face challenges including heightened competition and enhanced supervisory oversight, as well as upward pressure on non-maturity interest rates. This environment exerts downward pressure on revenues and upward pressure on costs. In response to these challenges, we are pursuing 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. Thank you for your continued support and we look forward to the new year.
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/s/Louis Prichard |
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Louis Prichard |
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President, CEO |
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UNAUDITED
CONSOLIDATED BALANCE SHEET
(in thousands)
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| Percentage |
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| 12/31/2017 |
| 12/31/2016 |
| Change |
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Assets |
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Cash & Due From Banks |
| $ | 38,851 |
| $ | 42,052 |
| (7.6) | % |
Interest Bearing Time Deposits |
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| 1,830 |
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| 5,029 |
| (63.6) |
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Securities |
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| 318,177 |
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| 273,770 |
| 16.2 |
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Trading Assets |
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| — |
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| 5,592 |
| (100.0) |
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Loans Held for Sale |
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| 1,231 |
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| 724 |
| 70.0 |
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Loans |
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| 648,535 |
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| 656,007 |
| (1.1) |
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Reserve for Loan Losses |
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| 7,720 |
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| 7,541 |
| 2.4 |
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Net Loans |
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| 640,815 |
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| 648,466 |
| (1.2) |
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Federal Funds Sold |
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| 321 |
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| 1,198 |
| (73.2) |
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Other Assets |
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| 51,968 |
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| 51,616 |
| 0.7 |
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Total Assets |
| $ | 1,053,193 |
| $ | 1,028,447 |
| 2.4 | % |
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Liabilities & Stockholders' Equity |
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Deposits |
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Demand |
| $ | 230,241 |
| $ | 219,556 |
| 4.9 | % |
Savings & Interest Checking |
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| 391,961 |
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| 382,020 |
| 2.6 |
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Certificates of Deposit |
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| 193,071 |
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| 201,405 |
| (4.1) |
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Total Deposits |
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| 815,273 |
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| 802,981 |
| 1.5 |
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Repurchase Agreements |
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| 19,900 |
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| 20,873 |
| (4.7) |
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Other Borrowed Funds |
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| 109,270 |
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| 103,807 |
| 5.3 |
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Other Liabilities |
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| 8,421 |
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| 7,814 |
| 7.8 |
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Total Liabilities |
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| 952,864 |
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| 935,475 |
| 1.9 |
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Stockholders' Equity |
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| 100,329 |
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| 92,972 |
| 7.9 |
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Total Liabilities & Stockholders' Equity |
| $ | 1,053,193 |
| $ | 1,028,447 |
| 2.4 | % |
CONSOLIDATED INCOME STATEMENT
(in thousands)
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| Years Ending |
| Three Months Ending |
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| Percentage |
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| Percentage |
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| 12/31/2017 |
| 12/31/2016 |
| Change |
| 12/31/2017 |
| 12/31/2016 |
| Change |
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Interest Income |
| $ | 38,659 |
| $ | 36,554 |
| 5.8 | % | $ | 9,980 |
| $ | 9,164 |
| 8.9 | % |
Interest Expense |
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| 5,014 |
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| 4,426 |
| 13.3 |
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| 1,298 |
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| 1,096 |
| 18.4 |
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Net Interest Income |
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| 33,645 |
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| 32,128 |
| 4.7 |
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| 8,682 |
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| 8,068 |
| 7.6 |
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Loan Loss Provision |
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| 500 |
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| 1,150 |
| (56.5) |
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| (150) |
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| 375 |
| (140.0) |
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Net Interest Income After Provision |
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| 33,145 |
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| 30,978 |
| 7.0 |
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| 8,832 |
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| 7,693 |
| 14.8 |
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Other Income |
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| 13,808 |
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| 12,149 |
| 13.7 |
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| 2,992 |
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| 3,017 |
| (0.8) |
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Other Expenses |
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| 33,073 |
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| 33,785 |
| (2.1) |
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| 8,003 |
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| 8,232 |
| (2.8) |
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Income Before Taxes |
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| 13,880 |
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| 9,342 |
| 48.6 |
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| 3,821 |
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| 2,478 |
| 54.2 |
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Income Taxes |
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| 3,163 |
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| 773 |
| 309.2 |
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| 1,243 |
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| 193 |
| 544.0 |
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Net Income |
| $ | 10,717 |
| $ | 8,569 |
| 25.1 | % | $ | 2,578 |
| $ | 2,285 |
| 12.8 | % |
Net Change in Unrealized Gain (Loss) on Securities |
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| 123 |
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| (1,315) |
| (109.4) |
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| (1,698) |
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| (4,558) |
| (62.7) |
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Comprehensive Income (Loss) |
| $ | 10,840 |
| $ | 7,254 |
| 49.4 | % | $ | 880 |
| $ | (2,273) |
| (138.7) | % |
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Selected Ratios |
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Return on Average Assets |
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| 1.04 | % |
| 0.86 | % |
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| 1.01 | % |
| 0.91 | % |
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Return on Average Equity |
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| 10.93 |
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| 9.10 |
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| 10.24 |
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| 9.60 |
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Earnings Per Share |
| $ | 3.61 |
| $ | 2.87 |
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| $ | 0.87 |
| $ | 0.77 |
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Earnings Per Share - assuming dilution |
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| 3.61 |
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| 2.87 |
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| 0.87 |
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| 0.77 |
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Cash Dividends Per Share |
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| 1.16 |
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| 1.08 |
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| 0.29 |
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| 0.27 |
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Book Value Per Share |
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| 33.76 |
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| 31.27 |
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Market Price |
| High |
| Low |
| Close |
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Fourth Quarter '17 |
| $ | 46.65 |
| $ | 41.70 |
| $ | 46.05 |
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Third Quarter '17 |
| $ | 41.70 |
| $ | 39.40 |
| $ | 41.70 |
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