Exhibit 99.1
Earnings Report – December 31, 2019
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 $13.1 million for the period ending December 31, 2019 compared to $12.4 million for the period ending December 31, 2018, reflecting an increase of 5.8%. Year-to-date diluted earnings per share was $2.21 and $2.09, for December 31, 2019 and 2018, respectively. Total assets were $1.11 billion as of December 31, 2019 compared to $1.09 billion as of December 31, 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 funding cost, and by higher provision expense due to loan growth, and higher non-interest income lifted by gains on securities combined with lower tax expense due to changes to corporate state income tax rates.
In addition to the loan growth year over year, included in the balance sheet change was a purposeful increase in our loan to deposit ratio to 88% as of December 31, 2019 from 81% as of December 31, 2018. This change reflects the desire to have proportionally more of our earning assets in loans which are higher yields relative to securities and other investments.
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 and has allowed us to invest in your company. As an example, we opened our newest branch, located on the corner of Polo Club and Man-O-War in Lexington, on January 6, 2020. In addition, we are currently constructing a branch near the corner of Tates Creek and Man-O-War in Lexington which we anticipate opening in the third quarter of 2020. Although requiring additional capital, increasing the Bank’s presence in our largest market is vital to our long-term growth strategy.
While we are pleased with year-to-date net income, there is pressure on future earnings. Specifically, the Federal Reserve’s reductions in interest rates, has compressed net interest margin while non-interest expenses have increased in accordance with our long-term growth. These factors, combined with increasing global economic weaknesses and geopolitical uncertainty, could negatively impact growth rates and ultimately earnings for your company.
For 2020, we plan 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.
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/s/Louis Prichard | |
Louis Prichard | |
President, CEO | |
