Exhibit 99.1
February 4, 2008
Quarterly Report
Fourth Quarter 2007
For the fourth quarter of 2007, earnings for your company were down
somewhat. We reported a $1.44 million profit for the fourth quarter of
2007 compared with $1.76 million during the fourth quarter of 2006. For
the full year, earnings rose to $6.59 million from $6.49 million the
prior year, a modest 1.5% increase. Strong earnings growth during the
first half of 2007 fell due to market pressure during the last six
months.
Our regional economy has been weakening, much like our national economy.
The sudden and unexpected problems of major financial institutions have
been widely publicized, particularly the problems tied to sub-prime
mortgage loans and a decline in the value of residential real estate.
Unlike these institutions, we do not have any sub-prime loan exposure.
However, we do finance residential construction, and newly-built homes
are not moving as quickly as they did a year ago. Therefore, this is a
more difficult time for builders generally. Additionally, it is a more
challenging time for some of our other customers and therefore, for us.
We have seen a drop in loan demand and some increase in late payments.
For example, our loan portfolio is 6% smaller than it was a year ago.
Our hope is for this period of economic weakness to be brief and we look
forward to a time when it will be less challenging for Kentucky Bank to
grow and for the earnings of our company to grow.
We are still actively improving our facilities. We are proud to announce
the opening of our newly refurbished Bourbon Banking Center. This new
building consolidates our main office and a small branch building in
Paris. The building provides plenty of customer parking on site, and
expanded drive-through capacity.
Our new main office in Morehead is nearing completion and we believe this
development will help us to continue to build market share in this
attractive region. We have also purchased a new site in Nicholasville
and are planning a new branch office in this growing market.
We named two new Regional Managers in the fourth quarter. Pam Slone
assumed the responsibility of managing our Harrison Region. Brandon
Eason was promoted to become Jessamine Regional Manager. Shane Foley and
Ben Caudill moved into the Commercial Lending Group. We believe that we
can best ensure our future success by developing and promoting employees
and officers whenever possible.
In the near term we face a challenging environment. Our plans are to
address today's marketplace conservatively, while we prepare for a
stronger economy in the future typically enjoyed in Central Kentucky.
That preparation is evidenced by our attractive new facilities, our
expanded offering of electronic convenience services and the training of
our employees to offer premier customer service. We remain dedicated to
building our business and producing good returns for our shareholders.
Louis Prichard
President, CEO
UNAUDITED
CONSOLIDATED BALANCE SHEET
Percentage
12/31/2007 12/31/2006 Change
<s> <c> <c> <c>
Assets
Cash & Due From Banks $ 15,445,596 $ 14,905,672 3.6%
Securities 147,749,546 127,890,612 15.5
Loans Held For Sale - - n/m
Loans 417,388,048 444,150,390 -6.0
Reserve for Loan Losses 4,878,732 4,991,277 -2.3
Net Loans 412,509,316 439,159,113 -6.1
Federal Funds Sold 10,361,000 4,106,000 152.3
Other Assets 44,873,383 43,480,906 3.2
Total Assets $ 630,938,841 $ 629,542,303 0.2%
Liabilities & Stockholders' Equity
Deposits
Demand $ 88,520,944 $ 87,503,263 1.2%
Savings & Interest Checking 158,228,869 159,240,794 -0.6
Certificates of Deposit 239,255,404 222,063,862 7.7
Total Deposits 486,005,217 468,807,919 3.7
Repurchase Agreements 5,976,986 9,627,533 -37.9
Other Borrowed Funds 71,968,116 88,946,663 -19.1
Other Liabilities 8,318,665 6,035,134 37.8
Total Liabilities 572,268,984 573,417,249 -0.2
Stockholders' Equity 58,669,857 56,125,054 4.5
Total Liabilities & Stockholders' Equity $ 630,938,841 $ 629,542,303 0.2%
CONSOLIDATED INCOME STATEMENT
Twelve Months Ending Three Months Ending
Percentage Percentage
12/31/2007 12/31/2006 Change 12/31/2007 12/31/2006 Change
<s> <c> <c> <c> <c> <c> <c>
Interest Income $39,219,086 $35,592,847 10.2% $9,577,575 $9,803,621 -2.3%
Interest Expense 19,034,105 16,718,208 13.9 4,659,213 4,765,854 -2.2
Net Interest Income 20,184,981 18,874,639 6.9 4,918,362 5,037,767 -2.4
Loan Loss Provision 1,000,000 475,000 110.5 350,000 141,000 148.2
Net Interest Income After Provision 19,184,981 18,399,639 4.3 4,568,362 4,896,767 -6.7
Other Income 8,150,125 7,471,110 9.1 2,011,523 2,071,043 -2.9
Other Expenses 18,345,022 16,916,884 8.4 4,648,492 4,585,737 1.4
Income Before Taxes 8,990,084 8,953,865 0.4 1,931,393 2,382,073 -18.9
Income Taxes 2,404,132 2,467,810 -2.6 495,094 618,848 -20.0
Net Income 6,585,952 6,486,055 1.5 1,436,299 1,763,225 -18.5
Net Change in Unrealized Gain (loss)
on Securities 564,706 462,645 22.1 676,705 (30,721) 2302.7
Comprehensive Income $ 7,150,658 $ 6,948,700 2.9% $2,113,004 $1,732,504 22.0%
Selected Ratios
Return on Average Assets 1.04% 1.09% 1.00% 1.11%
Return on Average Equity 11.6 12.8 11.0 12.7
Earnings Per Share $ 2.31 $ 2.35 $ 0.51 $ 0.62
Earnings Per Share - assuming dilution 2.30 2.34 0.51 0.62
Cash Dividends Per Share 1.08 1.00 0.27 0.25
Book Value Per Share 20.59 19.59
Market Price High Low Close
Fourth Quarter '07 $34.00 $31.75 $31.75
Third Quarter '07 $34.00 $30.50 $33.50