Exhibit 99.1
October 28, 2008
Quarterly Report
Third Quarter 2008
For the third quarter of 2008, we reported a $1.36 million profit, compared
with $1.67 million for the third quarter of 2007, a decline of 18.8%. On a
year to date basis, earnings for the nine months ended September 30, 2008,
were $4.03 million as compared to the $5.15 million earned through September
30, 2007. This represented a 21.6% drop in earnings on a year to date basis.
Assets totaled $636.7 million on September 30, 2008, a 4.0% increase over the
September 30, 2007 $612.0 million figure.
Total loans have increased from $418.8 million at the end of June 30, 2008 to
$421 million at the end of September 30, 2008. While we do not know that
this trend will continue considering the economy, we are pleased by this
increase in loan demand. The global, national, and regional economies have
certainly undergone dramatic changes since our last quarterly report. As we
have all been made aware by the media, the economy is slipping into what is
now defined as a recession, and the ultimate question remains as to how long
it will last and how deep it will be.
The markets that Kentucky Bank serves are certainly impacted by these times,
as well. Home sales continue to slide, retail sales are on the decline, and
unemployment numbers continue to increase. The management of the bank
continues to be very aggressive in working on credit issues as they arise. As
a prudent bank, it is imperative that we take this posture during these
uncertain economic times.
Additionally, this is an environment in which we should take aggressive steps
to control our expenses, as we prepare our budget for 2009. Along those
lines, management has made a decision to terminate our Defined Benefit Plan
as of December 31, 2008. These plans have become expensive to administer and
because regulations relating to these plans have become so burdensome, we
concluded it to be in the long term best interest of the bank, the
shareholders, and the employees to terminate the plan. Our estimates
anticipate that we will save approximately $4 million over a ten year period
as a result.
We always want to ensure that our bank is positioned to accommodate future
growth when the economy does rebound. Along those lines, I am happy to say
that progress is being made on the construction of our new Nicholasville
office. We are coming in on budget, and may have this office on line prior to
our anticipated date in the early spring. As always, we continue to look at
new products and services, as well as focusing on the delivery of premier
customer service. By continuing to add value to our banking customer
relationships, we will provide the appropriate return to our shareholders.
It is with very mixed emotions that we are announcing, as of January 2009,
Chairman Buckner Woodford IV has decided to retire. However, we are fortunate
to have him continue in his position as Chairman of the Board. Buck's vision
and leadership through the last 37 years have helped contribute to the growth
and profitability of the bank. Without question, Buck's tenure at Kentucky
Bank has proven to be of tremendous benefit to our customers and our
shareholders. He will now have the opportunity to pursue other activities
with that same energy and insight. Beyond that, I personally want to thank
Buck for all that he has done for Kentucky Bank and Kentucky Bancshares, and
I look forward to his continued advice and counsel as we move forward.
As always, we appreciate your support and confidence.
/s/Louis Prichard
Louis Prichard
President, CEO
UNAUDITED
CONSOLIDATED BALANCE SHEET
Percentage
9/30/2008 9/30/2007 Change
<s> <c> <c> <c>
Assets
Cash & Due From Banks $ 14,191,970 $ 13,420,164 5.8%
Securities 145,135,199 125,596,032 15.6
Loans Held For Sale 40,000 254,400 -84.3
Loans 420,552,066 423,130,006 -0.6
Reserve for Loan Losses 5,757,658 4,781,278 20.4
Net Loans 414,794,408 418,348,728 -0.8
Federal Funds Sold 14,676,000 9,188,000 59.7
Other Assets 47,841,582 45,182,566 5.9
Total Assets $636,679,159 $611,989,890 4.0%
Liabilities & Stockholders' Equity
Deposits
Demand $ 93,859,909 $ 87,409,373 7.4%
Savings & Interest Checking 145,482,377 132,269,814 10.0
Certificates of Deposit 232,236,700 243,097,465 -4.5
Total Deposits 471,578,986 462,776,652 1.9
Repurchase Agreements 8,656,381 11,506,568 -24.8
Other Borrowed Funds 95,173,186 73,058,675 30.3
Other Liabilities 5,558,139 7,156,770 -22.3
Total Liabilities 580,966,692 554,498,665 4.8
Stockholders' Equity 55,712,467 57,491,225 -3.1
Total Liabilities & Stockholders' Equity $636,679,159 $611,989,890 4.0%
CONSOLIDATED INCOME STATEMENT
Nine Months Ending Three Months Ending
Percentage Percentage
9/30/2008 9/30/2007 Change 9/30/2008 9/30/2007 Change
<s> <c> <c> <c> <c> <c> <c>
Interest Income $26,716,449 $29,641,511 -9.9% $ 8,788,176 $ 9,801,190 -10.3%
Interest Expense 11,682,880 14,374,892 -18.7 3,688,165 4,653,672 -20.7
Net Interest Income 15,033,569 15,266,619 -1.5 5,100,011 5,147,518 -0.9
Loan Loss Provision 1,500,000 650,000 130.8 600,000 330,000 81.8
Net Interest Income After Provision 13,533,569 14,616,619 -7.4 4,500,011 4,817,518 -6.6
Other Income 6,011,025 5,981,218 0.5 1,976,361 2,043,727 -3.3
Other Expenses 14,352,348 13,539,146 6.0 4,736,201 4,590,720 3.2
Income Before Taxes 5,192,246 7,058,691 -26.4 1,740,171 2,270,525 -23.4
Income Taxes 1,157,308 1,909,038 -39.4 383,821 600,577 -36.1
Net Income $ 4,034,938 $ 5,149,653 -21.6 $ 1,356,350 $ 1,669,948 -18.8
Net Change in Unrealized Gain (loss)
on Securities (1,589,827) (111,999) -1319.5 (739,557) 1,268,265 -158.3
Comprehensive Income $ 2,445,111 $ 5,037,654 -51.5% $ 616,793 $ 2,938,213 -79.0%
Selected Ratios
Return on Average Assets 0.85% 1.08% 0.85% 1.08%
Return on Average Equity 9.3 12.2 9.4 12.0
Earnings Per Share $ 1.44 $ 1.80 $ 0.49 $ 0.58
Earnings Per Share - assuming dilution 1.44 1.79 0.49 0.58
Cash Dividends Per Share 0.84 0.81 0.28 0.27
Book Value Per Share 20.28 20.15
Market Price High Low Close
Third Quarter '08 $27.25 $24.00 $26.00
Second Quarter '08 $30.00 $27.00 $27.25