Exhibit 99.1
July 23, 2009
Quarterly Report
Second Quarter 2009
For the second quarter ended June 30, 2009, earnings for your company
were down 1.0% when compared to the June 30, 2008 earnings. We reported
$1.47 million in profit for the second quarter of 2009, compared to $1.49
million for the second quarter of 2008. On a year to date basis, we
earned $2.6 million compared to $2.7 million for the six months ended
June 30, 2008. However, as it relates to our earnings per share, we are
pleased to announce that on a fully diluted basis, earnings per share for
your company increased from $0.95 per share for the first six months of
2008 to $0.96 per share through June 30, 2009. One very significant
event that took place in the second quarter of 2009 that impacted our
earnings, was the Special Assessment that all FDIC insured banks were
required to expense by June 30, 2009. This additional assessment was not
made formal until May of this year and cost Kentucky Bank approximately
$300 thousand through the first six months of this year. The Chairman of
the FDIC has also indicated that there may be another Special Assessment
that could take place by year end 2009 or perhaps in the first quarter of
2010. This, of course, will be based upon the need for the banking
industry to replenish the diminishing bank insurance fund. Additionally,
we are pleased to announce that total deposits of Kentucky Bank reached a
new high of $494.1 million, which represents an 8.5% increase in deposits
over the period ended June 30, 2008.
As has been said in prior quarterly reports, the state of the national
and local economies still loom large as we prepare for the second half of
2009 and even into 2010. Many economists are still predicting that the
picture will not be much brighter any time soon. The unemployment rate
nationally is approximately 9.5% and in Kentucky the unemployment rate is
10.6% at the date of this letter. The housing market continues to be
difficult in the markets that we serve; the manufacturing sector
continues to face difficulties, and retailers have been faced with
diminishing sales. All of these factors indicate that for the remainder
of 2009, the economy will continue to face serious difficulties.
As has been mentioned earlier, the bank continues to evaluate every
operating area to ensure that we are working in the most efficient manner
possible. We have completed the consolidation of our downtown Cynthiana
location, and we will be closing our North Middletown office on July 31,
2009. Along with the termination of our Defined Benefit Plan, we believe
that these difficult but necessary decisions should provide us some
significant cost savings.
In today's world we are looking for every smart opportunity to grow our
bank in a conservative yet profitable manner. Since March 31, 2009 our
total loans have increased slightly from $415.6 million to $417.6 million
as of June 30, 2009. Albeit this is not significant growth, we believe
in today's environment that to grow loans in a prudent manner with an
emphasis on credit quality, is in the long term best interest of our
shareholders.
As the discussion continues as to how long our economy will continue to
face these uncertain times, the Management and Board of your company are
committed to the long term best interests of our customers, employees,
and shareholders. As always, we appreciate your support.
/s/Louis Prichard
Louis Prichard
President, CEO
UNAUDITED
CONSOLIDATED BALANCE SHEET
Percentage
6/30/2009 6/30/2008 Change
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Assets
Cash & Due From Banks $ 13,675,111 $ 15,226,169 -10.2%
Securities 172,075,329 160,963,442 6.9
Loans Held For Sale 0 80,000 n/m
Loans 417,555,563 418,819,532 -0.3
Reserve for Loan Losses 6,372,929 5,393,760 18.2
Net Loans 411,182,634 413,425,772 -0.5
Federal Funds Sold 25,000 98,000 -74.5
Other Assets 51,716,490 46,711,286 10.7
Total Assets $ 648,674,564 $ 636,504,669 1.9%
Liabilities & Stockholders' Equity
Deposits
Demand $ 95,083,873 $ 93,376,264 1.8%
Savings & Interest Checking 139,219,785 139,022,703 0.1
Certificates of Deposit 259,790,859 222,800,353 16.6
Total Deposits 494,094,517 455,199,320 8.5
Repurchase Agreements 8,715,189 10,031,490 -13.1
Other Borrowed Funds 77,537,076 109,114,118 -28.9
Other Liabilities 8,950,115 6,058,740 47.7
Total Liabilities 589,296,897 580,403,668 1.5
Stockholders' Equity 59,377,667 56,101,001 5.8
Total Liabilities & Stockholders' Equity $ 648,674,564 $ 636,504,669 1.9%
CONSOLIDATED INCOME STATEMENT
Six Months Ending Three Months Ending
Percentage Percentage
6/30/2009 6/30/2008 Change 6/30/2009 6/30/2008 Change
<s> <c> <c> <c> <c> <c> <c>
Interest Income $ 16,104,728 $ 17,928,273 -10.2% $ 7,907,994 $ 8,675,414 -8.8%
Interest Expense 6,679,492 7,994,715 -16.5 3,234,176 3,637,531 -11.1
Net Interest Income 9,425,236 9,933,558 -5.1 4,673,818 5,037,883 -7.2
Loan Loss Provision 900,000 900,000 0.0 450,000 500,000 -10.0
Net Interest Income After Provision 8,525,236 9,033,558 -5.6 4,223,818 4,537,883 -6.9
Other Income 4,619,107 4,034,664 14.5 2,613,791 2,059,536 26.9
Other Expenses 10,043,711 9,616,147 4.4 5,156,007 4,654,734 10.8
Income Before Taxes 3,100,632 3,452,075 -10.2 1,681,602 1,942,685 -13.4
Income Taxes 462,045 773,487 -40.3 210,325 457,059 -54.0
Net Income 2,638,587 2,678,588 -1.5 1,471,277 1,485,626 -1.0
Net Change in Unrealized Gain (loss)
on Securities 818,877 -850,270 196.3 -217,594 -1,342,153 83.8
Comprehensive Income $ 3,457,464 $ 1,828,318 0.9 $ 1,253,683 $ 143,473 7.7
Selected Ratios
Return on Average Assets 0.78% 0.85% 0.87% 0.94%
Return on Average Equity 9.1 9.1 10.0 10.1
Earnings Per Share 0.96 0.95 0.53 0.53
Earnings Per Share - assuming di 0.96 0.95 0.53 0.53
Cash Dividends Per Share 0.40 0.56 0.20 0.28
Book Value Per Share 21.63 20.34
Market Price High Low Close
Second Quarter '09 $17.95 $15.50 $16.75
First Quarter '09 $19.50 $16.50 $17.50