Exhibit 99.1
October 31, 2013
Earnings Report
September 30, 2013
The year to date net income was $4.86 million for the period ended
September 30, 2013 compared to $5.09 million for the same time period in
2012. Year to date diluted earnings per share were $1.80 in 2013
compared to $1.88 during the same period last year. The decrease in year
to date earnings is largely attributable to lower gains on investment
sales and higher compensation expense, which were both partially offset
by lower provision expense. The decline in investment gains is a result
of increasing interest rates. The increase in compensation expense is
due to additional full time employees hired in association with our new
Lexington Branch as well as staffing for the loan and deposit growth
reflected on our balance sheet. Provision for loan loss expense is lower
due to continued improving loan quality.
Quarter to date net income was $1.37 million for the period ended
September 30, 2013 and $1.70 million for the same period in 2012.
Quarter to date diluted earnings per share were $0.51 for 2013 compared
to $0.63 for the same period last year. The decrease in quarterly
earnings is primarily due to the same factors driving year to date
earnings.
We are pleased to report that total assets were $741.4 million at
September 30, 2013, which represents a 10.3% increase from September 30,
2012. The increase in total assets was driven by a 15.0% increase in
securities and a 9.2% increase in net loans, which were funded by a 6.1%
increase in deposits and a 94.6% increase in other borrowings. We
increased our borrowings to strategically lock in longer term funding at
fixed rates to help fund loan growth and to minimize some interest rate
risk in anticipation of higher rates in the future.
Your Board has given approval for Management to seek regulatory
permission to establish a banking location in Richmond, Kentucky. On
October 21, 2013, we announced our intention to open a full service
branch at 5008 Atwood Drive, Suite 3 in Richmond. We believe this
expansion aligns well with our objective to grow franchise value. After
the opening of the Richmond office, Kentucky Bank will have branches in
Fayette County and all contiguous counties, in addition to branches in
Cynthiana, Morehead and Sandy Hook.
We continue to be excited about the opening of our Lexington, Kentucky
office which occurred during the second quarter of 2013. Through
September 30, 2013 Lexington's loan growth has been better than expected.
While both the Richmond and Lexington branches will increase expenses in
the short term, we believe these markets to be key locations for long
term growth, profitability, and shareholder value. As always, we will
continue to consider opportunities for further branch expansion,
including possible acquisition opportunities that advance our growth
objectives while maintaining Premier Customer Service to current and
future customers.
The recent government shut down and debt ceiling discussions, combined
with increasing interest rate volatility, have hindered local and
regional economic conditions. In fact, these events, uncertain Federal
monetary policy, and heightened regulatory pressure, continue to make for
a challenging banking environment.
We are moving forward with strategic opportunities, such as branch
expansion and loan growth, in a measured manner to build and reaffirm a
strong foundation for future growth. We will do everything possible to
accomplish what is in the long term best interest of our shareholders,
customers, and employees.
As always, we appreciate your support.
/s/Louis Prichard
Louis Prichard
President, CEO
UNAUDITED
CONSOLIDATED BALANCE SHEET
Percentage
9/30/2013 9/30/2012 Change
<s> <c> <c> <c>
Assets
Cash & Due From Banks $ 18,528,313 $ 13,606,239 36.2%
Securities 210,341,434 182,976,084 15.0
Loans Held for Sale 911,802 245,962 270.7
Loans 464,866,284 426,517,073 9.0
Reserve for Loan Losses 5,501,274 6,016,762 -8.6
Net Loans 459,365,010 420,500,311 9.2
Federal Funds Sold 139,000 178,000 -21.9
Other Assets 52,150,125 54,929,020 -5.1
Total Assets $ 741,435,684 $ 672,435,616 10.3%
Liabilities & Stockholders' Equity
Deposits
Demand $ 152,766,219 $ 139,934,470 9.2%
Savings & Interest Checking 233,594,860 214,873,754 8.7
Certificates of Deposit 187,124,934 185,773,119 0.7
Total Deposits 573,486,013 540,581,343 6.1
Repurchase Agreements 9,938,881 3,344,098 197.2
Other Borrowed Funds 83,235,389 42,777,399 94.6
Other Liabilities 5,461,368 12,029,791 -54.6
Total Liabilities 672,121,651 598,732,631 12.3
Stockholders' Equity 69,314,033 73,702,985 -6.0
Total Liabilities & Stockholders' Equity $ 741,435,684 $ 672,435,616 10.3%
CONSOLIDATED INCOME STATEMENT
Nine Months Ending Three Months Ending
Percentage Percentage
9/30/2013 9/30/2012 Change 9/30/2013 9/30/2012 Change
<s> <c> <c> <c> <c> <c> <c>
Interest Income $ 20,898,202 $ 21,420,654 -2.4% $ 7,105,286 $ 6,937,395 2.4%
Interest Expense 2,498,257 2,873,985 -13.1 860,330 859,629 0.1
Net Interest Income 18,399,945 18,546,669 -0.8 6,244,956 6,077,766 2.8
Loan Loss Provision 850,000 1,600,000 -46.9 250,000 600,000 -58.3
Net Interest Income After Provision 17,549,945 16,946,669 3.6 5,994,956 5,477,766 9.4
Other Income 7,779,374 8,066,286 -3.6 2,349,490 3,088,695 -23.9
Other Expenses 19,356,542 18,782,978 3.1 6,735,821 6,490,424 3.8
Income Before Taxes 5,972,777 6,229,977 -4.1 1,608,625 2,076,037 -22.5
Income Taxes 1,111,658 1,135,995 -2.1 241,748 377,960 -36.0
Net Income $ 4,861,119 $ 5,093,982 -4.6% $ 1,366,877 $ 1,698,077 -19.5%
Net Change in Unrealized Gain (Loss)
on Securities (7,530,786) 1,519,478 -595.6 (1,553,869) 242,673 -740.3
Comprehensive Income (Loss) $ (2,669,667) $ 6,613,460 -140.4% $ (186,992) $ 1,940,750 -109.6%
Selected Ratios
Return on Average Assets 0.90% 1.00% 0.75% 1.00%
Return on Average Equity 8.96 9.50 8.02 9.26
Earnings Per Share $ 1.80 $ 1.88 $ 0.51 $ 0.63
Earnings Per Share - assuming dilution 1.80 1.88 0.51 0.63
Cash Dividends Per Share 0.72 0.69 0.24 0.23
Book Value Per Share 25.47 27.10
Market Price High Low Close
Third Quarter '13 $27.67 $24.75 $26.25
Second Quarter '13 $25.00 $23.03 $25.00