Kish Bancorp : 2017 Fourth Quarter Financial Statement

I am pleased to report unaudited financial results for Kish Bancorp, Inc., parent company of Kish Bank and related affiliates, for the twelve month period ending December 31, 2017. It was a year of unprecedented growth for the Corporation and reflected an associated expansion in revenues and core earning categories. In addition, the passage of the Tax Cuts and Jobs Act in late December also significantly brightened the outlook for the future net income of the Corporation through a 40% reduction in the corporate tax rate. This enactment also triggered an adjustment for financial statement reporting purposes, as well as several other actions that better position the Corporation's balance sheet in anticipation of rising economic activity and an improved business climate. This will be discussed later in this letter and in full detail in the Annual Report.

Year-end highlights for 2017 include total assets reaching a new high, exceeding $800 million for the first time in our history; growth in total loans and deposits that both exceeded 16%; strong results by both the wealth management and travel services units; stability in revenues from mortgage originations, insurance activities, and bank fee income sources; and the completion of the acquisition of the Benefit Management Group practice. Despite some noise created by the passage of tax reform in the fourth quarter, it was a year of powerful results for the Corporation.

Balance Sheet

The Corporation's total assets ended the period at $811 million, an increase of $86.1 million, or 11.88%, compared to total assets of $725 million as of December 31, 2016. Asset growth continued to be driven by strong growth in lending activities, with loans rising $80.1 million to $575 million, or 16.20%, from $495 million at the end of December 2016. Total deposits grew by $91.8 million to $654 million, an increase of 16.33% from $562 million a year ago. Borrowings decreased to $95 million, compared to $104 million at the end of December 2016. The decrease in borrowings was due to strong deposit growth and a reduction in the securities portfolio.

Net Interest Income

In 2017, higher margins resulting from the robust growth in loans and core deposits generated net interest income of $23.10 million, an increase of $2.23 million, or 10.70%, compared to $20.87 million at the end of December 2016. Contributions to the loan loss reserve equaled $600 thousand for the year ending December 2017, as compared to $530 thousand in December 2016. Higher loan charge-offs at year end meant reserves were relatively unchanged year over year. Although the reserve as a percentage of outstanding loans declined, this was supported by stronger overall loan quality metrics.

Noninterest Income

Noninterest income was $6.53 million for the year ending December 31, 2017, a decrease of $570 thousand, or 8.03%, from $7.10 million in 2016. Noninterest income from most sources was generally stable asreflected in income from mortgage originations, bank service fees, and insurance agency revenue. Notably higher revenue was generated by travel services and wealth management services, which both registered strong results for 2017. However, these revenue gains were more than offset by year-end actions taken to reduce the Corporation's investment in tax-free municipal securities and longer dated maturities due to the passage of tax reform. Reinvestment of the proceeds in shorter maturity taxable securities at lower tax rates will mean the losses will be more than recouped in 2018. When compared to 2016, 2017 investment securities gains declined by $672 thousand.

Noninterest Expense

Year over year, noninterest expense increased by $1.70 million, or 7.69%, to $23.88 million as of December 31, 2017 from $22.18 million the prior year. The increase reflects higher compensation expenses related primarily to an expansion in the sales force throughout 2016 and 2017. These additions have served to dramatically expand sales results across most business units and will support the Corporation's capacity

• to drive future market share expansion. Another factor contributing

• to higher expenses was increased data processing costs necessary

• to support higher levels of customer activity. Most other expense categories were well controlled when compared to the prior year.

Net Income

Net income for 2017 was $4.56 million, a decrease of $60 thousand, or 1.29%, compared to $4.62 million in 2016. This was prior to an additional downward adjustment of $417 thousand required by FASB rules as a consequence of the enactment of the Tax Cuts and Jobs Act. This adjustment was due to a revaluation of net deferred tax assets held by the Corporation. While the timing of the implementation of the act was a challenge in 2017, the resulting benefit of lower tax rates will have a significantly positive impact in 2018 and beyond. Before the year-end financial statement reporting adjustments and securities losses taken to reposition the balance sheet, we had projected that net income for 2017 would be in excess of $5.1 million, or an increase of approximately $500 thousand, over 2016 net income.

The Board of Directors has declared a quarterly dividend in the amount of $0.46 per share, payable January 31, 2018, to shareholders of record as of January 15, 2018.

Your ownership stake in Kish Bancorp is appreciated. Please consider using Kish for all your financial service needs and recommending us to others as opportunities arise.

Sincerely,

William P. Hayes

Chairman, President and Chief Executive Officer

CONSOLIDATED BALANCE SHEET

(Unaudited; in thousands)

ASSETS:

Cash and due from banks Interest-bearing deposits with other institutions

Cash and cash equivalents

Certificates of deposit in other financial institutions Investment securities available for sale

Investment securities held to maturity

Loans held for sale

Loans

Less allowance for loan losses Net Loans

Premises and equipment Goodwill

Regulatory stock Bank-owned life insurance Accrued interest and other assets TOTAL ASSETS

LIABILITIES: Noninterest-bearing deposits Interest-bearing deposits Total Deposits

Short-term borrowings Other borrowings

Accrued interest and other liabilities TOTAL LIABILITIES

STOCKHOLDERS' EQUITY: Common stock, $0.50 par value; 2,000,000 shares authorized, 1,348,750 shares issued

Additional paid-in capital Retained earnings

Accumulated other comprehensive income

Treasury stock, at cost (85,792 and 106,324 shares)

TOTAL STOCKHOLDERS' EQUITY

TOTAL LIABILITIES AND

STOCKHOLDERS' EQUITY

Dec. 31, 2017

Dec. 31, 2016

$

7,964 $ 8,334 35,924 12,070 43,888 20,404

3,492 3,492 140,048 161,270

6,000 6,000 1,279 1,006 574,708 494,599 5,698 6,011 569,010 488,588

12,997 12,762

2,144 1,669

6,149 6,519

15,438 15,011

10,747 8,350

$

$

• $ 811,192

811,192 $ 725,071

85,526

568,161 488,480 653,687 561,928

8,931 14,783 85,932 89,349 6,303 5,418 754,853 671,478

674 674

3,071 2,956

56,291 54,453

426 110

$ 73,448

(4,123) 56,339

(4,600) 53,593

$ 725,071

CONSOLIDATED STATEMENT OF INCOME

(Unaudited; in thousands)

INTEREST AND DIVIDEND INCOME Interest and fees on loans:

Taxable

Exempt from federal income tax Investment securities:

Taxable

Exempt from federal income tax Interest-bearing deposits with other institutions

Other dividend income

TOTAL INTEREST AND DIVIDEND

INCOME

INTEREST EXPENSE Deposits

Short-term borrowings Other borrowings

TOTAL INTEREST EXPENSE

NET INTEREST INCOME Provision for loan losses

NET INTEREST INCOME AFTER

PROVISION FOR LOAN LOSSES

NONINTEREST INCOME

Service fees on deposit accounts Investment securities gains, net Gain on sale of loans, net Earnings on Bank-owned life insurance

Insurance commissions Travel agency commissions Wealth management Other

TOTAL NONINTEREST INCOME

NONINTEREST EXPENSE Salaries and employee benefits Occupancy and equipment Data processing Professional fees Advertising

Federal deposit insurance Other

TOTAL NONINTEREST EXPENSE

INCOME BEFORE INCOME TAXES Income taxes

NET INCOME BEFORE

ADJUSTMENT

Adjustment due to revaluation of net deferred tax assets due to tax reform

NET INCOME AFTER ADJUSTMENT

Twelve Months Ended Dec. 31, 2017 Dec. 31, 2016

$

22,855 $ 19,372

1,337 1,443

2,656 3,045

1,332 1,416

345 152

602 610

29,127 26,038

3,865 3,236

23 30

2,138 1,904

$

6,026 5,170 MARKET MAKERS

23,101 20,868

600 530

22,501 20,338

1,614 1,673

101 773

867 964

430 444

1,128 1,124

377 273

1,400 1,279

608 565

6,525 7,095

14,633 13,477

2,878 2,744

2,089 1,943

315 421

252 304

237 352

3,480 2,938

23,884 22,179

5,142 5,254

585 637

4,557 4,617

417 4,140

$

0 4,617

(Unaudited; in thousands, except for per share data)

SELECTED FINANCIAL HIGHLIGHTS

Net Income	$	4,557	$	4,617
Total Assets	$	811,192	$	725,071
Loans Outstanding	$	574,708	$	494,599
Total Deposits	$	653,687	$	561,928
ROA (annual)	0.59%	0.65%
ROE (annual)	8.20%	8.54%
Earnings per Share	$	3.64	$	3.73
Dividends per Share	$	1.84	$	1.72

The highlights above are based on net income before the adjustment required by the enactment of the Tax Cuts and Jobs Act.

Stifel, Nicolaus & Company, Incorporated Contact: Steven Jefferis 614-789-9354

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Contact: Anthony LanFranca 312-655-2961

222 South Riverside Plaza, 7th Floor Chicago, IL 60606

4255 East Main Street, Belleville, PA 17004 1-888-554-4748 |www.KishBank.com