Annual Report 2008 Letter From President & CEO Letter From Chairman

2008 Annual Report

Please note the totals in all graphs are as-of the 31st of December for each respective year.

Kirkpatrick Bank finished 2008 with year-end record total net loans. The Bank's loan portfolio is built on a long history of conservative lending principles. As evidenced by our loan growth in 2008, the Bank is willing and able to lend in this time of economic turmoil.

Kirkpatrick Bank's total assets and total deposits finished 2008 not far from their previous year highs. The Bank looks forward to 2009 and continuing the trend of stable asset and deposit growth.

A strong capital base is required to weather any storm. Kirkpatrick Bank's total equity continued on the path of healthy consistent growth in 2008 with the highest year- end total equity in the Bank's history, which began in 1970.

Kirkpatrick Bank is committed to preserving the values that have led to its success. Knowing that adversity often leads to opportunity, we look forward to the opportunities to serve our communities in 2009.

Letter from President & CEO

All through 2008, Kirkpatrick Bank continued to open accounts, take deposits, loan money and manage the process of business and banking. As a community bank, we make our decisions at the local level, serving the financial needs of our communities and customers. Our steadfast conservative approach has allowed Kirkpatrick Bank to be consistently rated four to five stars by Bauer Financial, an independent bank rating agency.

The financial events of 2008 are significant and will continue to generate economic challenges in the year ahead. While various Wall Street finance companies rush to seek the secure mantle of banks qualifying for FDIC and other Treasury assistance, Kirkpatrick Bank along with many community bank colleagues have elected not to participate in TARP, Troubled Asset Relief Program.

There is also much to celebrate in banking. The FDIC temporarily increased its limits on insured deposits, including the opportunity for banks to provide unlimited FDIC coverage on all noninterest-bearing transaction accounts as well as certain interest bearing accounts. Kirkpatrick Bank is a participant in this enhanced insurance coverage. Clearly, there has never been a better time to put your money in the bank.

What does all this mean to our customers in 2009? Look for the Bank to offer you more deposit options, including CDARS, new rate structures and more benefits for banking with us. Our lending activity remains strong and solid and we are well poised to assist our customers in their business development.

George M. Drew - President & CEO

Letter From Chairman

My grandfather, John Kirkpatrick, was always steadfast in his philosophy of approaching all people and all manner of business enterprises with integrity and responsibility. This philosophy reflects the way he was raised and the way he raised his family. John Kirkpatrick noted in an interview that his parents didn’t give him things. They gave him responsibilities. From that he “learned to be frugal,helpful and productive.” That translated itself into operating his businesses with a fearless pursuit of his objectives and an absolute commitment to doing the right thing for all concerned: his employees, partners, customers and community.

These are values that serve well in good times and in challenging times. These are the values behind our mission at Kirkpatrick Bank. We pledge to extend the courtesy, service and creativity of a private banking environment to our colleagues and our customers.

Over the past year, we have seen the U.S., and indeed the global, economy shaken by a series of financial events. Many of these had roots in policies that lacked accountability and, some might say, integrity. Kirkpatrick Bank experienced little of this upheaval. Our business practices and lending policies are rooted in responsibility and integrity. We seek business relationships that are sustainable for all parties, not those which may turn a quick profit but could be easily overextended.

As a result, we are pleased to present this annual report for 2008 and to recognize the achievements of Kirkpatrick Bank in a challenging environment. It is no small accomplishment to consider that in 2008 Kirkpatrick Bank outperformed J. P. Morgan, American Airlines, Lehman Brothers and Continental Airlines combined. We look forward to growth in 2009 and to the opportunity to develop new markets and new business relationships.

Christian Kirkpatrick Keesee - Chairman