Assign Territories to Accounts Not Working

Assign Territories to Accounts Not Working

I've created a Territory for the State of Kentucky. When I go into Assign Territories to Accounts I select "Use My Own Criteria", I then select "Billing State Is KY". It then brings up all matching accounts. 

When I run the rule to automatically assign the Territory I get the email saying it's completed a few minutes later. When you go back to the accounts page, it allows me to select the Territory Kentucky, but it displays no accounts.

What steps am I missing? I need to further break it down by assigned each sales representatives a group of individual counties, but I can't get the bigger Parent category to work right. 

Thanks