I^tttucky Bancsbam Inc, ]orisd5 Filings Services MAY 12 ?n SNL Financial, LC 1-800-969-4121 Call It Home! . . ^^ "'* ^ l / i a / i c i al Kentucky Bancshares, Inc. 2009 2008 2007 2006 Assets ($ thousands) $ 675,231 678,775 630,939 $ 629,542 Net Income ($ thousan(is) $ 4,848 3,713 6,586 6,486 Per Share Results Earnings (assuming dilution) Dividend $ $ 1.77 0.80 1.33 1.12 2.30 2.34 1.08 1.00 ANNUAL MEETING The annual meeting of Kentucky Bancshares, Inc. wiQ be held Wednesday May 19, 2010 at 11:00 A.M. in the corporate headquarters. INVESTOR INFORMATION Any individual may request a copy of the Corporation's 2009 Form 10-K Report by writing to Investor Relations at the Corporate Headquarters. SHAREHOLDER INFORMATION CORPORATE HEADQUARTERS Kentucky Bancshares, Inc. 339 Main Street Paris, Kentucky 40361 859-987-1795 wwwkybank.com TRANSFER, REGISTRAR AND DIVIDEND AGENT Registrar and Transfer Company 10 Commerce Drive Cranford, New Jersey 07016 800-368-5948 rtco.com ACQUIRING STOCK Kentucky Bancshares, Inc. common stock is available through your broker or Kentucky Bank's Wealth Management Department. We are listed on the Over-The-Counter Bulletin Board, symbol KTYB.OB. ear- We are pleased to report that for the year ended December 31, 2009, Kentucky Bancshares, Inc. showed a net income mcrease of 30.6% over prior year, from $3.7 miUion to $4.8 miEion. As a result our earnings per share, on a diluted basis, increased from $1.33 to $1.77, a 33% increase. The book value per share increased from $20,77 per share to $22.25 per share; a 7.1% improvement. Your company experienced a 0.5% decline in assets as we ended the year at $675.2 miUion compared to $678.8 milUon at year end 2008. Our loans were up 0.3% and ended the year at $425.4 miUion versus the $424.3 miUion for December 31, 2008. Deposits grew 3.0% and increased from $520.8 million to $536.4 miUion. Most of the increase we experienced in deposits was in the demand deposit and savings account areas. Without a doubt, 2008 and 2009 have been the most chaUengung years for the national, state, and local economies. Last year at this same time we anticipated that 2009 would be a continuation of the difficulties experienced in 2008, and unfortunately that has been the case. Just to cite a recent example, the unemployment rate in all 120 Kentucky counties has increased in 2009. In 95 of those counties, the unemployment rate is over 10%. This unemployment issue wiU not be quickly resolved. There have been some signs that the economy may have now bottomed out, but the most significant lingering question is how long wiU we be facing these difficult times. The impact on the banldng industry has been serious. In the fourth quarter of 2009, 32.7% of banks reported losses, which is a slight improvement over 2008. The good news is that for the fuU year, banks reported an overall increase in earnings. Also reflective of the continuing 2009 recession is the fact that loan growth declined 1.7% in the fourth quarter, which is the sixth consecutive quarter in which the banking industry has experienced decUning loan balances. Banks are also deaUng with issues beyond the economy and those are primarily regulatory in nature. Congress has introduced reform legislation in 2009 that wiU no doubt demand that the ^ industry find creative ways to generate revenue. On the expense side, the Federal Deposit Insurance Corporation has imposed on aU banks a three year prepayment of deposit insurance premiums. For Kentucky Bank, this amounted to approximately $1.0 miUion annuaUy Two years ago this premium was approximately $180,000. Despite these chaUenges, we were pleased to be able to have an increase in earnings in 2009. We have now put in place many of our cost control efforts that we have mentioned throughout the year We continue to focus vigorously on credit issues as they arise. However, we also feel that this is a time for us to redouble our efforts in providing our customers and cUents with Premier Customer Service. AdditionaUy we beUeve that this is an oppormne time to focus on building business. There are many people and businesses to whom we can provide exceUent banking services, and in difficult times often they are overlooked or underserved by their current financial institutions. We want to take advantage of this opportunity and as a result, we have put into place business development strategies to capitalize on our strengths as a bank. Repeatedly we have said that these are the most difficult economic times that we have faced in 75 years. To recover from these difficulties it wiU take time, perseverance, and hard work. We are dedicating ourselves to accompUshing our goals so that when the economy does in fact recover, Kenmcky Bancshares, Inc. wUl be ia a strong position to enjoy the benefits of our efforts. As always, we appreciate your support. Q^A^J^ />fr?£/. Louis Prichard President & CEO Kentucky Bancshares, Inc. Kentucky Bank at a glance Kentucky Bancshares, Inc. is a regional community bank offering an array of financial products deUvered with a high degree of personal service. The company's focus is to provide Premier Customer Service. We buUd relationships with our customers by being accessible and offering solutions to their financial and investment needs. With this platform, Kentucky Bank is able to continuaUy buUd the value of our long-term franchise. Kentucky Bank provides a fuU range of financial products including brokerage and Wealth Management services; Commercial Lending as weU as Agriculmral Lending; Certificate of Deposit Account Registry Service (CDARS); payment processing; remote deposit for businesses; and mortgage services including in-house, secondary market, and government mortgage programs. Market stability Kentucky Bank's offices are located primarUy in Central Kentucky with three additional offices in Rowan and EUiott Counties. Our communities represent fairly diverse economies; however, along with the rest of the state and country aU may have experienced substantial slow-downs and decUnes in housing, employment, and sales. WhUe we have been aggressive in pursuing business opportunities, it has been a time for caution. We remain optimistic about our long range opportunities in these communities, and feel it is part of our responsibiUty to help support the economies of these markets. We support hundreds of community organizations either through contributions, advertisements, or through employee involvement. Branch image capture In 2009 we expanded our use of check image processing to enable aU of our locations to convert paper checks to electronic images for faster, more efficient processing. As a result, processing costs are being reduced and items are being cleared much faster, aUowtng us to push back the hour of our business day cut-off time. SmaU busmess banking Our Market Presidents are working directly with local businesses to offer the most viable financial solutions for their needs. We feel we are weU positioned to pursue our goal of being the bank of choice for this important business segment. Use of our remote deposit service, which aUows business customers to deposit their paper checks directly into then- deposit account from their office is growing. We are working with the SmaU Business Administration (SBA) to expand our lending capabUities to smaU businesses. We look forward to continued growth with this market. About the cover The headquarters of Kentucky Bancshares, Inc. is located in Paris, Kentucky We have offices on three of the four corners of 4^*^ and Main Streets. One corner houses the administration offices, another houses our operations faciUties, and the third corner is one of our busiest banking offices. Upon approaching the Bourbon Banking Center, look up toward the northeast to catch a gUmpse of Bourbon County's beautiful and historic Courthouse. Like the Courthouse, we have a strong and extraordinary history "ieer^ 2 OOJ)... Senior Management Louis Prichard, President and CEO Brenda Bragonier, Sr VB Director of Marketing and Human Resources Human Resources Brenda Bragonier, Sr VB Director of Marketing & Human Resources Gregory J. Dawson, Sr VP, Chief Christopher J. LeMaster, AVB Financial Officer Norman J. Fryman, Sr VFJ Director of Sales & Service Clark Nyberg, Sr VB Director of Wealth Management Martha Woodford, Sr VB Du-ector of Du-ector of Training Judith Taylor, VB Human Resources Manager Operations Martha Woodford, Sr VB Director Operations of Operations Accounting Gregory J. Dawson, Sr VB Chief Karen Anderson, AVB Exception Item and Data Officer MeUnda Biddle, AVB Core Business Financial Officer Officer Brenda Berry, AVB Sr Accountant Brandon GUUam, AVB ControUer Janice Hash, AVB Sr Berry Ingram, VB Information Systems Manager Brandon Sumpter, Sr Software Accountant/Purchasing Administrator Clark County Darryl Terry, Market President Linda Johnson, Mortgage Origuiator Kathy Newkirk, AVB Consumer/Mortgage Lender Teresa Shimfessel, AVB Branch Manager/Consumer Lender East Kentucky WUUam Hough, Market Bresident Jeremy Brown, Mortgage Originator Eulah Gray, Consumer Lender Connie Ingram, Consumer Lender Sherry Mathis, AVB Branch Manager/Consumer Lender Tammy StegaU, Consumer Lender Harrison County Bam Slone, Market Bresident Dreama Harris, AVB Consumer Lender Jessamine County Brandon Eason, Market Bresident Debbie HamUton, Consumer Lender Scott County Bamela Jessie, Market Bresident Ben Fryman, Mortgage Originator Woodford County Duncan Gardiner, Market Bresident Alberta Carmickle, Consumer Lender Commercial Lending Darren Henry, VB Director of Commercial Lending Benjamin CaudUI, VB Commercial Lender Ken DeVasher, VB Commercial Lender Shane Foley VB Commercial Lender CompUance Lydia Sosby VB CompUance Officer Sherry Griffith, BSA/Security Officer Risk Management Mark Bond, Interim Director of Risk Management Wealth Management Clark Nyberg, Sr VB, Director of Wealth Management James Gray, Investment Advisor Quia Swiney Bersonal Trust Administrator Jan Worth, VB Sr Trust Officer Credit Administration Norman J. Fryman, Sr VB Director of Sales & Service Catherine HiU, VB CoUections Manager B o u r b on C o u n ty Nancye Fightmaster, Market Bresident WaUis Brooks, AVB Branch Manager/CRA Officer Rhonda Brown, AVB Shawn King, VB Credit Manager/Sr Consumer/Mortgage Lender Credit Analyst Lisa Highley AVP Arnita WUloughby AVB Secondary Consumer/Mortgage Lender Market Brofessional Susan Lemons, Sr Consumer Lender CH2r€lo/~Wirector^... WiUiam M. Arvin Attorney Law Offices of William MUes Arvin B. Proctor Caudill, Jr Special Projects Manager Kentucky Bank Henry Hinkle President Hinkle Contracting Corporation Betty J. Long Retired President FUrst Federal Savuigs of Cynthiana Theodore Kuster CEO Hillside Farm/Shawhan Place, LLC Ted McClam President HopeweU Insurance Company Louis Prichard President, CEO Kentucky Bank Kentucky Bancshares, Inc. REGIONAL DIRECTORS BOURBON Proctor W Blair Partner Ludwig, Blair and Busch, PLLC Lonnie Conley Businessman Allyson Eads Co-owner, Eads Hardware Rodes Shackelford Parrish President The Clay Ward Agency, LLC CLARK Mary Beth Hendricks Director, Clark County Child Support Services Donald Pace Retired Executive Director Central Kentucky Educational Co-op with UK John G. Roche Optician, Inc. Edwin S. Saunier President Saunier North American, Inc. EAST KENTUCKY Rep. Rocky Adkins Majority Floor Leader House of Representatives Robert G. Thompson Farmer, Thoroughbred Breeder SnowhUl Farm G.R. (Sonny) Jones VRCFO St. Claire Regional Medical Center Woodford Van Meter Professor of Ophthalmology ,#y University of Kentucky Edwin S. Saunier President Saunier North American, Inc. Buckner Woodford W Chairman Kentucky Bank Kentucky Bancshares, Inc. WOtiam H. Redwine AVF; AuxQiary Services Morehead State University Madonna Weathers VF; Student Life Morehead State University HARRISON K. Bruce Florence Director Licking VaUey College Betty J. Long Retired President First Federal Savings of Cynthiana Brad Marshall Farmer, Owner Marshall's Tractor Supply Joel Techau CEO, Techau, Inc. Gerry Whalen Broker Whalen and Company JESSAMINE WiUiam M. Arvin Attorney Law Offices of WiUiam MUes Arvin Dan Brewer President, CEO Blue Grass Energy Tom Buford Kentucky State Senator Eva McDaniel Jessamine County Clerk Jonah Mitchell President Jonah MitcheU Real Estate and Auction SCOTT Dr Gus Bynum Physician MUse Hockensmith Owner and President The Hockensmith Agency Inc. R. C. Johnson, Jr Owner and President Johnson's Funeral Home George Lusby County Judge Executive Everette Varney Former Mayor Georgetown WOODFORD Loren Carl District Coordinator Congressman Ben Chandler James Kay Businessman, Farmer Tricia N. Kittinger Circuit Clerk Woodford County 859 987 1795 HARRISON COUNTY Cynthiana US 27 Office 939 US Hwy 27 South Cynthiana, KY 41031 859 988 1300 JESSAMINE COUNTY 859 744 3825 NicholasviUe Office 920 N. Main Street NicholasvUle, KY 40356 Wilmore Office 108 E. Maui Street WUmore, KY 40390 859 744 1632 SCOTT COUNTY Cherry Blossom Office 260 Blossom Bark Dr Georgetown, KY 40324 Showalter Office 103 W Showalter Dr Georgetown, KY 40324 606 784 6973 WOODFORD COUNTY 606 738 5163 VersaiUes Office 520 MarsaUles Rd. VersaUIes, KY 40383 859-234-3363 859-885-6028 859-858-3993 502-863-5522 502-863-9400 859-873-9400 m ELLIOTT AND ROWAN COUNTIES 606 780 0535 CC& BOURBON COUNTY Bourbon Banking Center 401 Maut Street Paris, KY 40361 Lexington Road Office 2021 S. Main Street Paris, KY 40361 CLARK COUN'IY Colby Road Office 1975 Bypass Rd. Winchester, KY 40391 Winchester Main Office 24 W Lexington Ave. Wurchester, KY 40391 Morehead Downtown Office 400 W First Street Morehead, KY 40351 Flemingsburg Road Office 1500 Flemingsburg Rd. Morehead, KY 40351 Sandy Hook Office Main and Jane Streets Sandy Hook, KY 41171 f ^KmmtKI^^^^^^^^^^^^^^^Kmti^ ./ K^ntudky ^ ^ ^ ^ B a n c s h a r e sy Inc. ^^H 1 Ifentucky ^ ^ ^ ^ i^ RO- Box 157 • Paris, Kentucky 40362-0157 wwTCkybank.com