01 ~ g 33
.~
~017~
ANNUAL REPORT
Ke~tucl~Y
"Bancshares Inc.
TO OUR SHAREHOLDERS
The year of 2017 was a productive and successful year for your company.
We attained record earnings of $10.7 million, a 25.1°io increase over 2016, and
also record earnings per share, on a diluted basis, of $3.61. This was a 25.8%
improvement over the previous year. Total assets as of December 31, 2017 were
$1.05 billion which was another record high for your company.
i ne increase in year-to-aate net income rrom prior year was ariven by the
following factors: an increase in net interest income primarily due to higher securities balances, a decrease
in provision for loan loss expense due to declining loan balances and stable asset quality, along with an
increase in other income largely due to a gain on the sale of a building located in Winchester, Kentucky.
These increases in income were partially offset by an increase in tax expense due to higher income and
the signing of the Tax Cuts and Jobs Act on December 22, 2017. The new tax bill resulted in a deferred
tax asset adjustment and an adjustment to tax credit investments. Both of those adjustments resulted in
a slight, one time lowering of net income for 2017. Going forward, the tax bill, as it is currently written, will
reduce our statutory tax rate starting in 2018. We look forward to identifying ways to invest those savings
in our four main stakeholder groups —shareholders, customers, employees, and communities.
During 2017, we increased the breadth of our services by launching two new products -Positive Pay to our
commercial customers and Card Valet to our consumer and small business customers. We also worked
successfully to improve asset quality while focusing on cost management and efficiency enhancement.
While we are pleased with the results of 2017, we remain focused on the future. Our goal is a strategy of
disciplined and profitable growth. As we continue that strategy for 2018, I would like to highlight some
of our upcoming efforts.
• We are expanding our customer service by offering 24 x 7 x 365 call center support for our debit
NET INCOME
$10,717
($ thousand)
and credit card holders. We are working on the final stages of the set-up and anticipate offering
that service to our customers by the end of March, 2018.
• We are currently investing in our Clark County market by building a new branch which will include
a more efficient design. We expect the new branch to be open in the second quarter of 2018.
• We are increasing our customer service availability by adding additional offices to our Lexington,
Kentucky branch. We anticipate the expanded space to be open in the second quarter of 2018.
• We are increasing our mobile representation by offering digital wallet services including ApplePay°.
We expect the service to be available to customers by mid-2018.
• We are enhancing customer security by expanding our fraud notification capabilities through text
messaging alerts. We expect the service to be available to customers by mid-2018.
• We are increasing our digital service by offering online mortgage applications. We expect the
service to be available to customers by the third quarter of 2018.
Over the past few years, we have expanded our geographic footprint and enhanced our market
penetration, in spite of increasing regulatory burden and rising business costs. Those successes would
not have been possible without the great team we have at Kentucky Bank and the strong communities
which we serve. We remain optimistic about our ability to prevail over the persistent challenges in our
industry, and look forward to continuing to grow with our communities.
As always, we appreciate your support.
~~ ~~~ ~ h~
President and Chief Executive Officer
TOTA
•t•
•~~
ANNUAL MEETING
The annual meeting of
Kentucky Bancshares, Inc.
will be held Tuesday,
May 22, 2018 at 11:00 a.m.
in the Corporate
Headquarters.
INVESTOR RELATIONS
For more information about
your investment in Kentucky
Bancshares, Inc., please visit
www.kybank.com. Here you
will find company highlights,
dividend history, SEC filings,
historical graphs, and other
helpful information related
to your company and your
stock. In addition, you can
sign up for email alerts of
daily stock updates and
public announcements.
TRADING STOCK
Kentucky Bancshares, Inc.
common stock is publicly traded
and is available for purchase
through your broker or Kentucky
Bank's Wealth Management
Department at (800) 467-1939.
INVESTOR INFORMATION
..........
You may obtain a copy of the
Corporation's 2017 Form 10-K
Report by visiting our website
at www.kybank.com or writing
to Investor Relations at the
Corporate Headquarters.
KENTUCKY BANCSHARES, INC. (KTYB) STOCK ACTIVITY
Since January of 2016, we have experienced an increased volume of stock trades, along with an increased price per
share. Much of this activity is a result of our increased profitability, our increased dividends, our asset size, and the market
capitalization of your company. The benefit is that there appears to be more demand for our stock, which creates a more
liquid and orderly market for both larger and smaller blocks of shares.
Please contact our Wealth Management Department at (800) 467-1939 for more information concerning Kentucky
Bancshares, Inc.
•
•
•
•
•
2011
$1.16
$1.08
$1.04
$1.00
$0.96
$0.92
$3.61
$2.87
$2.40
$2.60
$2.15
$2.59
., ~ . .
', • •
~ Diluted Earnings Per Share ~ Dividend Per Share
PER SHARE
DATA
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
Among Kentucky Bancshares Inc, the Russell MicroCap Index and the NASDAC~ Bank Index
$350
$300
$250
$200
$150
$100
$50
$0
12/12
12/13
12/14
12/15
12/16
12/17
~ Kentucky Bancshares Inc.
~ Russell MicroCap
~ NASDAQ Bank
Kentucky Bancshares Inc.
Russell MicroCap
NASDAQ Bank
12/12
100.00
100.00
100.00
12/13
136.12
145.62
140.76
12/14
159.48
150.93
146.90
12/15
179.00
143.15
157.63
12/16
203.67
172.30
216.24
12/17
296.98
194.99
227.94
'$100 invested on 12/31/12 in stock or index, including reinvestment of dividends. Fiscal year ending December 31, 2017.
Copyright~~ 2018 Russell Investment Group. All rights reserved.
SHARE PRICE AND VOLUME
(January 2017 -December 2017)
550.00
$a5.00
Sao.00
$35.00
$30.00
$25.00
$20.00
$15.00
$10.00
Ss.00
S-
1/1/17
2/1/17 3/1/17
~~ _YJ
4/1/17 5/1/17
zo,000
is,000
i6,000
14,000
12,000
10,000
8,000
6,000
4,000
z,000
... . ~
11/1/17
12/1/17 12/31/17
J ►. 1~ ~.►~~,~. ~ VI._.
6/1/17
8/1/17
7/1/17
9/1/17 10/1/17
~ Daily Volume
~ Closing Share Price
BOARD OF DIRECTORS
BUCKNER WOODFORD IV
Chairman, Kentucky Bank
Kentucky Bancshares, Inc.
LOUIS PRICHARD
President and Chief Executive Officer
Kentucky Bank, Kentucky Bancshares, Inc.
B. PROCTOR CAUDILL, JR.
Special Projects Manager
Kentucky Bank
HENRY HINKLE
Chief Executive Officer
Hinkle Holding Company, LLC
BETTY J. LONG
President, Retired
First Federal Savings of Cynthiana
TED MCCLAIN
President, Hopewell Insurance Company
WES OMOHUNDRO
Secretary/Treasurer, The Allen Company, Inc.
EDWIN S. SAUNTER
President, Saunier North American, Inc.
ROBERT G. THOMPSON
Farmer, Thoroughbred Breeder
Snowhill Farm
WOODFORD S. VAN METER, MD
Professor of Ophthalmology
University of Kentucky
MARKET PRESIDENTS
BRANDON EASON
Bourbon County Market President
JOHN HAMILTON
Madison County Market President
ALLEN JOHNSON
Harrison County Market President
ALEX LYTTLE
Jessamine County Market President
SHERRY MATHIS
East Kentucky Market President
Elliott and Rowan Counties
MARK SULSKI
Scott County Market President
DARRYL M. TERRY
Central Kentucky Regional President
Clark, Fayette, Jessamine, and
Woodford Counties
SENIOR MANAGEMENT
LOUIS PRICHARD
President and Chief Executive Officer
JAMES BRADEN
Executive Vice President
Chief Operating Officer
BRENDA BRAGONIER
Senior Vice President
Director of Marketing
Customer Service Center
CAROLCASKEY
Senior Vice President
Director of Human Resources
GREGORY J. DAWSON
Senior Vice President
Chief Financial Officer
JAMES L. ELLIOTT
Senior Vice President
Director of Wealth Management
NORMAN J. FRYMAN
Executive Vice President
Chief Credit Officer
CHRIS GORLEY
Senior Vice President
Director of Operations
WILLIAM H. HOUGH
Executive Vice President
Director of Retail Banking
TOTAL NET LOANS AND DEPOSITS
900,000
800,000
700,000
600,000
500.000
400,000
300,000
200,000
100,000
__~.
.._
TOTAL NET LOANS
Compound Growth
2011
2012
2013 2014
2015
2016
2017
($ thousands)
TANGIBLE BOOK
VALUE/SHARE
$28.93
~€
X26.50
$24.97
$23.77
$22.19
_~ _ $19.96
Kentucky Bank and its tributaries began their commitment to
community banking in 1851 in Paris, Kentucky. Since its founding, the
bank has grown to over $1 billion in assets and employs over 250
people in 17 locations, while the location of the headquarters remains
on the corner of 4th and Main in Paris.
Kentucky
~"Bancshares, Inc.
PO Box 157 I Paris, KY 40362-0157 I (800) 467-1939 I www.kybank.com
The annual report contains various "forward-looking statements" within the meaning of that term as set forth ,
in Rule 175 of the Securities Act of 1933 and Rule 3b-6 of the Securities Exchange Act of 1934. Such statements are
generally contained in sentences including the words "may" or "expect' or "could" or "should" or "would" or "believe" or
"anticipate" The Company cautions that these forward-looking statements are subject to numerous assumptions, risks, and un-
certaintiesthat could cause actual results to differ materially from those contemplated by the forward-looking statements. Factors that
could cause future results to vary from current management expectations include, but are not limited to, changing economic conditions; legis-
lativeand regulatory changes; monetary and fiscal policies of the federal government; changes in interest rates; deposit flows and the cost of funds;
demand for loan products; competition; changes in managements business strategies; changes in accounting principles, policies, or guidelines;
changes in real estate values; and other factors discussed in the "risk factors" section of the Company's filings with the Securities and Exchange
Commission. The forward-looking statements are made as of the date of this annual report, and the Company assumes no obligation to update the
forward-looking statements or to update the reasons why actual results could differ from those projected in the forward-looking statements. For
more detailed financial information please see the Company's Annual Report on Form 10-K for the year ended December 31, 2017. The Form 10-K
will be available through the Bank's website at www.kybank.com on or about March 16, 2018, after it is electronically filed with the Securities and
Exchange Commission ("SEC"). Our SEC filings are also available on the SEC's website at www.sec.gov. You may also read and copy any document
we file with the SEC at the SEC's public reference room at 100 F Street, N.E., Room 1580, Washington, DC 20549. You should call 1-800-SEC-0330
for more information on the public reference room.