EX-99 2 form8k144ex99.txt EXHIBIT 99.1 Exhibit 99.1 January 30, 2015 Earnings Report December 31, 2014 Dear Shareholders: We are pleased to announce a record year for Kentucky Bancshares, Inc., as both total assets and net income reached record highs. Total assets were $855.2 million as of December 31, 2014 compared to $770.6 million as of December 31, 2013 reflecting a growth rate of 11.0%. Year to date net income was $7.1 million for the period ended December 31, 2014 compared to $5.8 million for December 31, 2013 reflecting an increase of 21.5%. These increases are fundamentally due to increased growth through deeper mature-market penetration and new-market expansion in Fayette and Madison Counties. Year to date diluted earnings per share increased 20.9% to $2.60 from $2.15 during the same period last year. The increase in year to date earnings is largely attributable to higher net interest income due to interest earning asset growth and lower provision expense due to continued improving loan quality. Quarter to date diluted earnings per share increased 74.3% to $0.61 from $0.35 during the same period last year. The increase in quarterly earnings is primarily due to higher net interest income, lower income tax relative to the same period last year, and the pension accrual in 2013. The overall increase in total assets was driven by a 14.9% increase in total loans, which was funded by a 6.1% increase in deposits and a 55.2% increase in other borrowed funds. Similar to 2013, borrowings increased in an effort to strategically lock in longer term funding at fixed rates for anticipated growth and to minimize rate sensitivity in anticipation of an increasing rate environment. Consistent with our strategic objective to build and reaffirm a strong foundation for future growth, we were excited to announce on January 21, 2015 the signing of a definitive agreement pursuant to which Kentucky Bancshares, Inc. will acquire Madison Financial Corporation, the parent company of Madison Bank, in an all-stock merger. This transaction will expand our existing footprint in Madison County and is anticipated to add approximately $120 million in total assets to our balance sheet. Madison Bank has great strengths in its customers and employees, and we look forward to the anticipated business combination in the second or third quarter of 2015. The completion of the transaction is subject to customary closing conditions, including the receipt of required regulatory approvals and the approval of Madison Financial Corporation shareholders. While the addition of new branches will increase expenses in the short term, we believe these expansions to be key components for future growth, profitability, and company value. Our view should always be a long term one and we will continue to consider opportunities for further franchise expansion, which advance our growth objectives while maintaining our ability to provide Premier Customer Service. We will continue to do everything possible to accomplish what is in the long term best interest of our shareholders, customers, and employees. As always, we appreciate your support. /s/Louis Prichard Louis Prichard President, CEO Additional Information for Shareholders because of Possible Business Combination This communication does not constitute a solicitation of any vote or approval or offer to sell securities. Kentucky Bancshares intends to file a registration statement on Form S-4 with the SEC to register the Company's shares that will be issued to Madison Financial Corporation's shareholders in connection with the transaction. The registration statement will include a proxy statement of Madison and a prospectus of the Company and will be mailed to each of Madison's shareholders when it is complete and the registration statement on Form S-4 becomes effective. WE URGE INVESTORS AND SECURITY HOLDERS TO READ THE REGISTRATION STATEMENT AND PROXY STATEMENT/PROSPECTUS WHEN IT BECOMES AVAILABLE (AND ANY OTHER DOCUMENTS FILED WITH THE SEC IN CONNECTION WITH THE TRANSACTION OR INCORPORATED BY REFERENCE INTO THE PROXY STATEMENT/PROSPECTUS) BECAUSE SUCH DOCUMENTS WILL CONTAIN IMPORTANT INFORMATION REGARDING THE PROPOSED SHARE EXCHANGE AND MERGER. Investors and security holders may obtain free copies of these documents and other documents filed with the SEC on the SEC's website at http://www.sec.gov. Investors and security holders may also obtain free copies of the documents filed with the SEC by the Company at the Company's website at http://www.kybank.com (which website is not incorporated herein by reference) or by directing a request to Greg Dawson, PO Box 157, 339 Main Street, Paris, Kentucky 40362. UNAUDITED
CONSOLIDATED BALANCE SHEET Percentage 12/31/2014 12/31/2013 Change Assets Cash & Due From Banks $ 16,770,880 $ 22,650,487 -26.0% Securities 248,140,871 230,396,296 7.7 Trading Assets 5,370,177 - n/a Loans Held for Sale 776,109 223,250 247.6 Loans 538,305,272 468,654,972 14.9 Reserve for Loan Losses 6,012,175 5,440,720 10.5 Net Loans 532,293,097 463,214,252 14.9 Federal Funds Sold 398,000 510,000 -22.0 Other Assets 51,459,990 53,584,558 -4.0 Total Assets $ 855,209,124 $ 770,578,843 11.0% Liabilities & Stockholders' Equity Deposits Demand $ 176,743,135 $ 152,052,558 16.2% Savings & Interest Checking 294,168,610 276,186,464 6.5 Certificates of Deposit 183,957,216 189,161,410 -2.8 Total Deposits 654,868,961 617,400,432 6.1 Repurchase Agreements 12,457,285 12,867,341 -3.2 Other Borrowed Funds 101,001,615 65,063,833 55.2 Other Liabilities 8,939,504 7,574,739 18.0 Total Liabilities 777,267,365 702,906,345 10.6 Stockholders' Equity 77,941,759 67,672,498 15.2 Total Liabilities & Stockholders' Equity $ 855,209,124 $ 770,578,843 11.0%
CONSOLIDATED INCOME STATEMENT Twelve Months Ending Three Months Ending Percentage Percentage 12/31/2014 12/31/2013 Change 12/31/2014 12/31/2013 Change Interest Income $ 29,730,779 $ 28,167,788 5.5% $ 7,560,234 $ 7,269,586 4.0% Interest Expense 3,755,566 3,455,771 8.7 951,089 957,514 -0.7 Net Interest Income 25,975,213 24,712,017 5.1 6,609,145 6,312,072 4.7 Loan Loss Provision 950,000 1,050,000 -9.5 450,000 200,000 125.0 Net Interest Income After Provision 25,025,213 23,662,017 5.8 6,159,145 6,112,072 0.8 Other Income 10,157,894 10,221,644 -0.6 2,730,683 2,442,270 11.8 Other Expenses 27,214,706 27,202,790 0.0 7,020,669 7,846,248 -10.5 Income Before Taxes 7,968,401 6,680,871 19.3 1,869,159 708,094 164.0 Income Taxes 897,683 858,997 4.5 193,703 (252,661) 176.7 Net Income $ 7,070,718 $ 5,821,874 21.5% $ 1,675,456 $ 960,755 74.4% Net Change in Unrealized Gain (Loss) on Securities 5,917,187 (9,409,430) 162.9 837,266 (1,878,644) 144.6 Comprehensive Income (Loss) $ 12,987,905 $ (3,587,556) 462.0% $ 2,512,722 $ (917,889) 373.8% Selected Ratios Return on Average Assets 0.89% 0.80% 0.83% 0.48% Return on Average Equity 9.50 8.12 8.58 5.59 Earnings Per Share $ 2.60 $ 2.15 $ 0.61 $ 0.35 Earnings Per Share - assuming dilution 2.60 2.15 0.61 0.35 Cash Dividends Per Share 1.00 0.96 0.25 0.24 Book Value Per Share 28.65 24.90
Market Price High Low Close Fourth Quarter '14 $28.85 $27.15 $27.35 Third Quarter '14 28.85 26.10 28.85