Attached files
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
