UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant _X_
Filed by a Party other than the Registrant __
Check the appropriate box:
_ Preliminary Proxy Statement
_ Confidential, for Use of the Commission Only (as permitted by
Rule 14a- 6(e)(2))
X Definitive Proxy Statement
_ Definitive Additional Materials
_ Soliciting Material Pursuant to Section 240.14a-12
KENTUCKY BANCSHARES, INC.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
X No fee required
_ Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-
11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
_ Fee paid previously with preliminary materials.
_ Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
KENTUCKY BANCSHARES, INC.
339 Main Street
Paris, KY 40361
(859) 987-1795
Notice of Annual Meeting of Shareholders
to be held May 18, 2011
April 18, 2011
To Our Shareholders:
The annual meeting of the shareholders of Kentucky Bancshares, Inc. will
be
held as follows:
Date: Wednesday, May 18, 2011
Time: 11:00 a.m., Eastern Daylight Time
Place: Kentucky Bank
Main Office
339 Main Street
Paris, Kentucky
Purpose: To ratify the appointment of Crowe Horwath LLP as the
Company's
registered public accountants for 2011,
To elect three Class III directors,
To obtain a non-binding advisory vote approving the compensation
the Company pays its named executive officers,
To obtain, on a non-binding advisory basis, the frequency with
which the Company will hold a non-binding advisory shareholder
vote to approve the compensation the Company pays its named
executive officers, and
To transact such other business as may properly come before
the
meeting or any adjournment thereof.
Record Date: Close of business on March 18, 2011.
All Shareholders are cordially invited to attend the Annual Meeting.
Whether
or not you expect to attend the Annual Meeting in person, please sign and
date the enclosed Proxy and return it promptly so your shares of stock
may be
voted.
Thank you for your time and consideration. Please feel free to contact
my
office should you have any questions.
BY ORDER OF THE BOARD OF DIRECTORS
/s/Gregory J. Dawson
Gregory J. Dawson
Secretary, Kentucky Bancshares, Inc.
YOUR VOTE IS IMPORTANT
Please mark, sign, date and return the accompanying proxy immediately
even if
you plan to attend the Annual Meeting.
Information about Attending the Annual Meeting
If you plan to attend the meeting, please bring the following:
1. Proper identification.
2. Acceptable Proof of Ownership if your shares are held in
"street name."
Street Name means your shares are held of record by brokers, banks or
other
institutions.
Acceptable Proof of Ownership is (a) a letter from your broker stating
that
you owned Kentucky Bancshares, Inc. stock on the record date or (b) an
account statement showing that you owned Kentucky Bancshares, Inc. stock
on
the record date.
Only shareholders of record on the record date may attend or vote at our
Annual Meeting of Shareholders.
KENTUCKY BANCSHARES, INC.
339 Main Street
Paris, KY 40361
The 2010 Annual Report to Shareholders, including financial
statements,
is being mailed to shareholders together with these proxy materials on or
about April 18, 2011.
This proxy statement is furnished in connection with the
solicitation
of proxies by the Board of Directors of Kentucky Bancshares, Inc. (the
"Company," "we," "us," or "our") for use at our Annual Meeting of
Shareholders to be held on May 18, 2011, and at any adjournments (the
"Annual
Meeting").
Important Notice Regarding the Availability of Proxy Materials
for the Shareholder Meeting to be Held on May 18, 2011.
This proxy statement, form of proxy and our 2010 Annual Report to
Shareholders, including financial statements, are available at
http://www.cfpproxy.com/5407.
Directions to Shareholder Meeting.
Our shareholder meeting will be held at Kentucky Bank's main
office
located at 339 Main Street, Paris, Kentucky. If you need directions,
please
contact our Secretary at Kentucky Bancshares, Inc., 339 Main Street,
Paris,
Kentucky 40361, Attention: Gregory J. Dawson or call our office at (859)
988-1303.
Who Can Vote; Voting Rights.
Each share of our common stock that you held on the record date
entitles you to one vote on any matter, other than the election of
directors
that may properly come before the Annual Meeting. In the election of
directors, each holder of shares of our common stock has "cumulative
voting
rights."
"Cumulative voting rights" means each holder is entitled to vote
the
number of shares of common stock he or she owns multiplied by four (the
number of directors to be elected at the Annual Meeting) by casting all
of
his or her votes for one candidate or by distributing such votes among
two or
more candidates.
On the record date, there were 2,743,929 shares of our common
stock
issued and outstanding.
Votes Required and Quorum.
Votes Required. Our corporate secretary will count votes cast at
the
Annual Meeting. Our directors are elected by cumulative voting of the
votes
cast at the Annual Meeting. The three director nominees receiving the
most
votes for director positions expiring in 2014 will be elected directors.
All
other matters will be approved if the votes cast for the proposal exceed
the
votes cast against the proposal at the Annual Meeting, except as
otherwise
provided by statute, our articles of incorporation or our bylaws.
Abstentions as to all such matters to come before the Annual Meeting will
not
be counted as votes for or against and will not be included in
calculating
the number of votes necessary for approval of those matters.
If your shares are held in a stock brokerage account, by a bank,
broker, trustee, or other nominee, you are considered the beneficial
owner of
shares held in "street name." Brokers, banks and other institutions
holding
shares in "street name" generally are not permitted to vote on certain
matters unless they receive voting instructions from their customers.
When
brokers, banks and other institutions do not receive voting instructions
from
their customers, they notify us on the proxy form that they lack voting
authority. The votes that could have been cast on the matter in question
by
brokers, banks and other institutions who did not receive voting
instructions
are called "broker non-votes."
If you are a beneficial owner and do not provide voting
instructions,
your bank, broker or other holder of record is permitted to vote your
shares
for the ratification of our independent registered public accounting firm
but
is not permitted to vote your shares on the election of directors or on
the
endorsement of the compensation of our executives.
Shares subject to broker non-votes will not be counted as votes
for or
against and will not be included in calculating the number of votes
necessary
for the approval of such matters to be presented at the meeting; however,
shares represented by proxies containing both broker non-votes and a vote
on
any matter will be considered present at the annual meeting for purposes
of
determining the existence of a quorum.
Quorum. A quorum at the Annual Meeting is at least a majority of
the
outstanding shares of our common stock entitled to vote present in person
or
represented by proxy. Shares of our common stock represented by properly
executed and returned proxies will be treated as present at the Annual
Meeting. Shares of our common stock present at the Annual Meeting that
abstain from voting or that are the subject of broker non-votes will be
counted as present for purposes of determining a quorum.
How Your Proxy Will Be Voted.
The Board of Directors is soliciting a proxy in the enclosed form
to
provide you with an opportunity to vote on all matters scheduled to come
before the Annual Meeting, whether or not you attend in person.
How To Vote. Shareholders may vote at the Annual Meeting in
person or
by proxy.
Voting By Shareholders of Record. If at the close of business on
March 18, 2011, your shares are registered directly in your name with our
transfer agent, Registrar and Transfer Company, you are considered the
shareholder of record of those shares and we have mailed these proxy
materials to you. You can vote your shares by proxy by signing, dating
and
mailing the enclosed proxy card, which authorizes and appoints Buckner
Woodford IV and Gregory J. Dawson as proxies, each with the power to
appoint
his substitute, to represent and vote your shares as you directed.
Voting By Beneficial Owners of Record ("Street Name"). If at the
close
of business on March 18, 2011 your shares are held in a stock brokerage
account, by a bank, broker, trustee, or other nominee, you are considered
the
beneficial owner of shares held in street name. These proxy materials are
being made available to you by your bank, broker, trustee or nominee that
is
considered the shareholder of record of those shares. As the beneficial
owner, you have the right to direct your bank, broker, trustee or nominee
on
how to vote your shares via the internet or by telephone if the bank,
broker,
trustee or nominee offers these options or by signing and returning a
proxy
card. Your bank, broker, trustee or nominee will send you instructions
for
voting your shares.
Voting at the Annual Meeting. You may also attend the Annual
Meeting
in person and vote by ballot, which would cancel any proxy that you
previously submitted. If you wish to vote in person at the Annual
Meeting
but hold your stock in "street name," then you must have a proxy from the
broker, bank or institution in order to vote at the meeting.
How Proxies Will Be Voted. If you vote by signing and returning
the
enclosed proxy card or, if you hold your shares in "street name" and you
vote
by a method offered by your bank, broker, trustee or nominee, your shares
will be voted in accordance with the instructions you provide. If you
vote
without providing contrary instructions, your proxy will be voted in the
following manner:
FOR the proposed ratification of the appointment of Crowe Horwath LLP
as the Company's registered public accountants for 2011;
FOR the proposed director nominees (or, if deemed appropriate by the
individuals appointed in the proxies, cumulatively voted for less than
all of the Board's nominees);
FOR the proposed non-binding advisory vote on the compensation the
Company paid its named executive officers as disclosed in this proxy
statement;
FOR every year for the frequency with which the Company should hold a
non-binding advisory shareholder vote to approve the compensation the
Company pays its named executive officers; and
FOR the transaction of such other business as may properly come before
the Annual Meeting.
We expect no matters to be presented for action at the Annual
Meeting
other than the items described in this proxy statement. By signing and
returning the enclosed proxy, however, you will give to the persons named
as
proxies therein discretionary voting authority with respect to any other
matter that may properly come before the Annual Meeting, and they intend
to
vote on any such other matter in accordance with their best judgment.
Revoking a Proxy. You may revoke or change your proxy at any time
before it is exercised by (i) filing with the Secretary of the Company
written notice of revocation bearing a later date than the proxy
previously
submitted (Gregory J. Dawson, Secretary, Kentucky Bancshares, Inc., 339
Main
Street, Paris, Kentucky 40361); (ii) submitting to the Secretary a duly-
executed proxy bearing a later date relating to the same shares of our
common
stock; or (iii) appearing at the Annual Meeting and (after having given
the
Secretary notice of your intention to vote in person) voting your shares
of
our common stock in person. If your shares are held in "street name"
(through a broker, bank or other institution) please contact your broker,
bank or other institution to revoke or change your proxy.
Proxy Solicitations.
We will pay all of the expenses of this solicitation of proxies.
We
will reimburse brokerage firms and other custodians, nominees and
fiduciaries
for reasonable expenses incurred by them in sending the proxy materials
to
the beneficial owners of our common stock. In addition to solicitations
by
mail, our directors, officers, and employees may solicit proxies
personally
or by telephone without additional compensation.
Multiple Shareholders Sharing the Same Address.
One copy of our Annual Report to Shareholders, including financial
statements, and one proxy statement is being delivered to multiple
shareholders sharing an address unless we have received contrary
instructions
from the affected shareholders. If at any time, you would prefer to
receive
a separate proxy statement as well as a separate copy of our Annual
Report to
Shareholders, including financial statements, then please notify your
broker
or other institution or direct your written request to Kentucky
Bancshares,
Inc., 339 Main Street, Paris, Kentucky 40361, Attn: Gregory J. Dawson,
Secretary.
Shareholders' Proposals for 2012 Annual Meeting.
We presently contemplate that the 2012 Annual Meeting of
Shareholders
will be held on or about May 16, 2012. If you want us to consider
including
a proposal in next year's proxy statement, you must deliver it in writing
by
no later than December 19, 2011 (the date 120 days prior to the first
anniversary of the date of the 2011 annual meeting proxy statement) to:
Kentucky Bancshares, Inc., 339 Main Street, Paris, Kentucky 40361,
Attention:
Gregory J. Dawson, Secretary. We recommend that you send any proposals
by
certified mail, return receipt requested.
If you want to present a proposal at next year's annual meeting
but do
not wish to have it included in our proxy statement, you do not need to
contact us in advance. Our bylaws do not contain any requirement for
shareholders to provide advance notice of proposals or nominations they
intend to present at the Meeting. However, if you do not notify us on or
before March 2, 2012 of any matter that you wish to present at next
year's
annual meeting, then the shareholders' proxies that we solicit in
connection
with our 2012 Annual Meeting of Shareholders will confer on the proxy
holders
discretionary authority to vote on the matter that you present at our
2012
Annual Meeting.
Corporate Governance.
Code of Ethics. Ethical business conduct is a shared value of our
Board of Directors, management and employees. Our Code of Ethics applies
to
our employees and officers, including the principal executive officer and
principal financial officer.
Our Code of Ethics covers all areas of professional conduct,
including,
but not limited to, conflicts of interest, disclosure obligations,
insider
trading and confidential information, as well as compliance with all
laws,
rules and regulations applicable to our business. We encourage all
employees, officers and directors to promptly report any violations of
the
Code of Ethics to the appropriate persons identified in the Code. A copy
of
our Code of Ethics is available at our website at www.kentuckybank.com
under
"Investor Relations" in the section entitled "About Us."
Board Structure and Committees. As of the date of this proxy
statement,
our Board of Directors consists of eleven (11) members. Our Board of
Directors held four meetings during 2010, consisting of four regularly
scheduled meetings. All directors, except Mr. Arvin and Mr. Hinkle,
attended
at least 75% of the total number of board meetings and the meetings of
the
committees to which they belonged. Our Board of Directors does not have
a
specific policy for director attendance at our annual meeting of
shareholders. Three of our directors attended our 2010 annual meeting.
Our Board of Directors has a standing Compensation Committee and
Audit
Committee but does not have a standing nominating committee.
Compensation
Meetings
Committee Members Functions of the Committee in
2010
Henry Hinkle Please refer to the sections in the proxy 3
(Chairman) statement entitled "Compensation Discussion
William Arvin and Analysis" and the "Report of the
Ted McClain Compensation Committee"
Edwin S. Saunier
Audit
Meetings
Committee Members Functions of the Committee in
2010
Robert G. Thompson Monitors the integrity of our financial 18
(Chairman) reporting processing and systems of internal
Theodore Kuster controls regarding finance, accounting, and
Betty J. Long legal compliance
Edwin S. Saunier Selects our independent auditor and determines
Such auditor's compensation
Monitors the independence and performance of
the independent auditor, management and the
internal audit department
Provides an avenue of communication among the
independent auditors, management, the intenal
audit department and the Board of Directors
Pre-approves, if appropriate, all related party
transactions
Oversees the establishment and investigation of
complaints regarding accounting controls or
audit matters
Committee Charters. Only our Audit Committee has a charter, which
is
available at www.kentuckybank.com under "Investor Relations" in the
section
entitled "About Us." The Board of Directors does not limit the number of
audit committees for other corporations on which its audit committee
members
may serve. None of the committee members currently serves on another
audit
committee for a publicly-held entity.
Board and Committee Independence. The Board has determined that
each
of its members is independent as defined by the rules of NASDAQ except
for
its employee directors: Mr. Caudill, Mr. Prichard and Mr. Woodford.
While
our Board determined that Mr. Arvin, Mr. McClain and Mr. Van Meter are
each
independent under the rules of NASDAQ, it did have to consider the
Company's
payments to their companies. Mr. Arvin is the sole owner of his law
firm.
The aggregate amount the Company paid to Mr. Arvin's company was below
the
$120,000 threshold set by NASDAQ. Mr. McClain owns 40% of The Hopewell
Company, Inc., which is a family business. The aggregate amount the
Company
paid to The Hopewell Company, Inc. for property or services during each
of
2010, 2009 and 2008 did not exceed $200,000 or 5% of Hopewell Insurance
Company's consolidated gross revenues for the applicable fiscal year.
Mr.
Van Meter is the sole owner of a company that rents parking space to us.
The
aggregate amount the Company paid to Mr. Van Meter's company was below
the
$120,000 threshold set by NASDAQ.
Audit Committee Financial Expert. Our Board of Directors has
determined that each of the members of the Audit Committee is independent
as
defined by the rules of NASDAQ for audit committee members. Further, our
Board of Directors has determined (in accordance with Securities and
Exchange
Commission Regulation S-K 407(d)) that Mrs. Betty J. Long satisfies the
qualifications of financial expert and Mrs. Betty J. Long accordingly has
been designated as the Audit Committee financial expert.
Consideration of Director Nominees. We do not have a standing
nominating committee. The members of our Board who are independent
directors
under NASDAQ rules, which is all of our directors and director nominees
except Mr. Caudill, Mr. Prichard and Mr. Woodford, determine the
nominees
for director to be presented for election based upon their review of all
proposed nominees for the Board, including those proposed by
shareholders.
The independent members of the Board of Directors select qualified
candidates
based upon the criteria set forth below and review their recommendations
with
the Board, which decides whether to invite the candidate to be a nominee
for
election to the Board.
Board members must possess the acumen, education and experience to
make
a significant contribution to the Board and bring a diverse range of
skills
and perspectives to satisfy the perceived needs of the Board at a
particular
time. Board members must have the highest ethical standards, a strong
sense
of professionalism, independence and an understanding of our business.
Additionally, Board members must have the aptitude and experience to
fully
appreciate the legal responsibilities of a director and the governance
processes of a public company, a willingness to commit, as well as have,
sufficient time to discharge their duties to the Board and such other
factors
as the independent members of the Board of Directors determine are
relevant
in light of the needs of the Board and the Company.
For a shareholder to submit a candidate for consideration as a
director, a shareholder must notify our secretary. To be considered for
nomination and inclusion in our proxy statement at the 2012 Annual
Meeting, a
shareholder must notify our secretary no later than December 19, 2011
(the
date 120 days prior to the first anniversary of the date of the 2011
annual
meeting proxy statement). Notices should be sent to: Kentucky
Bancshares,
Inc., 339 Main Street, Paris, Kentucky 40361, Attention: Gregory J.
Dawson,
Secretary.
Communications with the Board. Our Board of Directors has
established
a process for shareholders to communicate with the Board or an individual
director. Shareholders may contact the Board or an individual director
by
writing to the attention of one or more directors at our principal
executive
offices at Kentucky Bancshares, Inc., 339 Main Street, Paris, Kentucky
40361,
Attention: Gregory J. Dawson, Secretary. Each communication intended for
the
Board of Directors or an individual director will be forwarded to the
specified party.
Board Leadership Structure and Role in Risk Oversight. We are a
bank
holding company that was formed in 1981 under the Bank Holding Company
Act of
1956, as amended. We are the parent company of Kentucky Bank, a
separately
chartered commercial state bank.
Our Board is comprised of eight independent, two employee
directors and
1 director who was a former employee. We are committed to a strong,
independent Board and believe that objective oversight of the performance
of
our management is a critical aspect of effective governance.
Accordingly,
the role of Chairman of the Board and Chief Executive Officer are held by
different individuals. Our Chairman is an independent director and has
the
following duties:
Chair and preside at Board meetings;
Coordinate with our CEO in establishing the agenda and topic items
for Board meetings;
Advise on the quality, quantity and timeliness of the flow of
information from management to the Board;
Act as principal liaison between management and the Board on
sensitive issues;
Retain independent advisors on behalf of the Board as the Board may
determine is necessary or appropriate;
Assist the Compensation Committee with the annual evaluation of the
performance of the CEO; and
Provide an important communication link between the Board and
shareholders, as appropriate.
Our Board of Directors, together with the Audit and Compensation
Committees of the Board, coordinate with each other to provide
enterprise-
wide oversight of our management and handling of risk. These committees
report regularly to the entire Board of Directors on risk-related matters
and
provide our Board of Directors with integrated insight about our
management
of strategic, credit, interest rate, financial reporting, technology,
liquidity, compliance, operational and reputational risks.
In addition Kentucky Bank has its own board of directors, audit
and
asset liability management committees, which provide risk management.
Our
CEO serves on the board of Kentucky Bank. One of the key
responsibilities of
the subsidiary board is to manage strategic, credit, interest rate,
financial
reporting, technology, liquidity, compliance, operational and
reputational
risks. While we have not developed an enterprise-wide risk statement,
our
Board of Directors believes that sound credit underwriting to manage
credit
risk and a conservative investment portfolio to manage liquidity and
interest
rate risk contribute to an effective oversight of the Company's risk and
we
require our subsidiaries to follow this philosophy.
Report of the Audit Committee.
The Audit Committee of the Board of Directors has furnished the
following report:
The role and responsibilities of the Audit Committee are set forth
in a
written Charter adopted by the Board. Our Audit Committee charter can be
located at our website www.kentuckybank.com under "Investor Relations" in
the
section entitled "About Us." The Audit Committee reviews and reassesses
the
Charter annually and recommends any changes to the Board for approval.
Management is responsible for the preparation of the Company's
financial statements. The Company's registered independent public
accounting
firm is responsible for the audit of the financial statements. The Audit
Committee is responsible for overseeing the Company's overall financial
reporting process. In fulfilling its responsibilities for the financial
statements for fiscal year 2010, the Audit Committee:
Reviewed and discussed the audited financial statements for the fiscal
year ended December 31, 2010 with management and Crowe Horwath LLP
("Crowe Horwath"), the Company's independent registered public
accounting firm at the time of the audit;
Discussed with Crowe Horwath the matters required to be discussed by AU
Section 380 relating to the conduct, scope and results of the audit;
and
Received written disclosures and the letter from Crowe Horwath
regarding its independence as required by the Public Company Accounting
Oversight Board.
The Audit Committee discussed with Crowe Horwath such firm's
independence. The Audit Committee also discussed with management and
Crowe
Horwath the quality and adequacy of the Company's internal controls and
the
internal audit function's organization, responsibilities, budget and
staffing. The Audit Committee discussed with the independent auditors
their
audit plans, audit scope and identification of audit risks.
Based on the Audit Committee's review of the audited financial
statements and discussions with management and Crowe Horwath, the Audit
Committee recommended to the Board of Directors that the audited
financial
statements be included in the Company's Annual Report on Form 10-K for
the
fiscal year ended December 31, 2010 for filing with the Securities and
Exchange Commission.
AUDIT COMMITTEE
Robert G. Thompson, Chairman
Betty J. Long Theodore Kuster Edwin S. Saunier
Fees of Independent Registered Public Accounting Firm.
Preapproval Policies and Procedures. The Audit Committee's policy
is
to approve in advance all audit fees and terms and non-audit services
permitted by law to be provided by the external auditors. In accordance
with
that policy, the committee annually pre-approves a list of specific
services
and categories of services, including audit, audit-related and non-audit
services described below, for the upcoming or current fiscal year,
subject to
specified cost levels. Other services include:
Consultation regarding financial accounting and reporting
standards;
Discussions related to accounting for proposed acquisitions;
Discussions regarding regulatory requirements;
Consultation concerning tax planning strategies; and Audits of
benefit plans.
Since the May 2003 effective date of the SEC rules stating that an
auditor is not independent of an audit client if the services it provides
to
the client are not appropriately approved, each service provided by our
independent registered public accounting firm has been approved in
advance by
the Audit Committee. None of those services required use of the de
minimis
exception to preapproval contained in the SEC's rules.
Fees and Related Disclosures for Accounting Services. The
aggregate
fees we incurred for professional services rendered by Crowe Horwath were
as
follows:
Audit fees - Fees for the consolidated financial statement audit
and
the review of the Company's Form 10-Q's were $127,300 for 2010 and
$125,300
for 2009.
Audit related fees - Aggregate fees for all assurance and related
services were $28,053 for 2010 and $23,000 for 2009. These fees were
incurred for audits of benefit plans, and for 2010, also includes filing
a
Form S-8.
Tax fees - Fees related to tax compliance, advice and planning
were
$17,750 for 2010 and $18,890 for 2009.
All other fees - Consulting fees related to acquisitions,
compensation
structure, profitability and risk management were $3,510 for 2010 and
$20,100
for 2009.
All services provided by Crowe Horwath in 2010 and 2009 were
approved
by the Audit Committee. All fees were approved in accordance with the
preapproval policy. The Audit Committee has determined that the
provision of
the services described above is compatible with maintaining the
independence
of the external auditors.
PROPOSAL NO. 1
Ratification of Independent Registered Public Accounting Firm
On the recommendation of the Audit Committee, the Board engaged
Crowe
Horwath as its independent registered public accounting firm for the
fiscal
year ending December 31, 2011. Our Audit Committee and Board seek
shareholder ratification of our Board's appointment of Crowe Horwath to
act
as the independent auditors of our and our subsidiary's financial
statements
for the fiscal year ending December 31, 2011. If the shareholders do not
ratify the appointment of Crowe Horwath, our Audit Committee and Board
will
reconsider this appointment for 2012. Crowe Horwath will have one or
more
representatives at the Annual Meeting who will have an opportunity to
make a
statement, if they so desire, and will be available to respond to
appropriate
questions.
The Company's Board of Directors recommends voting FOR this
proposal.
Director Compensation.
We use a combination of cash and equity-based incentive
compensation to
attract and retain qualified candidates to serve on our Board of
Directors.
Additionally, each director of the Company is also a director of Kentucky
Bank, our operating subsidiary. In setting director compensation, we
consider the significant amount of time directors expend in fulfilling
their
duties to the Company as well as the skill-level required by the Company
to
be an effective member of the Board.
The form and amount of director compensation is reviewed by the
Compensation Committee, which makes recommendations to the full Board.
Cash Compensation. Each Director receives an annual fee of
$1,500.
The Audit Committee Chairman receives an additional annual fee of $2,000.
For 2010, each Director received a fee of $500 for attending each Company
board meeting and each Kentucky Bank board meeting, including $500 for
one
paid absence per year. Non-employee Directors are paid $100 for each
committee meeting of the Company and of Kentucky Bank that he or she
attends
(for which he or she is a member). The Chairman of the Board will
receive
$1,000 for each meeting, including one paid absence per year. Each Audit
Committee member will receive $2,000 in addition to the committee meeting
fee.
Equity-Based Compensation. Non-employee Directors have received
equity-based compensation under our 1993 Non-Employee Directors Stock
Ownership Incentive Plan. Pursuant to this plan, non-employee directors
have been granted options to purchase shares of our common stock
following
each year in which Kentucky Bank has a return on assets of one percent
(1%)
or greater. If options were granted, then the options were typically
awarded on the first business day in March following the year the
performance
goals were met, have terms of ten years, vest immediately and are
exercisable
at a strike price equal to 100% of the closing market price of a share of
our
common stock on the grant date. Exercise rights expire 90 days after
resignation or retirement (before age 72) from the Board and one (1) year
after death, disability or mandatory retirement from the Board (age 72).
This plan has expired although some previously awarded options are still
outstanding.
2010 Director Summary Compensation Table
The table below summarizes the total compensation paid to or
earned by
our non-employee Directors and Mr. Caudill (employee) during 2010. The
compensation of Mr. Prichard is reflected in the Summary Compensation
Table
under Executive Compensation.
Fees Earned
Or Paid in Option All Other
Name of Director Cash Awards (1) Compensation (2)
Total
William Arvin $11,100 - $48,161
$59,261
Henry Hinkle 9,200 - -
9,200
Proctor Caudill, Jr. 9,500 - 85,985
95,485
Theodore Kuster 14,800 - -
14,800
Betty J. Long 15,600 - -
15,600
Ted McClain 10,300 - -
10,300
Edward Saunier 13,800 - -
13,800
Robert G. Thompson 16,500 - -
16,500
Woodford Van Meter 10,100 - 6,000
16,100
Buckner Woodford 18,900 - -
18,900
(1) We did not grant any stock options to our non-
management directors in 2010. The aggregate number of stock
options held by each our non-management directors as of
December 31, 2010 is as follows: Messrs Arvin, Hinkle,
Kuster and Thompson - 700 each, Mr. McClain - 600, Mr. Van
Meter 400, Mr. Saunier and Mrs. Long - 300 each, and Mr.
Woodford - 0.
(2) The amount for Mr. Arvin reflects the amount we paid his
legal firm, of which he is the sole owner, for legal
services he provided to the Company during 2010. The amount
for Mr. Caudill includes employee compensation, premiums
paid for life insurance and the Company's matching
contribution of the first 6% of voluntarily deferred salary
contribution into his 401(k) plan. As described in
"Transactions with Related Persons," Mr. McClain is a
partial owner of The Hopewell Company, Inc., which received
$162,759 from the Company for the provision of insurance
services. Because these fees are not paid directly to Mr.
McClain, we have not included them in the table. The amount
paid to Mr. Van Meter reflects the amount we paid him for
parking lot rent.
Directors.
Classified Board. Under our Amended and Restated Articles of
Incorporation, our Board of Directors consists of three different classes
(Class I, Class II and Class III) as nearly equal in number as the then
total
number of directors constituting the Board permits. The directors in
each
class serve for a term of three years, and one class is elected annually.
Term; Vacancies. At the Annual Meeting, you will be asked to
elect
three directors for a term to expire at the Annual Meeting of
Shareholders to
be held in 2014. Any vacancies that occur after the directors are
elected
may be filled by the Board of Directors in accordance with law for the
remainder of the full term of the vacant directorship.
Independence of Directors. In accordance with rules of NASDAQ,
all of
the nominees for director, and all continuing directors listed below,
meet
the NASDAQ definition of "independent" except for Messrs. Caudill,
Prichard
and Woodford.
Director Qualifications. Our Board of Directors consists of
eleven
members who are well-qualified to serve on our board and represent our
shareholders' best interests. Our nominees are selected with a view of
establishing a board of directors that meet the criteria for qualified
candidates that is set forth above under the caption "Corporate
Governance-
Consideration of Director Nominees." We believe that each of the
director
nominees and other directors bring these qualifications to our Board of
Directors. Together, our director nominees and continuing directors
provide
our Board with a diverse complement of specific business skills,
experience
and perspectives, including: extensive financial and accounting
expertise,
knowledge of the commercial banking industry, experience with companies
that
serve the same communities that our various bank subsidiaries serve, and
extensive operational and strategic planning experience. The following
describes the key qualifications, business skills, experience and
perspectives that each of our directors brings to the Board of Directors,
in
addition to the general qualifications under "Corporate Governance-
Consideration of Director Nominees" and information included in the
biographical summaries provided below for each director. We believe that
each individual's skills and perspectives strengthen our Board's
collective
qualifications, skills and experience.
Name Qualifications
William Arvin Attorney in private practice since 1964 with
comprehensive experience in a broad range of
legal
and business issues; formerly served as
President of
a Savings and Loan institution for 15 years;
knowledge of local communities including service
on
numerous local boards of various civic and
professional organizations.
B. Proctor Caudill, Jr. Extensive banking career beginning in 1973;
significant executive management experience in
banking industry; knowledge of local communities
including service on numerous local boards of
various civic and professional organizations;
in-
depth knowledge of the Company's business,
strategy
and management team.
Louis Prichard Extensive banking career beginning in 1977;
significant executive management experience in
banking industry; knowledge of local communities
including service on numerous local boards of
various civic and professional organizations;
in-
depth knowledge of the Company's business,
strategy
and management team.
Woodford Van Meter Comprehensive business management experience as
a
managing physician of an ophthalmology practice;
extensive analytical and planning skills as a
Professor of Ophthalmology for a medical school;
in-
depth knowledge of the Company's business,
strategy
and management team.
Betty J. Long Extensive banking career beginning in 1965;
significant executive management and financial
experience in banking industry; knowledge of
local
communities including service on numerous local
boards of various civic and professional
organizations; in-depth knowledge of the
Company's
business, strategy and management team; brings
gender diversity to our Board.
Ted McClain Extensive risk management, financial and
operations
skills and general business experience through
ownership of an insurance company.
Edwin S. Saunier Extensive executive management and financial
experience as owner and president of a moving
and
storage business; degree in accounting;
extensive
knowledge of local communities including service
on
numerous local boards of various civic and
professional organizations.
Buckner Woodford Extensive banking career beginning in 1971;
significant executive management and financial
experience in banking industry; knowledge of
local
communities including service on numerous local
boards of various civic and professional
organizations; in-depth knowledge of the
Company's
business, strategy and management team from
previously serving as president of the Company
as
from serving as a director of Kentucky Bank
since
1971.
Henry Hinkle Extensive executive management and financial
experience as owner and president of a paving
and
construction company; extensive knowledge of
local
communities including service on numerous local
boards of various civic and professional
organizations; in-depth knowledge of the
Company's
business, strategy and management team from
serving
as a director of Kentucky Bank since 1989.
Theodore Kuster Extensive management, financial, operational and
general business skills as a business
entrepreneur
in the farming and thoroughbred industry;
extensive
knowledge of local communities including service
on
numerous local boards of various civic and
professional organizations; in-depth knowledge
of
the Company's business, strategy and management
team
from serving as a director of Kentucky Bank
since
1979.
Robert G. Thompson Extensive management, financial, operational and
general business skills as a business
entrepreneur
in the farming and thoroughbred industry;
extensive
knowledge of local communities including service
on
numerous local boards of various civic and
professional organizations; in-depth knowledge
of
the Company's business, strategy and management
team
from serving as a director of Kentucky Bank
since
1979.
PROPOSAL NO. 2
Election of Directors
Mr. Hinkle, Mr. Kuster and Mr. Thompson are currently serving as
directors in the class of directors whose terms expire at the Annual
Meeting.
Our Board has nominated each of Messrs. Hinkle, Kuster and Thompson to
serve
a 3-year term, until our 2014 annual shareholders' meeting (or until
their
successors have been elected and qualified).
Each of the nominees has agreed to serve as a director if elected.
Unless otherwise directed, each proxy executed and returned by a
shareholder
will be voted for the election of these nominees. Abstentions and shares
not
voted by brokers and other entities holding shares on behalf of
beneficial
owners will not be counted and will have no effect on the outcome of the
election.
If any of the director nominees should be unable or unwilling to
stand
for election at the time of the Annual Meeting, the proxies may vote for
a
replacement nominee recommended by the Board of Directors, or the Board
of
Directors may reduce the number of directors to be elected at the Annual
Meeting. At this time, the Board of Directors knows of no reason why any
of
the nominees listed above may not be able to serve as a director if
elected.
Information about Director Nominees and Continuing Directors. The
following tables set forth information with respect to each nominee for
director, and with respect to continuing directors who (by virtue of the
classes in which they serve) are not nominees for re-election at the
Annual
Meeting.
Principal Occupations, Year
First
Name of Other Public Directorships
Elected
Director Age and Positions with the Company (1) a
Director
Class III
Directors Nominated for a 3-Year Term
To Expire in 2014
Henry Hinkle 58 President of Hinkle Contracting Company.
1989
Director of Kentucky Bank since 1989.
Theodore 66 Farmer and thoroughbred horse breeder.
1985
Kuster Director of Kentucky Bank since 1979.
Robert G. 60 Farmer and thoroughbred horse breeder.
1991
Thompson Director of Kentucky Bank since 1991.
Class I
Continuing Directors Whose Terms
Expire in 2012
Betty J. Long 62 Retired President and CEO of First Federal
2003
Cynthiana. Director of Kentucky Bank
since 2006.
Ted McClain 58 Insurance agent and partial owner of The
2003
Hopewell Company, Inc. Director of Kentucky
Bank since 2002.
Edwin S. 52 President of Saunier North American, Inc.,
2007
Saunier a moving and storage company. Director of
Kentucky Bank since 2007.
Buckner 65 Chairman of the Board of the Company and
1981
Woodford Kentucky Bank. President and CEO of the
Company from 1991-2004. Director of Kentucky
Bank since 1971.
Class II
Continuing Directors Whose Terms
Expire in 2013
Willaim Arvin 70 Attorney, Law Office of William Arvin.
1995
Director of Kentucky Bank since 1995.
B Proctor 60 Special Projects Manager of the Company
2006
Caudill since 2006. President and CEO of Peoples
Bancorp of Sandy Hook, Inc. from 1981 to
2006 and President from 1999 to 2006. CEO
of Peoples Bank, (Sandy Hook, Kentucky)
from 1981 to 2006.
Louis Prichard 56 President and CEO of the Company and Kentucky
2003
Bank since 2004. President and Chief
Operating Officer of the Company and Kentucky
Bank from 2003 to 2004. Director of Kentucky
Bank since 2003.
Woodford Van 56 Ophthalmologist. Director of Kentucky Bank
2004
Meter since 2004.
(1) Kentucky Bank is our operating subsidiary. We acquired
Peoples Bancorp of Sandy Hook Inc. and Peoples Bank, (Sandy
Hook, Kentucky) in 2006.
None of the nominees or continuing directors is a director of any
company with a class of securities registered with the Securities and
Exchange Commission pursuant to Section 12 of the Securities Exchange Act
of
1934 or subject to the requirements of Section 15(d) of that Act, or any
company registered as an investment company under the Investment Company
Act
of 1940.
The Company's Board of Directors recommends voting FOR the election of
each
of the Nominees for Director.
Stock Ownership of Directors and Executive Officers.
We believe it is important for our Directors and executive
officers to
align their interests with the long-term interests of our shareholders.
Although we have encouraged stock accumulation through the grant of
equity
incentives to our directors and executive officers, we do not require our
directors and executive officers to own shares of our common stock.
Except as otherwise indicated below, the table below shows the
amount
of our common stock each of our Directors and Named Executive Officers
(as
defined in the Executive Compensation section below) owned on March 7,
2011.
Unless otherwise indicated, all shares shown are held with sole voting
and
investment power.
Number of
Number of Shares Total Number
Percent
Shares Not Subject to of Shares of
Name of Beneficial Subject to Exercisable Beneficially Class
Owner Options Options (1) Owned (2) (3)
William Arvin(4) 20,064 650 20,714 *
B. Proctor Caudill, Jr.(5) 129,577 - 129,577 4.7%
Brenda Bragonier 6,516 1,350 7,866 *
Gregory J. Dawson 6,435 1,450 7,885 *
Norman J. Fryman 467 1,800 2,267 *
Henry Hinkle(6) 41,820 650 42,470 1.5%
Theodore Kuster(7) 13,150 650 13,800 *
Betty J. Long(8) 1,943 300 2,243 *
Ted McClain(9) 2,494 600 3,094 *
Clark Nyberg 390 400 790 *
Louis Prichard(10) 5,509 8,000 13,509 *
Edward S. Saunier 500 300 800 *
Robert G. Thompson(11) 5,700 650 6,350 *
Woodford Van Meter(12) 32,679 400 33,079 1.2%
Buckner Woodford IV(13) 207,473 - 207,473 7.6%
Directors and Executive
Officer as a group 516,318 17,980 534,298 19.5%
* Ownership is less than 1.0%
(1) Shares of common stock attributed to a named person by virtue
of
options exercisable currently or within sixty days of March 7, 2011.
(2) Total number of shares beneficially owned does not include the
following nonvested shares of restricted stock:
Number of Shares of
Name of Beneficial Owner Restricted Common Stock
Brenda Bragonier 425
B. Proctor Caudill, Jr. 33
Gregory J. Dawson 495
Norman J. Fryman 495
Clark Nyberg 425
Louis Prichard 1,050
Executive Officers as a group 4,738
(3) Based on 2,743,929 shares of our common stock outstanding as of
March
7, 2011. Shares of common stock attributed to a named person by virtue
of
options exercisable currently or within sixty days are deemed outstanding
for
purposes of computing the percentage of outstanding shares of common
stock
owned by such person (and for all Directors and executive officers as a
group) but are not deemed outstanding for purposes of computing the
percentage of any other person.
(4) Includes 7,644 shares held in a retirement account and 11,968
shares
held of record by Mr. Arvin's wife, as to which Mr. Arvin disclaims
beneficial ownership.
(5) Includes 19,725 shares held of record by Mr. Caudill's wife,
as to
which Mr. Caudill's disclaims beneficial ownership.
(6) Includes 150 shares held by his wife and 2,225 shares held by
relatives, as to which Mr. Hinkle disclaims beneficial ownership.
Includes
37,280 shares held of record by Hinkle Contracting Company, as to which
Mr.
Hinkle, as president, has shared voting power.
(7) Includes 6,250 shares held of record by Mr. Kuster's wife of
which
Mr. Kuster disclaims beneficial ownership and 350 shares held by a
company
solely owned by Mr. Kuster's wife and of which Mr. Kuster disclaims
beneficial ownership.
(8) Includes 1,943 shares held in a retirement account.
(9) Includes 1,000 shares held of record by The Hopewell Company,
Inc.
as to which Mr. McClain, as a 40% owner and officer, has voting power.
(10) Includes 2,110 shares held jointly with his wife.
(11) Includes 200 shares held of record by Mr. Thompson's wife, as
to
which Mr. Thompson disclaims beneficial ownership.
(12) Includes 2,200 shares held of record by Mr. Van Meter's wife,
as
to which Mr. Van Meter disclaims beneficial ownership.
(13) Includes 8,000 shares held by his wife, as to which Mr.
Woodford
disclaims beneficial ownership.
Executive Compensation.
Compensation Discussion and Analysis.
Overview of Compensation Program. The Compensation Committee
("Committee") of the Board has responsibility for establishing,
implementing
and continually monitoring adherence with our compensation philosophy.
The
Committee ensures that the total compensation paid is fair, reasonable
and
competitive. The individuals who served as the Company's Chief Executive
Officer and Chief Financial Officer during fiscal 2010, as well as the
other
individuals included in the Summary Compensation Table, are referred to
as
the "Named Executive Officers."
Compensation Philosophy and Objectives. The Committee believes
that the
most effective executive compensation program is one that is designed to
reward the achievement of specific annual, long-term and strategic goals
by
the Company, and which aligns executives' interests with those of the
shareholders by rewarding performance above established corporate and
individual goals, with the ultimate objective of improving shareholder
value.
The Committee evaluates both performance and compensation to ensure that
the
Company maintains its ability to attract and retain superior employees in
key
positions and that compensation provided to key employees remains
competitive
relative to the compensation paid to similarly situated executives of our
peer companies. To that end, the Committee believes that the executive
compensation packages we provide to our executives, including the Named
Executive Officers, should include both cash and stock-based compensation
that reward performance as measured against established goals. The
Committee, and the President and Chief Executive Officer ("CEO"),
evaluate
the information in the annual Kentucky Bankers Association Financial
Institution Compensation Survey ("KBA Survey"), particularly the
percentage
increase in compensation, and then use their subjective judgment to
determine
a percentage increase in total base pay. Each manager, based on this
aggregate percentage increase, is allocated a pool of funds to allocate
increases among the employees the manager supervises. For 2011,
increases
ranging from 2% to 15% were granted to the Named Executive Officers. The
Committee chose the following banks from the KBA Survey to review because
they were deemed to be peers of the Company based on their lines of
business,
asset size and location:
The Bank of Kentucky, Inc. Citizens National Bank of Paintsville
Community Trust Bank, Inc. First Federal Savings Bank of
Elizabethtown
Planters Bank, Inc. Independence Bank of Kentucky
Traditional Bank, Inc.
Role of Executive Officers in Compensation Decisions. The Committee
makes all compensation decisions for the CEO and approves recommendations
regarding equity awards to all officers of the Company. Decisions
regarding
the non-equity compensation of other executive officers are made by the
CEO,
in his discretion using the pool of funds allocated to the other
executive
officers based on the overall corporate percentage increase.
Setting Executive Compensation. Based on the foregoing
objectives, the
Committee has structured the Company's annual and long-term incentive-
based
cash and non-cash executive compensation to motivate executives to
achieve
the business goals set by the Company and reward the executives for
achieving
such goals. A significant percentage of total compensation is allocated
to
incentives.
The Committee reviews relevant market data and alternatives when
making
compensation decisions for the CEO. Up to 52.5% of base compensation may
be
earned in performance-based incentive compensation as a result of the
performance of the Company, compared to established goals.
2010 Executive Compensation Components. For the fiscal year ended
December 31, 2010, the principal components of compensation for Named
Executive Officers were base salary, performance-based incentive
compensation, long-term equity incentive compensation, and retirement and
other benefits.
Currently Paid Compensation Components:
Base Salary. We provide our Named Executive Officers and other
employees with base salary to compensate them for services rendered
during
the fiscal year. Base salary ranges for Named Executive Officers are
determined for each executive based on his or her position and
responsibility. Salary levels are typically considered annually as part
of
our performance review process as well as upon a promotion or other
change in
job responsibility. The Committee and the CEO primarily use the annual
KBA
Survey in setting salary ranges on an annual basis. Every five years,
the
Committee recalibrates salary ranges based on the overall value of each
job
by comparing current market rates of benchmark jobs and assigning all
jobs to
salary grades, after considering their market value and internal value.
The
Committee undertook this review for the 2010 salaries. During his
review of
base salaries for other executives, the CEO primarily focuses on the
individual's performance.
Performance-Based Incentive Compensation. The Management
Incentive
Plan ("MIP") was created to promote continual high performance by
officers of
the Company through achievement of corporate goals and encouragement of
growth of shareholder value. We currently have approximately 49 officers
(including the Named Executive Officers) who are eligible to receive cash
awards under MIP. The MIP provides guidelines for the calculation of
semi-
annual non-equity incentive based compensation, subject to Committee
oversight and modification. Annually, the Committee considers whether
any
changes should be made with the MIP. The MIP includes various incentive
levels based on the participant's accountability and impact on our
operations, with target award opportunities that are established as a
percentage of base salary. These maximum targets range from 0% of base
salary to 52.5% of base salary for the Named Executive Officers.
MIP for Fiscal Years 2008. For fiscal year 2008, a Named
Executive Officer's MIP award was based upon achievement of corporate
financial objectives relating to Company earnings on a quarterly basis,
with goals set for threshold, target and maximum levels. Payments of
awards under the MIP were based upon the achievement of such objectives
for such fiscal year. Named Executive Officers participating in the
MIP received: 50% of the maximum award if threshold levels were met,
75% of the maximum award if target levels were met and 100% of the
maximum award if maximum levels were met.
Generally for a particular fiscal year, the Committee sets the
target level for earnings at the Company's earnings objective for the
same fiscal year. Threshold and maximum levels are set below and above
the target level (generally five to seven percentage points, as
applicable). In making the annual determination of the threshold,
target and maximum levels, the Committee may consider the specific
circumstances facing the Company during the coming year. The payout
percentages for the Named Executive Officers of our earnings for 2008
were 0%. Generally, the Committee sets the threshold, target and
maximum levels such that the relative difficulty of achieving the
target level is consistent from year to year.
MIP for Fiscal Year 2009 and 2010. Because of the difficulties
facing the financial industry in 2008 to the present, the Committee
chose to change the goals so that they were no longer tied solely to
Company earnings. The goals for each participant varied and related to
the individuals potential to affect our operations. For fiscal years
2009 and 2010, the Committee established specific monthly department
and/or individual and bank goals with a threshold, target and maximum
achievement level for each goal that remained constant throughout the
year. Threshold and outstanding levels are set below and above the
target level (generally ten to twenty percentage points, as
applicable). The monthly department and/or individual goals included
loan deposit increases, new customer accounts, job related training,
network integrity, increasing the number of residential mortgages that
close within 20 days after interest rate has been chosen by the
customer and specific customer service improvements. The Company goals
related to monthly increases in return on earnings and net interest
margins, monthly growth in deposit accounts, loan growth, increase in
mortgage market share, customer service improvements and reductions in
late loans and loan charge-offs.
We made semi-annual MIP Payments. To help our employees
individually monitor his or her achievement results, each month we
evaluated whether the applicable department, individual or Company
achieved the threshold level or achieved or exceeded the target or
maximum level for each of its, his or her goals. On a semi-annual
basis, we calculated the average of each of the prior 6-month results
for each goal and then evaluated whether the department, individual or
company achieved or exceeded the threshold, target or maximum levels
for the 6-month period for each of its, his or her goals. Each goal
had an award value based upon a percentage of an individual's salary
and each individual received 50% of the maximum goal award if the
threshold level was met, 75% of the maximum goal award if target level
was met and 100% of the maximum goal award if maximum level was met.
The payout percentages (as a percent of salary) for the Named Executive
Officers ranged from 1.2% to 18.5% for 2010. Awards made to Named
Executive Officers under the MIP for performance in 2009 and 2010 are
reflected in column (g) of the Summary Compensation Table.
Long-Term Incentive Compensation:
2009 Stock Award Plan. The 2009 Stock Award Plan is intended to
help
us to enhance the link between the creation of shareholder value and
long-
term executive incentive compensation, to provide an opportunity for
increased equity ownership by executives and to maintain competitive
levels
of total compensation. Under this plan, our Board and the Committee have
the
ability to issue stock options, stock appreciation rights, restricted
stock
and other stock-based awards. No awards have been issued under this
plan.
2005 Restricted Stock Grant Plan. The 2005 Restricted Stock Grant
Plan
encourages participants to focus on long-term Company performance and
provides an opportunity for executives and other officers to increase
their
stake in the Company through restricted grants of our common stock.
Starting
in 2006, the Committee utilized the 2005 Restricted Stock Grant Plan to
compensate executives and other officers for sustained increases in our
stock
performance. Twenty percent of each grant vests annually on anniversary
date
of the grant (assuming the recipient is still in our employ). Vesting
expires 90 days after termination of employment and one (1) year after
death,
disability or retirement. Upon a change of control, any restriction
period
will expire immediately and the employee will hold the restricted stock
free
of any restrictions.
Based on its subjective judgment, the Committee annually
establishes
the awards to the executive officers under the 2005 Restricted Stock
Grant
Plan based on the salary level of each employee. The Committee, in its
discretion, may also award stock grants to newly hired employees and to
employees who are promoted. These awards are reflected in the Summary
Compensation Table and the Grants of Plan Based Awards Table for our
Named
Executive Officers.
1999 Employee Stock Option Plan. Some of our employees hold
vested,
unexercised options under this plan. We can no longer issue any options
under this plan because it expired in May of 2009. The 1999 Employee
Stock
Option Plan has helped us to enhance the link between the creation of
shareholder value and long-term executive incentive compensation, to
provide
an opportunity for increased equity ownership by executives and to
maintain
competitive levels of total compensation. Since the establishment of the
2005 Restricted Stock Grant Plan, the Committee has not awarded any stock
options. Currently, the Committee anticipates that stock option awards
for
officers will be used, if at all, for newly hired or promoted executives.
Options are awarded at the current closing price of our common stock on
the
date of the grant. The options granted vest at a rate of 20% per year
over
the first five years of the ten-year option term. Prior to the exercise
of
an option, the holder has no rights as a shareholder with respect to the
shares subject to such option, including voting rights and the right to
receive dividends or dividend equivalents. Vesting and exercise rights
expire 90 days after termination of employment and one (1) year after
death,
disability or retirement. In the event of a change of control of the
Company, each outstanding option will become fully vested and immediately
exercisable.
Retirement Plan & Trust. The Retirement Plan & Trust was
terminated at
December 31, 2008. Under the Retirement Plan & Trust, all full or part-
time
employees who had completed five continuous years of employment with us,
including the Named Executive Officers, earned the right to receive
certain
benefits upon retirement at the normal retirement age of 65 or upon early
retirement on or after age 55. Retirement benefits were calculated as
the
product of 1% times the years of service multiplied by the final average
eligible pay for the five highest consecutive years. If the employee
retired
between the ages of 55 and 64, the amount of benefits was reduced such
that
if the associate retired at age 55, he or she would be entitled to 50% of
the
accrued benefits. The benefits were not subject to a deduction for
Social
Security or other offset amounts. Final distributions were at the
discretion
of the employee. Transition credits are earned by employees who had more
than
50 years of combined age plus years of service as of December 31, 2008
and
this will be paid through the 401k Plan.
Profit Sharing (401k) Plan. Our Profit Sharing (401k) Plan is
available to all employees, including the Named Executive Officers. We
match
100% of the first 6% of pay that is contributed by an employee to the
plan.
All employee contributions to the plan are fully-vested upon
contribution,
and matching contributions are vested after 3 years of service. We may,
at
our discretion, make a profit sharing contribution to the plan. We have
not
made a profit sharing contribution since we added the 401(k) feature to
the
plan. Due to the termination of the Retirement Plan mentioned above,
transition credits will be earned by employees who have more than 50
years of
combined age plus years of service as of December 31, 2008 and this will
be
paid through the 401k Plan.
Employee Stock Gift Program. We provide gifts of shares of our
common
stock to our full time employees, including the Named Executive Officers,
who
have completed at least 15 years of service. Under the Employee Stock
Gift
Program, participants may be awarded an increasing number of shares of
common
stock for each five-year anniversary starting with 15 years for their
continued dedicated service to the Company.
Compensation Policies and Practices as They Relate to the
Company's
Risk Management. We do not believe that there is anything inherent in
the
various compensation plans described above that encourages the
manipulation
of reported earnings to enhance the compensation of any employee or
encourages behavior focused on short-term results rather than long-term
value
creation. Our compensation plans use multiple performance goals and
risk-
based criteria and, in a number of cases (a) provide for delayed payment
of
awards in order to ensure that risk-based performance measurements
continue
to be met over an extended period of time; and (b) provide for payment in
the
common stock of the Company, which effectively aligns the interests of
employees with those of shareholders in enhancing the long-term value of
the
Company's stock.
Report of the Compensation Committee.
The Compensation Committee of our Board of Directors is composed
of
four members who are independent, outside directors as defined under
NASDAQ
rules. The Compensation Committee has furnished the following report:
We determine the total compensation of the Company's CEO. With
input
from the CEO, we also determine the total long-term compensation of the
other
executive officers and the total short-term and long-term compensation of
the
directors. We do not have power to delegate our authority. We do not
have a
charter.
Please refer to "Compensation Discussion and Analysis" above for a
more
thorough discussion of the Company's philosophy and procedures. We have
reviewed and discussed the Compensation Discussion and Analysis with
management. Based on our review of the Compensation Discussion and
Analysis
and discussions with management, we recommended to the Board of Directors
that the Compensation Discussion and Analysis be included in the
Company's
proxy statement for its 2011 Annual Meeting of Shareholders.
Dated: March 30, 2011
Henry Hinkle, Chairman
William Arvin
Ted McClain
Edwin S. Saunier
Compensation of Named Executive Officers.
Summary Compensation Table
The table below summarizes the total compensation paid to or
earned by
our CEO, our chief financial officer, and each of our four most highly
compensated executive officers other than the CEO and chief financial
officer.
Summary Compensation Table
Change in
Pension
Value and
Non-Equity
Nonqualified
Incentive
Deferred
Stock Plan
Compensation All Other
Name & Position Year Salary Bonus Awards Compensation
Earnings Compensation Total
(1) (2) (3)
(4) (5)
<s> <c> <c> <c> <c> <c>
<c> <c> <c>
Louis Prichard 2010 $214,240 $ - $ 5,740 $14,564
$ - $25,042 $259,586
President, CEO 2009 207,000 - 6,003 16,401
- 23,265 252,669
2008 207,000 - 11,113 -
26,188 22,848 267,149
Gregory J. Dawson 2010 107,770 - 2,706 14,790
5,636 8,948 139,850
Sr VP, CFO 2009 96,343 - 2,830 22,418
- 7,199 128,790
2008 96,343 - 5,239 -
21,803 7,571 130,956
Brenda Bragonier 2010 103,967 - 2,132 10,776
- 7,888 124,763
Sr VP, Director of 2009 89,479 - 2,230 15,137
- 6,654 113,500
Marketing 2008 89,479 - 4,128 -
n/a 6,764 100,371
Norman J. Fryman 2010 130,886 1,000 2,706 2,869
9,913 9,689 157,063
Sr VP, Director of 2009 126,460 - 2,830 9,703
- 9,048 148,041
Sales & Service 2008 126,460 - 5,239 -
54,659 9,668 196,026
Clark Nyberg 2010 100,418 - 2,132
18,539 - 8,080 129,169
Sr VP, Director of 2009 97,022 - 2,230 13,516
- 6,745 119,513
Wealth Management 2008 97,022 - 4,128
- 9,149 7,205 117,504
_____________
(1) Represents compensation for achievement on a special
project.
(2) The amounts under this column represent the aggregate
grant date fair value of the restricted stock that we granted
each of our Named Executive Officers computed in accordance
with FASB ASC Topic 718. The restricted stock will vest
ratably over a five-year period. The grant date fair value
of each restricted stock awarded in 2008 was $31.75, in 2009
was $17.15 and in 2010 was $16.40.
(3) Represents cash payments from satisfaction of an
individual's specific performance goals under the MIP plan
for June 2010 and December 2010. See discussion above under
"Currently Paid Compensation Components: Performance-Based
Incentive Compensation".
(4) Represents change in value of pension benefits, and for
2010 the transition credit amount from the termination of the
pension plan. Information for Ms. Bragonier for 2008 not
available due to plan termination.
(5) The amounts reflected in this column for the Named
Executive Officers include premiums paid for life insurance,
a car allowance for Mr. Prichard, the Company's matching
contributions of the first 6% of voluntarily deferred salary
contribution into his/her 401(k) plan (which was $14,509 for
Mr. Prichard) and director fees of $9,500 for Mr. Prichard.
Grants of Plan Based Awards Table
The following table contains information regarding incentive
compensation under the Company's MIP plan and the grant of restricted
stock
under the 2005 Restricted Stock Grant Plan to the Named Executive
Officers
eligible for incentive plan awards during the year ended December 31,
2010.
Grants of Plan Based Awards
Estimated Future Payments Under
Non-Equity Incentive Plan
Awards
(1)
All Other
Stock Awards:
Number of
Shares of
Restricted
Stock
Grant
Date Fair
Value
of Stock
Awards
Name
Grant
Date
Threshold
Target
Maximum
(2)
<s> <c> <c> <c> <c>
<c> <c>
Louis Prichard
Restricted Stock 1/4/2010
350 $ 5,740
MIP 1/1/2010 $37,492 $74,984 $112,476
Gregory J. Dawson
Restricted Stock 1/4/2010
165 2,706
MIP 1/1/2010 16,166 32,331 48,497
Brenda Bragonier
Restricted Stock 1/4/2010
130 2,132
MIP 1/1/2010 15,595 31,190 46,785
Norman J. Fryman
Restricted Stock 1/4/2010
165 2,706
MIP 1/1/2010 19,633 39,266 58,899
Clark Nyberg
Restricted Stock 1/4/2010
130 2,132
MIP 1/1/2010 15,063 30,125 45,188
_____________
(1) Represents three potential management incentive plan
compensation amounts for the year that could be paid to the individual
Named Executive Office depending upon the Company's meeting various
targets in 2010. Each Named Executive Officer had numerous goals. The
semi-annual payment that he or she received is equal to the sum of the
various threshold amounts that he or she achieved with respect to each
goal. For example, a Named Executive Officer may have achieved the
threshold level for some goals, the target level for other goals and
the maximum level for the remaining goals or alternatively, he or she
may have only achieved the threshold level for each individual goal.
See the "Non-Equity Incentive Plan Compensation" column in the "Summary
Compensation Table" above for amounts earned by the respective
individuals. For a discussion of the goals and requirements of the
incentive compensation, see "Currently Paid Compensation Components:
Performance-Based Incentive Compensation - MIP for Fiscal Year 2010."
(2) Awards of restricted shares of our common stock in 2010 under
our 2005 Restricted Stock Grant Plan. The shares of restricted stock
vest ratably over 5-years.
Outstanding Equity Awards Table
Outstanding Equity Awards at
December 31, 2010
Option Awards(1)
Stock Awards(2)___
Market
Number of Number of
Number of Value of
Securities Securities
Shares or Shares or
Underlying Underlying
Units of Units of
Unexercised Unexercised Option
Option Stock that Stock that
Grant Options Options Exercise
Expiration Have not Have not
Name Date Exercisable Unexercisable Price
Date Vested Vested
<s> <c> <c> <c> <c>
<c> <c> <c>
Louis Prichard 1/4/10 - - -
- 350 $5,862
1/2/09 - - -
- 280 $4,690
1/2/08 - - -
- 210 $3,518
1/2/07 - - -
- 140 $2,345
1/3/06 - - -
- 70 $1,172
1/3/05 4,000 - 30.50
1/3/15
1/2/04 1,000 - 33.90
1/2/14
1/2/03 3,000 - 25.50
1/2/13
Gregory J. Dawson 1/4/10 - - -
- 165 $2,764
1/2/09 - - -
- 132 $2,211
1/2/08 - - -
- 99 $1,658
1/2/07 - - -
- 66 $1,106
1/3/06 - - -
- 33 $ 553
1/3/05 500 - 30.50
1/3/15
1/2/04 400 - 33.90
1/2/14
1/2/03 400 - 25.50
1/2/13
1/2/02 150 - 26.00
1/2/12
1/2/01 150 - 23.50
1/2/11
Brenda Bragonier 1/4/10 - - -
- 130 $2,178
1/2/09 - - -
- 104 $1,742
1/2/08 - - -
- 78 $1,306
1/2/07 - - -
- 52 $ 871
1/3/06 - - -
- 26 $ 436
1/3/05 400 - 30.50
1/3/15
1/2/04 400 - 33.90
1/2/14
1/2/03 400 - 25.50
1/2/13
1/2/02 150 - 26.00
1/2/12
1/2/01 80 - 23.50
1/2/11
Norman J. Fryman 1/4/10 - - -
- 165 $2,764
1/2/09 - - -
- 132 $2,211
1/2/08 - - -
- 99 $1,658
1/2/07 - - -
- 66 $1,106
1/3/06 - - -
- 33 $ 553
1/3/05 500 - 30.50
1/3/15
1/2/04 500 - 33.90
1/2/14
1/2/03 500 - 25.50
1/2/13
1/2/02 300 - 26.00
1/2/12
1/2/01 300 - 23.50
1/2/11
Clark Nyberg 1/4/10 - - -
- 130 $2,178
1/2/09 - - -
- 104 $1,742
1/2/08 - - -
- 78 $1,306
1/2/07 - - -
- 52 $ 871
1/3/06 - - -
- 26 $ 436
1/3/05 400 - 30.50
1/3/15
__________
(1) The stock options vest ratably over a five-year period and
have a
term of ten-years. In the event of a change of control of the Company,
each
outstanding option will become fully vested and immediately exercisable.
(2) The shares of restricted common stock vest ratably over a
five-
year period. In the event of a change in control of the Company, any
restrictions will expire immediately and the employee will thereafter
hold
the shares of common stock without any restrictions.
Option Exercises and Stock Vested Table
The following table sets forth certain information regarding the
vesting of restricted stock and the exercise of options by the Named
Executive Officers during calendar year 2010.
Stock Awards _ _
Number of
Shares Acquired Value Realized
Name on Vesting on Vesting
Louis Prichard 280 $ 4,592
Gregory J. Dawson 132 2,165
Brenda Bragonier 104 1,706
Norman J. Fryman 132 2,165
Clark Nyberg 104 1,706
___________
PROPOSAL NO. 3
Non-binding, Advisory Vote on the Compensation the Company Paid its Named
Executive Officers
Recently enacted federal legislation embodied in Section 14A of
the
Securities and Exchange Act of 1934, as amended, requires that we include
in
this proxy statement a resolution subject to shareholder vote on the
compensation paid to our Named Executive Officers as disclosed in this
proxy
statement (commonly referred to as "Say-on-Pay").
The compensation paid to our Named Executive Officers is disclosed
on
pages 16 to 24 of this proxy statement in the sections entitled
"Compensation
Discussion and Analysis" and "Compensation of Named Executive Officers."
We
believe that our compensation policies and decisions are focused on pay-
for-
performance principles and are strongly aligned with the long-term
interests
of our shareholders. Compensation of our Named Executive Officers is
designed to enable us to attract and retain talented and experienced
senior
executives to lead the Company successfully in a competitive
environment. Shareholders are being asked to cast a non-binding,
advisory
vote on the following resolution:
RESOLVED, that the compensation the Company paid its Named Executive
Officers, as disclosed in the "Compensation Discussion and Analysis"
section
and the "Compensation of Named Executive Officers" section of this proxy
statement, are APPROVED."
If there is no designation on any proxy as to how the shares
represented should be voted, the proxy will be voted for the approval of
the
compensation paid to the Company's Named Executive Officers. The
affirmative
vote of the holders of a majority of shares represented in person or by
proxy
and entitled to vote on this proposal will be required for approval.
Your vote on this Proposal 3 is advisory, and therefore not
binding on
the Company, the Compensation Committee, or the Board of Directors. The
vote
will not be construed to overrule any decision by the Company or the
Board of
Directors; to create or imply any change to the fiduciary duties of the
Company or the Board of Directors; or to create or imply any additional
fiduciary duties for the Company or the Board of Directors. However, our
Board of Directors and our Compensation Committee value the opinions of
our
shareholders and to the extent there is any significant vote against the
compensation paid to our Named Executive Officers as disclosed in this
proxy
statement, we will consider our shareholders' concerns and the
Compensation
Committee will evaluate whether any actions are necessary to address
those
concerns.
The Company's Board of Directors recommends voting FOR the proposal to
approve the compensation paid to the Company's Named Executive Officers
disclosed in "Compensation Discussion and Analysis" and "Compensation of
Named Executive Officers" appearing on pages 16 through 24 of this proxy
statement.
PROPOSAL NO. 4
Non-binding, Advisory Vote on Whether the Shareholder Vote on Named
Executive Compensation Should Occur Every 1, 2 or 3 Years
In addition to the advisory Say-on-Pay vote on Named Executive
Compensation described above in Proposal No. 3 and as required by Section
14A
of the Securities and Exchange Act of 1934, we are also providing our
shareholders the opportunity to vote on the frequency of future non-
binding,
advisory Say-on-Pay votes on Named Executive Compensation.
After careful consideration, the Board of Directors has determined
that
holding an advisory vote on Named Executive Compensation every year is
the
most appropriate policy for Kentucky Bancshares, Inc. at this time. The
Board recommends that our shareholders vote for an annual non-binding
advisory Say-on-Pay vote of the compensation we pay our Named Executive
Officers. While our executive compensation programs are designed to
reward
performance over various time periods, the Board of Directors recognizes
that
Named Executive Officer compensation disclosures are an important
consideration for our shareholders on an annual basis. While it may not
be
feasible to change the compensation program in consideration of any one
year's advisory vote on compensation, holding an annual non-binding
advisory
vote on executive compensation provides us with more immediate feedback
of
our shareholders' opinions of our compensation practices and enables the
Board to respond timely, when deemed appropriate, to shareholder concerns
about our compensation practices.
We understand that our shareholders may have different views as to
what
is an appropriate frequency for advisory votes on Named Executive
Compensation, and we will carefully review the voting results on this
proposal. Shareholders will be able to specify one of four choices for
this
proposal on the proxy card: one year, two years, three years or abstain.
Shareholders are not voting to approve or disapprove the Board's
recommendation. This advisory vote on the frequency of future advisory
votes
on Named Executive Compensation is non-binding on the Board of Directors.
Notwithstanding the Board's recommendation and the outcome of the
shareholder
vote, the Board of Directors may in the future decide to conduct advisory
votes on a more or less frequent basis and may vary its practice based on
factors such as discussions with shareholders and the adoption of
material
changes to compensation programs.
If there is no designation on any proxy as to how the shares
represented should be voted, the proxy will be voted for Choice 1 - every
year.
The Company's Board of Directors recommends that you vote to conduct
future
non-binding advisory votes on Named Executive Compensation "EVERY YEAR."
Transactions with Related Persons.
Our operating subsidiary, Kentucky Bank, has had and expects in
the
future to have banking transactions in the ordinary course of business
with
our directors and executive officers and their affiliates. All loans to
and
deposits from such persons or their affiliates have been on substantially
the
same terms, including interest rates and collateral on loans, as those
prevailing at the same time for comparable transactions with other
persons
not related to the lender, and have not involved more than the normal
risk of
collectability or other unfavorable features.
Additional information concerning transactions with related
persons is
hereby incorporated by reference to Note 4 of our December 31, 2010
audited
consolidated financial statements filed on Form 10-K.
Our practice has been that any transaction that would require
disclosure under Item 404(a) of Regulation S-K of the rules and
regulations
of the Securities and Exchange Commission, with respect to a director or
executive officer, must be reviewed and approved, or ratified, annually
by
the Board of Directors. Any such related party transactions will only be
approved or ratified if the Board determines that such transaction will
not
impair the involved person's service to, and exercise of judgment on
behalf
of, the Company, or otherwise create a conflict of interest that would be
detrimental to the Company. The transaction relating to Mr. McClain
described below has been reviewed and approved or ratified by our Board.
The Company paid The Hopewell Company, Inc., a Kentucky
corporation,
$162,759 in 2010 for insurance related services it provided to the
Company.
Ted McClain owns 40% of The Hopewell Company, Inc. and is also a director
and
officer of the company. The aggregate amount we paid to The Hopewell
Company, Inc. for property or services during each of 2010, 2009 and 2008
did
not exceed $200,000 or 5% of The Hopewell Insurance Company's
consolidated
gross revenues for the applicable year.
Section 16(a) Beneficial Ownership Reporting Compliance.
Section 16(a) of the Securities and Exchange Act of 1934, as
amended,
requires our directors and executive officers and persons who own more
than
10% of our common stock to file reports of ownership and changes in
ownership
with the SEC. Based solely upon our review of the Forms 3, 4 and 5 filed
during 2010, and written representations from certain reporting persons
that
no Forms 5 were required, we reasonably believe that all required reports
were timely filed with the following exception: One Form 4 covering one
purchase of common stock for Mr. Hinkle was filed late.
Kentucky Bancshares, Inc.
This Proxy is Solicited by the Board of Directors for
Annual Meeting of Shareholders to be Held on May 18, 2011
Appointment of Proxies; Items to be Voted Upon. The undersigned hereby
appoints Buckner Woodford IV and Gregory J. Dawson, or either one of them
(with full power to act alone), my proxy, each with the power to appoint
his
substitute, to represent me to vote all of the Company's Common Shares
which
I held of record or am otherwise entitled to vote at the close of
business on
March 18, 2011, at the 2011 Annual Meeting of Shareholders to be held on
May
18, 2011 and at any adjournments thereof, with all powers the undersigned
would possess if personally present, as follows:
1. RATIFICATION OF APPOINTMENT OF CROWE HORWATH, LLP AS THE COMPANY'S
REGISTERED PUBLIC ACCOUNTANTS FOR 2011.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
2. ELECTION OF DIRECTORS: To elect three Class III directors.
[ ] FOR ALL NOMINEES [ ] WITHHOLD AUTHORITY FOR ALL
NOMINEES
[ ] FOR ALL EXCEPT (See instructions below)
Nominees: Henry Hinkle [ ] _____
Theodore Kuster [ ] _____
Robert G. Thompson [ ] _____
INSTRUCTION: To withhold authority to vote for any individual nominee(s)
for
Class III director, mark "FOR ALL EXCEPT" and fill in the circle next to
each
nominee you wish to withhold. If you desire to cumulate your votes for
any
individual nominee(s), please do so in the blanks following each name.
Cumulative voting is described in the section of the Proxy Statement
entitled
"Who Can Vote; Voting Rights."
3. NON-BINDING ADVISORY VOTE ON THE COMPENSATION THE COMPANY PAID ITS
NAMED EXECUTIVE OFFICERS.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
4. NON-BINDING ADVISORY VOTE ON THE FREQUENCY WITH WHICH THE COMPANY
WILL
HOLD A SHAREHOLDER ADVISORY VOTE ON THE NAMED EXECUTIVE OFFICER
COMPENSATION.
1 YEAR 2 YEARS 3 YEARS ABSTAIN
[ ] [ ] [ ] [ ]
5. OTHER BUSINESS. In their discretion, the Proxies are authorized to
act
upon such other matters as may properly be brought before the Annual
Meeting
or any adjournment thereof.
YOUR BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" ITEMS 1, 2, 3
AND "FOR 1 YEAR" ON ITEM 4 ABOVE.
How Your Proxy Will Be Voted. If this proxy is properly executed, then
the
Proxies will vote: (1) as you specify above or (2) if you do not specify
your vote above, then
- FOR the ratification of the registered public accountants,
- FOR all the Nominees referred to in Item 2. Additionally, the
Proxies will have discretionary authority to cumulate votes selectively
among
the nominees as to whom authority to vote has not been withheld and to
vote
for a substitute nominee if any nominee becomes unavailable for election
for
any reason,
- FOR the proposed non-binding advisory vote on the compensation
the
Company paid its named executive officers,
- FOR 1 YEAR on the non-binding advisory vote on the frequency of
the
shareholder vote on executive compensation, and
- As the Proxies decide on any other matter that comes before the
meeting.
Directions to Shareholder Meeting. Our shareholder meeting will be held
at
Kentucky Bank's main office located at 339 Main Street, Paris, Kentucky.
If
you need directions, please contact our Secretary at Kentucky Bancshares,
Inc., 339 Main Street, Paris, Kentucky 40361, Attention: Gregory J.
Dawson
or call our office at (859) 988-1303.
Important Notice Regarding the Availability of Proxy Materials for the
Shareholder Meeting to be Held on May 18, 2011. The proxy statement,
this
form of proxy and our 2010 Annual Report to Shareholders, including
financial
statements, are available at http://www.cfpproxy.com/5407.
Acknowledgement. By signing this card the undersigned acknowledges
receipt
of the Notice of Annual Meeting of Shareholders to be held May 18, 2011,
the
accompanying proxy statement, and our 2010 Annual Report to Shareholders,
including financial statements.
PLEASE DATE, SIGN AND RETURN IN THE ENCLOSED ENVELOPE.
This proxy is solicited by the Board of Directors and will be voted as
stated
herein.
Kentucky Bancshares, Inc.
Proxy
I hereby vote my shares as indicated on the reverse side.
Please sign your name exactly as it appears on your stock certificate(s).
Joint owners must each sign. When signing as attorney, executor,
administrator, trustee or guardian, please give your full title.
Date ____________________, 2011 _____________________________
Signature
_______________________________
Signature, if held jointly
43