UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2009
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ____________________ to ___________________
Commission File Number: 000-52598
KENTUCKY BANCSHARES, INC.
(Exact name of registrant as specified in its charter)
Kentucky 61-0993464
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
P.O. Box 157, Paris, Kentucky 40362-0157
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (859) 987-1795
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No _____
Indicate by check mark whether the registrant has submitted electronically and
posted on its corporate Web site, if any, every Interactive Data File required
to be submitted and posted pursuant to Rule 405 of Regulation S-T (Section
232.405 of this chapter) during the preceding 12 months (or for such shorter
period that the registrant was required to submit and post such files).
Yes _____ No _X____
Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company.
See definitions of "large accelerated filer," "accelerated filer" and "smaller
reporting company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer ____
Accelerated filer ____
Non-accelerated filer X (Do not check if a smaller reporting company)
Smaller reporting company ____
Indicate by check mark whether the registrant is a shell company (as defined
in Rule 12b-2 of the Exchange Act). Yes No X _
Number of shares of Common Stock outstanding as of April 30, 2009: 2,749,443.
KENTUCKY BANCSHARES, INC.
Table of Contents
Part I - Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets 3
Consolidated Statements of Income and
Comprehensive Income 4
Consolidated Statement of Changes in
Stockholders' Equity 5
Consolidated Statements of Cash Flows 6
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 15
Item 3. Quantitative and Qualitative Disclosures About
Market Risk 21
Item 4. Controls and Procedures 22
Part II - Other Information 22
Signatures 23
Exhibits
31.1 Certifications of Chief Executive Officer pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002. 24
31.2 Certifications of Chief Financial Officer pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002. 26
32 Certifications of Chief Executive Officer and Chief
Financial Officer pursuant to 18 U.S.C. Section 1350,
as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002. 28
Item 1 - Financial Statements
KENTUCKY BANCSHARES, INC.
CONSOLIDATED BALANCE SHEETS (unaudited)
(thousands) 3/31/2009 12/31/2008
Assets
Cash and due from banks $ 11,559 $ 16,411
Federal funds sold 2,350 20,695
Cash and cash equivalents 13,909 37,106
Securities available for sale 205,886 172,834
Loans 415,638 424,276
Allowance for loan losses (5,999) (5,465)
Net loans 409,639 418,811
Federal Home Loan Bank stock 6,731 6,731
Bank premises and equipment, net 17,875 17,875
Interest receivable 4,505 5,156
Goodwill 13,117 13,117
Other intangible assets 1,456 1,523
Mortgage servicing rights 593 465
Other assets 5,323 5,157
Total assets $ 679,034 $ 678,775
Liabilities and Stockholders' Equity
Deposits
Non-interest bearing $ 96,195 $ 90,480
Time deposits, $100,000 and over 115,103 108,465
Other interest bearing 315,083 321,863
Total deposits 526,381 520,808
Repurchase agreements and other borrowings 13,546 10,717
Federal Home Loan Bank advances 66,723 77,301
Subordinated debentures 7,217 7,217
Interest payable 3,716 2,874
Other liabilities 2,728 2,817
Total liabilities 620,311 621,734
Stockholders' equity
Common stock 12,373 12,053
Retained earnings 45,300 44,974
Accumulated other comprehensive income 1,050 14
Total stockholders' equity 58,723 57,041
Total liabilities & stockholders' equity $ 679,034 $ 678,775
See Accompanying Notes
KENTUCKY BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (unaudited)
(thousands, except per share amounts) Three Months Ending
3/31/2009 3/31/2008
INTEREST INCOME:
Loans, including fees $ 6,079 $ 7,308
Securities available for sale 2,108 1,734
Other 10 211
Total interest income 8,197 9,253
INTEREST EXPENSE:
Deposits 2,533 3,506
Other 912 851
Total interest expense 3,445 4,357
Net interest income 4,752 4,896
Loan loss provision 450 400
Net interest income after provision 4,302 4,496
NON-INTEREST INCOME:
Service charges 1,146 1,189
Loan service fee income 27 24
Trust department income 109 154
Securities available for sale gains (losses), net 4 7
Gain on sale of mortgage loans 378 161
Other 341 440
Total other income 2,005 1,975
NON-INTEREST EXPENSE:
Salaries and employee benefits 2,549 2,649
Occupancy expenses 661 734
Amortization 66 67
Advertising and marketing 124 140
Taxes other than payroll, property and income 188 179
Other 1,300 1,193
Total other expenses 4,888 4,962
Income before taxes 1,419 1,509
Income taxes 252 316
Net income $ 1,167 $ 1,193
Other Comprehensive Income, net of tax:
Change in Unrealized Gains on Securities 1,036 492
Comprehensive Income $ 2,203 $ 1,685
Earnings per share
Basic $ 0.43 $ 0.42
Diluted 0.43 0.42
See Accompanying Notes
KENTUCKY BANCSHARES, INC.
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (unaudited)
(thousands, except share information)
Accumulated
Other Total
----Common Stock---- Retained Comprehensive Stockholders'
Shares Amount (1) Earnings Income Equity
Balances, December 31, 2008 2,745,729 $ 12,344 $ 44,683 $ 14 $ 57,041
Common stock issued, including tax
benefit, net (including stock grants
of 3,714 shares) 3,714 - - - -
Stock based compensation expense - 29 - - 29
Net change in unrealized gain (loss)
on securities available for sale,
net of tax - - - 1,036 1,036
Net income - - 1,167 - 1,167
Dividends declared - $0.20 per share - - (550) - (550)
Balances, March 31, 2009 2,749,443 $ 12,373 $ 45,300 $ 1,050 $ 58,723
(1)Common Stock has no par value; amount includes Additional Paid-in Capital
See Accompanying Notes
KENTUCKY BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
(thousands) Three Months Ending
3/31/2009 3/31/2008
Cash Flows From Operating Activities
Net Income $ 1,167 $ 1,193
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation & Amortization 334 392
Securities amortization (accretion), net 200 (147)
Stock based compensation expense 29 34
Provision for loan losses 450 400
Securities (gains) losses, net (4) (7)
Originations of loans held for sale (17,678) (7,590)
Proceeds from sale of loans 18,056 7,751
Gain on sale of mortgage loans (378) (161)
Changes in:
Interest receivable 651 617
Other assets (343) (585)
Interest payable 842 (1,235)
Other liabilities (623) (416)
Net cash from operating activities 2,703 246
Cash Flows From Investing Activities
Purchases of securities available for sale (42,811) (43,700)
Proceeds from principal payments, maturities and
calls of securities available for sale 11,134 38,759
Net change in loans 8,722 6,360
Purchases of bank premises and equipment (237) (861)
Net cash from investing activities (23,192) 558
Cash Flows From Financing Activities:
Net change in deposits 5,573 2,902
Net change in securities sold under agreements to
repurchase, federal funds purchased and other borrowings 3,029 1,965
Advances from Federal Home Loan Bank - 5,000
Payments on Federal Home Loan Bank advances (10,560) (6,604)
Payment on note payable (200) -
Proceeds from issuance of common stock - 15
Purchase of common stock - (226)
Dividends paid (550) (799)
Net cash from financing activities (2,708) 2,253
Net change in cash and cash equivalents (23,197) 3,057
Cash and cash equivalents at beginning of period 37,106 25,807
Cash and cash equivalents at end of period 13,909 28,864
Supplemental disclosures of cash flow information
Cash paid during the year for:
Interest expense $ 2,603 $ 5,592
Income taxes - -
Supplemental schedules of non-cash investing
activities
Real estate acquired through foreclosure $ 2,890 $ 353
See Accompanying Notes
KENTUCKY BANCSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities as of the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Estimates
used in the preparation of the financial statements are based on various
factors including the current interest rate environment and the general
strength of the local economy. Changes in the overall interest rate
environment can significantly affect the Company's net interest income and
the value of its recorded assets and liabilities. Actual results could
differ from those estimates used in the preparation of the financial
statements.
The financial information presented as of any date other than December 31
has been prepared from the Company's books and records without audit. The
accompanying consolidated financial statements have been prepared in
accordance with the instructions to Form 10-Q and Rule 10-01 of Regulation
S-X. Certain financial information that is normally included in annual
financial statements prepared in accordance with accounting principles
generally accepted in the United States of America, but is not required for
interim reporting purposes, has been condensed or omitted. In the opinion
of management, all adjustments, consisting of normal recurring adjustments,
necessary for a fair presentation of such financial statements, have been
included. The results of operations for the interim periods are not
necessarily indicative of the results to be expected for the full year.
For further information, refer to the consolidated financial statements and
footnotes thereto included in the Company's Annual Report on Form 10-K for
the year ended December 31, 2008.
Recently Issued But Not Yet Effective Accounting Standards
In April 2009, the Financial Accounting Standard Board ("FASB") issued FASB
Staff Position ("FSP") FAS 157-4, "Determining Fair Value When the Volume
and Level of Activity for the Asset or Liability Have Significantly
Decreased and Identifying Transactions That Are Not Orderly". This FSP:
? Affirms that the objective of fair value when the market for an asset
is not active is the price that would be received to sell the asset in
an orderly transaction.
? Clarifies and includes additional factors for determining whether
there has been a significant decrease in market activity for an asset
when the market for that asset is not active.
? Eliminates the proposed presumption that all transactions are
distressed (not orderly) unless proven otherwise. The FSP instead
requires an entity to base its conclusion about whether a transaction
was not orderly on the weight of the evidence.
? Includes an example that provides additional explanation on
estimating fair value when the market activity for an asset has declined
significantly.
? Requires an entity to disclose a change in valuation technique (and
the related inputs) resulting from the application of the FSP and to
quantify its effects, if practicable.
? Applies to all fair value measurements when appropriate.
FSP FAS 157-4 must be applied prospectively and is effective for interim
and annual periods ending after June 15, 2009, with early adoption
permitted for periods ending after March 15, 2009. The Company has
elected to not early adopt this FSP. The Company does not expect this
FSP to have a material impact on the Company's consolidated results of
operations or financial position upon adoption.
In April 2009, the FASB issued FSP FAS 115-2 and FAS 124-2, "Recognition
and Presentation of Other-Than-Temporary Impairments". This FSP:
? Changes existing guidance for determining whether an impairment is
other than temporary to debt securities;
? Replaces the existing requirement that the entity's management assert
it has both the intent and ability to hold an impaired security until
recovery with a requirement that management assert: (a) it does not have
the intent to sell the security; and (b) it is more likely than not it
will not have to sell the security before recovery of its cost basis;
? Incorporates examples of factors from existing literature that should
be considered in determining whether a debt security is other-than-
temporarily impaired;
? Requires that an entity recognize noncredit losses on held-to-
maturity debt securities in other comprehensive income and amortize that
amount over the remaining life of the security in a prospective manner
by offsetting the recorded value of the asset unless the security is
subsequently sold or there are additional credit losses;
? Requires an entity to present the total other-than-temporary
impairment in the statement of earnings with an offset for the amount
recognized in other comprehensive income; and
? When adopting FSP FAS 115-2 and FAS 124-2, an entity is required to
record a cumulative-effect adjustment as of the beginning of the period
of adoption to reclassify the noncredit component of a previously
recognized other-temporary impairment from retained earnings to
accumulated other comprehensive income if the entity does not intend to
sell the security and it is not more likely than not that the entity
will be required to sell the security before recovery.
FSP FAS 115-2 and FAS 124-2 are effective for interim and annual periods
ending after June 15, 2009, with early adoption permitted for periods
ending after March 15, 2009. The Company has elected to not early adopt
this FSP. The Company does not expect this FSP to have a material impact
on the Company's consolidated results of operations or financial position
upon adoption.
In April 2009, the FASB issued FSP FAS 107-1 and APB 28-1, "Interim
Disclosures about Fair Value of Financial Instruments". This FSP amends
SFAS No. 107, "Disclosures about Fair Value of Financial Instruments", to
require an entity to provide disclosures about fair value of financial
instruments in interim financial information. This FSP also amends APB
Opinion No. 28, "Interim Financial Reporting", to require those disclosures
in summarized financial information at interim reporting periods. Under
this FSP, a publicly traded company shall include disclosures about the
fair value of its financial instruments whenever it issues summarized
financial information for interim reporting periods. In addition, an
entity shall disclose in the body or in the accompanying notes of its
summarized financial information for interim reporting periods and in its
financial statements for annual reporting periods the fair value of all
financial instruments for which it is practicable to estimate that value,
whether recognized or not recognized in the statement of financial
position, as required by SFAS No. 107.
FSP 107-1 and APB 28-1 are effective for interim periods ending after June
15, 2009, with early adoption permitted for periods ending after March 15,
2009. The Company has elected to not early adopt this FSP. The Company
does not expect this FSP to have a material impact on the Company's
consolidated results of operations or financial position upon adoption.
Adoption of New Accounting Standards
Effective January 1, 2009 the Company adopted SFAS No. 141(R), "Business
Combinations", SFAS No. 160, "Noncontrolling Interests in Consolidated
Financial Statements", SFAS NO. 161, "Disclosures about Derivative
Instruments and Hedging Activities", and SFAS No. 163, "Accounting for
Financial Guarantee Insurance Contracts".
SFAS No. 141(R) establishes principals and requirements for how an acquirer
recognizes and measures in its financial statements the identifiable assets
acquired, liabilities assumed, and any noncontrolling interest in an
acquiree. The statement also provides guidance for recognizing and
measuring goodwill or gain from a bargain purchase in a business
combination and determines what information to disclose to enable users of
the financial statements to evaluate the nature and financial effects of
the business combination. The adoption of this statement did not have an
impact on the Company's consolidated financial position or results of
operations.
SFAS No. 160 amends Accounting Research Bulletin ("ARB") No. 51,
"Consolidated Financial Statements" to establish accounting and reporting
standards for the noncontrolling interest in a subsidiary and for the
deconsolidation of a subsidiary. The statement also amends certain of ARB
No. 51's consolidation procedures for consistency with the requirements of
SFAS No. 141(R). The adoption of this statement did not have an impact on
the Company's consolidated financial position or results of operations.
SFAS No. 161 amends and expands the disclosure requirements of SFAS No.
133, "Accounting for Derivative Instruments and Hedging Activities" to
provide enhanced disclosures about 1) how and why an entity uses derivative
instruments; 2) how derivative instruments and related hedged items are
accounted for under SFAS No. 133 and related interpretations; and 3) how
derivative instruments and related hedged items affect an entity's
financial position, financial performance, and cash flows. The adoption of
this statement did not have an impact on the Company's consolidated
financial position or results of operations.
In April 2009, the FASB ratified the Emerging Issues Task Force's (EITF)
concensus on FSP EITF 03-6-1, "Determining Whether Instruments Granted in
Share-Based Payment Transactions are Participating Securities". The FSP
addresses whether instruments granted in share-based payment transactions
are participating securities prior to vesting and, therefore, need to be
included in the earnings allocation in computing basic and fully diluted
earnings per share. FSP EITF 03-6-1 does not have a significant impact on
the Company's consolidated financial position or results of operations.
2. INVESTMENT SECURITIES
Period-end securities are as follows:
(in thousands)
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
Available for Sale
March 31, 2009
U.S. government agencies $ 31,692 $ 182 $ (3) $ 31,871
States and political subdivisions 70,129 1,164 (1,698) 69,595
Mortgage-backed 102,203 1,988 (64) 104,127
Equity securities 270 23 - 293
Total 204,294 3,357 (1,765) 205,886
December 31, 2008
U.S. government agencies $ 19,138 $ 212 $ - $ 19,350
States and political subdivisions 65,091 1,061 (2,181) 63,971
Mortgage-backed 88,314 1,142 (233) 89,223
Equity securities 270 20 - 290
Total 172,813 2,435 (2,414) 172,834
The Company regularly evaluates its investment securities with significant
declines in fair value to determine whether losses are other-than-temporary
under the principles of SFAS No. 115, FSP No. 115, and Staff Accounting
Bulletin ("SAB") No. 59. A decline in the fair value of any available for
sale security below cost that is deemed other-than-temporary results in a
charge to earnings and the establishment of a new cost basis for the
security. In estimating other-than-temporary losses, management considers
each of the following: the length of time and extent that fair value has
been less than cost, the financial condition and near term prospects of the
issuer, and the Company's ability and intent to hold the security for a
period sufficient to allow for any anticipated recovery in fair value.
Based on this evaluation, the Company has determined it does not have any
other-than-temporary impairment losses and has not recorded any other-than-
temporary impairment charges.
3. LOANS
Loans at period-end are as follows:
(in thousands)
3/31/2009 12/31/2008
Commercial $ 21,468 $ 21,505
Real estate construction 17,531 16,818
Real estate mortgage 278,411 286,846
Agricultural 80,234 80,779
Consumer 17,994 18,328
Total 415,638 424,276
4. EARNINGS PER SHARE
Basic earnings per common share is net income divided by the weighted
average number of common shares outstanding during the period. Diluted
earnings per common share includes the dilutive effect of additional
potential common shares issuable under stock options.
The factors used in the earnings per share computation follow:
Three Months Ended
March 31
2009 2008
(in thousands, except per share information)
Basic Earnings Per Share
Net Income $1,167 $1,193
Weighted average common shares outstanding 2,736 2,841
Basic earnings per share $ 0.43 $ 0.42
Diluted Earnings Per Share
Net Income $1,167 $1,193
Weighted average common shares outstanding 2,736 2,841
Add dilutive effects of assumed exercise
of stock options 1 6
Weighted average common and dilutive
potential common shares outstanding 2,737 2,847
Diluted earnings per share $ 0.43 $ 0.42
Stock options for 37,844 shares of common stock for the three months ended
March 31, 2009, and for 30,300 shares of common stock for the three months
ended March 31, 2008 were excluded from diluted earnings per share because
their impact was antidilutive.
5. STOCK COMPENSATION
The Company has two share based compensation plans as described below.
Stock Option Plan
The Company grants certain officers and key employees stock option awards
which vest and become fully exercisable at the end of five years and
provides for issue of up to 100,000 options. The Company also grants
certain directors stock option awards which vest and become fully
exercisable immediately and provides for issue of up to 20,000 options. The
exercise price of each option, which has a ten year life, was equal to the
market price of the Company's stock on the date of grant.
The fair value of each option award is estimated on the date of grant using
a closed form option valuation (Black-Scholes) model that uses the
assumptions noted in the table below. Expected volatilities are based on
historical volatilities of the Company's common stock. The Company uses
historical data to estimate option exercise and post-vesting termination
behavior. The expected term of options granted is based on historical data
and represents the period of time that options granted are expected to be
outstanding, which takes into account that the options are not
transferable. The risk-free interest rate for the expected term of the
option is based on the U.S. Treasury yield curve in effect at the time of
the grant.
The fair value of options granted was determined using the following
weighted-average assumptions as of grant date. No options have been
granted in 2009.
2008
Weighted-average fair value of options
granted during the year $2.38
Risk-free interest rate 2.96%
Expected option life 8 years
Expected stock price volatility 11.05%
Expected dividend yield 3.61%
Summary of activity in the stock option plan for the three months ended
March 31, 2009 follows:
Weighted
Weighted Average
Average Remaining Aggregate
Exercise Contractual Intrinsic
Shares Price Term Value
Outstanding, beginning of year 50,169 $28.57
Forfeited or expired (12,325) 25.86
Outstanding, end of period 37,844 29.45 57.6 months $ -
Vested and expected to vest 37,844 29.45 57.6 months -
Options exercisable at period end 35,374 29.38 56.8 months -
The intrinsic value for stock options is calculated based on the exercise
price of the underlying awards and the market price of our common stock as
of the reporting date. The Company recorded $29 thousand in stock
compensation expense during the three months ended March 31, 2009 to
salaries and employee benefits.
Stock Grant Plan
On February 15, 2005, the Company's Board of Directors adopted a restricted
stock grant plan. Total shares issuable under the plan are 50,000. A
summary of changes in the Company's nonvested shares for the year follows:
Weighted-Average
Grant-Date
Nonvested Shares Shares Fair Value
Nonvested at December 31, 2008 10,006 $ 306,023
Granted 4,150 71,173
Vested (2,702) (81,576)
Forfeited (280) (7,225)
Nonvested at March 31, 2009 11,174 $ 288,395
6. DIVIDENDS
Dividends per share paid for the quarter ended March 31, 2009 were $0.20
compared to $0.28 for the quarter ending March 31, 2008.
7. RETIREMENT PLAN
Components of Net Periodic Benefit Cost
Three months ended March 31
(in thousands)
Pension Benefits
2009 2008
Service cost $ - $ 121
Interest cost - 112
Expected return on plan assets - (120)
(Gain) loss amortization - 4
Net Periodic Benefit Cost $ - $ 117
Employer Contributions
The defined benefit plan offered to employees by the Company was terminated
effective December 31, 2008. Therefore, the company had no contributions
to the plan during the first quarter of this year and will also have no
contributions going forward.
As of December 31, 2008, the date of termination, the projected benefit
obligation was $6,749,694 and the fair value of the plan assets was
$5,206,908. The difference of $1,542,786 is recognized in other
liabilities on the consolidated balance sheet.
8. Fair Value Measurements
Statement 157 establishes a fair value hierarchy which requires an entity to
maximize the use of observable inputs and minimize the use of unobservable
inputs when measuring fair value. The standard describes three levels of
inputs that may be used to measure fair value:
Level 1: Quoted prices (unadjusted) for identical assets or liabilities
in active markets that the entity has the ability to access as of the
measurement date.
Level 2: Significant other observable inputs other than Level 1 prices
such as quoted prices for similar assets or liabilities; quoted prices
in markets that are not active; or other inputs that are observable or
can be corroborated by observable market data.
Level 3: Significant unobservable inputs that reflect a reporting
entity's own assumptions about the assumptions that market participants
would use in pricing an asset or liability.
The fair values of securities available for sale are determined by obtaining
quoted prices on nationally recognized securities exchanges (Level 1 inputs)
or matrix pricing, which is a mathematical technique widely used in the
industry to value debt securities without relying exclusively on quoted prices
for the specific securities but rather by relying on the securities'
relationship to other benchmark quoted securities (Level 2 inputs).
The fair value of servicing rights is based on a valuation model that
calculates the present value of estimated net servicing income. The valuation
model incorporates assumptions that market participants would use in
estimating future net servicing income. The Company is able to compare the
valuation model inputs and results to widely available published industry data
for reasonableness (Level 2 inputs).
The fair value of impaired loans with specific allocations of the allowance
for loan losses is generally based on recent real estate appraisals. These
appraisals may utilize a single valuation approach or a combination of
approaches including comparable sales and the income approach. Adjustments
are routinely made in the appraisal process by the appraisers to adjust for
differences between the comparable sales and income data available. Such
adjustments are typically significant and result in a Level 3 classification
of the inputs for determining fair value.
Assets and Liabilities Measured on a Recurring Basis
For this disclosure, the Company only has available for sale investment
securities that meet the requirement.
Available for sale investment securities are the Company's only balance
sheet item that meet the disclosure requirements for instruments measured
at fair value on a recurring basis. Disclosures are as follows in the
table below.
(In thousands) Fair Value Measurements at March 31, 2009 Using
Quoted Prices
In Active
Markets for Significant Other Significant
Identical Observable Unobservable
Fair Value Assets Inputs Inputs
Description 3/31/09 (Level 1) (Level 2) (Level 3)
Available for Sale $205,886 $ 293 $205,593 $ -
Securities
(In thousands) Fair Value Measurements at December 31, 2008 Using
Quoted Prices
In Active
Markets for Significant Other Significant
Identical Observable Unobservable
Fair Value Assets Inputs Inputs
Description 12/31/08 (Level 1) (Level 2) (Level 3)
Available for Sale
Securities $172,834 $ 290 $172,544 $ -
Assets and Liabilities Measured on a Non-Recurring Basis
Servicing rights are carried at lower of cost or fair value. The current
value of $593 thousand includes a valuation allowance of $213 thousand, which
was recorded during the fourth quarter of 2008.
Impaired loans totaled $1,819,000 at March 31, 2009 and $5,131,000 at December
31, 2008. The total allowance for loan losses related to these loans was
$320,000 and $320,000 at March 31, 2009 and December 31, 2008. Impaired loans
are measured at fair value based on the underlying collateral and are
considered level 3 inputs.
Item 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Forward-Looking Statements
This discussion contains forward-looking statements under the Private
Securities Litigation Reform Act of 1995 that involve risks and uncertainties.
Words such as "believes," "anticipates," "expects," "intends," "plans,"
"targeted," and similar expressions are intended to identify forward-looking
statements but are not the exclusive means of identifying such statements.
Although the Company believes that the assumptions underlying the
forward-looking statements contained herein are reasonable, any of the
assumptions could be inaccurate, and therefore, there can be no assurance that
the forward-looking statements included herein will prove to be accurate.
Factors that could cause actual results to differ from the results discussed
in the forward-looking statements include, but are not limited to: economic
conditions (the Company and its bank operate in areas affected by various
markets); competition for the Company's customers from other providers of
financial and mortgage services; government legislation and regulation (which
changes from time to time and over which the Company has no control); changes
in interest rates (both generally and more specifically mortgage interest
rates); material unforeseen changes in the liquidity, results of operations,
or financial condition of the Company's customers; and other risks detailed in
the Company's filings with the Securities and Exchange Commission, all of
which are difficult to predict and many of which are beyond the control of the
Company. The Company undertakes no obligation to update or revise
forward-looking statements to reflect events or circumstances after the date
hereof or to reflect the occurrence of unanticipated events.
Summary
Kentucky Bancshares, Inc. recorded net income of $1.2 million, or $0.43 basic
earnings and diluted earnings per share for the first three months ending
March 31, 2009 compared to $1.2 million, or $0.42 basic earnings and diluted
earnings per share for the three month period ending March 31, 2008. The
first three months earnings reflects a decrease of 2.2% compared to the same
time period in 2008, due primarily to a decrease in net interest income of
$144 thousand, an increase in the loan loss provision of $50 thousand and an
increase in other expenses of $107 thousand. These decreases to net income
were partially offset by a reduction in income tax expense of $64 thousand.
Return on average assets was 0.68% for the three months ended March 31, 2009
and 0.75% for the three month period ended March 31, 2008. Return on average
equity was 8.1% for the three month period ended March 31, 2009 and 8.0% for
the same period in 2008.
Loans decreased $8.7 million from $424.3 million on December 31, 2008 to
$415.6 million on March 31, 2009. The decrease is primarily attributed to a
decrease in real estate mortgage loans of $8.4 million slightly offset by an
increase of $713 thousand in real estate construction loans. Smaller
decreases in commercial, agricultural & consumer loans also contributed to the
overall decline in the loan portfolio balance.
Total deposits increased from $520.8 million on December 31, 2008 to $526.4
million on March 31, 2009, an increase of $5.6 million. This increase is
primarily the result of an increase in non-interest bearing deposit accounts
of $5.7 million and an increase in interest bearing time deposit accounts over
$100 thousand of $6.6 million. These increases were partially offset by a
decrease in other interest bearing deposit accounts of $6.8 million.
Management attributes the increase mainly to obtaining a large public fund
account in early January. As a result of this, management has paid off
Federal Home Loan Bank advances that came due during 2009. Because of this,
as of March 31, 2009, Federal Home Bank advances have declined $10.7 million
since December 31, 2008.
Net Interest Income
Net interest income was $4.8 million for the three months ended March 31, 2009
compared to $4.9 million for the three months ended March 31, 2008, a decrease
of 2.9%. The interest spread of 2.95% for the first three months of 2009 is
down from 3.26% reported for the same period in 2008, a decrease of 31 basis
points. During the first quarter of 2009, the prime interest rate was two
hundred basis points less than a year ago. This has significantly impacted
the Company's interest spread. In addition to lower rates and tightening
margins, the net interest spread for 2009 is also lower than 2008 due to an
increase in "lost" loan interest during 2009 that can be attributed to an
increase in non-performing loans in our loan portfolio.
For the first three months, the yield on assets decreased from 6.34% in 2008
to 5.18% in 2009. The cost of liabilities decreased from 3.08% in 2008 to
2.23% in 2009. Year to date average loans increased $7.5 million, or 1.8%
from March 31, 2008 to March 31, 2009. Loan interest income has decreased
$1.2 million for the first three months of 2009 compared to the first three
months of 2008. Year to date average deposits increased from March 31, 2008
to March 31, 2009, up $45.4 million or 9.3%. The increase is primarily the
result of an increase in interest bearing deposits with balances greater than
$100 thousand. Deposit interest expense has decreased $973 thousand for the
first three months of 2009 compared to the same period in 2008.
Non-Interest Income
Non-interest income increased $30 thousand for the three months ended March
31, 2009 compared to the same period in 2008 to $2.0 million, due primarily to
an increase in the gain on sold mortgage loans of $217 thousand, offset by a
decrease in service charges of $43 thousand and a decrease in other non-
interest income of $99 thousand. The decrease in service charges was
primarily due to a decrease in overdraft income of $75 thousand. The other
non-interest income decrease was primarily due to a decrease of $108 thousand
in brokerage income.
Gain on sale of mortgage loans increased from $161 thousand in the first three
months of 2008 to $378 thousand during the first three months of 2009. The
volume of mortgage loan originations and sales is generally inverse to rate
changes. A change in the mortgage loan rate environment can have a
significant impact on the related gain on sale of mortgage loans.
Non-Interest Expense
Total non-interest expenses decreased $74 thousand for the three month period
ended March 31, 2009 compared to the same period in 2008.
For the comparable three month periods, salaries and benefits decreased $100
thousand, a decrease of 3.8%. The decrease in salaries & benefits is
primarily attributed to the company terminating the defined benefit plan
offered to employees as of December 31, 2008. As of March 31, 2009, the
company has saved $117 thousand by terminating the defined benefit plan.
Occupancy expenses decreased $73 thousand to $661 thousand for the first three
months of 2009 compared to the same time period in 2008. The decrease during
2009 is mainly attributable to a decrease in depreciation expense of $48
thousand. The decrease in depreciation expense is due to assets with a high
cost basis becoming fully depreciated at the end of 2008. The relocation of
the Nicholasville branch, scheduled to be complete in the second quarter of
2009, is expected to result in a slight increase in occupancy expense starting
in the second quarter of 2009.
Other expenses increased $107 thousand for the first three months ended March
31, 2009 compared to the same time period in 2008. The year to date increase
is mainly a result of an increase in FDIC insurance premiums (see below for
more details) of $218 thousand and an increase in repossession expense of $57
thousand. These increases were partially offset by a decrease in legal &
professional fees of $93 thousand. Due to the downturn in the financial
industry and related bank failures, the FDIC is expected to increase the FDIC
insurance premiums in 2009. Although the amount of the increase is unknown at
this time, the increase in expense to the Company is expected to be
significant.
Deposit Insurance: In February 2009, the FDIC adopted a long-term deposit
insurance fund ("DIF") restoration plan as well as an additional emergency
assessment for 2009. The restoration plan increases base assessment rates for
banks in all risk categories with the goal of raising the DIF reserve ratio
from its current 0.40% to 1.15% within seven years. Banks in the best risk
category, which include the Company's subsidiary bank, will pay initial base
rates ranging from 12 to 16 basis points of assessable deposits beginning
April 1, 2009, up from the initial base rate range of 12 to 14 basis points.
Additionally, the FDIC approved an interim rule imposing a special emergency
assessment to all financial institutions of 20 basis points of insured
deposits as of June 30, 2009. The interim rule was subject to a 30-day
comment period and in early March 2009 a proposal was introduced in Congress
to lower the special emergency assessment to 10 basis points from the initial
20 basis points. The special emergency assessment is estimated to be $1.1
million for the Company as currently adopted under the 20 basis point rule and
will be collected on September 30, 2009. The amount of the special emergency
assessment would decrease to $530 thousand if the 10 basis point scenario is
adopted. The FDIC is also permitted to impose an emergency special assessment
after June 30, 2009 of up to 10 basis points if necessary to maintain public
confidence in federal deposit insurance. The increase in assessments by the
FDIC could have a material adverse effect on the Company's earnings.
Temporary Liquidity Guarantee Program ("TLGP"): The TLGP consists of two
separate programs implemented by the FDIC in October 2008. This includes the
Debt Guarantee Program ("DGP") and the Transaction Account Guarantee Program
("TAGP"). These programs were initially provided at no cost to participants
during the first 30 days. Eligible institutions that do not "opt out" of
either of these programs become participants by default and will incur the
fees assessed for taking part.
Under the DGP, the FDIC will guarantee senior unsecured debt issued on or
after October 14, 2008 through June 30, 2009 up to certain limits by
participating entities. The FDIC will provide guarantee coverage for debt
issued between those dates until the earlier of the maturity date of the debt
or June 30, 2012. The Company chose to opt out of the DGP.
Under the TAGP, the FDIC guarantees 100% of certain noninterest bearing
transaction accounts up to any amount to participating FDIC insured
institutions. The unlimited coverage is applicable until December 31, 2009.
The Company opted to participate in the TAGP; as such, it will incur an
additional quarterly-assessed 10 basis point fee on balances in noninterest
bearing transaction accounts exceeding the recently increased $250 thousand
deposit limit that became effective on November 13, 2008. The previous
deposit insurance limit amount was $100 thousand.
Emergency Economic Stabilization Act of 2008 ("EESA"): EESA was signed into
law by the President on October 3, 2008 as a measure to stabilize and provide
liquidity to the U.S. financial markets. Under EESA, the Troubled Asset
Relief Program ("TARP") was created. TARP granted the Treasury authority to,
among other things, invest in financial institutions and purchase troubled
assets in an aggregate amount up to $700 billion.
In connection with TARP, the Capital Purchase Program ("CPP") was launched on
October 14, 2008. Under the CPP, the Treasury announced a plan to use up to
$250 billion of TARP funds to purchase equity stakes in certain eligible
financial institutions, including the Company. The Company was preliminarily
approved for $13 million of equity capital in December 2008, and subsequently
withdrew its application.
Income Taxes
The effective tax rate for the three months ended March 31, 2009 was 17.8%
compared to 20.9% in 2008. These rates are less than the statutory rate as a
result of the tax-free securities and loans held by the Company. The rates
for 2009 are lower due to the lower level of income for 2009. Nontaxable
interest income increased $58 thousand for the first three months of 2009
compared to the same time period in 2008.
Stock Repurchase Program
On October 25, 2000, the Company announced that its Board of Directors
approved a stock repurchase program to purchase up to 100,000 shares of its
outstanding common stock. On November 11, 2002, the Board of Directors
approved and authorized the Company's repurchase of an additional 100,000
shares. On May 20, 2008, the Board of Directors approved and authorized the
Company to repurchase an additional 100,000 shares. Shares will be purchased
from time to time in the open market depending on market prices and other
considerations. Through March 31, 2009, 258,001 shares have been purchased
under the program. The most recent share repurchase occurred on December 22,
2008.
Liquidity and Funding
Liquidity risk is the possibility that the Company may not be able to meet its
cash requirements. Management of liquidity risk includes maintenance of
adequate cash and sources of cash to fund operations and to meet the needs of
borrowers, depositors and creditors. Excess liquidity has a negative impact
on earnings as a result of the lower yields on short-term assets.
Cash and cash equivalents were $13.9 million as of March 31, 2009 compared to
$37.1 million at December 31, 2008. The decrease in cash and cash equivalents
is mainly attributable to a decrease in federal funds sold resulting primarily
from an increase in the Company's security portfolio. In addition to cash and
cash equivalents, the securities portfolio provides an important source of
liquidity. Securities available for sale totaled $205.9 million at March 31,
2009 compared to $172.8 million at December 31, 2008. The available for sale
securities are available to meet liquidity needs on a continuing basis. The
Company expects the customers' deposits to be adequate to meet its funding
demands.
Generally, the Company relies upon net cash inflows from financing activities,
supplemented by net cash inflows from operating activities, to provide cash
used in its investing activities. As is typical of many financial
institutions, significant financing activities include deposit gathering and
the use of short-term borrowings, such as federal funds purchased and
securities sold under repurchase agreements along with long-term debt. The
Company's primary investing activities include purchasing investment
securities and loan originations.
Management is aware of the challenge of funding sustained loan growth.
Therefore, in addition to deposits, other sources of funds, such as Federal
Home Loan Bank (FHLB) advances, may be used. The Company relies on FHLB
advances for both liquidity and asset/liability management purposes. These
advances are used primarily to fund long-term fixed rate residential mortgage
loans. In early July 2008, the Company received deposits from being the
successful bidder on $20 million in public deposits. As of March 31, 2009,
these deposits had declined $5.7 million, with the remainder expected to roll
off by June 2009. In addition, in early January 2009, the Company received
deposits in the amount of $18 million as a result of being the successful
bidder on a public fund account. As of March 31, 2009, $4.7 million had
rolled off. It is expected that $11.3 million of the remaining $13.3 million
will roll off during the remainder of 2009 and another $2.0 million will
mature in the first quarter of 2010. As of March 31, 2009, we have
sufficient collateral to borrow an additional $39 million from the FHLB. In
addition, as of March 31, 2009, over $35 million is available in overnight
borrowing through various correspondent banks. In light of this, management
believes there is sufficient liquidity to meet all reasonable borrower,
depositor and creditor needs in the present economic environment.
Non-Performing Assets
As of March 31, 2009, the Company's non-performing assets totaled $14.8
million or 2.49% of loans compared to $9.2 million or 1.73% of loans at
December 31, 2008. (See table below) The Company experienced an increase of
$1.6 million in non-accrual loans from December 31, 2008 to March 31, 2009,
largely due to an increase in non-accrual loans secured by real estate of $1.3
million and an increase in non-accrual commercial loans of $437 thousand. As
of March 31, 2009, non-accrual loans include $2.3 million in loans secured by
1-4 family residential real estate, $1.8 million in real estate construction
and $2.9 million in loans secured by non-farm non-residential properties.
Real estate loans composed 95% of the non-performing loans as of March 31,
2009 and 96% as of December 31, 2008. Forgone interest income on the non-
accrual loans was $205 thousand for the first three months of 2009 compared to
$18 thousand for the same time period in 2008. Accruing loans that are
contractually 90 days or more past due as of March 31, 2009 totaled $2.2
million compared to $779 thousand for the same period a year ago, an increase
of $1.5 million. The increase is mainly attributed to an increase in closed
end loans secured by 1-4 family residential properties. As of March 31, 2009,
closed end loans secured by 1-4 family residential properties that were
contractually 90 days or more past due and still accruing totaled $2.0 million
compared to $221 thousand as of December 31, 2008, an increase of $1.8
million. In addition, the amount the Company has booked as "Other Real
Estate" has increased $2.6 million from December 31, 2008 to March 31, 2009.
As of March 31, 2009 the amount booked as "Other Real Estate" totaled $4.4
million compared to $1.8 million at December 31, 2008. The increase is
largely attributed to two loan customers who specialized in commercial & land
development properties.
Nonperforming Assets
3/31/09 12/31/08
(in thousands)
Non-accrual Loans $ 8,129 $ 6,562
Accruing Loans which are
Contractually past due
90 days or more 2,239 779
Total Nonperforming and Restructured 10,368 7,341
Other Real Estate 4,439 1,840
Total Nonperforming and Restructured
Loans and Other Real Estate $ 14,807 $ 9,181
Nonperforming and Restructured Loans
as a Percentage of Loans 2.49% 1.73%
Nonperforming and Restructured Loans
and Other Real Estate as a Percentage
of Total Assets 2.18% 1.35%
Allowance as a Percentage of
Period-end Loans 1.44% 1.29%
Allowance as a Percentage of
Non-performing and Restructured Loans 58% 60%
Provision for Loan Losses
The loan loss provision for the first three months was $450 thousand for 2009
and $400 thousand for the same period in 2008. The current level of
nonperforming loans has caused management to increase the 2009 provision in
order to maintain an allowance for loan losses that is representative of the
risk of loss based on the quality of loans currently in the portfolio.
Management estimates the allowance balance required using past loan loss
experience, the nature and volume of the portfolio, information about specific
borrower situations and estimated collateral values, economic conditions, and
other factors. Net recoveries for the three month period ended March 31, 2009
were $84 thousand compared to net charge-offs of $188 thousand for the same
period in 2008. Future levels of charge-offs will be determined by the
particular facts and circumstances surrounding individual loans. Management
believes the current loan loss allowance is sufficient to meet probable
incurred loan losses.
Loan Losses
Three Months Ended March 31, 2009
(in thousands)
2009 2008
Balance at Beginning of Period $ 5,465 $ 4,879
Amounts Charged-off:
Real Estate Construction 3 125
Real Estate Mortgage 48 24
Agricultural 6 12
Consumer 271 358
Total Charged-off Loans 328 519
Recoveries on Amounts
Previously Charged-off:
Commercial - 4
Real Estate Construction - 2
Real Estate Mortgage 235 7
Agricultural - 29
Consumer 177 289
Total Recoveries 412 331
Net Charge-offs (84) 188
Provision for Loan Losses 450 400
Balance at End of Period 5,999 5,091
Loans
Average 418,712 411,258
At March 31 415,638 410,840
As a Percentage of Average Loans:
Net Charge-offs (0.02)% 0.05%
Provision for Loan Losses 0.11% 0.10%
Allowance as a Multiple of
Net Charge-offs (17.9) 6.8
Item 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Asset/Liability management control is designed to ensure safety and soundness,
maintain liquidity and regulatory capital standards, and achieve acceptable
net interest income. Management considers interest rate risk to be the most
significant market risk. The Company's exposure to market risk is reviewed on
a regular basis by the Asset/Liability Committee. Interest rate risk is the
potential of economic losses due to future interest rate changes. These
economic losses can be reflected as a loss of future net interest income
and/or a loss of current fair market values. The objective is to measure the
effect on net interest income and to adjust the balance sheet to minimize the
inherent risk, while at the same time, maximize income.
Management realizes certain risks are inherent and that the goal is to
identify and minimize the risks. The primary tools used by management are
interest rate shock and economic value of equity (EVE) simulations. The
Company has no market risk sensitive instruments held for trading purposes.
Using interest rate shock simulations, the following table depicts the change
in net interest income resulting from 100 and 300 basis point changes in rates
on the Company's interest earning assets and interest bearing liabilities.
The projections are based on balance sheet growth assumptions and repricing
opportunities for new, maturing and adjustable rate amounts. As of March 31,
2009, the projected percentage changes are within the Board approved limits
except when assuming rates declining 100 basis points. Although management
does analyze and monitor the projected percentage change in a declining
interest rate environment, due to the current rate environment many of the
current deposit rates cannot decline an additional 100 basis points.
Therefore, management places more emphasis in the rising rate environment
scenarios. This period's volatility is higher in each rate shock both in a
falling and rising rate environment when compared to the same period a year
ago. The projected net interest income report summarizing the Company's
interest rate sensitivity as of March 31, 2009 is as follows:
(dollars in thousands)
PROJECTED NET INTEREST INCOME
Level
Rate Change: - 300 - 100 Rates + 100 + 300
Year One (4/09 - 3/10)
Net interest income $20,351 $21,431 $22,359 $22,901 $23,364
Net interest income dollar change (2,008) (928) N/A 542 1,005
Net interest income percentage change -8.9% -4.1% N/A 2.4% 4.5%
Board approved limit >-10.0% >-4.0% N/A >-4.0% >-10.0%
The projected net interest income report summarizing the Company's interest
rate sensitivity as March 31, 2008 is as follows:
PROJECTED NET INTEREST INCOME
(dollars in thousands)
Level
Change in basis points: - 300 - 100 Rates + 100 + 300
Year One (4/08 - 3/09)
Net interest income $21,052 $21,807 $22,534 $22,861 $23,256
Net interest income dollar change (1,482) (727) N/A 327 722
Net interest income percentage change -6.6% -3.2% N/A 1.5% 3.2%
Board approved limit >-10.0% >-4.0% N/A >-4.0% >-10.0%
Projections from March 31, 2009, year one reflected a decline in net interest
income of 4.1% with a 100 basis point decline compared to the 3.2% decline in
2008. The 100 basis point increase in rates reflected a 2.4% increase in net
interest income in 2009 compared to 1.5% in 2008. The additional volatility
is due to lengthening our certificate of deposit maturities and increasing our
security portfolio.
EVE applies discounting techniques to future cash flows to determine the
present value of assets, liabilities, and therefore equity. Based on applying
these techniques to the March 31, 2009 balance sheet, a 100 basis point
increase in rates results in a 4.2% decrease in EVE. A 100 basis point
decrease in rates results in a 2.3% increase in EVE. These are within the
Board approved limits.
Item 4 - CONTROLS AND PROCEDURES
As of the end of the period covered by this report, the Company carried out an
evaluation, under the supervision and with the participation of the Company's
management, including the Company's Chief Executive Officer and Chief
Financial Officer, of the effectiveness of the design and operation of the
Company's disclosure controls and procedures. Based on the foregoing, the
Company's Chief Executive Officer and Chief Financial Officer concluded that
the Company's disclosure controls and procedures were effective, in all
material respects, to ensure that information required to be disclosed in the
reports the Company files and submits under the Exchange Act is recorded,
processed, summarized and reported as and when required.
The Company also conducted an evaluation of internal control over financial
reporting to determine whether any changes occurred during the quarter covered
by this report that have materially affected, or are reasonably likely to
materially affect, the Company's internal control over financial reporting.
Based on this evaluation, there has been no such change during the quarter
covered by this report.
Part II - Other Information
Item 1. Legal Proceedings
The Company is not a party to any material legal proceedings.
Item 1A. Risk Factors
There have been no material changes in risk factors, as previously
disclosed in the December 31, 2008 Form 10-K.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
ISSUER PURCHASES OF EQUITY SECURITIES
Period (a) Total (b) (c) Total Number (d) Maximum Number
Number of Average of Shares (or Units) (or Approximate Dollar
Shares (or Price Paid Purchased as Part Value) of Shares (or
Units) Per Share of Publicly Units) that May Yet Be
Purchased (or Unit) Announced Plans Purchased Under the
Or Programs Plans of Programs
1/1/09 -
1/31/09 - $ - - 41,999 shares
2/1/09 -
2/28/09 - - - 41,999 shares
3/1/09 -
3/31/09 - - - 41,999 shares
Total - - - 41,999 shares
On October 25, 2000, the Company announced that its Board of Directors
approved a stock repurchase program. The Company is authorized to purchase up
to 100,000 shares of its outstanding common stock. On November 11, 2002, the
Board of Directors approved and authorized the Company's repurchase of an
additional 100,000 shares. On May 20, 2008, the Board of Directors approved
and authorized an additional 100,000 shares. Shares will be purchased from
time to time in the open market depending on market prices and other
considerations. Through March 31, 2009, 258,001 shares have been purchased.
Item 3. Defaults upon Senior Securities
None
Item 5. Other Information
None
Item 6. Exhibits
31.1 Certifications of Chief Executive Officer pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.
31.2 Certifications of Chief Financial Officer pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.
32 Certifications of Chief Executive Officer and Chief
Financial Officer pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
KENTUCKY BANCSHARES, INC.
Date _____5/14/09_______ __/s/Louis Prichard______________
Louis Prichard, President and C.E.O.
Date _____5/14/09_______ __/s/Gregory J. Dawson___________
Gregory J. Dawson, Chief Financial Officer
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