KENTUCKY BANCSHARES, INC.

339 Main Street

Paris, KY  40361

(859) 987-1795

Notice of Annual Meeting of Shareholders
to be held May 22, 2018

April 16, 2018

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.

YOUR VOTE IS IMPORTANT

Please vote by telephone, internet, or 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 2017 Annual Report to Shareholders and our Annual Report on Form 10-K for the period ending December 31, 2017, which include our financial statements, are being mailed to shareholders together with these proxy materials on or about April 16, 2018.

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 22, 2018, and at any adjournments (the “ Annual Meeting ”).

Important Notice Regarding the Availability of Proxy Materials for the Shareholder Meeting to be Hel d on May 22, 2018 .

This proxy statement, form of proxy, our 2017 Annual Report to Shareholders, and our Annual Report on Form 10-K for the period ending December 31, 2017, which includes financial statements, are available at www.envisionreports.com/ktyb .

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, Secretary 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 you are entitled to multiply the number of shares of common stock you hold by the number of directors to be elected and cast the total for a single nominee or divide the votes in any manner among the nominees.  This is in contrast to “regular” or “statutory” voting in which you may only cast the total number of shares of common stock you hold for any single director nominee.  For example, we have three director nominees.  If you hold 500 shares (with one vote per share), under the regular method you could vote a maximum of 500 shares for each one candidate (giving you 1,500 votes total—500 votes per each of the three candidates). With cumulative voting, you are afforded the 1,500 votes from the start and could choose to vote all 1,500 votes for one candidate, 750 each to two candidates, or otherwise divide your votes whichever way you wanted.

If you choose to exercise your cumulative voting rights, you will not be able to vote by internet or telephone.  If, however; you choose to vote for or against each director nominee, then you may vote by internet or telephone.

On the record date, there were 2,978,628 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 2018 will be elected directors.  All other matters, including the proposal to ratify the appointment of Crowe Horwath LLP as the Company’s registered public accountants for 2018, 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.

Brokers, banks, and other institutions holding shares of record for customers 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 the Company 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 .”  Broker non-votes will not be counted as votes for or against a matter and will not be included in calculating the number of votes necessary for approval on those matters.

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 If You Are the Registered Owner.  If at the close of business on March 15, 2018, your shares are registered directly in your name with our transfer agent, Computershare, you are considered the shareholder of record of those shares and we have mailed these proxy materials to you.  You may vote your shares by internet*, telephone*, or by mail as further described below.  Your vote authorizes each of Buckner Woodford IV and Gregory J. Dawson as proxies, each with the power to appoint his or her substitute, to represent and vote your shares as you directed.

Only the latest dated proxy received from you, whether by internet, telephone or mail, will be voted at the Meeting.  If you vote by internet or telephone, please do not mail your proxy card.

* You may not vote by internet or telephone if you choose to exercise your cumulative voting rights with respect to director nominees. See “ Who Can Vote; Voting Rights — Cumulative voting rights ” on page 3 above for an explanation of how cumulative voting works.

How To Vote If You Hold Your Shares In Street Name.  If at the close of business on March 15, 2018 you held your shares in “street name” (through a broker, bank or other institution), you may receive a separate voting instruction form, or you may need to contact your broker, bank or other institution to determine whether you will be able to vote electronically using the internet or the telephone.

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 properly return a proxy as specified above, 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 2018;

FOR the proposed director nominees (or, if deemed appropriate by the individuals appointed in the proxies, less than all of the proposed director nominees based upon the results of the cumulative voting);

FOR the proposed non-binding advisory vote on the Company’s overall executive compensation programs and procedures; 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 voting by telephone, the internet, or 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 (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 that you hold; (iii) voting again by internet or telephone (unless you are exercising your cumulative voting rights, in which case voting by internet or telephone is not an option) or (iv) 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, Attention: Gregory J. Dawson, Secretary.

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 1, 2019 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 2019 Annual Meeting of Shareholders will confer on the proxy holders discretionary authority to vote on the matter that you present at our 2019 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 of Ethics.  A copy of our Code of Ethics is available at our website www.kybank.com in the section entitled “About Us” under “Investor Relations” in the “Corporate Information — Governance Documents” subsection.

Board Structure and Committees . As of the date of this proxy statement, our Board of Directors consists of ten (10) members.  Our Board of Directors held four meetings during 2017, consisting of four regularly scheduled meetings.  All directors, except Messrs.  Caudill and 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.  Two of our directors attended our 2017 annual meeting.

Our Board of Directors has a standing Compensation Committee and Audit Committee but does not have a standing nominating committee.

 * Betty J. Long served on the Audit Committee during 2017, but does not serve on the Committee in 2018.

Committee Charters .  Only our Audit Committee has a charter, which is available at our website www.kybank.com in the section entitled “About Us” under “Investor Relations” in the “Corporate Information — Governance Documents” subsection.

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 current employee directors:  Mr. Caudill and Mr. Prichard.  While our Board determined that 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. 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 2017, 2016  and 2015 did not exceed the greater of $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 Mr. Jack W. Omohundro satisfies the qualifications of financial expert and Mr. Omohundro accordingly has been designated as the Audit Committee financial expert.

Consideration of Director Nominees .  The members of our Board who are independent directors under NASDAQ rules approve 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.  This year our Strategic Planning/Governance Committee, comprised of Messrs. Caudill, Hinkle, Prichard, and Woodford, suggested that the directors Messrs. McClain, Saunier, and Woodford IV, whose terms are expiring this May be considered as candidates for nomination.  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. The independent directors approved the suggested nominees and invited each of these candidates 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 2019 Annual Meeting, a shareholder must notify our Secretary no later than December 17, 2018 (the date that is 120 days before the first anniversary of the date on this 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 financial holding company effective June 26, 2014 (previously 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, and KBI Insurance Company, Inc., a captive insurance company.

Our Board is comprised of eight independent directors and two employee directors.  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:

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.

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, 2017 for filing with the Securities and Exchange Commission.

AUDIT COMMITTEE

Robert G. Thompson, Chairman

Jack W. Omohundro     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:

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, review of the Company's Form 10-Q's were $182,000 for 2017 and $148,750 for 2016.

Audit related fees - Aggregate fees for all assurance and related services were $13,750 for 2017 and $13,250 for 2016.  These fees were incurred for audits of benefit plans in 2017 and 2016.

Tax fees - Fees related to tax compliance, advice and planning were $48,025 for 2017 and $40,175 for 2016.

All other fees - Consulting fees related to risk management in 2017 and 2016 were $3,750 for 2017 and $7,500 for 2016 .

All services provided by Crowe Horwath in 2017 and 2016 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.

Non-employee Directors receive equity-based compensation in the form of stock under our 2009 Stock Award Plan equivalent to approximately $5,000 for part of their annual retainer.  In 2018, we granted 109 shares of stock to each of our Directors, except Mr. Prichard.

2017 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 2017.  The compensation of Mr. Prichard is reflected in the Summary Compensation Table under Executive Compensation.

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 2021.  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 and Prichard.

Director Qualifications .  Our Board of Directors currently consists of ten members who are well-qualified to serve on our board and represent our shareholders’ best interests.    Follwing our annual meeting, we anticipate having nine directors.  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.