The Bank of Kentucky Financial Corporation Announces Third Quarter Earnings

The Bank of Kentucky Financial Corporation Announces Third Quarter Earnings

Net Income Available to Common Shareholders of $4,196,000 Up 5% for the Third
Quarter

CRESTVIEW HILLS, Ky., Oct. 18, 2012 (GLOBE NEWSWIRE) -- The Bank of Kentucky
Financial Corporation (the "Company") (Nasdaq:BKYF), the holding company of
The Bank of Kentucky, Inc. (the "Bank"), today reported its earnings for the
third quarter and nine months ended September 30, 2012. For the third quarter,
the Company reported an increase in diluted earnings per common share of 4%
from the same period in 2011.

A summary of the Company's results follows:

Third Quarter ended September 30,           2012        2011        Change
Net income                                  $4,196,000  $4,274,000  (2)%
Net income available to common shareholders $4,196,000  $4,013,000  5%
Earnings per common share, basic            $0.56       $0.54       4%
Earnings per common share, diluted          $0.56       $0.54       4%
                                                                 
Nine Months ended September 30,             2012        2011        Change
Net income                                  $13,135,000 $11,580,000 13%
Net income available to common shareholders $13,135,000 $10,803,000 22%
Net income per common share, basic          $1.76       $1.45       21%
Net income per common share, diluted        $1.74       $1.45       20%

Robert Zapp, President & CEO, stated, "The positive trends we have seen in
lending over the past several months continued into the third quarter of 2012,
with most of the growth coming in the past few months.In addition, increased
mortgage volume at a time when interest rates were at historic lows helped to
increase fee revenue for the quarter.Although slow moving, we are
experiencing a steady climb in borrowing among businesses and consumers and
are active in helping local businesses obtain credit of any size.We continue
to grow organically and have focused on expanding existing customer
relationships by selling investment services and additional bank products and
services.The Bank has further established itself in the region by capturing
additional market share and maintaining our position as the largest bank in
Northern Kentucky with 23% of total deposits.Overall, The Bank continues to
execute its strategy and looks forward to future success."

The increase in earnings available to common shareholders in the third quarter
of 2012 was primarily attributable to a $350,000 (14%) decrease in the
provision for loan losses and a $261,000 (100%) decrease in preferred stock
dividends and amortization as compared to the third quarter of 2011.Also
contributing to increased earnings was a 2% increase in total revenue (net
interest income and non interest income), which was offset with a 10% increase
in noninterest expense. The decrease in the provision for loan losses
reflected lower levels of impaired loan reserves,lower levels of
nonperforming loans and lower levels of adversely classified loans as compared
to September 2011. The reduction of preferred stock dividends and amortization
reflects the November 2011 repurchase of the final $17 million of the
Company's Fixed Rate Cumulative Perpetual Preferred Stock, Series A (the
"Series A Preferred Stock"), previously issued to the U.S. Department of the
Treasury as part of the TARP CPP program.

Net interest income decreased $114,000 in the third quarter of 2012, as
compared to the same period in 2011. The net interest margin, on a tax
equivalent basis, decreased 19 basis points from 3.83% in the third quarter of
2011 to 3.64% in the third quarter of 2012.Contributing to the decrease in
the net interest margin was the mix of the growth in earning assets.Of the
$71 million growth in average earning assets from the third quarter of 2011 to
third quarter of 2012, $46 million or 65% of the growth was attributed to the
Bank's securities portfolio, which generally has lower yields than loans.

The provision for loan losses decreased by $350,000 (14%) in the third quarter
of 2012, as compared to the same period in 2011.Contributing to this decrease
were lower levels of impaired loan reserves, non-performing andadversely
classified loans as compared to September 2011. The Company's non-performing
loans as a percentage of total loans were 1.29% as of September 30, 2012, as
compared to 1.43% as of September 30, 2011, while annualized net charge-offs
to average loans increased from .86% in the third quarter of 2011 to 1.39% in
the third quarter of 2012.The Company recorded $3,961,000 in net charge-offs
in the third quarter of 2012 as compared to $2,425,000 in the third quarter of
2011.The majority of the loans charged off in the third quarter of 2012 were
reserved for in prior quarters.On a sequential basis, the provision for loan
losses of $2,200,000 in the third quarter of 2012 was $500,000 higher than the
provision in the second quarter of 2012, while non-performing loans decreased
from $16.5 million (1.44% of total loans) at June 30, 2012 to $14.9 million
(1.29% of total loans) at September 30, 2012.Net charge-offs on a sequential
basis increased from $1,716,000 (0.61% of loans) in the second quarter of 2012
to $3,961,000 (1.39% of loans) in the third quarter of 2012.The allowance for
loan losses (ALL) as of September 30, 2012 decreased $1,761,000 from June
2012.The decrease in the ALL is primarily the result of the loans that were
charged off in the third quarter of 2012 that were reserved for in previous
quarters.The reserve for impaired loans was $6,254,000 at September 30, 2012,
which was $1,261,000 lower than the $7,515,000 at June 30, 2012 and $1,508,000
lower than the $7,762,000 at September 30, 2011.As a result, the ALL has
decreased from 1.60% of loans at the end of the second quarter of 2012 to
1.43% of loans at the end of the third quarter of 2012. The adequacy of the
ALL is analyzed quarterly and adjusted as necessary to maintain appropriate
reserves for probable incurred losses in the Bank's loan portfolio.

The Company's non-performing assets as a percentage of total assets were 1.23%
as of September 30, 2012, as compared to 1.11% as of September 30,
2011.Non-performing loans decreased $1,091,000 from September 2011 to
September 2012 and other real estate owned increased $4,298,000 in the same
time period.On a sequential quarterly basis, other real estate owned
increased $242,000 from June 2012.The increase in other real estate owned
from September of 2011 was primarily the result of one commercial real estate
relationship which added $3,475,000 in other real estate owned in the fourth
quarter of 2011.These properties are recorded at their fair value less
estimated costs to sell with the difference between this value and the loan
balance being recorded as a charge-off.

Non-interest income increased 11% ($564,000) in the third quarter of 2012, as
compared to the same period in 2011, while non-interest expense increased 10%
($1,072,000) from the same period last year.Contributing to the increase in
non-interest income was a $214,000 or a 30% increase in the gains on sale of
real estate loans. These gains were driven by the low current interest rates,
which has prompted increased demand for home mortgage loan refinancing.
Contributing to the increase in non-interest expense was a $558,000 (10%)
increase in salaries and benefits expense. The increase in salaries and
benefits included $181,000 in higher commission expense.The increase in
commission expense included higher commissions paid based on higher real
estate loan originations.

Total assets were $1.722 billion at the end of the third quarter of 2012,
which was $98 million or 6% higher than the same date a year ago. Total loans
increased $40 million (4%), investments in securities increased $21 million
(6%) and cash and cash equivalents increased $14 million (21%) from September
of 2011. The balance sheet increases were funded by an increase in deposits of
$102 million, or 7%. Total equity decreased $1.7 million from the same date in
2011 as a result of the repurchase of the Series A Preferred Stock.

The Bank of Kentucky Financial Corporation
Selected Consolidated Financial Data
(Dollars in thousands, except per share data)
                                                               
                     Third Quarter Comparison Nine months ended September 30,
                                               Comparison
Income Statement Data 9/30/12  9/30/11 % Chg   9/30/12    9/30/11    % Chg
Interest income       $15,433  $16,280 (5)%    $46,782    $48,702    (4)%
Interest expense      1,471    2,204   (33)%   4,929      7,251      (32)%
Net interest income   13,962   14,076  (1)%    41,853     41,451     1%
                                                               
Provision for loan    2,200    2,550   (14)%   5,700      8,550      (33)%
losses
Net interest income
after provision for   11,762   11,526  2%      36,153     32,901     10%
loan losses
Non interest income   5,861    5,297   11%     16,820     15,194     11%
Noninterest expense  11,799   10,727  10%     34,668     31,711     9%
Net income before     5,824    6,096   (4)%    18,305     16,384     12%
income taxes
Provision for income  1,628    1,822   (11)%   5,170      4,804      8%
taxes
Net income            4,196    4,274   (2)%    13,135     11,580     13%
Preferred stock
dividends &           --      261     (100)%  --        777        (100)%
amortization
Net income available
to common             $4,196   $4,013  5%      $13,135    $10,803    22%
shareholders
Per Common Share Data                                           
Diluted earnings per  0.56     0.54    4%      1.74       1.45       20%
common share
Cash dividends        0.32     0.28    14%     0.62       0.56       11%
declared
Earnings Performance                                            
Data
Return on common      10.05%   10.51%  (46)bps 10.83%     9.78%      105bps
equity
Return on assets      0.98%    1.05%   (7)bps  1.02%      0.95%      7bps
Net interest margin   3.56%    3.76%   (20)bps 3.54%      3.69%      (15)bps


The Bank of Kentucky Financial Corporation
Selected Consolidated Financial Data
(Dollars in thousands, except per share data)
                                                           
                                                           
Balance Sheet Data                                          
                                         September 30, 2012 December 31, 2011
Assets:                                                     
Cash and cash equivalents                 $81,950            $135,964
Investments                               361,108            371,737
Loans held for sale                       19,314             8,920
Total loans, gross                        1,159,074          1,129,954
Allowance for loan losses                 (16,585)           (18,288)
Premises and equipment, net               22,714             22,827
Goodwill and acquisition intangibles, net 24,668             25,251
Other assets and accrued interest         69,711             68,359
receivable
Total assets                              $1,721,954         $1,744,724
                                                           
Liabilities & Shareholders' Equity                          
Total deposits                            $1,471,246         $1,498,821
Short-term borrowings                     22,142             29,300
Notes payable                             48,721             48,739
Accrued interest payable and other        12,224             11,294
liabilities
Total liabilities                         1,554,333          1,588,154
Common stockholders' equity               167,621            156,570
Total liabilities and shareholders'       $1,721,954         $1,744,724
equity


The Bank of Kentucky Financial Corporation
Selected Consolidated Financial Data
(Dollars in thousands, except per share data)
                                                                  
                     Average Balance Sheet Rates (presented on a tax
                      equivalent basis )
                     Three Months ended September Three Months ended
                      30,2012                     September 30, 2011
                      Average      Interest Yield/ Average     Interest Yield/
                     outstanding  earned/  rate   outstanding earned/  rate
                      balance      paid            balance     paid
Interest-earning                                                   
assets:
Loans receivable      $1,158,072   $13,926  4.78%  $1,126,118  $14,652  5.16%
(1)(2)
Securities (2)        369,707      1,763    1.90   324,144     1,881    2.30
Other
interest-earning      32,781       71       0.86   39,721      69       0.69
assets
                                                                  
Total
interest-earning      1,560,560    15,760   4.02   1,489,983   16,602   4.42
assets
                                                                  
Non-interest-earning  147,283                    133,736             
assets
Total assets          $1,707,843                 $1,623,719          
                                                                  
Interest-bearing                                                   
liabilities:
Transaction accounts  796,346      280      0.14   711,046     524      0.29
Time deposits         369,327      934      1.01   411,193     1,430    1.38
Borrowings            70,445       257      1.45   72,421      250      1.37
Total
interest-bearing      1,236,118    1,471    0.47   1,194,660   2,204    0.73
liabilities
                                                                  
Non-interest-bearing  305,689                    261,219             
liabilities
                                                                  
Total liabilities     1,541,807                  1,455,879           
                                                                  
Shareholders' equity  166,036                    167,840             
                                                                  
Total liabilities and $1,707,843                 $1,623,719          
shareholders' equity
                                                                  
Net interest income               $14,289                   $14,398  
Interest rate spread                      3.55%                     3.69%
Net interest margin
(net interest income
as a percent of                           3.64%                     3.83%
average
interest-earning
assets)
                                                                  
(1) Includes non-accrual loans.
(2) Income presented on a tax equivalent basis using a 35.00%tax rate in 2012
and 2011. The tax equivalent adjustment was $327,000 and $322,000 in 2012 and
2011, respectively.


The Bank of Kentucky Financial Corporation
Selected Consolidated Financial Data
(Dollars in thousands, except per share data)
                                                                  
                      Average Balance Sheet Rates (presented on a tax
                       equivalent basis )
                      Nine Months ended September Nine Months ended September
                       30, 2012                    30, 2011
                       Average     Interest Yield/ Average     Interest Yield/
                      outstanding earned/  rate   outstanding earned/  rate
                       balance     paid            balance     paid
                                                                  
Interest-earning                                                   
assets:
Loans receivable       $1,142,833  $41,832  4.89%  $1,118,185  $43,886  5.25%
(1)(2)
Securities (2)         373,036     5,684    2.04   315,364     5,454    2.31
Other interest-earning 63,895      242      0.51   69,341      291      0.56
assets
                                                                  
Total interest-earning 1,579,764   47,758   4.04   1,502,890   49,631   4.40
assets
                                                                  
Non-interest-earning   148,025                   132,355             
assets
Total assets           $1,727,789                $1,635,245          
                                                                  
Interest-bearing                                                   
liabilities:
Transaction accounts   810,382     1,175    0.19   720,339     1,708    0.32
Time deposits          384,549     2,953    1.03   424,428     4,785    1.51
Borrowings             75,657      801      1.41   72,879      758      1.39
Total interest-bearing 1,270,588   4,929    0.52   1,217,646   7,251    0.80
liabilities
                                                                  
Non-interest-bearing   295,194                   252,033             
liabilities
                                                                  
Total liabilities      1,565,782                 1,469,679           
                                                                  
Shareholders' equity   162,007                   165,566             
                                                                  
Total liabilities and  $1,727,789                $1,635,245          
shareholders' equity
                                                                  
Net interest income               $42,829                   $42,380  
Interest rate spread                      3.52%                     3.60%
Net interest margin
(net interest income
as a percent of                           3.62%                     3.77%
average
interest-earning
assets)
                                                                  
(1) Includes non-accrual loans.
(2) Income presented on a tax equivalent basis using a 35.00% tax rate in 2012
and 2011. The tax equivalent adjustment was $976,000 and $929,000 in 2012 and
2011, respectively.


The Bank of Kentucky Financial Corporation
Selected Consolidated Financial Data
(Dollars in thousands, except per share data)
                                                                
                            Five-Quarter Comparison
Income Statement Data        9/30/12   6/30/12   3/31/12   12/31/11  9/30/11
Net interest income          $13,962   $14,047   $13,844   $14,087   $14,076
Provision for loan losses    2,200     1,700     1,800     2,200     2,550
                                                                
Net interest income after    11,762    12,347    12,044    11,887    11,526
provision for loan losses
Service charges and fees     2,325     2,241     2,201     2,390     2,470
Gain on sale of real estate  917       589       586       580       703
loans
Gain/(loss) on sale of       --        (4)       207       --        --
securities
Trust fee income             710       694       689       625       630
Bankcard transaction revenue 940       952       902       885       849
Gains/(losses) on other real (67)      (40)      (94)      (85)      (98)
estate owned
Other non-interest income    1,036     921       1,115     1,135     743
Total non-interest income    5,861     5,353     5,606     5,530     5,297
Salaries and employee        5,909     5,724     5,451     5,044     5,351
benefits expense
Occupancy and equipment      1,316     1,315     1,277     1,192     1,216
expense
Data processing expense      505       533       535       522       500
State bank taxes             579       579       559       415       550
Amortization of intangible   187       196       200       220       202
assets
FDIC Insurance               267       295       305       305       269
Other non-interest expenses  3,036     2,885     3,015     2,705     2,639
Total non-interest expense   11,799    11,527    11,342    10,403    10,727
Net income before income tax 5,824     6,173     6,308     7,014     6,096
expense
Income tax expense           1,628     1,749     1,793     2,105     1,822
Net income                   4,196     4,424     4,515     4,909     4,274
Preferred stock dividends &  --       --       --       195       261
amortization
Net income available to      $4,196    $4,424    $4,515    $4,714    $4,013
common shareholders
Per Common Share Data                                            
Diluted earnings per common  0.56      0.59      0.60      0.63      0.54
share
Cash dividends declared      0.32      0.00      0.30      0.00      0.28
Weighted average common                                          
shares outstanding
Basic                       7,465,926 7,465,434 7,448,604 7,432,995 7,432,995
Diluted                     7,554,271 7,542,372 7,520,062 7,465,606 7,488,743
Earnings Performance Data                                        
Return on common equity      10.05%    10.99%    11.49%    12.21%    10.51%
Return on assets             0.98%     1.03%     1.04%     1.13%     1.05%
Net interest margin          3.56%     3.57%     3.49%     3.55%     3.76%
Net interest margin (tax     3.64%     3.65%     3.57%     3.63%     3.83%
equivalent)


The Bank of Kentucky Financial Corporation
Selected Consolidated Financial Data
(Dollars in thousands, except per share data)
                                                               
                                                               
                       Five-Quarter Comparison
Balance Sheet Data      9/30/12    6/30/12    3/31/12    12/31/11   9/30/11
Assets:                                                         
Cash and cash           $81,950    $66,719    $133,153   $135,964   $67,657
equivalents
Investments             361,108    376,454    374,336    371,737    339,780
Loans held for sale     19,314     13,983     10,863     8,920      6,612
Total loans             1,159,074  1,143,733  1,130,200  1,129,954  1,118,630
Allowance for loan      (16,585)   (18,346)   (18,362)   (18,288)   (17,941)
losses
Premises and equipment, 22,714     22,923     23,159     22,827     22,653
net
Goodwill and
acquisition             24,668     24,856     25,051     25,251     24,826
intangibles, net
Other assets & accrued  69,711     73,543     74,381     68,359     62,182
interest receivable
Total assets            $1,721,954 $1,703,865 $1,752,781 $1,744,724 $1,624,399
Liabilities &                                                   
Shareholders' Equity
Total deposits          $1,471,246 $1,455,328 $1,505,709 $1,498,821 $1,369,215
Short-term borrowings   22,142     24,373     29,334     29,300     26,248
Notes payable           48,721     48,727     48,733     48,739     48,745
Accrued interest
payable & other         12,224     10,987     9,531      11,294     10,905
liabilities
Total liabilities       1,554,333  1,539,415  1,593,307  1,588,154  1,455,113
Common stockholders'    167,621    164,450    159,474    156,570    152,356
equity
Preferred stock         --        --        --        --        16,930
Shareholders' equity    167,621    164,450    159,474    156,570    169,286
Total liabilities and   $1,721,954 $1,703,865 $1,752,781 $1,744,724 $1,624,399
shareholders' equity
Common shares           7,467,396  7,465,841  7,464,811  7,432,995  7,432,995
outstanding
Average Balance Sheet                                           
Data
Average investments     $369,707   $375,245   $374,027   $360,265   $324,144
Average other earning   32,781     70,648     88,597     76,258     39,721
assets
Average loans           1,158,072  1,136,894  1,133,367  1,139,767  1,126,118
Average earning assets  1,560,560  1,582,787  1,595,991  1,576,290  1,489,983
Average assets          1,707,843  1,730,575  1,745,169  1,717,816  1,623,719
Average deposits        1,459,593  1,482,222  1,494,332  1,464,550  1,372,244
Average interest        1,165,673  1,194,699  1,224,743  1,190,716  1,122,239
bearing deposits
Average interest
bearing transaction     796,346    813,312    821,643    783,753    711,046
deposits
Average interest        369,327    381,387    403,100    406,963    411,193
bearing time deposits
Average borrowings      70,445     75,789     80,798     77,832     72,421
Average interest        1,236,118  1,270,488  1,305,541  1,268,548  1,194,660
bearing liabilities
Average common          166,036    161,962    158,022    153,175    150,934
stockholders equity
Average preferred stock --         --         --         9,753      16,906


The Bank of Kentucky Financial Corporation
Selected Consolidated Financial Data
(Dollars in thousands, except per share data)
                                                                  
                                     Five-Quarter Comparison
Asset Quality Data                    9/30/12 6/30/12 3/31/12 12/31/11 9/30/11
Allowance for loan losses to total    1.43%   1.60%   1.62%   1.62%    1.60%
loans
Allowance for loan losses to          112%    111%    105%    115%     112%
non-performing loans
Nonaccrual loans                      $14,813 $16,265 $16,779 $15,651  $15,964
Loans – 90 days past due & still      105     195     680     219      45
accruing
Total non-performing loans            14,918  16,460  17,459  15,870   16,009
OREO and repossessed assets           6,192   5,950   6,328   5,844    1,894
Total non-performing assets           21,110  22,410  23,787  21,714   17,903
Restructured loans-accruing           12,270  15,388  15,492  13,306   13,108
Non-performing loans to total loans   1.29%   1.44%   1.54%   1.40%    1.43%
Non-performing assets to total assets 1.23%   1.32%   1.36%   1.25%    1.11%
Annualized charge-offs to average     1.39%   0.61%   0.62%   0.65%    0.86%
loans
Net charge-offs                       $3,961  $1,716  $1,726  $1,853   $2,425
                                                                  
                                                                  
Other Information                                                  
Total assets under management(in     715     701     702     667      639
millions)
Full-time equivalent employees        370     376     359     356      349

About BKFC

BKFC, a bank holding company with assets of approximately $1.722 billion,
offers banking and related financial services to both individuals and business
customers.BKFC operates thirty-three branch locations and fifty-five ATMs in
the Northern Kentucky/Cincinnati market.

CONTACT: Martin Gerrety
         Executive Vice President and CFO
         (859) 372-5169
         mgerrety@bankofky.com
 
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