The Bank of Kentucky Financial Corporation Announces First Quarter Earnings

The Bank of Kentucky Financial Corporation Announces First Quarter Earnings

CRESTVIEW HILLS, Ky., April 18, 2013 (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
first quarter ended March 31, 2013. For the first quarter, the Company
reported a decrease in diluted earnings per common share of 10% as compared to
the same period in 2012.

A summary of the Company's results follows:

First Quarter ended March 31,      2013       2012       Change
Net income                         $4,090,000 $4,515,000 (9)%
Earnings per common share, basic   $0.55      $0.61      (10)%
Earnings per common share, diluted $0.54      $0.60      (10)%

Robert W. Zapp, President & CEO, stated, "We are encouraged by the growth in
our wealth advisory business and consistent revenue generated from our
mortgage business. In addition, we continue to pursue organic growth in loans
and deposits, while maintaining sound credit practices and risk management,
although the slow moving recovery has kept loan demand down in the markets we
serve as businesses continue to recover." Mr. Zapp continued, "We experienced
an increase in charge-offs and non-performing loans during the first quarter
of 2013, along with continued pressure on net interest margins, which were
contributing factors to the decrease in earnings for the first quarter of 2013
as compared to last year. However, I am confident that our strategy and
current efforts will keep us on a positive path as we navigate through the
economic and regulatory challenges facing our industry."

The primary factors that contributed to the decrease in earnings in the first
quarter of 2013 was the compression on the net interest margin and higher
credit cost. For the first quarter of 2013 net interest income decreased
$261,000 (2%) and the provision for loan losses increased $200,000 (11%). The
compression of the net interest margin is the result of the historically low
interest rate environment, where the cost of funds are close to a floor and
the yield on earning assets still has room to decline. Contributing to the
higher provision for loan losses were higher levels of charge-offs in the
first quarter of 2013 as compared to 2012.

Net interest income decreased $261,000, or 2% in the first quarter of 2013, as
compared to the same period in 2012. The net interest margin, on a tax
equivalent basis, decreased 17 basis points from 3.57% in the first quarter of
2012 to 3.40% in the first quarter of 2013. As discussed above, the decrease
in the net interest income and the compression of the net interest margin was
the result of the yield on earning assets falling faster than the cost of
interest bearing liabilities. The yield on earning assets decreased 32 basis
points from 4.03% in the first quarter of 2012 to 3.71% in the first quarter
of 2013, while the cost of interest bearing liabilities only decreased 18
basis points from .57% to .39% in the same period. The decrease in the
interest margin was partially offset with an increase in earning assets of $61
million, or 4% on average from the first quarter of 2012. On a tax equivalent
basis the effect of the reduction in the net interest income as a result of
rate was a negative $1,129,000 which was partially offset by an $851,000
positive effect on net interest income as a result of the growth in earning
assets.

The provision for loan losses increased by $200,000 (11%) in the first quarter
of 2013, as compared to the same period in 2012. Contributing to this increase
were higher levels of non-performing loans and higher levels charge-offs as
compared to March 2012. The Company's non-performing loans as a percentage of
total loans were 1.84% as of March 31, 2013, as compared to 1.54% as of March
31, 2012, while annualized net charge-offs to average loans increased from
.62% in the first quarter of 2012 to .66% in the first quarter of 2013. The
Company recorded $1,927,000 in net charge-offs in the first quarter of 2013 as
compared to $1,726,000 in the first quarter of 2012. On a sequential basis,
the provision for loan losses of $2,000,000 in the first quarter of 2013 was
$700,000 higher than the provision in the fourth quarter of 2012, while
non-performing loans increased from $19.3 million (1.61% of total loans) at
December 31, 2012 to $21.8 million (1.84% of total loans) at March 31, 2013.
Net charge-offs on a sequential basis increased from $1,317,000 (.45% of
loans) in the fourth quarter of 2012 to $1,927,000 (.66% of loans) in the
first quarter of 2013. Net charge-offs in the fourth quarter of 2012 were
reduced by a $961,000 recovery on a loan charged-off in the third quarter of
2012. The majority of the loans charged off in the first quarter of 2013 were
reserved for in prior quarters. The reserve for impaired loans was $3,920,000
at March 31, 2013, which was $3,693,000 lower than the $7,613,000 reserve at
March 31, 2012. As a result of the lower impaired loan reserves and lower
levels of adversely classified loans, the Allowance for Loan Losses (ALL) has
decreased from 1.62% of loans at the end of the first quarter of 2012 to 1.40%
of loans at the end of the first quarter of 2013. On a sequential basis the
ALL increased slightly from 1.39% at December 31, 2012 to 1.40% as of March
31, 2013. Somewhat higher levels of classified loans and non- performing loans
in the first quarter were offset by a decrease in the levels of reserves for
impaired loans in the same period. 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 1.50%
as of March 31, 2013, as compared to 1.36% as of March 31, 2012. While
non-performing loans increased $4,348,000 from March 2012 to March 2013, other
real estate owned decreased $874,000 in the same time period. These properties
are recorded at their estimated net realizable value with the difference
between this value and the loan balance being recorded as a charge-off.

Non-interest income increased 5% ($256,000) in the first quarter of 2013, as
compared to the same period in 2012, while non-interest expense increased 4%
($427,000) from the same period last year. Contributing to the increase in
non-interest income was a $163,000 or 24% increase in trust fee income.
Contributing to the increase in non-interest expense was $462,000 (8%)
increase in the salaries and benefits expense. The increase in salaries and
benefits included $109,000 in higher accruals for pension plan expense.

Total assets were $1.820 billion at the end of the first quarter of 2013,
which was $68 million or 4% higher than the same date a year ago. Total loans
increased $58 million (5%) and were funded by an increase in deposits of $53
million, or 4%. Total equity increased $13.5 million from the same date in
2012. In September 2012 the Board of Directors voted to change from a
semi-annual cash dividend to a quarterly cash dividend, commencing with the
fourth quarter of 2012. This resulted in cash dividends declared to decrease
from $.30 in the first quarter of 2012 to $.17 in the same period of 2013.

The Bank of Kentucky Financial Corporation
Selected Consolidated Financial Data
(Dollars in thousands, except per share data)
First Quarter Comparison
                                                                 
Income Statement Data                               3/31/13 3/31/12 % Chg
Interest income                                     $14,866 $15,688 (5)%
Interest expense                                    1,283   1,844   (30)%
Net interest income                                 13,583  13,844  (2)%
Provision for loan losses                           2,000   1,800   11%
Net interest income after provision for loan losses 11,583  12,044  (4)%
Non interest income                                 5,862   5,606   5%
Noninterest expense                                11,769  11,342  4%
Net income before income taxes                      5,676   6,308   (10)%
Provision for income taxes                          1,586   1,793   (12)%
Net income                                          $4,090  $4,515  (10)%
                                                                 
Per Common Share Data                                             
Diluted earnings per common share                   0.54    0.60    (10)%
Cash dividends declared                             0.17    0.30    (43)%
Earnings Performance Data                                         
Return on common equity                             9.66%   11.49%  (183)bps
Return on assets                                    0.92%   1.04%   (12)bps
Net interest margin                                 3.32%   3.49%   (17)bps


The Bank of Kentucky Financial Corporation
Selected Consolidated Financial Data
(Dollars in thousands, except per share data)
                                                           
Balance Sheet Data                                          
                                             March 31, 2013 December 31, 2012
Assets:                                                     
Cash and cash equivalents                     $138,561       $151,832
Investments                                   376,704        381,537
Loans held for sale                           14,038         16,324
Total loans, gross                            1,187,742      1,195,409
Allowance for loan losses                     (16,641)       (16,568)
Premises and equipment, net                   22,559         22,494
Goodwill and acquisition intangibles, net     24,088         24,485
Other assets and accrued interest receivable  73,460         68,591
Total assets                                  $1,820,511     $1,844,104
                                                           
Liabilities & Shareholders' Equity                          
Total deposits                                $1,558,933     $1,570,007
Short-term borrowings                         28,309         41,408
Notes payable                                 48,709         48,715
Accrued interest payable and other            11,604         13,534
liabilities
Total liabilities                             1,647,555      1,673,664
Common stockholders' equity                   172,956        170,440
Total liabilities and shareholders' equity    $1,820,511     $1,844,104


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 )
                    Quarter ended March 31,      Quarter ended March 31, 2012
                     2013
                    Average      Interest       Average     Interest 
                    outstanding earned/  Yield/ outstanding earned/   Yield/
                    balance      paid     rate   balance     paid      rate
                                                                  
Interest-earning                                                   
assets:
Loans receivable     $1,194,657   $13,396  4.55%  $1,133,367  $13,958   4.95%
(1)(2)
Securities (2)       376,370      1,679    1.81   374,027     1,960     2.11
Other
interest-earning     86,110       96       0.45   88,597      92        0.42
assets
                                                                  
Total
interest-earning     1,657,137    15,171   3.71   1,595,991   16,010    4.03
assets
                                                                  
Non-interest-earning 154,538                    149,178              
assets
Total assets         $1,811,675                 $1,745,169           
                                                                  
Interest-bearing                                                   
liabilities:
Transaction accounts 892,609      399      0.18   821,643     470       0.23
Time deposits        351,751      645      0.74   403,100     1,096     1.09
Borrowings           75,375       239      1.29   80,798      278       1.38
Total
interest-bearing     1,319,735    1,283    0.39   1,305,541   1,844     0.57
liabilities
Non-interest-bearing 320,242                    281,606              
liabilities
                                                                  
Total liabilities    1,639,977                  1,587,147            
                                                                  
Shareholders' equity 171,698                    158,022              
Total liabilities
and shareholders'    $1,811,675                 $1,745,169           
equity
Net interest income              $13,888                   $14,166   
Interest rate spread                     3.32%                      3.46%
Net interest margin
(net interest income
as a percent of                          3.40%                      3.57%
average
interest-earning
assets)
                                                                  
(1) Includes non-accrual loans.
(2) Income presented on a tax equivalent basis using a 35.00% tax rate in 2013
and 2012, respectively. The tax equivalent adjustment was $305,000 and
$322,000 in 2013 and 2012, respectively.


The Bank of Kentucky Financial Corporation
Selected Consolidated Financial Data
(Dollars in thousands, except per share data)
                                                                
                            Five-Quarter Comparison
Income Statement Data        3/31/13   12/31/12  9/30/12   6/30/12   3/31/12
Net interest income          $13,583   $14,332   $13,962   $14,047   $13,844
Provision for loan losses    2,000     1,300     2,200     1,700     1,800
                                                                
Net interest income after    11,583    13,032    11,762    12,347    12,044
provision for loan losses
Service charges and fees     2,131     2,322     2,325     2,241     2,201
Gain on sale of real estate  539       694       917       589       586
loans
Gain on sale of securities   274       --        --        (4)       207
Trust fee income             852       749       710       694       689
Bankcard transaction revenue 957       971       940       952       902
Gains/(losses) on other real (4)       (226)     (67)      (40)      (94)
estate owned
Other non-interest income    1,113     1,091     1,036     921       1,115
Total non-interest income    5,862     5,601     5,861     5,353     5,606
Salaries and employee        5,913     5,869     5,909     5,724     5,451
benefits expense
Occupancy and equipment      1,306     1,341     1,316     1,315     1,277
expense
Data processing expense      550       618       505       533       535
State bank taxes             575       554       579       579       559
Amortization of intangible   159       183       187       196       200
assets
FDIC Insurance               295       296       267       295       305
Other non-interest expenses  2,971     2,809     3,036     2,885     3,015
Total non-interest expense   11,769    11,670    11,799    11,527    11,342
Net income before income tax 5,676     6,963     5,824     6,173     6,308
expense
Income tax expense           1,586     1,953     1,628     1,749     1,793
Net income                   $4,090    $5,010    $4,196    $4,424    $4,515
Per Common Share Data                                            
Diluted earnings per common  0.54      0.66      0.56      0.59      0.60
share
Cash dividends declared      0.17      0.17      0.32      0.00      0.30
Weighted average common                                          
shares outstanding
Basic                       7,478,901 7,470,146 7,465,926 7,465,434 7,448,604
Diluted                     7,583,544 7,557,777 7,554,271 7,542,372 7,520,062
Earnings Performance Data                                        
Return on common equity      9.66%     11.79%    10.05%    10.99%    11.49%
Return on assets             0.92%     1.12%     0.98%     1.03%     1.04%
Net interest margin          3.32%     3.52%     3.56%     3.57%     3.49%
Net interest margin (tax     3.40%     3.63%     3.64%     3.65%     3.57%
equivalent)


The Bank of Kentucky Financial Corporation
Selected Consolidated Financial Data
(Dollars in thousands, except per share data)
                       Five-Quarter Comparison
                                                               
Balance Sheet Data      3/31/13    12/31/12   9/30/12    6/30/12    3/31/12
Assets:                                                         
Cash and cash           $138,561   $151,832   $81,950    $66,719    $133,153
equivalents
Investments             376,704    381,537    361,108    376,454    374,336
Loans held for sale     14,038     16,324     19,314     13,983     10,863
Total loans             1,187,742  1,195,409  1,159,074  1,143,733  1,130,200
Allowance for loan      (16,641)   (16,568)   (16,585)   (18,346)   (18,362)
losses
Premises and equipment, 22,559     22,494     22,714     22,923     23,159
net
Goodwill and
acquisition             24,088     24,485     24,668     24,856     25,051
intangibles, net
Other assets & accrued  73,460     68,591     69,711     73,543     74,381
interest receivable
Total assets            $1,820,511 $1,844,104 $1,721,954 $1,703,865 $1,752,781
Liabilities &                                                   
Shareholders' Equity
Total deposits          $1,558,933 $1,570,007 $1,471,246 $1,455,328 $1,505,709
Short-term borrowings   28,309     41,408     22,142     24,373     29,334
Notes payable           48,709     48,715     48,721     48,727     48,733
Accrued interest
payable & other         11,604     13,534     12,224     10,987     9,531
liabilities
Total liabilities       1,647,555  1,673,664  1,554,333  1,539,415  1,593,307
Shareholders' equity    172,956    170,440    167,621    164,450    159,474
Total liabilities and   $1,820,511 $1,844,104 $1,721,954 $1,703,865 $1,752,781
shareholders' equity
Common shares           7,482,776  7,470,236  7,467,396  7,465,841  7,464,811
outstanding
Average Balance Sheet                                           
Data
Average investments     $376,370   $373,008   $369,707   $375,245   $374,027
Average other earning   86,110     71,139     32,781     70,648     88,597
assets
Average loans           1,194,657  1,175,879  1,158,072  1,136,894  1,133,367
Average earning assets  1,657,137  1,620,026  1,560,560  1,582,787  1,595,991
Average assets          1,811,675  1,772,766  1,707,843  1,730,575  1,745,169
Average deposits        1,551,953  1,518,557  1,459,593  1,482,222  1,494,332
Average interest        1,244,360  1,207,238  1,165,673  1,194,699  1,224,743
bearing deposits
Average interest
bearing transaction     892,609    848,302    796,346    813,312    821,643
deposits
Average interest        351,751    358,936    369,327    381,387    403,100
bearing time deposits
Average borrowings      75,375     72,193     70,445     75,789     80,798
Average interest        1,319,735  1,279,431  1,236,118  1,270,488  1,305,541
bearing liabilities
Average common          171,698    169,031    166,036    161,962    158,022
stockholders equity


The Bank of Kentucky Financial Corporation
Selected Consolidated Financial Data
(Dollars in thousands, except per share data)
                                     Five-Quarter Comparison
                                                                  
Asset Quality Data                    3/31/13 12/31/12 9/30/12 6/30/12 3/31/12
Allowance for loan losses to total    1.40%   1.39%    1.43%   1.60%   1.62%
loans
Allowance for loan losses to          76%     86%      112%    111%    105%
non-performing loans
Nonaccrual loans                      $21,771 $19,244  $14,813 $16,265 $16,779
Loans – 90 days past due & still      36      39       105     195     680
accruing
Total non-performing loans            21,807  19,283   14,918  16,460  17,459
OREO and repossessed assets           5,454   5,396    6,192   5,950   6,328
Total non-performing assets           27,261  24,679   21,110  22,410  23,787
Restructured loans-accruing           7,499   6,046    12,270  15,388  15,492
Non-performing loans to total loans   1.84%   1.61%    1.29%   1.44%   1.54%
Non-performing assets to total assets 1.50%   1.34%    1.23%   1.32%   1.36%
Annualized charge-offs to average     0.66%   0.45%    1.39%   0.61%   0.62%
loans
Net charge-offs                       $1,927  $1,317   $3,961  $1,716  $1,726
                                                                  
Other Information                                                  
Total assets under management (in     744     714      715     701     702
millions)
Full-time equivalent employees        364     365      370     376     359

About BKFC

BKFC, a bank holding company with assets of approximately $1.821 billion,
offers banking and related financial services to both individuals and business
customers.BKFC operates thirty-three branch locations and fifty-six ATMs in
the Northern Kentucky market.

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