The Bank of Kentucky Financial Corporation Announces First Quarter Earnings

The Bank of Kentucky Financial Corporation Announces First Quarter Earnings  Net Income of $4,618,000 for the First Quarter, Up 13% From 2013  CRESTVIEW HILLS, Ky., April 17, 2014 (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, 2014. For the first quarter, the Company reported an increase in net income of 13% compared with the same period in 2013.  A summary of the Company's results follows:  First Quarter ended March 31,      2014       2013       Change Net income                         $4,618,000 $4,090,000 13% Earnings per common share, basic   $0.60      $0.55      9% Earnings per common share, diluted $0.60      $0.54      11%  Robert W. Zapp, President & CEO, commented, "The positive first quarter results for the Company were underscored by solid loan growth, specifically in our commercial lending divisions. In addition, improving credit metrics and revenue growth from our Wealth Advisory Group helped offset the significant decline in mortgage loan volume compared to last year. We continued to invest in technology and people in the first quarter. We are in the process of improving how we process loans with an upgraded system; we continue to roll out new mobile and online banking services; and we added talent and resources to help us grow quality loans while addressing the increased regulatory demands on our business. Going forward, we will maintain this path, maximizing opportunities to expand, grow, and improve the Bank."  The increase in net income in the first quarter of 2014 was primarily due to a $1,100,000 (55%) decrease in the provision for loan losses and a $286,000 (2%) increase in net interest income compared with the first quarter of 2013. Contributing to the decrease in the provision for loan losses were lower levels of charge-offs and lower levels of non-performing loans compared with March of 2013. Contributing to the increase in net interest income was the $74,121,000 (6%) growth in loans from March 31, 2013.  Non-interest income decreased 5% ($280,000) in the first quarter of 2014, compared with the same period in 2013, while non-interest expense increased 3% ($349,000) from the same period last year. Contributing to the decrease in non-interest income was a $274,000 or 100% decrease in gain on the sale of securities and a $374,000 or 69% decrease in gains on the sale of real estate loans, which was partially offset with $303,000 or 14% increase in service charges on deposits and an $89,000 or 10% increase in trust fee income. The decrease in gains on the sale of real estate was the result of lower refinancing volume due to slightly higher long term rates compared with 2013.  Net interest income increased $286,000, or 2% in the first quarter of 2014, compared with the same period in 2013. The net interest margin, on a tax equivalent basis, decreased 1 basis point from 3.40% in the first quarter of 2013 to 3.39% in the first quarter of 2014. The increase in the net interest income was the result of a $40.3 million or 2% growth in earning assets compared with the first quarter of 2013. The yield on earning assets decreased 6 basis points from 3.71% in the first quarter of 2013 to 3.65% in the first quarter of 2014, while the cost of interest bearing liabilities also decreased 6 basis points from .39% to .33% in the same period.  The provision for loan losses decreased by $1,100,000 (55%) in the first quarter of 2014, compared with the same period in 2013. Contributing to this decrease were lower levels of charge-offs compared with the first quarter of 2013.The Company's annualized net charge-offs to average loans decreased from .66% in the first quarter of 2013 to .27% in the first quarter of 2014 while non-performing loans as a percentage of total loans were 1.23% as of March 31, 2014, compared with 1.84% as of March 31, 2013.The Company recorded $857,000 in net charge-offs in the first quarter of 2014 compared with $1,927,000 in the first quarter of 2013.On a quarterly sequential basis, the provision for loan losses of $900,000 in the first quarter of 2014 was $400,000 higher than theprovision in the fourth quarter of 2013, while non-performing loans increased from $15.4 million (1.24% of total loans) at December 31, 2013 to $15.5 million (1.23% of total loans) at March 31, 2014.Net charge-offs on a quarterly sequential basis increased slightly from $826,000 (.27% of loans) in the fourth quarter of 2014 to $857,000 (.27% of loans) in the first quarter of 2014.As a result of improving credit metrics, the Allowance for Loan Losses (ALL) has decreased from 1.40% of loans at the end of the first quarter of 2013 to 1.30% of loans at the end of the first quarter of 2014.On a quarterly sequential basis the ALL remained stable at 1.30% at the end of the fourth quarter of 2013 and the end of the first quarter of 2014. 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.  Total assets were $1.859 billion at the end of the first quarter of 2014, which was $39 million or 2% higher than on the same date a year ago. The increase of $74 million (6%) in total loans and $20 million (5%) in investments were offset by a $49 million (38%) decrease in cash and cash equivalents.The decrease in cash and cash equivalents included a $53 million (67%) decrease in fed funds sold.The increase in assets was funded by an increase in deposits of $25 million, or 2%, and an increase in equity of $13.7 million or 8% from the same date in 2013.                                  The Bank of Kentucky Financial Corporation                                 Selected Consolidated Financial Data                                 (Dollars in thousands, except per share data)                                 First Quarter Comparison Income Statement Data            3/31/14         3/31/13         % Chg Interest income                  $14,929         $14,866         0% Interest expense                 1,060           1,283           (17)% Net interest income              13,869          13,583          2%                                                                Provision for loan losses       900             2,000           (55)% Net interest income after        12,969          11,583          12% provision for loan losses Non interest income              5,582           5,862           (5)% Noninterest expense             12,118          11,769          3% Net income before income taxes   6,433           5,676           13% Provision for income taxes       1,815           1,586           14% Net income                       $4,618          $4,090          13% Per Common Share Data                                           Diluted earnings per common      0.60            0.54            11% share Cash dividends declared          0.18            0.17            6% Earnings Performance Data                                       Return on common equity          10.18%          9.66%           52bps Return on assets                 1.01%           0.92%           9bps Net interest margin              3.31%           3.32%           (1)bps   The Bank of Kentucky Financial Corporation Selected Consolidated Financial Data (Dollars in thousands, except per share data)                                                             Balance Sheet Data                                                                                        March 31, 2014 December 31, 2013 Assets:                                                      Cash and cash equivalents                     $89,102        $78,621 Investments                                   396,733        418,385 Loans held for sale                           6,248          3,214 Total loans, gross                            1,261,863      1,249,645 Allowance for loan losses                     (16,349)       (16,306) Premises and equipment, net                   22,845         22,444 Goodwill and acquisition intangibles, net     23,737         23,871 Other assets and accrued interest receivable  75,244         77,618 Total assets                                  $1,859,423     $1,857,492                                                             Liabilities & Shareholders' Equity                           Total deposits                                $1,584,076     $1,587,585 Short-term borrowings                         29,220         27,643 Notes payable                                 45,515         45,577 Accrued interest payable and other            13,981         15,548 liabilities Total liabilities                             1,672,792      1,676,353 Common stockholders' equity                   186,631        181,139 Total liabilities and shareholders' equity    $1,859,423     $1,857,492                                           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,                      2014                        2013                      Average     Interest        Average     Interest Yield/                     outstanding earned/  Yield/ outstanding earned/  rate                      balance     paid     rate   balance     paid                                                                  Interest-earning                                                  assets: Loans receivable     $1,255,552  $13,123  4.24%  $1,194,657  $13,396  4.55% (1)(2) Securities (2)       412,047     2,074    2.04   376,370     1,679    1.81 Other interest-earning     29,854      67       0.91   86,110      96       0.45 assets                                                                  Total interest-earning     1,697,453   15,264   3.65   1,657,137   15,171   3.71 assets                                                                  Non-interest-earning 158,850                   154,538              assets Total assets         $1,856,303                $1,811,675                                                                            Interest-bearing                                                  liabilities: Transaction accounts 947,221     386      0.17   892,609     399      0.18 Time deposits        298,020     438      0.60   351,751     645      0.74 Borrowings           73,529      236      1.30   75,375      239      1.29 Total interest-bearing     1,318,770  1,060   0.33  1,319,735  1,283   0.39 liabilities                                                                  Non-interest-bearing 353,648                   320,242              liabilities                                                                  Total liabilities    1,672,418                1,639,977                                                                            Shareholders' equity 183,885                   171,698                                                                               Total liabilities and shareholders'    $1,856,303               $1,811,675          equity                                                                  Net interest income             $14,204                   $13,888   Interest rate spread                    3.32%                     3.32% Net interest margin (net interest income as a percent of                         3.39%                     3.40% average interest-earning assets)                                                                                   (1) Includes non-accrual loans.                                                    (2) Income presented on a tax equivalent basis using a 35.00% tax rate in 2014 and 2013, respectively. The tax equivalent adjustment was $335,000 and        $305,000 in 2014 and 2013, respectively.   The Bank of Kentucky Financial Corporation Selected Consolidated Financial Data (Dollars in thousands, except per share data)                         Five-Quarter Comparison                           Income Statement Data    3/31/14   12/31/13  9/30/13   6/30/13   3/31/13 Net interest income      $13,869   $14,041   $13,922   $13,708   $13,583 Provision for loan       900       500       600       1,600     2,000 losses                                                              Net interest income after provision for loan 12,969   13,541   13,322   12,108   11,583 losses Service charges and fees 2,434     2,782     2,829     2,581     2,131 Gain on sale of real     165       165       282       672       539 estate loans Gain on sale of          -         -         -         -         274 securities Trust fee income         941       854       846       850       852 Bankcard transaction     999       1,008     1,012     1,044     957 revenue Gains/(losses) on other  (81)      (22)      (201)     (308)     (4) real estate owned Other non-interest       1,124     1,466     1,288     1,001     1,113 income Total non-interest       5,582     6,253     6,056     5,840     5,862 income Salaries and employee    5,873     5,691     5,969     5,988     5,913 benefits expense Occupancy and equipment  1,435     1,330     1,366     1,315     1,306 expense Data processing expense  535       551       533       537       550 State bank taxes         642       584       615       615       575 Other real estate owned  342       384       457       350       334 and loan collection Amortization of          133       148       151       157       159 intangible assets FDIC Insurance           554       376       317       335       295 Other non-interest       2,604     2,528     2,311     2,368     2,637 expenses Total non-interest       12,118    11,592    11,719    11,665    11,769 expense Net income before income 6,433     8,202     7,659     6,283     5,676 tax expense Income tax expense       1,815     2,427     2,244     1,798     1,586 Net income               $4,618    $5,775    $5,415    $4,485    $4,090 Per Common Share Data                                         Diluted earnings per     0.60      0.76      0.72      0.59      0.54 common share Cash dividends declared  0.18      0.18      0.17      0.17      0.17 Weighted average common                                       shares outstanding Basic                    7,640,872 7,565,121 7,516,770 7,491,619 7,478,901 Diluted                  7,687,106 7,611,879 7,549,530 7,564,121 7,583,544 Earnings Performance                                          Data Return on common equity  10.18%    12.86%    12.44%    10.48%    9.66% Return on assets         1.01%     1.25%     1.21%     1.00%     0.92% Net interest margin      3.31%     3.32%     3.42%     3.38%     3.32% Net interest margin (tax 3.39%     3.39%     3.50%     3.46%     3.40% equivalent)   The Bank of Kentucky Financial Corporation Selected Consolidated Financial Data (Dollars in thousands, except per share data)                        Five-Quarter Comparison                     Balance Sheet Data      3/31/14    12/31/13   9/30/13    6/30/13    3/31/13 Assets:                                                          Cash and cash           $89,102    $78,621    $102,448   $80,941    $138,561 equivalents Investments             396,733    418,385    389,179    384,653    376,704 Loans held for sale     6,248      3,214      2,435      9,909      14,038 Total loans             1,261,863  1,249,645  1,201,193  1,185,449  1,187,742 Allowance for loan      (16,349)   (16,306)   (16,632)   (16,650)   (16,641) losses Premises and equipment, 22,845     22,444     22,517     22,560     22,559 net Goodwill and acquisition             23,737     23,871     24,018     24,169     24,325 intangibles, net Other assets & accrued  75,244     77,618     77,066     74,859     73,223 interest receivable Total assets            $1,859,423 $1,857,492 $1,802,224 $1,765,890 $1,820,511 Liabilities &                                                    Shareholders' Equity: Total deposits          $1,584,076 $1,587,585 $1,529,505 $1,504,829 $1,558,933 Short-term borrowings   29,220     27,643     32,167     26,934     28,309 Notes payable           45,515     45,577     50,695     50,702     48,709 Accrued interest payable & other         13,981     15,548     14,606     13,196     11,604 liabilities Total liabilities       1,672,792  1,676,353  1,626,973  1,595,661  1,647,555 Shareholders' equity    186,631    181,139    175,251    170,229    172,956 Total liabilities and   $1,859,423 $1,857,492 $1,802,224 $1,765,890 $1,820,511 shareholders' equity Common shares           7,649,493  7,619,999  7,528,618  7,498,014  7,482,776 outstanding Average Balance Sheet                                            Data Average investments     $412,047   $404,687   $386,644   $387,526   $376,370 Average other earning   29,854     55,521     29,039     46,886     86,110 assets Average loans           1,255,552  1,218,140  1,199,824  1,190,590  1,194,657 Average earning assets  1,697,453  1,678,348  1,615,507  1,625,002  1,657,137 Average assets          1,856,303  1,839,242  1,771,491  1,790,043  1,811,675 Average deposits        1,576,944  1,568,764  1,506,101  1,529,159  1,551,953 Average interest        1,245,241  1,215,455  1,164,947  1,215,858  1,244,360 bearing deposits Average interest bearing transaction     947,221    911,075    848,512    882,084    892,609 deposits Average interest        298,020    304,380    316,435    333,774    351,751 bearing time deposits Average borrowings      73,529     78,197     80,733     74,927     75,375 Average interest        1,318,770  1,293,652  1,248,680  1,290,785  1,319,735 bearing liabilities Average common          183,885    178,135    172,740    171,593    171,698 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                    3/31/14 12/31/13 9/30/13 6/30/13 3/31/13 Allowance for loan losses to total    1.30%   1.30%    1.38%   1.40%   1.40% loans Allowance for loan losses to          105%    106%     101%    88%     76% non-performing loans Nonaccrual loans                      $15,531 $15,417  $16,197 $18,934 $21,771 Loans – 90 days past due & still      12      21       207     11      36 accruing Total non-performing loans            15,543  15,438   16,404  18,945  21,807 OREO and repossessed assets           5,557   5,305    6,141   5,207   5,454 Total non-performing assets           21,100  20,743   22,545  24,152  27,261 Restructured loans-accruing           11,825  8,816    7,109   7,204   7,499 Non-performing loans to total loans   1.23%   1.24%    1.37%   1.60%   1.84% Non-performing assets to total assets 1.14%   1.12%    1.26%   1.38%   1.50% Annualized charge-offs to average     0.27%   0.27%    0.21%   0.54%   0.66% loans Net charge-offs                       $857    $826     $618    $1,591  $1,927                                                                    Other Information                                                   Total assets under management (in     858     836      766     747     744 millions) Full-time equivalent employees        345     346      351     361     364  About BKFC  BKFC, a bank holding company with assets of approximately $1.859 billion, offers banking and related financial services to both individuals and business customers.BKFC operates thirty-two branch locations and fifty-six ATMs in the Northern Kentucky market.  CONTACT: For more information contact:           Martin Gerrety          Executive Vice President and CFO          (859) 372-5169          mgerrety@bankofky.com