N E W S  R E L E A S E

  

THE BANK OF KENTUCKY FINANCIAL CORPORATION

ANNOUNCES FOURTH QUARTER EARNINGS

 

Net income available to common shareholders of $5,010,000 up 6% for the

Fourth quarter

 

CRESTVIEW HILLS, KENTUCKY, January 17, 2013 – 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 fourth quarter and year ended December 31, 2012. For the fourth quarter and the twelve months of 2012, the Company reported an increase in diluted earnings per common share of 5% and 16% respectively as compared to the same periods in 2011.

 

A summary of the Company’s results follows:

 

Fourth Quarter ended December 31,		2012				2011				Change
Net income		$	5,010,000			$	4,909,000				2	%
Net income available to common shareholders		$	5,010,000			$	4,714,000				6	%
Earnings per common share, basic		$	0.67			$	0.63				6	%
Earnings per common share, diluted		$	0.66			$	0.63				5	%

 

Year ended December 31,		2012				2011				Change
Net income		$	18,145,000			$	16,489,000				10	%
Net income available to common shareholders		$	18,145,000			$	15,517,000				17	%
Net income per common share, basic		$	2.43			$	2.09				16	%
Net income per common share, diluted		$	2.41			$	2.07				16	%

 

Robert Zapp, President & CEO stated, “We continued to build on a strong year, highlighted by a fourth quarter in which earnings topped $5 million. Total loans increased by $65 million for the year, which was the highest organic loan growth experienced since the financial crisis began in 2008. Mortgage loan volume remained robust in the fourth quarter, capping off the best year since 2003. Adding new customer relationships, both on the business and consumer side, fueled core account growth, which added more than $70 million in net deposits for the year. Investment revenue from our Wealth Advisory Group continues to experience double-digit growth, and we are pleased with the success of our newest branch in Cincinnati, which celebrates its one year anniversary this month. Overall, I am pleased to report our financial performance for the fourth quarter and the full year. We continue to review opportunities to expand through acquisition, while striving to grow organically, investing in our core lines of business.”

 

The increase in earnings available to common shareholders in the fourth quarter of 2012 was primarily attributable to a $900,000 (41%) decrease in the provision for loan losses and a $195,000 (100%) decrease in preferred stock dividends and amortization as compared to the fourth 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 12% increase in noninterest expense. The decrease in the provision for loan losses reflected lower levels of charge-offs, lower levels of impaired loan reserves and lower levels of adversely classified loans as compared to December 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, previously issued to the U.S. Department of the Treasury as part of the TARP CPP program.

 

 

Net interest income increased $245,000 in the fourth quarter of 2012, as compared to the same period in 2011. The net interest margin, on a tax equivalent basis was 3.63% in the fourth quarter of 2012 which equaled the net interest margin in the fourth quarter of 2011. Contributing to the increase in net interest income was a $247,000 prepayment fee received in the quarter. This prepayment fee also contributed 6 basis points to the net interest margin for the quarter.

 

The provision for loan losses decreased by $900,000 (41%) in the fourth quarter of 2012, as compared to the same period in 2011. Contributing to this decrease were lower levels of charge-offs and lower levels of impaired loan reserves as compared to December 2011. The Company’s annualized net charge-offs to average loans decreased from .65% in the fourth quarter of 2011 to .45% in the fourth quarter of 2012. The Company recorded $1,317,000 in net charge-offs in the fourth quarter of 2012 as compared to $1,853,000 in the fourth quarter of 2011. 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 fourth quarter of 2012 were reserved for in prior quarters. The reserve for impaired loans was $6,265,000 at December 31, 2012, which was $1,178,000 lower than the $7,443,000 reserve at December 31, 2011. As a result of the lower impaired loan reserves, lower charge-offs 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 fourth quarter of 2011 to 1.39% of loans at the end of the fourth 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. On a sequential basis, the provision for loan losses of $1,300,000 in the fourth quarter of 2012 was $900,000 lower than the provision in the third quarter of 2012. Net charge-offs on a sequential basis decreased from $3,961,000 (1.39% of loans) in the third quarter of 2012 to $1,371,000 (.45% of loans) in the fourth quarter of 2012. Contributing to the decrease in the provision and charge-offs on a sequential basis was the $961,000 recovery discussed previously.

 

The Company’s non-performing assets as a percentage of total assets were 1.34% as of December 31, 2012, as compared to 1.25% as of December 31, 2011. The Company’s non-performing loans as a percentage of total loans were 1.61% as of December 31, 2012, as compared to 1.40% as of December 31, 2011. Non-performing loans increased $3,413,000 from December 2011 to December 2012 and other real estate owned decreased $448,000 in the same time period. On a sequential quarterly basis, non-performing loans increased $4,365,000 while other real estate owned decreased $796,000 from September 2012. Contributing to the increase in non-performing loans from December of 2011 and September of 2012 was one commercial relationship which added approximately $7,000,000 to non-accruing loans in the fourth quarter of 2012. This relationship was reported as an accruing restructured loan in September of 2012 and the preceding four quarters.

 

Non-interest income increased 1% ($71,000) in the fourth quarter of 2012, as compared to the same period in 2011, while non-interest expense increased 12% ($1,267,000) from the same period last year. Contributing to the increase in non-interest income was an $114,000 or a 20% increase in the gains on sale of real estate loans and a $124,000 or 20% increase in trust fee income, which were offset by an increase of $141,000 or 166% increase in losses on other real estate owned. Contributing to the increase in non-interest expense was an $825,000 (16%) increase in salaries and benefits expense. The increase in salaries and benefits included $285,000 in higher accruals for bonuses and $182,000 in higher accruals for pension plan expense. The added bonus accrual reflects the end of the TARP restriction on bonus pay for executives, while the increased pension plan expense was the result of a lower discount rate applied to future benefits.

 

 

Total assets were $1.844 billion at the end of the fourth quarter of 2012, which was $99 million or 6% higher than the same date a year ago. Total loans increased $65 million (6%), investments in securities increased $10 million (3%) and cash and cash equivalents increased $16 million (12%) from December of 2011. The balance sheet increases were funded by an increase in deposits of $71 million, or 5% and an increase in short-term borrowings of $12 million or 41%. Total equity increased $14 million or 9% from the same date in 2011.

 

The Bank of Kentucky Financial Corporation

Selected Consolidated Financial Data

(Dollars in thousands, except per share data)

 

		Fourth Quarter Comparison												Year ended December 31, Comparison
Income Statement Data		12/31/12				12/31/11				% Chg				12/31/12				12/31/11				% Chg
Interest income		$	15,742			$	16,096				(2	)%		$	62,524			$	64,798				(4	)%
Interest expense			1,410				2,009				(30	)%			6,339				9,260				(32	)%
Net interest income			14,332				14,087				2	%			56,185				55,538				1	%
Provision for loan losses			1,300				2,200				(41	)%			7,000				10,750				(35	)%
Net interest income after provision for loan losses			13,032				11,887				10	%			49,185				44,788				10	%
Non interest income			5,601				5,530				1	%			22,421				20,724				8	%
Non interest expense			11,670				10,403				12	%			46,338				42,114				10	%
Net income before income taxes			6,963				7,014				(1	)%			25,268				23,398				8	%
Provision for income taxes			1,953				2,105				(7	)%			7,123				6,909				3	%
Net income			5,010				4,909				2	%			18,145				16,489				10	%
Preferred stock dividends & amortization			-				195				(100	)%			-				972				(100	)%
Net income available to common shareholders		$	5,010			$	4,714				6	%		$	18,145			$	15,517				17	%
Per Common Share Data
Diluted earnings per common share			0.66				0.63				5	%			2.41				2.07				16	%
Cash dividends declared			0.17				0.00				100	%			0.79				0.56				41	%
Earnings Performance Data
Return on common equity			11.79	%			12.21	%			(42	)bps			11.08	%			10.41	%			47	bps
Return on assets			1.12	%			1.13	%			(1	)bps			1.05	%			1.00	%			5	bps
Net interest margin			3.52	%			3.55	%			(3	)bps			3.53	%			3.65	%			(12	)bps

 

 

The Bank of Kentucky Financial Corporation

Selected Consolidated Financial Data

(Dollars in thousands, except per share data)

 

Balance Sheet Data
		December 31, 2012				December 31, 2011
Assets:
Cash and cash equivalents		$	151,832			$	135,964
Investments			381,537				371,737
Loans held for sale			16,324				8,920
Total loans, gross			1,195,409				1,129,954
Allowance for loan losses			(16,568	)			(18,288	)
Premises and equipment, net			22,494				22,827
Goodwill and acquisition intangibles, net			24,485				25,251
Other assets and accrued interest receivable			68,591				68,359
Total assets		$	1,844,104			$	1,744,724
Liabilities & Shareholders’ Equity
Total deposits		$	1,570,007			$	1,498,821
Short-term borrowings			41,408				29,300
Notes payable			48,715				48,739
Accrued interest payable and other liabilities			13,534				11,294
Total liabilities			1,673,664				1,588,154
Common stockholders’ equity			170,440				156,570
Total liabilities and shareholders’ equity		$	1,844,104			$	1,744,724

 

 

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 December 31, 2012												Quarter ended December 31, 2011
		Average outstanding balance				Interest earned/ paid				Yield/ rate				Average outstanding balance				Interest earned/ paid				Yield/ rate
Interest-earning assets:
Loans receivable (1)(2)		$	1,175,879			$	14,365				4.86	%		$	1,139,767			$	14,493				5.04	%
Securities (2)			373,008				1,728				1.84				360,265				1,848				2.02
Other interest-earning assets			71,139				92				0.51				76,258				81				0.42
Total interest-earning assets			1,620,026				16,185				3.97				1,576,290				16,422				4.13
Non-interest-earning assets			152,740												141,526
Total assets		$	1,772,766											$	1,717,816
Interest-bearing liabilities:
Transaction accounts			848,302				432				0.20				783,753				528				0.27
Time deposits			358,936				720				0.80				406,963				1,217				1.19
Borrowings			72,193				258				1.42				77,832				264				1.35
Total interest-bearing liabilities			1,279,431				1,410				0.44				1,268,548				2,009				0.63
Non-interest-bearing liabilities			324,304												286,340
Total liabilities			1,603,735												1,554,888
Shareholders’ equity			169,031												162,928
Total liabilities and shareholders’ equity		$	1,772,766											$	1,717,816
Net interest income						$	14,775											$	14,413
Interest rate spread											3.53	%											3.50	%
Net interest margin (net interest income as a percent of average interest-earning assets)											3.63	%											3.63	%

 

(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 $443,000 and $326,000 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 )

 

		Year ended December 31, 2012												Year ended December 31, 2011
		Average outstanding balance				Interest earned/ paid				Yield/ rate				Average outstanding balance				Interest earned/ paid				Yield/ rate
Interest-earning assets:
Loans receivable (1)(2)		$	1,151,139			$	56,196				4.88	%		$	1,123,625			$	58,379				5.20	%
Securities (2)			373,029				7,412				1.99				326,681				7,302				2.24
Other interest-earning assets			65,716				334				0.51				71,085				372				0.52
Total interest-earning assets			1,589,884				63,942				4.02				1,521,391				66,053				4.34
Non-interest-earning assets			143,694												134,667
Total assets		$	1,733,578											$	1,656,058
Interest-bearing liabilities:
Transaction accounts			819,915				1,552				0.21				736,323				2,403				0.33
Time deposits			378,111				3,728				0.93				420,026				5,835				1.39
Borrowings			74,786				1,059				1.42				74,147				1,022				1.38
Total interest-bearing liabilities			1,272,812				6,339				0.50				1,230,496				9,260				0.75
Non-interest-bearing liabilities			297,003												262,245
Total liabilities			1,569,815												1,492,741
Shareholders’ equity			163,763												163,317
Total liabilities and shareholders’ equity		$	1,733,578											$	1,656,058
Net interest income						$	57,603											$	56,793
Interest rate spread											3.52	%											3.59	%
Net interest margin (net interest income as a percent of average interest-earning assets)											3.62	%											3.73	%

___________________________

(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 $1,418,000 and $1,255,000 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			12/31/12				9/30/12				6/30/12				3/31/12				12/31/11
Net interest income		$	14,332			$	13,962			$	14,047			$	13,844			$	14,087
Provision for loan losses			1,300				2,200				1,700				1,800				2,200
Net interest income after provision for loan losses			13,032				11,762				12,347				12,044				11,887
Service charges and fees			2,322				2,325				2,241				2,201				2,390
Gain on sale of real estate loans			694				917				589				586				580
Gain/(loss) on sale of securities			-				-				(4	)			207				-
Trust fee income			749				710				694				689				625
Bankcard transaction revenue			971				940				952				902				885
Gains/(losses) on other real estate owned			(226	)			(67	)			(40	)			(94	)			(85	)
Other non-interest income			1,091				1,036				921				1,115				1,135
Total non-interest income			5,601				5,861				5,353				5,606				5,530
Salaries and employee benefits expense			5,869				5,909				5,724				5,451				5,044
Occupancy and equipment expense			1,341				1,316				1,315				1,277				1,192
Data processing expense			618				505				533				535				522
State bank taxes			554				579				579				559				415
Amortization of intangible assets			183				187				196				200				220
FDIC Insurance			296				267				295				305				305
Other non-interest expenses			2,809				3,036				2,885				3,015				2,705
Total non-interest expense			11,670				11,799				11,527				11,342				10,403
Net income before income tax expense			6,963				5,824				6,173				6,308				7,014
Income tax expense			1,953				1,628				1,749				1,793				2,105
Net income			5,010				4,196				4,424				4,515				4,909
Preferred stock dividends & amortization			-				-				-				-				195
Net income available to common shareholders		$	5,010			$	4,196			$	4,424			$	4,515			$	4,714
Per Common Share Data
Diluted earnings per common share			0.66				0.56				0.59				0.60				0.63
Cash dividends declared			0.17				0.32				0.00				0.30				0.00
Weighted average common shares outstanding
Basic			7,470,146				7,465,926				7,465,434				7,448,604				7,432,995
Diluted			7,557,777				7,554,271				7,542,372				7,520,062				7,465,606
Earnings Performance Data
Return on common equity			11.79	%			10.05	%			10.99	%			11.49	%			12.21	%
Return on assets			1.12	%			0.98	%			1.03	%			1.04	%			1.13	%
Net interest margin			3.52	%			3.56	%			3.57	%			3.49	%			3.55	%
Net interest margin (tax equivalent)			3.63	%			3.64	%			3.65	%			3.57	%			3.63	%

 

 

The Bank of Kentucky Financial Corporation

Selected Consolidated Financial Data

(Dollars in thousands, except per share data)

Five-Quarter Comparison

Balance Sheet Data		12/31/12				9/30/12				6/30/12				3/31/12				12/31/11
Assets:
Cash and cash equivalents		$	151,832			$	81,950			$	66,719			$	133,153			$	135,964
Investments			381,537				361,108				376,454				374,336				371,737
Loans held for sale			16,324				19,314				13,983				10,863				8,920
Total loans			1,195,409				1,159,074				1,143,733				1,130,200				1,129,954
Allowance for loan losses			(16,568	)			(16,585	)			(18,346	)			(18,362	)			(18,288	)
Premises and equipment, net			22,494				22,714				22,923				23,159				22,827
Goodwill and acquisition intangibles, net			24,485				24,668				24,856				25,051				25,251
Other assets & accrued interest receivable			68,591				69,711				73,543				74,381				68,359
Total assets		$	1,844,104			$	1,721,954			$	1,703,865			$	1,752,781			$	1,744,724
Liabilities & Shareholders’ Equity
Total deposits		$	1,570,007			$	1,471,246			$	1,455,328			$	1,505,709			$	1,498,821
Short-term borrowings			41,408				22,142				24,373				29,334				29,300
Notes payable			48,715				48,721				48,727				48,733				48,739
Accrued interest payable & other liabilities			13,534				12,224				10,987				9,531				11,294
Total liabilities			1,673,664				1,554,333				1,539,415				1,593,307				1,588,154
Common stockholders’ equity			170,440				167,621				164,450				159,474				156,570
Preferred stock			-				-				-				-				-
Shareholders’ equity			170,440				167,621				164,450				159,474				156,570
Total liabilities and shareholders’ equity		$	1,844,104			$	1,721,954			$	1,703,865			$	1,752,781			$	1,744,724
Common shares outstanding			7,470,146				7,467,396				7,465,841				7,464,811				7,432,995
Average Balance Sheet Data
Average investments		$	373,008			$	369,707			$	375,245			$	374,027			$	360,265
Average other earning assets			71,139				32,781				70,648				88,597				76,258
Average loans			1,175,879				1,158,072				1,136,894				1,133,367				1,139,767
Average earning assets			1,620,026				1,560,560				1,582,787				1,595,991				1,576,290
Average assets			1,772,766				1,707,843				1,730,575				1,745,169				1,717,816
Average deposits			1,518,557				1,459,593				1,482,222				1,494,332				1,464,550
Average interest bearing deposits			1,207,238				1,165,673				1,194,699				1,224,743				1,190,716
Average interest bearing transaction deposits			848,302				796,346				813,312				821,643				783,753
Average interest bearing time deposits			358,936				369,327				381,387				403,100				406,963
Average borrowings			72,193				70,445				75,789				80,798				77,832
Average interest bearing liabilities			1,279,431				1,236,118				1,270,488				1,305,541				1,268,548
Average common stockholders equity			169,031				166,036				161,962				158,022				153,175
Average preferred stock			-				-				-				-				9,753

 

 

The Bank of Kentucky Financial Corporation

Selected Consolidated Financial Data

(Dollars in thousands, except per share data)

Five-Quarter Comparison

Asset Quality Data		12/31/12				9/30/12				6/30/12				3/31/12				12/31/11
Allowance for loan losses to total loans			1.39	%			1.43	%			1.60	%			1.62	%			1.62	%
Allowance for loan losses to non-performing loans			86	%			112	%			111	%			105	%			115	%
Nonaccrual loans		$	19,244			$	14,813			$	16,265			$	16,779			$	15,651
Loans – 90 days past due & still accruing			39				105				195				680				219
Total non-performing loans			19,283				14,918				16,460				17,459				15,870
OREO and repossessed assets			5,396				6,192				5,950				6,328				5,844
Total non-performing assets			24,679				21,110				22,410				23,787				21,714
Restructured loans-accruing			6,046				12,270				15,388				15,492				13,306
Non-performing loans to total loans			1.61	%			1.29	%			1.44	%			1.54	%			1.40	%
Non-performing assets to total assets			1.34	%			1.23	%			1.32	%			1.36	%			1.25	%
Annualized charge-offs to average loans			0.45	%			1.39	%			0.61	%			0.62	%			0.65	%
Net charge-offs		$	1,317			$	3,961			$	1,716			$	1,726			$	1,853

 

Other Information
Total assets under management (in millions)			714				715				701				702				667
Full-time equivalent employees			365				370				376				359				356

 

About BKFC

 

BKFC, a bank holding company with assets of approximately $1.844 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/Cincinnati market.

 

For more information contact:

 

Martin Gerrety

Executive Vice President and CFO

(859) 372-5169

mgerrety@bankofky.com

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