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% |
| Non interest 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 liabilities | 11,604 | 13,534 |
| 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, 2013 | Quarter ended March 31, 2012 | |||||
| Average | Interest | Average | Interest | |||
| outstanding | earned/ | Yield/ | outstanding | earned/ | Yield/ | |
| balance | paid | rate | balance | paid | rate | |
| Interest-earning assets: | ||||||
| Loans receivable (1)(2) | $1,194,657 | $13,396 | 4.55% | $1,133,367 | $13,958 | 4.95% |
| Securities (2) | 376,370 | 1,679 | 1.81 | 374,027 | 1,960 | 2.11 |
| Other interest-earning assets | 86,110 | 96 | 0.45 | 88,597 | 92 | 0.42 |
| Total interest-earning assets | 1,657,137 | 15,171 | 3.71 | 1,595,991 | 16,010 | 4.03 |
| Non-interest-earning assets | 154,538 | 149,178 | ||||
| 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 liabilities | 1,319,735 | 1,283 | 0.39 | 1,305,541 | 1,844 | 0.57 |
| Non-interest-bearing liabilities | 320,242 | 281,606 | ||||
| Total liabilities | 1,639,977 | 1,587,147 | ||||
| Shareholders' equity | 171,698 | 158,022 | ||||
| Total liabilities and shareholders' equity | $1,811,675 | $1,745,169 | ||||
| Net interest income | $13,888 | $14,166 | ||||
| Interest rate spread | 3.32% | 3.46% | ||||
| Net interest margin (net interest income as a percent of average interest-earning assets) | 3.40% | 3.57% | ||||
| (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 provision for loan losses | 11,583 | 13,032 | 11,762 | 12,347 | 12,044 |
| Service charges and fees | 2,131 | 2,322 | 2,325 | 2,241 | 2,201 |
| Gain on sale of real estate loans | 539 | 694 | 917 | 589 | 586 |
| 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 estate owned | (4) | (226) | (67) | (40) | (94) |
| 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 benefits expense | 5,913 | 5,869 | 5,909 | 5,724 | 5,451 |
| Occupancy and equipment expense | 1,306 | 1,341 | 1,316 | 1,315 | 1,277 |
| Data processing expense | 550 | 618 | 505 | 533 | 535 |
| State bank taxes | 575 | 554 | 579 | 579 | 559 |
| Amortization of intangible assets | 159 | 183 | 187 | 196 | 200 |
| 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 expense | 5,676 | 6,963 | 5,824 | 6,173 | 6,308 |
| 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 share | 0.54 | 0.66 | 0.56 | 0.59 | 0.60 |
| 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 equivalent) | 3.40% | 3.63% | 3.64% | 3.65% | 3.57% |
| 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 equivalents | $138,561 | $151,832 | $81,950 | $66,719 | $133,153 |
| 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 losses | (16,641) | (16,568) | (16,585) | (18,346) | (18,362) |
| Premises and equipment, net | 22,559 | 22,494 | 22,714 | 22,923 | 23,159 |
| Goodwill and acquisition intangibles, net | 24,088 | 24,485 | 24,668 | 24,856 | 25,051 |
| Other assets & accrued interest receivable | 73,460 | 68,591 | 69,711 | 73,543 | 74,381 |
| 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 liabilities | 11,604 | 13,534 | 12,224 | 10,987 | 9,531 |
| 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 shareholders' equity | $1,820,511 | $1,844,104 | $1,721,954 | $1,703,865 | $1,752,781 |
| Common shares outstanding | 7,482,776 | 7,470,236 | 7,467,396 | 7,465,841 | 7,464,811 |
| Average Balance Sheet Data | |||||
| Average investments | $376,370 | $373,008 | $369,707 | $375,245 | $374,027 |
| Average other earning assets | 86,110 | 71,139 | 32,781 | 70,648 | 88,597 |
| 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 bearing deposits | 1,244,360 | 1,207,238 | 1,165,673 | 1,194,699 | 1,224,743 |
| Average interest bearing transaction deposits | 892,609 | 848,302 | 796,346 | 813,312 | 821,643 |
| Average interest bearing time deposits | 351,751 | 358,936 | 369,327 | 381,387 | 403,100 |
| Average borrowings | 75,375 | 72,193 | 70,445 | 75,789 | 80,798 |
| Average interest bearing liabilities | 1,319,735 | 1,279,431 | 1,236,118 | 1,270,488 | 1,305,541 |
| Average common stockholders equity | 171,698 | 169,031 | 166,036 | 161,962 | 158,022 |
| 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 loans | 1.40% | 1.39% | 1.43% | 1.60% | 1.62% |
| Allowance for loan losses to non-performing loans | 76% | 86% | 112% | 111% | 105% |
| Nonaccrual loans | $21,771 | $19,244 | $14,813 | $16,265 | $16,779 |
| Loans – 90 days past due & still accruing | 36 | 39 | 105 | 195 | 680 |
| 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 loans | 0.66% | 0.45% | 1.39% | 0.61% | 0.62% |
| Net charge-offs | $1,927 | $1,317 | $3,961 | $1,716 | $1,726 |
| Other Information | |||||
| Total assets under management (in millions) | 744 | 714 | 715 | 701 | 702 |
| 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.