CRESTVIEW HILLS, Ky., July 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 second quarter ended June 30, 2013. For the second quarter, the Company reported an increase in net income of 1% as compared to the same period in 2012.
A summary of the Company's results follows:
| Second Quarter ended June 30, | 2013 | 2012 | Change |
| Net income | $4,485,000 | $4,424,000 | 1% |
| Earnings per common share, basic | $0.60 | $0.59 | 2% |
| Earnings per common share, diluted | $0.59 | $0.59 | 0% |
| Six Months ended June 30, | 2013 | 2012 | Change |
| Net income | $8,575,000 | $8,939,000 | (4)% |
| Net income per common share, basic | $1.15 | $ 1. 20 | (4)% |
| Net income per common share, diluted | $1.13 | $ 1 .19 | (5)% |
Robert W. Zapp, President & CEO, commented on the financial results: "Our second quarter finished strong as we maintained forward progress in our core businesses, even as we continue to experience margin compression and a sluggish economic recovery that has kept loan growth to a minimum. However, I am encouraged to see increased activity with respect to small business and corporate borrowing and I anticipate this trend to remain positive along with improved credit metrics." Zapp added, "We continue to deepen client relationships by cross-selling investments, mortgage loans, treasury management and card products. Revenue in these areas experienced double-digit growth in the second quarter compared to 2012, contributing to our increase in earnings. In addition, we continue to improve and modify our approach to retail banking, internet banking, mobile banking and how we serve our customers. As a result, we experienced an increase in overall service charge revenue, have become more efficient, and continue to invest in new technologies, maintaining our high level of customer service, and addressing the growing regulatory demands all banks are facing today. I am pleased with our second quarter performance as we look to build on this momentum for the second half of the year."
Driving the increase in net income in the second quarter of 2013 was a $487,000 (9%) increase in non-interest income, which offset a $339,000 (2%) decrease in net interest income as compared to the second quarter of 2012. Contributing to the increase in non-interest income were service charges on deposits, gains on the sale of real estate loans, trust fee income and bankcard revenue. The decrease in net interest income was the result of the compression on the net interest margin. 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.
Non-interest income increased 9% ($487,000) in the second quarter of 2013, as compared to the same period in 2012, while non-interest expense increased 1% ($138,000) from the same period last year. Contributing to the increase in non-interest income was a $340,000 or 15% increase in service charges on deposits, a $156,000 or 22% increase in trust fee income, a $92,000 or 10% increase in bankcard transaction revenue and a $83,000 or 14% increase in gains on the sale of real estate loans which were offset by $268,000 higher losses on other real estate owned. Contributing to the increase in non-interest expense was $264,000 or 5% increase in the salaries and benefits expense.
Net interest income decreased $339,000, or 2% in the second quarter of 2013, as compared to the same period in 2012. The net interest margin, on a tax equivalent basis, decreased 19 basis points from 3.65% in the second quarter of 2012 to 3.46% in the second 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 31 basis points from 4.06% in the second quarter of 2012 to 3.75% in the second quarter of 2013, while the cost of interest bearing liabilities only decreased 15 basis points from .51% to .36% in the same period. The decrease in the interest margin was partially offset with an increase in earning assets of $42 million, or 3% on average from the second 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 $1,101,000, which was partially offset by an $748,000 positive effect on net interest income as a result of the growth in earning assets.
The provision for loan losses decreased by $100,000 (6%) in the second quarter of 2013, as compared to the same period in 2012. Contributing to this decrease were lower levels of charge-offs as compared to the second quarter of 2012. The Company's annualized net charge-offs to average loans decreased from .61% in the second quarter of 2012 to .54% in the second quarter of 2013 while non-performing loans as a percentage of total loans were 1.60% as of June 30, 2013, as compared to 1.44% as of June 30, 2012. The Company recorded $1,591,000 in net charge-offs in the second quarter of 2013 as compared to $1,716,000 in the second quarter of 2012. On a sequential basis, the provision for loan losses of $1,600,000 in the second quarter of 2013 was $400,000 lower than the provision in the first quarter of 2013, while non-performing loans decreased from $21.8 million (1.84% of total loans) at March 31, 2013 to $18.9 million (1.60% of total loans) at June 30, 2013. Net charge-offs on a sequential basis decreased from $1,927,000 (.66% of loans) in the first quarter of 2013 to $1,591,000 (.54% of loans) in the second quarter of 2013. 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 $4,361,000 at June 30, 2013, which was $3,155,000 lower than the $7,516,000 reserve at June 30, 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 1.60% of loans at the end of the second quarter of 2012 to 1.40% of loans at the end of the second quarter of 2013. On a sequential basis the ALL was 1.40% at the end of both the first and second quarter of 2013. 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 1.38% as of June 30, 2013, as compared to 1.32% as of June 30, 2012. While non-performing loans increased $2,485,000 from June 2012 to June 2013, other real estate owned decreased $743,000 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 at the time of foreclosure.
Total assets were $1.766 billion at the end of the second quarter of 2013, which was $62 million or 4% higher than the same date a year ago. Total loans increased $42 million (4%) and were funded by an increase in deposits of $50 million, or 3%. Total equity increased $5.8 million from the same date in 2012. In September 2012, the Company's 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 increasing from $.00 in the second quarter of 2012 to $.17 in the same period of 2013. On a year to date basis, cash dividends increased from $.30 in 2012 to $.34 in 2013.
| The Bank of Kentucky Financial Corporation | ||||||
| Selected Consolidated Financial Data | ||||||
| (Dollars in thousands, except per share data) | ||||||
| Second Quarter Comparison | Six months ended June 30, Comparison | |||||
| Income Statement Data | 6/30/13 | 6/30/12 | % Chg | 6/30/13 | 6/30/12 | % Chg |
| Interest income | $ 14,880 | $ 15,661 | (5)% | $ 29,746 | $ 31,349 | (5)% |
| Interest expense | 1,172 | 1,614 | (27)% | 2,455 | 3,458 | (29)% |
| Net interest income | 13,708 | 14,047 | (2)% | 27,291 | 27,891 | (2)% |
| Provision for loan losses | 1,600 | 1,700 | (6)% | 3,600 | 3,500 | 3% |
| Net interest income after provision for loan losses | 12,108 | 12,347 | (2)% | 23,691 | 24,391 | (3)% |
| Non interest income | 5,840 | 5,353 | 9% | 11,702 | 10,959 | 7% |
| Non interest expense | 11,665 | 11,527 | 1% | 23,434 | 22,869 | 2% |
| Net income before income taxes | 6,283 | 6,173 | 2% | 11,959 | 12,481 | (4)% |
| Provision for income taxes | 1,798 | 1,749 | 3% | 3,384 | 3,542 | (4)% |
| Net income | $ 4,485 | $ 4,424 | 1% | $ 8,575 | $ 8,939 | (4)% |
| Per Common Share Data | ||||||
| Diluted earnings per common share | 0.59 | 0.59 | 0% | 1.13 | 1.19 | (5)% |
| Cash dividends declared | 0.17 | 0.00 | 0% | 0.34 | 0.30 | 13% |
| Earnings Performance Data | ||||||
| Return on common equity | 10.48% | 10.99% | (51)bps | 10.07% | 11.24% | (117)bps |
| Return on assets | 1.00% | 1.03% | (3)bps | .96% | 1.03% | (7)bps |
| Net interest margin | 3.38% | 3.57% | (19)bps | 3.35% | 3.53% | (18)bps |
| The Bank of Kentucky Financial Corporation | ||
| Selected Consolidated Financial Data | ||
| (Dollars in thousands, except per share data) | ||
| Balance Sheet Data | ||
| June 30, 2013 | December 31, 2012 | |
| Assets: | ||
| Cash and cash equivalents | $ 80,941 | $ 151,832 |
| Investments | 384,653 | 381,537 |
| Loans held for sale | 9,909 | 16,324 |
| Total loans, gross | 1,185,449 | 1,195,409 |
| Allowance for loan losses | (16,650) | (16,568) |
| Premises and equipment, net | 22,560 | 22,494 |
| Goodwill and acquisition intangibles, net | 24,169 | 24,485 |
| Other assets and accrued interest receivable | 74,859 | 68,591 |
| Total assets | $ 1,765,890 | $ 1,844,104 |
| Liabilities & Shareholders' Equity | ||
| Total deposits | $ 1,504,829 | $ 1,570,007 |
| Short-term borrowings | 26,934 | 41,408 |
| Notes payable | 50,702 | 48,715 |
| Accrued interest payable and other liabilities | 13,196 | 13,534 |
| Total liabilities | 1,595,661 | 1,673,664 |
| Common stockholders' equity | 170,229 | 170,440 |
| Total liabilities and shareholders' equity | $ 1,765,890 | $ 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 ) | ||||||
| Three Months ended June 30, 2013 | Three Months ended June 30, 2012 | |||||
|
Average outstanding balance |
Interest earned/ paid |
Yield/ rate |
Average outstanding balance |
Interest earned/ paid |
Yield/ rate |
|
| Interest-earning assets: | ||||||
| Loans receivable (1)(2) | $1,190,590 | $13,390 | 4.51% | $1,136,894 | $13,948 | 4.93% |
| Securities (2) | 387,526 | 1,725 | 1.79 | 375,245 | 1,961 | 2.10 |
| Other interest-earning assets | 46,886 | 78 | 0.67 | 70,648 | 79 | 0.45 |
| Total interest-earning assets | 1,625,002 | 15,193 | 3.75 | 1,582,787 | 15,988 | 4.06 |
| Non-interest-earning assets | 165,041 | 147,788 | ||||
| Total assets | $1,790,043 | $1,730,575 | ||||
| Interest-bearing liabilities: | ||||||
| Transaction accounts | 882,084 | 355 | 0.16 | 813,312 | 425 | 0.21 |
| Time deposits | 333,774 | 579 | 0.70 | 381,387 | 923 | 0.97 |
| Borrowings | 74,927 | 238 | 1.27 | 75,789 | 266 | 1.41 |
| Total interest-bearing liabilities | 1,290,785 | 1,172 | 0.36 | 1,270,488 | 1,614 | 0.51 |
| Non-interest-bearing liabilities | 327,665 | 298,125 | ||||
| Total liabilities | 1,618,450 | 1,568,613 | ||||
| Shareholders' equity | 171,593 | 161,962 | ||||
| Total liabilities and shareholders' equity | $1,790,043 | $1,730,575 | ||||
| Net interest income | $14,021 | $14,374 | ||||
| Interest rate spread | 3.39% | 3.55% | ||||
| Net interest margin (net interest income as a percent of average interest-earning assets) | 3.46% | 3.65% | ||||
| (1) Includes non-accrual loans. | ||||||
| (2) Income presented on a tax equivalent basis using a 35.00% tax rate in 2013 and 2012. The tax equivalent adjustment was $313,000 and $327,000 in 2013 and 2012, 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 ) | ||||||
| Six Months ended June 30,2013 | Six Months ended June 30, 2012 | |||||
|
Average outstanding balance |
Interest earned/ paid |
Yield/ rate |
Average outstanding balance |
Interest earned/ paid |
Yield/ rate |
|
| Interest-earning assets: | ||||||
| Loans receivable (1)(2) | $1,192,612 | $26,785 | 4.53% | $1,135,131 | $27,906 | 4.94% |
| Securities (2) | 381,979 | 3,404 | 1.80 | 374,636 | 3,921 | 2.10 |
| Other interest-earning assets | 66,390 | 174 | 0.53 | 79,622 | 171 | 0.43 |
| Total interest-earning assets | 1,640,981 | 30,363 | 3.73 | 1,589,389 | 31,998 | 4.05 |
| Non-interest-earning assets | 159,819 | 148,483 | ||||
| Total assets | $1,800,800 | $1,737,872 | ||||
| Interest-bearing liabilities: | ||||||
| Transaction accounts | 887,317 | 754 | 0.17 | 817,477 | 895 | 0.22 |
| Time deposits | 342,714 | 1,224 | 0.72 | 392,243 | 2,019 | 1.04 |
| Borrowings | 75,149 | 477 | 1.28 | 78,293 | 544 | 1.40 |
| Total interest-bearing liabilities | 1,305,180 | 2,455 | 0.38 | 1,288,013 | 3,458 | 0.54 |
| Non-interest-bearing liabilities | 323,975 | 289,867 | ||||
| Total liabilities | 1,629,155 | 1,577,880 | ||||
| Shareholders' equity | 171,645 | 159,992 | ||||
| Total liabilities and shareholders' equity | $1,800,800 | $1,737,872 | ||||
| Net interest income | $27,908 | $28,540 | ||||
| Interest rate spread | 3.35% | 3.51% | ||||
| Net interest margin (net interest income as a percent of average interest-earning assets) |
3.43% |
3.61% |
||||
| ________________________ | ||||||
| (1) Includes non-accrual loans. | ||||||
| (2) Income presented on a tax equivalent basis using a 35.00% tax rate in 2013 and 2012. The tax equivalent adjustment was $617,000 and $649,000 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 | 6/30/13 | 3/31/13 | 12/31/12 | 9/30/12 | 6/30/12 |
| Net interest income | $ 13,708 | $ 13,583 | $ 14,332 | $ 13,962 | $ 14,047 |
| Provision for loan losses | 1,600 | 2,000 | 1,300 | 2,200 | 1,700 |
| Net interest income after provision for loan losses | 12,108 | 11,583 | 13,032 | 11,762 | 12,347 |
| Service charges and fees | 2,581 | 2,131 | 2,322 | 2,325 | 2,241 |
| Gain on sale of real estate loans | 672 | 539 | 694 | 917 | 589 |
| Gain on sale of securities | -- | 274 | -- | -- | (4) |
| Trust fee income | 850 | 852 | 749 | 710 | 694 |
| Bankcard transaction revenue | 1,044 | 957 | 971 | 940 | 952 |
| Gains/(losses) on other real estate owned | (308) | (4) | (226) | (67) | (40) |
| Other non-interest income | 1,001 | 1,113 | 1,091 | 1,036 | 921 |
| Total non-interest income | 5,840 | 5,862 | 5,601 | 5,861 | 5,353 |
| Salaries and employee benefits expense | 5,988 | 5,913 | 5,869 | 5,909 | 5,724 |
| Occupancy and equipment expense | 1,315 | 1,306 | 1,341 | 1,316 | 1,315 |
| Data processing expense | 537 | 550 | 618 | 505 | 533 |
| State bank taxes | 615 | 575 | 554 | 579 | 579 |
| Amortization of intangible assets | 157 | 159 | 183 | 187 | 196 |
| FDIC Insurance | 335 | 295 | 296 | 267 | 295 |
| Other non-interest expenses | 2,718 | 2,971 | 2,809 | 3,036 | 2,885 |
| Total non-interest expense | 11,665 | 11,769 | 11,670 | 11,799 | 11,527 |
| Net income before income tax expense | 6,283 | 5,676 | 6,963 | 5,824 | 6,173 |
| Income tax expense | 1,798 | 1,586 | 1,953 | 1,628 | 1,749 |
| Net income | $ 4,485 | $ 4,090 | $ 5,010 | $ 4,196 | $ 4,424 |
| Per Common Share Data | |||||
| Diluted earnings per common share | 0.59 | 0.54 | 0.66 | 0.56 | 0.59 |
| Cash dividends declared | 0.17 | 0.17 | 0.17 | 0.32 | 0.00 |
| Weighted average common shares outstanding | |||||
| Basic | 7,491,619 | 7,478,901 | 7,470,146 | 7,465,926 | 7,465,434 |
| Diluted | 7,564,179 | 7,583,544 | 7,557,777 | 7,554,271 | 7,542,372 |
| Earnings Performance Data | |||||
| Return on common equity | 10.48% | 9.66% | 11.79% | 10.05% | 10.99% |
| Return on assets | 1.00% | 0.92% | 1.12% | 0.98% | 1.03% |
| Net interest margin | 3.38% | 3.32% | 3.52% | 3.56% | 3.57% |
| Net interest margin (tax equivalent) | 3.46% | 3.40% | 3.63% | 3.64% | 3.65% |
|
|
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| The Bank of Kentucky Financial Corporation | ||||||
| Selected Consolidated Financial Data | ||||||
| (Dollars in thousands, except per share data) | ||||||
| Five-Quarter Comparison | ||||||
| Balance Sheet Data | 6/30/13 | 3/31/13 | 12/31/12 | 9/30/12 | 6/30/12 | |
| Assets: | ||||||
| Cash and cash equivalents | $ 80,941 | $ 138,561 | $ 151,832 | $ 81,950 | $ 66,719 | |
| Investments | 384,653 | 376,704 | 381,537 | 361,108 | 376,454 | |
| Loans held for sale | 9,909 | 14,038 | 16,324 | 19,314 | 13,983 | |
| Total loans | 1,185,449 | 1,187,742 | 1,195,409 | 1,159,074 | 1,143,733 | |
| Allowance for loan losses | (16,650) | (16,641) | (16,568) | (16,585) | (18,346) | |
| Premises and equipment, net | 22,560 | 22,559 | 22,494 | 22,714 | 22,923 | |
| Goodwill and acquisition intangibles, net | 24,169 | 24,325 | 24,485 | 24,668 | 24,856 | |
| Other assets & accrued interest receivable | 74,859 | 73,223 | 68,591 | 69,711 | 73,543 | |
| Total assets | $ 1,765,890 | $ 1,820,511 | $ 1,844,104 | $ 1,721,954 | $ 1,703,865 | |
| Liabilities & Shareholders' Equity: | ||||||
| Total deposits | $ 1,504,829 | $ 1,558,933 | $ 1,570,007 | $ 1,471,246 | $ 1,455,328 | |
| Short-term borrowings | 26,934 | 28,309 | 41,408 | 22,142 | 24,373 | |
| Notes payable | 50,702 | 48,709 | 48,715 | 48,721 | 48,727 | |
| Accrued interest payable & other liabilities | 13,196 | 11,604 | 13,534 | 12,224 | 10,987 | |
| Total liabilities | 1,595,661 | 1,647,555 | 1,673,664 | 1,554,333 | 1,539,415 | |
| Shareholders' equity | 170,229 | 172,956 | 170,440 | 167,621 | 164,450 | |
| Total liabilities and shareholders' equity | $ 1,765,890 | $ 1,820,511 | $ 1,844,104 | $ 1,721,954 | $ 1,703,865 | |
| Common shares outstanding | 7,498,014 | 7,482,776 | 7,470,236 | 7,467,396 | 7,465,841 | |
| Average Balance Sheet Data | ||||||
| Average investments | $387,526 | $376,370 | $373,008 | $369,707 | $375,245 | |
| Average other earning assets | 46,886 | 86,110 | 71,139 | 32,781 | 70,648 | |
| Average loans | 1,190,590 | 1,194,657 | 1,175,879 | 1,158,072 | 1,136,894 | |
| Average earning assets | 1,625,002 | 1,657,137 | 1,620,026 | 1,560,560 | 1,582,787 | |
| Average assets | 1,790,043 | 1,811,675 | 1,772,766 | 1,707,843 | 1,730,575 | |
| Average deposits | 1,529,159 | 1,551,953 | 1,518,557 | 1,459,593 | 1,482,222 | |
| Average interest bearing deposits | 1,215,858 | 1,244,360 | 1,207,238 | 1,165,673 | 1,194,699 | |
| Average interest bearing transaction deposits | 882,084 | 892,609 | 848,302 | 796,346 | 813,312 | |
| Average interest bearing time deposits | 333,774 | 351,751 | 358,936 | 369,327 | 381,387 | |
| Average borrowings | 74,927 | 75,375 | 72,193 | 70,445 | 75,789 | |
| Average interest bearing liabilities | 1,290,785 | 1,319,735 | 1,279,431 | 1,236,118 | 1,270,488 | |
| Average common stockholders equity | 171,593 | 171,698 | 169,031 | 166,036 | 161,962 | |
| The Bank of Kentucky Financial Corporation | |||||
| Selected Consolidated Financial Data | |||||
| (Dollars in thousands, except per share data) | |||||
| Five-Quarter Comparison | |||||
| Asset Quality Data | 6/30/13 | 3/31/13 | 12/31/12 | 9/30/12 | 6/30/12 |
| Allowance for loan losses to total loans | 1.40% | 1.40% | 1.39% | 1.43% | 1.60% |
| Allowance for loan losses to non-performing loans | 88% | 76% | 86% | 112% | 111% |
| Nonaccrual loans | $18,934 | $21,771 | $19,244 | $14,813 | $16,265 |
| Loans – 90 days past due & still accruing | 11 | 36 | 39 | 105 | 195 |
| Total non-performing loans | 18,945 | 21,807 | 19,283 | 14,918 | 16,460 |
| OREO and repossessed assets | 5,207 | 5,454 | 5,396 | 6,192 | 5,950 |
| Total non-performing assets | 24,152 | 27,261 | 24,679 | 21,110 | 22,410 |
| Restructured loans-accruing | 7,204 | 7,499 | 6,046 | 12,270 | 15,388 |
| Non-performing loans to total loans | 1.60% | 1.84% | 1.61% | 1.29% | 1.44% |
| Non-performing assets to total assets | 1.38% | 1.50% | 1.34% | 1.23% | 1.32% |
| Annualized charge-offs to average loans | 0.54% | 0.66% | 0.45% | 1.39% | 0.61% |
| Net charge-offs | $1,591 | $1,927 | $1,317 | $3,961 | $1,716 |
| Other Information | |||||
| Total assets under management (in millions) | 747 | 744 | 714 | 715 | 701 |
| Full-time equivalent employees | 361 | 364 | 365 | 370 | 376 |
About BKFC
BKFC, a bank holding company with assets of approximately $1.766 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.