The Bank of Kentucky Financial Corporation Announces First Quarter Earnings

Net Income of $4,618,000 for the First Quarter, Up 13% From 2013

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| Source: The Bank of Kentucky Financial Corp.

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 the provision 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 provision for loan losses 12,969 11,583 12%
Non interest income 5,582 5,862 (5)%
Non interest 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 share 0.60 0.54 11%
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 liabilities 13,981 15,548
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, 2014 Quarter ended March 31, 2013
  Average
outstanding
balance
Interest
earned/
paid
Yield/
rate
Average
outstanding
balance
Interest
earned/
paid
Yield/
rate
             
Interest-earning assets:            
Loans receivable (1)(2) $1,255,552 $13,123 4.24% $1,194,657 $13,396 4.55%
Securities (2) 412,047 2,074 2.04 376,370 1,679 1.81
Other interest-earning assets 29,854 67 0.91 86,110 96 0.45
             
 Total interest-earning assets 1,697,453 15,264 3.65 1,657,137 15,171 3.71
             
Non-interest-earning assets 158,850     154,538    
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 liabilities  1,318,770  1,060  0.33  1,319,735  1,283  0.39
             
Non-interest-bearing liabilities 353,648     320,242    
             
Total liabilities  1,672,418      1,639,977    
             
Shareholders' equity 183,885     171,698    
             
Total liabilities and shareholders' equity  $1,856,303      $1,811,675    
             
Net interest income   $14,204     $13,888  
Interest rate spread     3.32%     3.32%
Net interest margin (net interest income as a percent of average interest-earning assets)     3.39%     3.40%
             
(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 losses 900 500 600 1,600 2,000
           
Net interest income after provision for loan losses  12,969  13,541  13,322  12,108  11,583
Service charges and fees 2,434 2,782 2,829 2,581 2,131
Gain on sale of real estate loans 165 165 282 672 539
Gain on sale of securities - - - - 274
Trust fee income 941 854 846 850 852
Bankcard transaction revenue 999 1,008 1,012 1,044 957
Gains/(losses) on other real estate owned (81) (22) (201) (308) (4)
Other non-interest income 1,124 1,466 1,288 1,001 1,113
Total non-interest income 5,582 6,253 6,056 5,840 5,862
Salaries and employee benefits expense 5,873 5,691 5,969 5,988 5,913
Occupancy and equipment expense 1,435 1,330 1,366 1,315 1,306
Data processing expense 535 551 533 537 550
State bank taxes 642 584 615 615 575
Other real estate owned and loan collection 342 384 457 350 334
Amortization of intangible assets 133 148 151 157 159
FDIC Insurance 554 376 317 335 295
Other non-interest expenses 2,604 2,528 2,311 2,368 2,637
Total non-interest expense 12,118 11,592 11,719 11,665 11,769
Net income before income tax expense 6,433 8,202 7,659 6,283 5,676
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 common share 0.60 0.76 0.72 0.59 0.54
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 equivalent) 3.39% 3.39% 3.50% 3.46% 3.40%
 
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 equivalents $89,102 $78,621 $102,448 $80,941 $138,561
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 losses (16,349) (16,306) (16,632) (16,650) (16,641)
Premises and equipment, net 22,845 22,444 22,517 22,560 22,559
Goodwill and acquisition intangibles, net 23,737 23,871 24,018 24,169 24,325
Other assets & accrued interest receivable 75,244 77,618 77,066 74,859 73,223
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 liabilities 13,981 15,548 14,606 13,196 11,604
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 shareholders' equity $1,859,423 $1,857,492 $1,802,224 $1,765,890 $1,820,511
Common shares outstanding 7,649,493 7,619,999 7,528,618 7,498,014 7,482,776
Average Balance Sheet Data          
Average investments $412,047 $404,687 $386,644 $387,526 $376,370
Average other earning assets 29,854 55,521 29,039 46,886 86,110
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 bearing deposits 1,245,241 1,215,455 1,164,947 1,215,858 1,244,360
Average interest bearing transaction deposits 947,221 911,075 848,512 882,084 892,609
Average interest bearing time deposits 298,020 304,380 316,435 333,774 351,751
Average borrowings 73,529 78,197 80,733 74,927 75,375
Average interest bearing liabilities 1,318,770 1,293,652 1,248,680 1,290,785 1,319,735
Average common stockholders equity 183,885 178,135 172,740 171,593 171,698
 
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 loans 1.30% 1.30% 1.38% 1.40% 1.40%
Allowance for loan losses to non-performing loans 105% 106% 101% 88% 76%
Nonaccrual loans $15,531 $15,417 $16,197 $18,934 $21,771
Loans – 90 days past due & still accruing 12 21 207 11 36
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 loans 0.27% 0.27% 0.21% 0.54% 0.66%
Net charge-offs $857 $826 $618 $1,591 $1,927
           
Other Information          
Total assets under management (in millions) 858 836 766 747 744
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.

For more information contact:

Martin Gerrety
Executive Vice President and CFO
(859) 372-5169