EX-99.1 2 v326033_ex99-1.htm EXHIBIT 99.1

 

NEWS RELEASE

 

 

 

_____________________________________________________________

 

THE BANK OF KENTUCKY FINANCIAL CORPORATION

ANNOUNCES THIRD QUARTER EARNINGS

 

Net income available to common shareholders of $4,196,000 up 5% for the

third quarter

 

CRESTVIEW HILLS, KENTUCKY, October 18, 2012 – 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 third quarter and nine months ended September 30, 2012. For the third quarter, the Company reported an increase in diluted earnings per common share of 4% from the same period in 2011.

A summary of the Company’s results follows:

 

Third Quarter ended September 30,  2012   2011   Change 
Net income  $4,196,000   $4,274,000    (2)%
Net income available to common shareholders  $4,196,000   $4,013,000    5%
Earnings per common share, basic  $0.56   $0.54    4%
Earnings per common share, diluted  $0.56   $0.54    4%

  

             
Nine Months ended September 30,  2012   2011   Change 
Net income  $13,135,000   $11,580,000    13%
Net income available to common shareholders  $13,135,000   $10,803,000    22%
Net income per common share, basic  $1.76   $1.45    21%
Net income per common share, diluted  $1.74   $1.45    20%

   

Robert Zapp, President & CEO stated, “The positive trends we have seen in lending over the past several months continued into the third quarter of 2012, with most of the growth coming in the past few months. In addition, increased mortgage volume at a time when interest rates were at historic lows helped to increase fee revenue for the quarter. Although slow moving, we are experiencing a steady climb in borrowing among businesses and consumers and are active in helping local businesses obtain credit of any size. We continue to grow organically and have focused on expanding existing customer relationships by selling investment services and additional bank products and services. The Bank has further established itself in the region by capturing additional market share and maintaining our position as the largest bank in Northern Kentucky with 23% of total deposits. Overall, The Bank continues to execute its strategy and looks forward to future success.”

 

The increase in earnings available to common shareholders in the third quarter of 2012 was primarily attributable to a $350,000 (14%) decrease in the provision for loan losses and a $261,000 (100%) decrease in preferred stock dividends and amortization as compared to the third 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 10% increase in noninterest expense. The decrease in the provision for loan losses reflected lower levels of impaired loan reserves, lower levels of nonperforming loans and lower levels of adversely classified loans as compared to September 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 (the “Series A Preferred Stock”), previously issued to the U.S. Department of the Treasury as part of the TARP CPP program.

1
 

 

Net interest income decreased $114,000 in the third quarter of 2012, as compared to the same period in 2011. The net interest margin, on a tax equivalent basis, decreased 19 basis points from 3.83% in the third quarter of 2011 to 3.64% in the third quarter of 2012. Contributing to the decrease in the net interest margin was the mix of the growth in earning assets. Of the $71 million growth in average earning assets from the third quarter of 2011 to third quarter of 2012, $46 million or 65% of the growth was attributed to the Bank’s securities portfolio, which generally has lower yields than loans.

 

The provision for loan losses decreased by $350,000 (14%) in the third quarter of 2012, as compared to the same period in 2011. Contributing to this decrease were lower levels of impaired loan reserves, non-performing and adversely classified loans as compared to September 2011. The Company’s non-performing loans as a percentage of total loans were 1.29% as of September 30, 2012, as compared to 1.43% as of September 30, 2011, while annualized net charge-offs to average loans increased from .86% in the third quarter of 2011 to 1.39% in the third quarter of 2012. The Company recorded $3,961,000 in net charge-offs in the third quarter of 2012 as compared to $2,425,000 in the third quarter of 2011. The majority of the loans charged off in the third quarter of 2012 were reserved for in prior quarters. On a sequential basis, the provision for loan losses of $2,200,000 in the third quarter of 2012 was $500,000 higher than the provision in the second quarter of 2012, while non-performing loans decreased from $16.5 million (1.44% of total loans) at June 30, 2012 to $14.9 million (1.29% of total loans) at September 30, 2012. Net charge-offs on a sequential basis increased from $1,716,000 (0.61% of loans) in the second quarter of 2012 to $3,961,000 (1.39% of loans) in the third quarter of 2012. The allowance for loan losses (ALL) as of September 30, 2012 decreased $1,761,000 from June 2012. The decrease in the ALL is primarily the result of the loans that were charged off in the third quarter of 2012 that were reserved for in previous quarters. The reserve for impaired loans was $6,254,000 at September 30, 2012, which was $1,261,000 lower than the $7,515,000 at June 30, 2012 and $1,508,000 lower than the $7,762,000 at September 30, 2011. As a result, the ALL has decreased from 1.60% of loans at the end of the second quarter of 2012 to 1.43% of loans at the end of the third 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.

 

The Company’s non-performing assets as a percentage of total assets were 1.23% as of September 30, 2012, as compared to 1.11% as of September 30, 2011. Non-performing loans decreased $1,091,000 from September 2011 to September 2012 and other real estate owned increased $4,298,000 in the same time period. On a sequential quarterly basis, other real estate owned increased $242,000 from June 2012. The increase in other real estate owned from September of 2011 was primarily the result of one commercial real estate relationship which added $3,475,000 in other real estate owned in the fourth quarter of 2011. These properties are recorded at their fair value less estimated costs to sell with the difference between this value and the loan balance being recorded as a charge-off.

 

Non-interest income increased 11% ($564,000) in the third quarter of 2012, as compared to the same period in 2011, while non-interest expense increased 10% ($1,072,000) from the same period last year. Contributing to the increase in non-interest income was a $214,000 or a 30% increase in the gains on sale of real estate loans. These gains were driven by the low current interest rates, which has prompted increased demand for home mortgage loan refinancing. Contributing to the increase in non-interest expense was a $558,000 (10%) increase in salaries and benefits expense. The increase in salaries and benefits included $181,000 in higher commission expense. The increase in commission expense included higher commissions paid based on higher real estate loan originations.

2
 

 

Total assets were $1.722 billion at the end of the third quarter of 2012, which was $98 million or 6% higher than the same date a year ago. Total loans increased $40 million (4%), investments in securities increased $21 million (6%) and cash and cash equivalents increased $14 million (21%) from September of 2011. The balance sheet increases were funded by an increase in deposits of $102 million, or 7%. Total equity decreased $1.7 million from the same date in 2011 as a result of the repurchase of the Series A Preferred Stock.

 

3
 

  The Bank of Kentucky Financial Corporation

Selected Consolidated Financial Data

(Dollars in thousands, except per share data)

 

    Third Quarter Comparison   Nine months ended September 30, Comparison
                                                 
Income Statement Data     9/30/12       9/30/11       % Chg       9/30/12       9/30/11       % Chg  
Interest income   $ 15,433     $ 16,280       (5 )%   $ 46,782     $ 48,702       (4 )%
Interest expense     1,471       2,204       (33 )%     4,929       7,251       (32 )%
Net interest income     13,962       14,076       (1 )%     41,853       41,451       1 %
Provision for loan losses     2,200       2,550       (14 )%     5,700       8,550       (33 )%
Net interest income after provision for loan losses     11,762       11,526       2 %     36,153       32,901       10 %
Non interest income     5,861       5,297       11 %     16,820       15,194       11 %
Non  interest expense     11,799       10,727       10 %     34,668       31,711       9 %
Net income before income taxes     5,824       6,096       (4 )%     18,305       16,384       12 %
Provision for income taxes     1,628       1,822       (11 )%     5,170       4,804       8 %
Net income     4,196       4,274       (2 )%     13,135       11,580       13 %
Preferred stock dividends & amortization     -       261       (100 )%     -       777       (100 )%
Net income available to common shareholders   $ 4,196     $ 4,013       5 %   $ 13,135     $ 10,803       22 %
Per Common Share Data                                                
Diluted earnings per common share     0.56       0.54       4 %     1.74       1.45       20 %
Cash dividends declared     0.32       0.28       14 %     0.62       0.56       11 %
Earnings Performance Data                                                
Return on common equity     10.05 %     10.51 %     (46 )bps     10.83 %     9.78 %     105 bps
Return on assets     0.98 %     1.05 %     (7 )bps     1.02 %     0.95 %     7 bps
Net interest margin     3.56 %     3.76 %     (20 )bps     3.54 %     3.69 %     (15 )bps

 

4
 

The Bank of Kentucky Financial Corporation

Selected Consolidated Financial Data

(Dollars in thousands, except per share data)

 

Balance Sheet Data        
   September 30, 2012   December 31, 2011 
Assets:          
Cash and cash equivalents  $81,950   $135,964 
Investments   361,108    371,737 
Loans held for sale   19,314    8,920 
Total loans, gross   1,159,074    1,129,954 
Allowance for loan losses   (16,585)   (18,288)
Premises and equipment, net   22,714    22,827 
Goodwill and acquisition intangibles, net   24,668    25,251 
Other assets and accrued interest receivable   69,711    68,359 
Total assets  $1,721,954   $1,744,724 
           
Liabilities & Shareholders’ Equity          
Total deposits  $1,471,246   $1,498,821 
Short-term borrowings   22,142    29,300 
Notes payable   48,721    48,739 
Accrued interest payable and other liabilities   12,224    11,294 
Total liabilities   1,554,333    1,588,154 
Common stockholders’ equity   167,621    156,570 
Total liabilities and shareholders’ equity  $1,721,954   $1,744,724 
           
           

 

5
 

 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 September 30, 2012   Three Months ended September 30, 2011 
   Average outstanding balance   Interest earned/
paid
   Yield/
rate
   Average outstanding balance   Interest earned/
paid
   Yield/
rate
 
                 
Interest-earning assets:                              
Loans receivable (1)(2)  $1,158,072   $13,926    4.78%  $1,126,118   $14,652    5.16%
Securities (2)   369,707    1,763    1.90    324,144    1,881    2.30 
Other interest-earning assets   32,781    71    0.86    39,721    69    0.69 
Total interest-earning assets   1,560,560    15,760    4.02    1,489,983    16,602    4.42 
Non-interest-earning assets   147,283              133,736           
Total assets  $1,707,843             $1,623,719           
Interest-bearing liabilities:                              
Transaction accounts   796,346    280    0.14    711,046    524    0.29 
Time deposits   369,327    934    1.01    411,193    1,430    1.38 
Borrowings   70,445    257    1.45    72,421    250    1.37 
Total interest-bearing liabilities   1,236,118    1,471    0.47    1,194,660    2,204    0.73 
Non-interest-bearing liabilities   305,689              261,219           
Total liabilities   1,541,807              1,455,879           
Shareholders’ equity   166,036              167,840           
Total liabilities and shareholders’ equity  $1,707,843             $1,623,719           
Net interest income       $14,289             $14,398      
Interest rate spread             3.55%             3.69%
Net interest margin (net interest income as a percent of average interest-earning assets)             3.64%             3.83%

  

(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 $327,000 and $322,000 in 2012 and 2011, respectively.

 

6
 

  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 ) 
   Nine Months ended September 30, 2012   Nine Months ended September 30, 2011 
  

Average

outstanding balance

   Interest earned/
paid
  

 

Yield/
rate

  

Average

outstanding balance

   Interest earned/
paid
  

 

Yield/
rate

 
                 
Interest-earning assets:                              
Loans receivable (1)(2)  $1,142,833   $41,832    4.89%  $1,118,185   $43,886    5.25%
Securities (2)   373,036    5,684    2.04    315,364    5,454    2.31 
Other interest-earning assets   63,895    242    0.51    69,341    291    0.56 
 
Total interest-earning assets
   1,579,764    47,758    4.04    1,502,890    49,631    4.40 
Non-interest-earning assets   148,025              132,355           
Total assets
  $1,727,789             $1,635,245           
Interest-bearing liabilities:                              
Transaction accounts   810,382    1,175    0.19    720,339    1,708    0.32 
Time deposits   384,549    2,953    1.03    424,428    4,785    1.51 
Borrowings   75,657    801    1.41    72,879    758    1.39 
Total interest-bearing liabilities
   1,270,588    4,929    0.52    1,217,646    7,251    0.80 
Non-interest-bearing liabilities   295,194              252,033           
 
Total liabilities
   1,565,782              1,469,679           
Shareholders’ equity
   162,007              165,566           
Total liabilities and shareholders’ equity
  $1,727,789             $1,635,245           
Net interest income       $42,829             $42,380      
Interest rate spread             3.52%             3.60%
Net interest margin (net interest income as a percent of average interest-earning assets)             3.62%             3.77%

___________________________

(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 $976,000 and $929,000 in 2012 and 2011, respectively.

 

 

7
 

 The Bank of Kentucky Financial Corporation

Selected Consolidated Financial Data

(Dollars in thousands, except per share data)

 

   Five-Quarter Comparison 
Income Statement Data  9/30/12   6/30/12   3/31/12   12/31/11   9/30/11 
Net interest income  $13,962   $14,047   $13,844   $14,087   $14,076 
Provision for loan losses   2,200    1,700    1,800    2,200    2,550 
Net interest income after provision for loan losses   11,762    12,347    12,044    11,887    11,526 
Service charges and fees   2,325    2,241    2,201    2,390    2,470 
Gain on sale of real estate loans   917    589    586    580    703 
Gain/(loss) on sale of securities   -    (4)   207    -    - 
Trust fee income   710    694    689    625    630 
Bankcard transaction revenue   940    952    902    885    849 
Gains/(losses) on other real estate owned   (67)   (40)   (94)   (85)   (98)
Other non-interest income   1,036    921    1,115    1,135    743 
Total non-interest income   5,861    5,353    5,606    5,530    5,297 
Salaries and employee benefits expense   5,909    5,724    5,451    5,044    5,351 
Occupancy and equipment expense   1,316    1,315    1,277    1,192    1,216 
Data processing expense   505    533    535    522    500 
State bank taxes   579    579    559    415    550 
Amortization of intangible assets   187    196    200    220    202 
FDIC Insurance   267    295    305    305    269 
Other non-interest expenses   3,036    2,885    3,015    2,705    2,639 
Total non-interest expense   11,799    11,527    11,342    10,403    10,727 
Net income before income tax expense   5,824    6,173    6,308    7,014    6,096 
Income tax expense   1,628    1,749    1,793    2,105    1,822 
Net income   4,196    4,424    4,515    4,909    4,274 
Preferred stock dividends & amortization   -    -    -    195    261 
Net income available to common shareholders  $4,196   $4,424   $4,515   $4,714   $4,013 
Per Common Share Data                         
Diluted earnings per common share   0.56    0.59    0.60    0.63    0.54 
Cash dividends declared   0.32    0.00    0.30    0.00    0.28 
Weighted average common shares outstanding                         
Basic   7,465,926    7,465,434    7,448,604    7,432,995    7,432,995 
Diluted   7,554,271    7,542,372    7,520,062    7,465,606    7,488,743 
Earnings Performance Data                         
Return on common equity   10.05%   10.99%   11.49%   12.21%   10.51%
Return on assets   0.98%   1.03%   1.04%   1.13%   1.05%
Net interest margin   3.56%   3.57%   3.49%   3.55%   3.76%
Net interest margin (tax equivalent)   3.64%   3.65%   3.57%   3.63%   3.83%

 

8
 

 The Bank of Kentucky Financial Corporation

Selected Consolidated Financial Data

(Dollars in thousands, except per share data)

 

   Five-Quarter Comparison 
Balance Sheet Dataaia  9/30/12   6/30/12   3/31/12   12/31/11   9/30/11 
Assets:                    
Cash and cash equivalents  $81,950   $66,719   $133,153   $135,964   $67,657 
Investments   361,108    376,454    374,336    371,737    339,780 
Loans held for sale   19,314    13,983    10,863    8,920    6,612 
Total loans   1,159,074    1,143,733    1,130,200    1,129,954    1,118,630 
Allowance for loan losses   (16,585)   (18,346)   (18,362)   (18,288)   (17,941)
Premises and equipment, net   22,714    22,923    23,159    22,827    22,653 
Goodwill and acquisition intangibles, net   24,668    24,856    25,051    25,251    24,826 
Other assets & accrued interest receivable   69,711    73,543    74,381    68,359    62,182 
Total assets  $1,721,954   $1,703,865   $1,752,781   $1,744,724   $1,624,399 
Liabilities & Shareholders’ Equity                         
Total deposits  $1,471,246   $1,455,328   $1,505,709   $1,498,821   $1,369,215 
Short-term borrowings   22,142    24,373    29,334    29,300    26,248 
Notes payable   48,721    48,727    48,733    48,739    48,745 
Accrued interest payable & other liabilities   12,224    10,987    9,531    11,294    10,905 
Total liabilities   1,554,333    1,539,415    1,593,307    1,588,154    1,455,113 
Common stockholders’ equity   167,621    164,450    159,474    156,570    152,356 
Preferred stock   -    -    -    -    16,930 
Shareholders’ equity   167,621    164,450    159,474    156,570    169,286 
Total liabilities and shareholders’ equity  $1,721,954   $1,703,865   $1,752,781   $1,744,724   $1,624,399 
Common shares outstanding   7,467,396    7,465,841    7,464,811    7,432,995    7,432,995 
Average Balance Sheet Data                         
Average investments  $369,707   $375,245   $374,027   $360,265   $324,144 
Average other earning assets   32,781    70,648    88,597    76,258    39,721 
Average loans   1,158,072    1,136,894    1,133,367    1,139,767    1,126,118 
Average earning assets   1,560,560    1,582,787    1,595,991    1,576,290    1,489,983 
Average assets   1,707,843    1,730,575    1,745,169    1,717,816    1,623,719 
Average deposits   1,459,593    1,482,222    1,494,332    1,464,550    1,372,244 
Average interest bearing deposits   1,165,673    1,194,699    1,224,743    1,190,716    1,122,239 
Average interest bearing transaction deposits   796,346    813,312    821,643    783,753    711,046 
Average interest bearing time deposits   369,327    381,387    403,100    406,963    411,193 
Average borrowings   70,445    75,789    80,798    77,832    72,421 
Average interest bearing liabilities   1,236,118    1,270,488    1,305,541    1,268,548    1,194,660 
Average common stockholders equity   166,036    161,962    158,022    153,175    150,934 
Average preferred stock   -    -    -    9,753    16,906 

 

9
 

The Bank of Kentucky Financial Corporation

Selected Consolidated Financial Data

(Dollars in thousands, except per share data)

 

   Five-Quarter Comparison 
Asset Quality Data  9/30/12   6/30/12   3/31/12   12/31/11   9/30/11 
Allowance for loan losses to total loans   1.43%   1.60%   1.62%   1.62%   1.60%
Allowance for loan losses to non-performing loans   112%   111%   105%   115%   112%
Nonaccrual loans  $14,813   $16,265   $16,779   $15,651   $15,964 
Loans – 90 days past due & still accruing   105    195    680    219    45 
Total non-performing loans   14,918    16,460    17,459    15,870    16,009 
OREO and repossessed assets   6,192    5,950    6,328    5,844    1,894 
Total non-performing assets   21,110    22,410    23,787    21,714    17,903 
Restructured loans-accruing   12,270    15,388    15,492    13,306    13,108 
Non-performing loans to total loans   1.29%   1.44%   1.54%   1.40%   1.43%
Non-performing assets to total assets   1.23%   1.32%   1.36%   1.25%   1.11%
Annualized charge-offs to average loans   1.39%   0.61%   0.62%   0.65%   0.86%
Net charge-offs  $3,961   $1,716   $1,726   $1,853   $2,425 

 

 

Other Information          
Total assets under management (in millions) 715  701  702  667  639
Full-time equivalent employees 370  376  359  356 349

 

About BKFC

BKFC, a bank holding company with assets of approximately $1.722 billion, offers banking and related financial services to both individuals and business customers. BKFC operates thirty-three branch locations and fifty-five 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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