Back to GetFilings.com



Table of Contents
 
FORM 10-Q
 
U.S. Securities and Exchange Commission
Washington, D.C. 20549
 
 
(Mark One)
 
 
x
 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For Quarterly Period ended September 30, 2002
 
 
¨
 
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the transition period from                         to                         .
 
Commission File Number:    0-25960
 
 
THE BANK OF KENTUCKY FINANCIAL CORPORATION
(Exact name of registrant as specified in its charter)
 
Kentucky
  
61-1256535
(State or other jurisdiction of
incorporation or organization)
  
(I.R.S. Employer
Identification Number)
 
1065 Burlington Pike, Florence, Kentucky 41042
(Address of principal executive offices) (Zip Code)
 
Registrant’s telephone number: (859) 371-2340
 
Indicate by checkmark whether the registrant (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the issuer was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨
 
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x             
 
As of November 8, 2002 the latest practicable date, 5,952,349 shares of the Registrant’s Common Stock, no par value, were issued and outstanding.
 

Table of Contents
 
The Bank of Kentucky Financial Corporation
 
INDEX
 
Part I
   
FINANCIAL INFORMATION
   
PAGE
       
3
       
10
       
12
       
12
Part II
   
OTHER INFORMATION
     
       
13
       
13
       
13
       
13
       
13
       
13
             Signatures
  
14

Table of Contents
 
THE BANK OF KENTUCKY FINANCIAL CORPORATION
 
PART I FINANCIAL INFORMATION
 
Item 1. Financial Statements
 
THE BANK OF KENTUCKY FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Dollars in thousands)
(Unaudited)
 
Assets
     
September 30, 2002
       
December 31, 2001
  
Cash and cash equivalents
     
$
29,702
 
     
$
26,706
 
Available-for-sale securities
     
 
32,918
 
     
 
35,164
 
Held-to-maturity securities
     
 
15,914
 
     
 
17,134
 
Loans held for sale
     
 
6,042
 
     
 
5,509
 
Total loans
     
 
457,455
 
     
 
411,472
 
Less: Allowance for loan loss
     
 
(4,802
)
     
 
(4,244
)
      
    
Net Loans
     
 
452,653
 
     
 
407,228
 
Premises and equipment, net
     
 
5,696
 
     
 
6,081
 
FHLB stock, at cost
     
 
3,717
 
     
 
3,590
 
Accrued interest receivable and other assets
     
 
7,031
 
     
 
5,850
 
      
    
Total assets
     
$
553,673
 
     
$
507,262
 
      
    
Liabilities & Shareholders’ Equity
                      
Liabilities
                      
Deposits
     
$
478,936
 
     
$
416,183
 
Short-term borrowings
     
 
5,302
 
     
 
26,343
 
Long-term borrowings
     
 
9,426
 
     
 
9,449
 
Accrued interest payable & other liabilities
     
 
3,938
 
     
 
3,766
 
      
    
Total liabilities
     
 
497,602
 
     
 
455,741
 
Shareholders’ Equity
                      
Common stock
     
 
3,098
 
     
 
3,098
 
Additional paid-in capital
     
 
10,308
 
     
 
11,313
 
Retained earnings
     
 
42,265
 
     
 
36,906
 
Accumulated other comprehensive income
     
 
400
 
     
 
204
 
      
    
Total shareholder’s equity
     
 
56,071
 
     
 
51,521
 
      
    
Total liabilities & shareholders’ equity
     
$
553,673
 
     
$
507,262
 
      
    
 
See accompanying notes

3

Table of Contents
 
THE BANK OF KENTUCKY FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
FOR THE THREE AND NINE MONTH PERIODS ENDED SEPTEMBER 30, 2002 AND 2001
(Dollars in thousands, except per share data—unaudited)
 
    
Three Months
Ended September 30
     
Nine Months
Ended September 30
  
    
2002
     
2001
     
2002
     
2001
  
INTEREST INCOME
                                    
Loans, including related fees
   
$
7,703
 
   
$
8,177
 
   
$
22,632
 
   
$
25,008
 
Securities and other
   
 
630
 
   
 
811
 
   
 
1,991
 
   
 
2,580
 
    
  
  
  
Total interest income
   
 
8,333
 
   
 
8,988
 
   
 
24,623
 
   
 
27,588
 
    
  
  
  
INTEREST EXPENSE
                                    
Deposits
   
 
2,767
 
   
 
3,988
 
   
 
8,210
 
   
 
13,176
 
Borrowings
   
 
180
 
   
 
240
 
   
 
507
 
   
 
698
 
    
  
  
  
Total interest expense
   
 
2,947
 
   
 
4,228
 
   
 
8,717
 
   
 
13,874
 
    
  
  
  
Net interest income
   
 
5,386
 
   
 
4,760
 
   
 
15,906
 
   
 
13,714
 
Provision for loan losses
   
 
(380
)
   
 
(365
)
   
 
(900
)
   
 
(641
)
    
  
  
  
Net interest income after provision for loan losses
   
 
5,006
 
   
 
4,395
 
   
 
15,006
 
   
 
13,073
 
    
  
  
  
NON-INTEREST INCOME
                                    
Service charges and fees
   
 
714
 
   
 
504
 
   
 
1,891
 
   
 
1,419
 
Gain/(loss) on securities
   
 
0
 
   
 
0
 
   
 
113
 
   
 
67
 
Gain on loans sold
   
 
445
 
   
 
183
 
   
 
744
 
   
 
619
 
Other
   
 
325
 
   
 
341
 
   
 
935
 
   
 
944
 
    
  
  
  
Total non-interest income
   
 
1,484
 
   
 
1,028
 
   
 
3,683
 
   
 
3,049
 
NON-INTEREST EXPENSE
                                    
Salaries and benefits
   
 
1,541
 
   
 
1,388
 
   
 
4,555
 
   
 
4,114
 
Occupancy and equipment
   
 
518
 
   
 
510
 
   
 
1,538
 
   
 
1,496
 
Data processing
   
 
224
 
   
 
219
 
   
 
695
 
   
 
640
 
Advertising
   
 
97
 
   
 
81
 
   
 
275
 
   
 
243
 
Other
   
 
866
 
   
 
723
 
   
 
2,522
 
   
 
2,345
 
    
  
  
  
Total non-interest expense
   
 
3,246
 
   
 
2,921
 
   
 
9,585
 
   
 
8,838
 
    
  
  
  
INCOME BEFORE INCOME TAXES
   
 
3,244
 
   
 
2,502
 
   
 
9,104
 
   
 
7,284
 
Less: income taxes
   
 
1,057
 
   
 
778
 
   
 
2,970
 
   
 
2,318
 
    
  
  
  
NET INCOME
   
$
2,187
 
   
$
1,724
 
   
$
6,134
 
   
$
4,966
 
    
  
  
  
COMPREHENSIVE INCOME
   
$
2,219
 
   
$
2,144
 
   
$
6,330
 
   
$
5,513
 
    
  
  
  
Earnings per share
   
$
.37
 
   
$
.28
 
   
$
1.03
 
   
$
.81
 
Earnings per share, assuming dilution
   
$
.37
 
   
$
.28
 
   
$
1.02
 
   
$
.81
 
Dividends per share
   
$
.07
 
   
$
.05
 
   
$
.13
 
   
$
.10
 
 
See accompanying notes

4

Table of Contents
 
THE BANK OF KENTUCKY FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
FOR THE NINE MONTH PERIODS ENDED SEPTEMBER 30, 2002 AND 2001
(Dollars in thousands)
(Unaudited)
 
    
2002
     
2001
  
Balance as of January 1
   
$
51,521
 
   
$
47,777
 
Comprehensive income
                  
Net income
   
 
6,134
 
   
 
4,966
 
Change in net unrealized gain/(loss) net of tax
   
 
196
 
   
 
547
 
    
  
Total comprehensive income
   
 
6,330
 
   
 
5,513
 
Cash dividends paid
   
 
(775
)
   
 
(609
)
Exercise of stock options (including tax benefits of $3 in 2001)
   
 
163
 
   
 
15
 
Benefit Plan Termination
   
 
0
 
   
 
458
 
Stock repurchase and retirement
   
 
(1,168
)
   
 
(2,596
)
    
  
Balance as of September 30
   
$
56,071
 
   
$
50,558
 
    
  
 
See accompanying notes

5

Table of Contents
 
THE BANK OF KENTUCKY FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(unaudited)
 
    
FOR THE NINE MONTHS
ENDED SEPT. 30
  
    
2002
     
2001
  
CASH FLOWS FROM OPERATING ACTIVITIES
                  
Net income
   
$
6,134
 
   
$
4,966
 
Adjustments to reconcile net income to net cash from operating activities
   
 
59
 
   
 
1,229
 
    
  
Net cash from operating activities
   
 
6,193
 
   
 
6,195
 
CASH FLOWS FROM INVESTING ACTIVITIES
                  
Proceeds from pay downs and maturities of held-to-maturity securities
   
 
5,105
 
   
 
14,900
 
Proceeds from sales, pay downs and maturities of available-for-sale securities
   
 
13,878
 
   
 
20,633
 
Purchases of held-to-maturity securities
   
 
(3,887
)
   
 
(2,205
)
Purchases of available-for-sale securities
   
 
(11,240
)
   
 
(30,370
)
Net change in loans
   
 
(46,858
)
   
 
(16,941
)
Property and equipment expenditures
   
 
(104
)
   
 
(378
)
    
  
Net cash from investing activities
   
 
(43,106
)
   
 
(14,361
)
CASH FLOWS FROM FINANCING ACTIVITIES
                  
Net change in deposits
   
 
62,753
 
   
 
13,736
 
Net change in short-term borrowings
   
 
(21,041
)
   
 
6,699
 
Proceeds from exercise of stock options
   
 
163
 
   
 
12
 
Cash dividend paid
   
 
(775
)
   
 
(609
)
Stock repurchase and retirement
   
 
(1,168
)
   
 
(2,596
)
Payments on note payable
   
 
(23
)
   
 
(7,717
)
    
  
Net cash from financing activities
   
 
39,909
 
   
 
9,525
 
    
  
Net change in cash and cash equivalents
   
 
2,996
 
   
 
1,359
 
Cash and cash equivalents at beginning of period
   
 
26,706
 
   
 
22,248
 
    
  
Cash and cash equivalents at end of period
   
$
29,702
 
   
$
23,607
 
    
  
 
See accompanying notes

6

Table of Contents
 
THE BANK OF KENTUCKY FINANCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2002
 
Note 1—Basis of Presentation:
 
The consolidated financial statements include the accounts of The Bank of Kentucky Financial Corporation (the company) and its wholly owned subsidiary, The Bank of Kentucky (the Bank). All significant intercompany accounts and transactions have been eliminated.
 
Note 2—General:
 
These financial statements were prepared in accordance with the instructions for Form 10-Q and, therefore, do not include all of the disclosures necessary for a complete presentation of financial position, results of operations and cash flows in conformity with generally accepted accounting principles. Except for required accounting changes, these financial statements have been prepared on a basis consistent with the annual financial statements and include, in the opinion of management, all adjustments, consisting of only normal recurring adjustments, necessary for a fair presentation of the results of operations and financial position at the end of and for the periods presented.
 
Note 3—Earnings per Share:
 
Earnings per share are computed based upon the weighted average number of shares outstanding during the respective three and nine month periods. Diluted earnings per share are computed assuming that average stock options outstanding, when dilutive, are exercised and the proceeds, including the relevant tax benefit, are used entirely to reacquire shares at the average price for the period. The following table presents the numbers of shares used to compute basic and diluted earnings per share for the indicated periods:
 
    
Three Months
Ended
September 30
   
Nine Months
Ended
September 30
    
2002
   
2001
   
2002
   
2001
Weighted Average Shares Outstanding
   
5,952,108
   
6,057,687
   
5,963,501
   
6,116,830
Shares used to compute diluted Earnings per share
   
5,999,243
   
6,082,337
   
5,996,193
   
6,142,986

7

Table of Contents
 
Note 4—New and proposed accounting standards:
 
A new accounting standard dealing with asset retirement obligations will apply for 2003. The company does not believe this standard will have a material effect on its financial position or results of operations.
 
Effective January 1, 2002, the Company adopted a new standard issued by the FASB on impairment and disposal of long-lived assets. The effect of this on the financial position and results of operations of the Company was not material.
 
New accounting standards issued in 2001 require all business combinations to be recorded using the purchase method of accounting for any transaction initiated after June 30, 2001. Under the purchase method, all identifiable tangible and intangible assets and liabilities of the acquired company must be recorded at fair value at date of acquisition, and the excess of cost over fair value of net assets acquired is recorded as goodwill. Identifiable intangible assets must be separated from goodwill. Identifiable intangible assets with finite useful lives will be amortized under the new standard, whereas goodwill, both amounts previously recorded and future amounts purchased, will cease being amortized starting in 2002. Annual impairment testing will be required for goodwill with impairment being recorded if the carrying amount of goodwill exceeds its implied fair value. Adoption of this standard on January 1, 2002 did not have a material effect on the Company’s financial statements.
 
New Accounting Pronouncements:
 
On October 1, 2002, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards (“SFAS”) No. 147, “Acquisitions of Certain Financial Institutions.” SFAS No. 147 is effective October 1, 2002, and may be early applied. SFAS No. 147 supersedes SFAS No. 72, “Accounting for Certain Acquisitions of Banking or Thrift Institutions.” SFAS No. 147 provides guidance on the accounting for the acquisition of a financial institution, and applies to all such acquisitions except those between two or more mutual enterprises. Under SFAS No. 147, the excess of the fair value of liabilities assumed over the fair value of tangible and identifiable intangible assets acquired in a financial institution business combination represents goodwill that should be accounted for under SFAS No. 142, “Goodwill and Other Intangible Assets.” If certain criteria are met, the amount of the unidentifiable intangible asset resulting from prior financial institutions acquisitions is to be reclassified to goodwill upon adoption of this Statement. Financial institutions meeting conditions outlined in SFAS No. 147 are required to restate previously issued financial statements. The objective of the restatement is to present the balance sheet and income statement as if the amount accounted for under SFAS No. 72 as an unidentifiable intangible asset had been reclassified to goodwill as of the date the Company adopted SFAS No. 142. Adoption of SFAS No. 147 on October 1, 2002 did not have a material effect on the Company’s consolidated financial position or results of operations.

8

Table of Contents
 
Note 5—Proposed Acquisition:
 
On September 23, 2002, The Bank of Kentucky, Inc., Peoples Bank of Northern Kentucky, Inc. and Peoples Bancorporation of Northern Kentucky entered into an Asset Purchase and Assumption Agreement pursuant to which The Bank of Kentucky, Inc., subject to terms and conditions of the Purchase Agreement, will purchase certain assets and assume certain liabilities of Peoples Bank of Northern Kentucky, Inc.
 
Under terms of the contemplated transaction, the Bank will purchase certain loans, totaling approximately $147,000,000, all of the branch facilities and all ATMs of Peoples Bank and will assume approximately $156,000,000 in deposits. Consummation of the transaction is subject to receipt of required regulatory and shareholder approvals.
 
As a condition of approval, banking regulators are requiring the company to ensure that the regulatory capital of both the holding company and the bank remain at the “well capitalized “ level. In order to meet this requirement, additional capital will be raised, most likely through issuance of trust preferred securities. Management currently anticipates issuing $17 million of such securities.

9

Table of Contents
 
Item 2.    Management’s Discussion and Analysis of Financial Condition and the Results of Operations
 
FINANCIAL CONDITION
 
Total assets at September 30, 2002 were $553,673,000 compared to $507,262,000 at December 31, 2001, an increase of $46,411,000 (9.2%). This increase was primarily due to an increase in loans of $45,983,000 (11.2%), from $411,472,000 at December 31, 2001 to $457,455,000 at September 30, 2002. Total deposits increased $62,753,000 (15.1%), from $416,183,000 at December 31, 2001 to $478,936,000 at September 30, 2002.
 
RESULTS OF OPERATIONS
 
GENERAL
 
Net income year to date increased from $4,966,000 in 2001 to $6,134,000 in 2002, an increase of $1,167,000 (23.5%). Net income for the quarter ended September 30, 2002 was $2,187,000 ($.37 per share) compared to $1,724,000 ($.28 per share) during the same period in 2001, an increase of $463,000 (26.9%). The increase in earnings was driven by an increase in net interest income and higher non-interest income, partially offset by an increase in operating expenses.
 
NET INTEREST INCOME
 
Net interest income increased $625,000 (13.1%) in the third quarter of 2002 over the same period in 2001, while the year to date total increased $2,192,000 (16.0%) from $13,714,000 in 2001 to $15,906,000 in 2002. The increase in net interest income was driven by the continued growth in the loan portfolio and an improvement in the net interest margin to 4.39% through September 30, 2002 compared to 4.18% for the same period last year.
 
PROVISION FOR LOAN LOSSES
 
The loan loss provision was $900,000 for the nine months ended September 30, 2002 compared to $641,000 recorded in the same period in 2001. The provision was increased to provide for strong loan growth and in recognition of higher levels of classified loans that are performing but being monitored by management. Classified loans increased from $9,523,000 (2.39% of loans outstanding) at September 30, 2001 to $13,738,000 (3.00% of loans outstanding) at September 30, 2002. The Bank had $1,859,000 in non-performing loans, (.41%) of total loans outstanding at September 30, 2002, compared to $3,587,000 (.92%) at September 30, 2001. Real estate loans accounted for $1,765,000 of the non-performing loans at September 30, 2002. Management is satisfied that the reserve is adequate at September 30, 2002.

10

Table of Contents
 
NON-INTEREST INCOME
 
Total non-interest income increased $634,000 (20.8%) to $3,683,000 through September 30, 2002, compared to $3,049,000 for the same period in 2001. Service charges on deposits increased $210,000 (41.8%) in the third quarter, to $714,000 for the quarter ending September 30, 2002 compared to $504,000 for the same period in 2001. Transaction growth and higher fees in the third quarter contributed to the continued growth in deposit fees. Income from the sale of loans into the secondary market increased $125,000 (20.1%) to $744,000 through September 30, 2002, compared to $619,000 for the same period in 2001. The Bank originates fixed rate first mortgage loans and sells them, service released, into the secondary market. The increase in fee income was driven by increased volume. During the first nine months of 2002, 457 loans with a principal balance of $65.0 million were sold compared to 432 loans with a principal balance of $52.9 million during the same period in 2001. Loans held for sale at September 30, 2002 increased to $6,042,000 from $5,509,000 at December 31, 2001. These loans have been approved by the secondary market buyer and closed by the Bank. The Bank is awaiting settlement but is not exposed to significant interest rate or pricing risk during the period between closing the loan and settlement.
 
NON-INTEREST EXPENSE
 
Non-interest expense increased $325,000 (11.1%) in the third quarter of 2002, with year to date expenses increasing $747,000 (8.5%) to $9,585,000 through Sept 30, 2002 compared to $8,838,000 for the same period in 2001. Salary and employee benefit expense increased $441,000 (10.7%) to $4,555,000 through September 30, 2002, compared to $4,114,000 for the same period in 2001, driven by merit increases and some staff expansion. All other expenses remained relatively stable from period to period.
 
INCOME TAX EXPENSE
 
Income tax expense increased by $651,000 (28.1%) through the third quarter of 2002 compared to 2001, and the effective tax rate increased to 32.6% from 31.8%. The increase was partially due to less tax-free income from loans and investments.
 
LIQUIDITY AND CAPITAL RESOURCES
 
The Bank achieves liquidity by maintaining an appropriate balance between its sources and uses of funds to assure that sufficient funds are available to meet loan demands and deposit fluctuations. The Bank has the ability to draw funds from the Federal Home Loan Bank and two of its correspondent banks to meet liquidity demands. Management is satisfied that the Company’s liquidity is sufficient at September 30, 2002.

11

Table of Contents
 
The company’s total shareholders’ equity increased $4,550,000, from $51,521,000 at December 31, 2001 to $56,071,000 at September 30, 2002. In the first quarter of 2002 the Company paid a cash dividend of $.06 per share totaling $358,000 followed by a third quarter dividend of $.07 per share totaling $417,000.
 
On March 16, 2001 the Company’s Board of Directors approved the repurchase and retirement of up to 2% of the outstanding common shares of the Company in the over-the-counter market. All shares were repurchased according to the agreement by the end of the third quarter of 2001. On October 8, 2001 the Company’s Board of Directors approved the repurchase and retirement of 100,000 common shares of the Company in the over-the-counter market. As of the date of this report, 96,630 of the 100,000 shares authorized for repurchase had been repurchased. Any repurchases are funded, as needed, by dividends from the Bank.
 
For purposes of determining a bank’s deposit insurance assessment and for other supervisory purposes, the FDIC has issued regulations that define a “well capitalized” bank as one with a leverage ratio of 5% or more and a total risk-based ratio of 10% or more. At September 30, 2002, the Bank’s leverage and total risk-based ratios were 10.19% and 11.88% respectively, which exceed the well-capitalized thresholds.
 
Item 3.    Quantitative and Qualitative Disclosures About Market Risk.
 
There has been no material change in market risk since the Company’s annual report on Form 10-K for the year ending December 31, 2001.
 
Item 4.    Controls and Procedures.
 
 
(a)
 
The Company’s principal executive officer and principal financial officer have concluded, based upon their evaluation of the Company’s disclosure controls and procedures as of September 30, 2002, that the Company’s disclosure controls and procedures are effective.
 
 
(b)
 
There have been no significant changes in the Company’s internal controls or in other factors that could significantly affect these controls subsequent to the date of their evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

12

Table of Contents
 
THE BANK OF KENTUCKY FINANCIAL CORPORATION
 
PART II OTHER INFORMATION
 
ITEM 1.
 
   
Legal Proceedings
      
None.
ITEM 2.
 
   
Changes in Securities
      
Not applicable.
ITEM 3.
 
   
Defaults Upon Senior Securities
      
Not applicable
ITEM 4.
 
   
Submission of Matters to a Vote of Security Holders
      
Not applicable
ITEM 5.
 
   
Other Information
      
Not applicable
ITEM 6.
 
   
Exhibits and Reports on Form 8—K
(a
)
   
The Registrant has included the following exhibits:
      
Exhibit 2 Asset Purchase and Assumption Agreement
      
Exhibit 99.1 Safe Harbor under the Private Securities Litigation Reform Act of 1995.
      
Exhibit 99.2 Certification Pursuant to 18 U.S.C. Section 1350 as adopted to section 906 of the Sarbanes-Oxley Act of
2002.
      
Exhibit 99.3 Certification Pursuant to 18 U.S.C. Section 1350 as adopted to section 906 of the Sarbanes-Oxley Act of
2002.
(b
)
   
The Registrant filed a report on Form 8 –K on September 27, 2002 reporting the execution of an agreement to acquire
certain assets and certain liabilities of Peoples Bank of Northern Kentucky.

13

Table of Contents
 
SIGNATURES
 
Pursuant to the requirement of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
Date:    November 13, 2002        
          
/s/    Robert W. Zapp        
           
Robert W. Zapp
President
 
Date:    November 13, 2002        
          
/s/    Robert D. Fulkerson        
           
Robert D. Fulkerson
Treasurer (Chief Financial Officer)

14

Table of Contents
 
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER
CERTIFICATIONS FOR QUARTERLY REPORT ON FORM 10-Q
 
I, Robert W. Zapp, certify that:
 
 
1.
 
I have reviewed this quarterly report on Form 10-Q of The Bank of Kentucky Financial Corporation, “the registrant”;
 
 
2.
 
Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;
 
 
3.
 
Based on my knowledge, the financial statements and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;
 
 
4.
 
The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
 
a.
 
designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made know to us by others within those entities, particularly during the period in which this quarterly report is being prepared;
 
b.
 
evaluated effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and
 
c.
 
presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;
 
 
5.
 
The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors:
 
a.
 
all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and
 
b.
 
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and
 
 
6.
 
The registrant’s other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.
 
   
/s/    Robert W. Zapp        
   
Robert W. Zapp
President and Chief Executive Officer
 
Date:    November 13, 2002

15

Table of Contents
 
CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER
CERTIFICATIONS FOR QUARTERLY REPORT ON FORM 10-Q
 
I, Robert D. Fulkerson, certify that:
 
 
1.
 
I have reviewed this quarterly report on Form 10-Q of The Bank of Kentucky Financial Corporation, “the registrant”;
 
 
2.
 
Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;
 
 
3.
 
Based on my knowledge, the financial statements and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;
 
 
4.
 
The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
 
a.
 
designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made know to us by others within those entities, particularly during the period in which this quarterly report is being prepared;
 
b.
 
evaluated effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and
 
c.
 
presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;
 
 
5.
 
The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors:
 
a.
 
all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and
 
b.
 
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and
 
 
6.
 
The registrant’s other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.
 
   
/s/    Robert D. Fulkerson         
   
Robert D. Fulkerson
Treasurer and Assistant Secretary
(Chief Financial Officer)
 
Date:    November 13, 2002
 
 
 

16

Table of Contents
 
The Bank of Kentucky Financial Corporation
 
Exhibit Index
 
Exhibit 2
   
Asset Purchase and Assumption Agreement.
     
included
Exhibit 99.1
   
Safe Harbor under the Private Securities Litigation
Reform Act of 1995.
     
included
Exhibit 99.2
   
Certification Pursuant to 18 U.S.C. Section 1350
as adopted to section 906 of the Sarbanes-Oxley Act
of 2002.
     
included
Exhibit 99.3
   
Certification Pursuant to 18 U.S.C. Section 1350
as adopted to section 906 of the Sarbanes-Oxley Act
of 2002.
     
included