Exhibit 99.1

 

 

	N E W S   R E L E A S E

 

 

THE BANK OF KENTUCKY FINANCIAL CORPORATION

ANNOUNCES RECORD EARNINGS FOR 2013

 

Record net income of $5,775,000 for the fourth quarter, up 15% from 2012

 

 

CRESTVIEW HILLS, KENTUCKY, January 16, 2014 – 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 fourth quarter ended December 31, 2013. For the fourth quarter and the year ending December 31, 2013, the Company reported an increase in net income of 15% and 9% respectively compared with the same periods in 2012.

A summary of the Company’s results follows:

Fourth Quarter ended December 31,		2013				2012				Change
Net income		$	5,775,000			$	5,010,000				15	%
Earnings per common share, basic		$	0.76			$	0.67				13	%
Earnings per common share, diluted		$	0.76			$	0.66				15	%

 

Year ended December 31,		2013				2012				Change
Net income		$	19,765,000			$	18,145,000				9	%
Net income per common share, basic		$	2.63			$	2.43				8	%
Net income per common share, diluted		$	2.61			$	2.41				8	%

 

Robert W. Zapp, President & CEO, commented, “In the wake of achieving record earnings in the third quarter, we finished the year even better, setting another record by exceeding $5.7 million in net income for the fourth quarter and $19.7 million for the year. Several areas contributed to this achievement including record revenue from The Bank’s Wealth Advisory Group and revenue from retail banking. In addition, it was encouraging to see momentum on the commercial lending side, particularly since mortgage originations have decreased in recent months. We experienced our greatest loan growth in the fourth quarter and we believe the pipeline will remain robust with opportunities going into 2014. Net loan growth in the fourth quarter, for example, exceeded $48 million, helping push total loans outstanding to a record $1.250 billion.” Zapp added, “Charge-offs and non-performing loans continue to decline, resulting in lower allowances and decreased provisioning. The trend of improving credit metrics in 2013 not only helped the company’s financial performance, it is also a positive sign going forward for sound growth and economic development in the markets we serve, which benefits everyone.”

The increase in net income in the fourth quarter of 2013 was primarily due to an $800,000 (62%) decrease in the provision for loan losses and a $652,000 (12%) increase in non-interest income compared with the fourth quarter of 2012. 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 December of 2012. Contributing to the increase in non-interest income were higher service charges on deposits and trust fee income.

Non-interest income increased 12% ($652,000) in the fourth quarter of 2013, compared with the same period in 2012, while non-interest expense decreased 1% ($78,000) from the same period last year. Contributing to the increase in non-interest income was a $460,000 or 20% increase in service charges on deposits, a $105,000 or 14% increase in trust fee income and a $204,000 or 90% decrease in losses on other real estate owned, which was offset by a $529,000 or 76% decrease in gains on the sale of real estate loans. Other non-interest income and other non-interest expense both included $180,000 in revenue and expense related to benefits plans. The revenue reflected an increase in investments related to benefits plans and the expense reflected an offsetting increase in liabilities for the same benefits plans. The $180,000 was $213,000 higher than the figures from the fourth quarter of 2012. Contributing to the 3% ($178,000) decrease in salaries and benefits was lower bonus accruals and fewer employees as compared to the fourth quarter of 2012.

Net interest income decreased $291,000, or 2% in the fourth quarter of 2013, compared with the same period in 2012. The net interest margin, on a tax equivalent basis, decreased 24 basis points from 3.63% in the fourth quarter of 2012 to 3.39% in the fourth quarter of 2013. Contributing to the net interest income in 2012 was a $247,000 loan prepayment fee received in the quarter. This prepayment fee contributed 6 basis points to the net interest margin for the fourth quarter of 2012. Adjusting out the 2012 prepayment fee the net interest income remained relatively unchanged compared with the same period in 2012, decreasing $44,000 from the fourth quarter of 2012. 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 3.97% in the fourth quarter of 2012 to 3.65% in the fourth quarter of 2013, while the cost of interest bearing liabilities only decreased 11 basis points from .44% to .33% in the same period. The decrease in the net interest margin was partially offset with an increase in earning assets of $58 million, or 4% on average from the fourth quarter of 2012.

The provision for loan losses decreased by $800,000 (62%) in the fourth quarter of 2013, compared with the same period in 2012. Contributing to this decrease were lower levels of charge-offs compared with the fourth quarter of 2012. The Company’s annualized net charge-offs to average loans decreased from .45% in the fourth quarter of 2012 to .27% in the fourth quarter of 2013 while non-performing loans as a percentage of total loans were 1.24% as of December 31, 2013, compared with 1.61% as of December 31, 2012. The Company recorded $826,000 in net charge-offs in the fourth quarter of 2013 compared with $1,317,000 in the fourth quarter of 2012. On a sequential basis, the provision for loan losses of $500,000 in the fourth quarter of 2013 was $100,000 lower than the provision in the third quarter of 2013, while non-performing loans decreased from $16.4 million (1.37% of total loans) at September 30, 2013 to $15.4 million (1.24% of total loans) at December 31, 2013. Net charge-offs on a sequential basis increased from $618,000 (.21% of loans) in the third quarter of 2013 to $826,000 (.27% of loans) in the fourth quarter of 2013. The majority of the charge-offs in the fourth quarter of 2013 were reserved for in previous periods. As a result of improving credit metrics, the Allowance for Loan Losses (ALL) has decreased from 1.39% of loans at the end of the fourth quarter of 2012 to 1.30% of loans at the end of the fourth quarter of 2013. On a sequential basis the ALL decreased from 1.38% at the end of the third quarter of 2013 to 1.30% at the end of the fourth quarter of 2013, as a result of $326,000 decrease in the ALL balance and a $48 million increase in loans outstanding. 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 $1.857 billion at the end of the fourth quarter of 2013, which was $13 million or 1% higher than the same date a year ago. The increase of $54 million (5%) in total loan and $37 million (10%) in investments were offset by a $73 million (48%) decrease in cash and cash equivalents. The decrease in cash and cash equivalents included a $53 million (70%) decrease in fed funds sold. The increase in assets was funded by an increase in deposits of $18 million, or 1%. Total equity increased $10.6 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. The change in the dividend frequency resulted in cash dividends decreasing from $.79 per share in 2012 to $.69 per share in 2013 on a year to date basis. Cash dividends declared in the fourth quarter increased $.01 (6%) to $.18 per share as compared to $.17 per share in the fourth quarter of 2012. 

 

 

The Bank of Kentucky Financial Corporation

Selected Consolidated Financial Data

(Dollars in thousands, except per share data)

 

 

		Fourth Quarter Comparison												Year ended December 31, Comparison
Income Statement Data			12/31/13				12/31/12				% Chg				12/31/13				12/31/12				% Chg
Interest income		$	15,132			$	15,742				(4	)%		$	59,912			$	62,524				(4	)%
Interest expense			1,091				1,410				(23	)%			4,658				6,339				(27	)%
Net interest income			14,041				14,332				(2	)%			55,254				56,185				(2	)%
Provision for loan losses			500				1,300				(62	)%			4,700				7,000				(33	)%
Net interest income after provision for loan losses			13,541				13,032				4	%			50,554				49,185				3	%
Non interest income			6,253				5,601				12	%			24,011				22,421				7	%
Non  interest expense			11,592				11,670				(1	)%			46,745				46,338				1	%
Net income before income taxes			8,202				6,963				18	%			27,820				25,268				10	%
Provision for income taxes			2,427				1,953				24	%			8,055				7,123				13	%
Net income		$	5,775			$	5,010				15	%		$	19,765			$	18,145				9	%
Per Common Share Data
Diluted earnings per common share			0.76				0.66				15	%			2.61				2.41				8	%
Cash dividends declared			0.18				0.17				6	%			0.69				0.79				(13	)%
Earnings Performance Data
Return on common equity			12.86	%			11.79	%			107	bps			11.39	%			11.08	%			31	bps
Return on assets			1.25	%			1.12	%			13	bps			1.10	%			1.05	%			5	bps
Net interest margin			3.32	%			3.52	%			(20	)bps			3.36	%			3.53	%			(17	)bps

 

 

The Bank of Kentucky Financial Corporation

Selected Consolidated Financial Data

(Dollars in thousands, except per share data)

 

Balance Sheet Data
		December 31, 2013				December 31, 2012
Assets:
Cash and cash equivalents		$	78,621			$	151,832
Investments			418,385				381,537
Loans held for sale			3,214				16,324
Total loans, gross			1,249,645				1,195,409
Allowance for loan losses			(16,306	)			(16,568	)
Premises and equipment, net			22,444				22,494
Goodwill and acquisition intangibles, net			23,871				24,485
Other assets and accrued interest receivable			77,618				68,591
Total assets		$	1,857,492			$	1,844,104
Liabilities & Shareholders’ Equity
Total deposits		$	1,587,585			$	1,570,007
Short-term borrowings			27,643				41,408
Notes payable			45,577				48,715
Accrued interest payable and other liabilities			15,548				13,534
Total liabilities			1,676,353				1,673,664
Common stockholders’ equity			181,139				170,440
Total liabilities and shareholders’ equity		$	1,857,492			$	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 December 31, 2013												Quarter ended December 31, 2012
		Average outstanding balance				Interest earned/paid				Yield/ rate				Average outstanding balance				Interest earned/ paid				Yield/ rate
Interest-earning assets:
Loans receivable (1)(2)		$	1,218,140			$	13,344				4.35	%		$	1,175,879			$	14,365				4.86	%
Securities (2)			404,687				2,013				1.97				373,008				1,728				1.84
Other interest-earning assets			55,521				88				0.63				71,139				92				0.51
Total interest-earning assets			1,678,348				15,445				3.65				1,620,026				16,185				3.97
Non-interest-earning assets			161,014												152,740
Total assets		$	1,839,362											$	1,772,766
Interest-bearing liabilities:
Transaction accounts			911,075				368				0.16				848,302				432				0.20
Time deposits			304,380				472				0.62				358,936				720				0.80
Borrowings			78,197				251				1.27				72,193				258				1.42
Total interest-bearing liabilities			1,293,652				1,091				0.33				1,279,431				1,410				0.44
Non-interest-bearing liabilities			367,515												324,304
Total liabilities			1,661,106												1,603,735
Shareholders’ equity			178,195												169,031
Total liabilities and shareholders’ equity		$	1,839,362											$	1,772,766
Net interest income						$	14,354											$	14,775
Interest rate spread											3.32	%											3.53	%
Net interest margin (net interest income as a percent of average interest-earning assets)											3.39	%											3.63	%

 

 

(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 $314,000 and $443,000 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)
		Year ended December  31, 2013												Year ended December 31, 2012
		Average outstanding balance				Interest earned/ paid				Yield/ rate				Average outstanding balance				Interest earned/ paid				Yield/ rate
Interest-earning assets:
Loans receivable (1)(2)		$	1,200,866			$	53,570				4.46	%		$	1,151,139			$	56,196				4.88	%
Securities (2)			388,878				7,253				1.87				373,029				7,412				1.99
Other interest-earning assets			54,235				335				0.62				65,716				334				0.51
Total interest-earning assets			1,643,979				61,158				3.72				1,589,884				63,942				4.02
Non-interest-earning assets			159,153												149,211
Total assets		$	1,803,132											$	1,739,095
Interest-bearing liabilities:
Transaction accounts			883,525				1,449				0.16				819,915				1,552				0.21
Time deposits			326,427				2,215				0.68				378,111				3,728				0.93
Borrowings			77,352				994				1.29				74,786				1,059				1.42
Total interest-bearing liabilities			1,287,304				4,658				0.36				1,272,812				6,339				0.50
Non-interest-bearing liabilities			342,272												302,520
Total liabilities			1,629,576												1,575,332
Shareholders’ equity			173,556												163,763
Total liabilities and shareholders’ equity		$	1,803,132											$	1,739,095
Net interest income						$	56,500											$	57,603
Interest rate spread											3.36	%											3.52	%
Net interest margin (net interest income as a percent of average interest-earning assets)											3.44	%											3.62	%

 

 

___________________________

(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 $1,246,000 and $1,418,000 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		12/31/13				9/30/13				6/30/13				3/31/13				12/31/12
Net interest income		$	14,041			$	13,922			$	13,708			$	13,583			$	14,332
Provision for loan losses			500				600				1,600				2,000				1,300
Net interest income after provision for loan losses			13,541				13,322				12,108				11,583				13,032
Service charges and fees			2,782				2,829				2,581				2,131				2,322
Gain on sale of real estate loans			165				282				672				539				694
Gain on sale of securities			-				-				-				274				-
Trust fee income			854				846				850				852				749
Bankcard transaction revenue			1,008				1,012				1,044				957				971
Gains/(losses) on other real estate owned			(22	)			(201	)			(308	)			(4	)			(226	)
Other non-interest income			1,466				1,288				1,001				1,113				1,091
Total non-interest income			6,253				6,056				5,840				5,862				5,601
Salaries and employee benefits expense			5,691				5,969				5,988				5,913				5,869
Occupancy and equipment expense			1,330				1,366				1,315				1,306				1,341
Data processing expense			551				533				537				550				618
State bank taxes			584				615				615				575				554
Other real estate owned and loan collection			389				455				444				244				324
Amortization of intangible assets			148				151				157				159				183
FDIC Insurance			376				317				335				295				296
Other non-interest expenses			2,523				2,313				2,274				2,727				2,485
Total non-interest expense			11,592				11,719				11,665				11,769				11,670
Net income before income tax expense			8,202				7,659				6,283				5,676				6,963
Income tax expense			2,427				2,244				1,798				1,586				1,953
Net income		$	5,775			$	5,415			$	4,485			$	4,090			$	5,010
Per Common Share Data
Diluted earnings per common share			0.76				0.72				0.59				0.54				0.66
Cash dividends declared			0.18				0.17				0.17				0.17				0.17
Weighted average common shares outstanding
Basic			7,565,121				7,516,770				7,491,619				7,478,901				7,470,146
Diluted			7,611,879				7,549,530				7,564,121				7,583,544				7,557,777
Earnings Performance Data
Return on common equity			12.86	%			12.44	%			10.48	%			9.66	%			11.79	%
Return on assets			1.25	%			1.21	%			1.00	%			0.92	%			1.12	%
Net interest margin			3.32	%			3.42	%			3.38	%			3.32	%			3.52	%
Net interest margin (tax equivalent)			3.39	%			3.50	%			3.46	%			3.40	%			3.63	%

 

 

 

The Bank of Kentucky Financial Corporation

Selected Consolidated Financial Data

(Dollars in thousands, except per share data)

 

 

		Five-Quarter Comparison
Balance Sheet Data		12/31/13				9/30/13				6/30/13				3/31/13				12/31/12
Assets:
Cash and cash equivalents		$	78,621			$	102,448			$	80,941			$	138,561			$	151,832
Investments			418,385				389,179				384,653				376,704				381,537
Loans held for sale			3,214				2,435				9,909				14,038				16,324
Total loans			1,249,645				1,201,193				1,185,449				1,187,742				1,195,409
Allowance for loan losses			(16,306	)			(16,632	)			(16,650	)			(16,641	)			(16,568	)
Premises and equipment, net			22,444				22,517				22,560				22,559				22,494
Goodwill and acquisition intangibles, net			23,871				24,018				24,169				24,325				24,485
Other assets & accrued interest receivable			77,618				77,066				74,859				73,223				68,591
Total assets		$	1,857,492			$	1,802,224			$	1,765,890			$	1,820,511			$	1,844,104
Liabilities & Shareholders’ Equity:
Total deposits		$	1,587,585			$	1,529,505			$	1,504,829			$	1,558,933			$	1,570,007
Short-term borrowings			27,643				32,167				26,934				28,309				41,408
Notes payable			45,577				50,695				50,702				48,709				48,715
Accrued interest payable & other liabilities			15,548				14,606				13,196				11,604				13,534
Total liabilities			1,676,353				1,626,973				1,595,661				1,647,555				1,673,664
Shareholders’ equity			181,139				175,251				170,229				172,956				170,440
Total liabilities and shareholders’ equity		$	1,857,492			$	1,802,224			$	1,765,890			$	1,820,511			$	1,844,104
Common shares outstanding			7,619,999				7,528,618				7,498,014				7,482,776				7,470,236
Average Balance Sheet Data
Average investments		$	404,687			$	386,644			$	387,526			$	376,370			$	373,008
Average other earning assets			55,521				29,039				46,886				86,110				71,139
Average loans			1,218,140				1,199,824				1,190,590				1,194,657				1,175,879
Average earning assets			1,678,348				1,615,507				1,625,002				1,657,137				1,620,026
Average assets			1,839,242				1,771,491				1,790,043				1,811,675				1,772,766
Average deposits			1,568,764				1,506,101				1,529,159				1,551,953				1,518,557
Average interest bearing deposits			1,215,455				1,164,947				1,215,858				1,244,360				1,207,238
Average interest bearing transaction deposits			911,075				848,512				882,084				892,609				848,302
Average interest bearing time deposits			304,380				316,435				333,774				351,751				358,936
Average borrowings			78,197				80,733				74,927				75,375				72,193
Average interest bearing liabilities			1,293,652				1,248,680				1,290,785				1,319,735				1,279,431
Average common stockholders equity			178,135				172,740				171,593				171,698				169,031

 

 

The Bank of Kentucky Financial Corporation

Selected Consolidated Financial Data

(Dollars in thousands, except per share data)

 

 

		Five-Quarter Comparison
Asset Quality Data		12/31/13				9/30/13				6/30/13				3/31/13				12/31/12
Allowance for loan losses to total loans			1.30	%			1.38	%			1.40	%			1.40	%			1.39	%
Allowance for loan losses to non-performing loans			106	%			101	%			88	%			76	%			86	%
Nonaccrual loans		$	15,417			$	16,197			$	18,934			$	21,771			$	19,244
Loans – 90 days past due & still accruing			21				207				11				36				39
Total non-performing loans			15,438				16,404				18,945				21,807				19,283
OREO and repossessed assets			5,305				6,141				5,207				5,454				5,396
Total non-performing assets			20,743				22,545				24,152				27,261				24,679
Restructured loans-accruing			8,816				7,109				7,204				7,499				6,046
Non-performing loans to total loans			1.24	%			1.37	%			1.60	%			1.84	%			1.61	%
Non-performing assets to total assets			1.12	%			1.26	%			1.38	%			1.50	%			1.34	%
Annualized charge-offs to average loans			0.27	%			0.21	%			0.54	%			0.66	%			0.45	%
Net charge-offs		$	826			$	618			$	1,591			$	1,927			$	1,317

 

Other Information
Total assets under management (in millions)		836				766				747				744				714
Full-time equivalent employees			346				351				361				364				365

 

 

About BKFC

BKFC, a bank holding company with assets of approximately $1.857 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

mgerrety@bankofky.com

 

 

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