NEWS RELEASE

 

THE BANK OF KENTUCKY FINANCIAL CORPORATION

ANNOUNCES SECOND QUARTER EARNINGS

 

Net income of $5,065,000 for the second quarter, up 13% from 2013

 

 

CRESTVIEW HILLS, KENTUCKY, July 17, 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 second quarter ended June 30, 2014. For the second 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 are as follows:

 

Second Quarter ended June 30,		2014				2013				Change
Net income		$	5,065,000			$	4,485,000				13	%
Earnings per common share, basic		$	0.66			$	0.60				10	%
Earnings per common share, diluted		$	0.66			$	0.59				12	%
Six Months ended June 30,			2014				2013				Change
Net income		$	9,683,000			$	8,575,000				13	%
Net income per common share, basic		$	1.27				$         1. 15				10	%
Net income per common share, diluted		$	1.26				$         1 .13				12	%

  

“Our strong second quarter performance mirrored the first quarter as The Bank increased earnings by 13% from the previous year,” commented Robert W. Zapp, President & CEO. “Not only is solid commercial loan growth contributing to the Bank’s success, but new relationships have led to opportunities in other areas such as treasury management.  Our Wealth Advisory Group and their team of investment specialists continue to partner closely with our retail branch personnel, expanding relationships and reaching new clients, which resulted in another record quarter for this business unit.  Zapp added, “As we begin the second half of the year, I feel we are well positioned in the markets we serve to grow organically and leverage our talent, technologies and relationships to meet our goals”. 

 

The increase in net income in the second quarter of 2014 was primarily due to a $600,000 (38%) decrease in the provision for loan losses and a $454,000 (8%) increase in non-interest income compared with the second 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 June of 2013. Contributing to the increase in non-interest income was a $305,000 gain on the sale of securities.

 

 

Non-interest income increased $454,000 or 8% in the second quarter of 2014 compared with the same period in 2013, while non-interest expense increased $483,000 or 4% from the same period last year. Contributing to the increase in non-interest income was a $305,000 or 100% increase in gain on the sale of securities and a $134,000 or 16% increase in trust fee income, which was partially offset by a $424,000 or 63% decrease in gains on the sale of real estate loans. The decrease in gains on the sale of real estate loans was the result of lower refinancing volume due to slightly higher long term rates compared to 2013.

 

Net interest income increased $273,000, or 2% in the second quarter of 2014, compared with the same period in 2013. The net interest margin, on a tax equivalent basis, decreased eight basis points from 3.46% in the second quarter of 2013 to 3.38% in the second quarter of 2014. The increase in net interest income was the result of a $72.6 million or 4% growth in earning assets compared with the second quarter of 2013. The yield on earning assets decreased 10 basis points from 3.75% in the second quarter of 2013 to 3.65% in the second quarter of 2014, while the cost of interest bearing liabilities decreased two basis points from 0.36% to 0.34% in the same period.

 

The provision for loan losses decreased by $600,000 (38%) in the second quarter of 2014, compared with the same period in 2013. Contributing to this decrease were lower levels of charge-offs compared with the second quarter of 2013. The Company’s annualized net charge-offs to average loans decreased from 0.54% in the second quarter of 2013 to 0.32% in the second quarter of 2014 while non-performing loans as a percentage of total loans were 1.37% as of June 30, 2014, compared with 1.60% as of June 30, 2013. The Company recorded $1,015,000 in net charge-offs in the second quarter of 2014 compared with $1,591,000 in the second quarter of 2013. On a quarterly sequential basis, the provision for loan losses of $1,000,000 in the second quarter of 2014 was $100,000 higher than the provision in the first quarter of 2014, while non-performing loans increased from $15.5 million (1.23% of total loans) at March 31, 2014 to $17.4 million (1.37% of total loans) at June 30, 2014. Net charge-offs on a quarterly sequential basis increased from $857,000 (.27% of loans) in the first quarter of 2014 to $1,015,000 (.32% of loans) in the second quarter of 2014. As a result of improving credit metrics, the Allowance for Loan Losses (ALL) decreased from 1.40% of loans at the end of the second quarter of 2013 to 1.28% of loans at the end of the second quarter of 2014. On a quarterly sequential basis the ALL decreased two basis points from 1.30% at the end of the first quarter of 2014 to 1.28% at the end of the second 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 $1.858 billion at the end of the second quarter of 2014, which was $92 million or 5% higher than the end of the second quarter of 2013. The increase of $87 million (7%) in total loans and $16 million (4%) in investments were offset by a $6 million (8%) decrease in cash and cash equivalents. The increase in assets was funded by an increase in deposits of $68 million, or 5%, and an increase in equity of $22 million or 13% from the same date 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		6/30/14				6/30/13				% Chg				6/30/14				6/30/13				% Chg
Interest income		$	15,100			$	14,880				1	%		$	30,029			$	29,746				1	%
Interest expense			1,119				1,172				(5	)%			2,179				2,455				(11	)%
Net interest income			13,981				13,708				2	%			27,850				27,291				2	%
Provision for loan losses			1,000				1,600				(38	)%			1,900				3,600				(47	)%
Net interest income after provision for loan losses			12,981				12,108				7	%			25,950				23,691				10	%
Non interest income			6,294				5,840				8	%			11,876				11,702				1	%
Non  interest expense			12,148				11,665				4	%			24,266				23,434				4	%
Net income before income taxes			7,127				6,283				13	%			13,560				11,959				13	%
Provision for income taxes			2,062				1,798				15	%			3,877				3,384				15	%
Net income		$	5,065			$	4,485				13	%		$	9,683			$	8,575				13	%
Per Common Share Data
Diluted earnings per common share			0.66				0.59				12	%			1.26				1.13				12	%
Cash dividends declared			0.18				0.17				6	%			0.36				0.34				6	%
Earnings Performance Data
Return on common equity			10.70	%			10.48	%			22	bps			10.45	%			10.07	%			38	bps
Return on assets			1.10	%			1.00	%			10	bps			1.06	%			.96	%			10	bps
Net interest margin			3.30	%			3.38	%			(8	)bps			3.31	%			3.35	%			(4	)bps

 

 

The Bank of Kentucky Financial Corporation

Selected Consolidated Financial Data

(Dollars in thousands, except per share data)

 

Balance Sheet Data
		June 30, 2014				December 31, 2013
Assets:
Cash and cash equivalents		$	74,447			$	78,621
Investments			400,444				418,385
Loans held for sale			4,437				3,214
Total loans, gross			1,272,152				1,249,645
Allowance for loan losses			(16,334	)			(16,306	)
Premises and equipment, net			22,704				22,444
Goodwill and acquisition intangibles, net			23,620				23,871
Other assets and accrued interest receivable			76,317				77,618
Total assets		$	1,857,787			$	1,857,492
Liabilities & Shareholders’ Equity
Total deposits		$	1,572,819			$	1,587,585
Short-term borrowings			21,012				27,643
Notes payable			55,451				45,577
Accrued interest payable and other liabilities			16,242				15,548
Total liabilities			1,665,524				1,676,353
Common stockholders’ equity			192,263				181,139
Total liabilities and shareholders’ equity		$	1,857,787			$	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 )
		Three Months ended June 30, 2014												Three Months ended June 30, 2013
		Average outstanding balance				Interest earned/ paid				Yield/ rate				Average outstanding balance				Interest earned/ paid				Yield/ rate
Interest-earning assets:
Loans receivable (1)(2)		$	1,268,370			$	13,356				4.22	%		$	1,190,590			$	13,390				4.51	%
Securities (2)			403,047				2,020				2.01				387,526				1,725				1.79
Other interest-earning assets			26,175				62				0.95				46,886				78				0.67
Total interest-earning assets			1,697,592				15,438				3.65				1,625,002				15,193				3.75
Non-interest-earning assets			149,684												165,041
Total assets		$	1,847,276											$	1,790,043
Interest-bearing liabilities:
Transaction accounts			934,082				387				0.17				882,084				355				0.16
Time deposits			300,759				482				0.64				333,774				579				0.70
Borrowings			79,455				250				1.26				74,927				238				1.27
Total interest-bearing liabilities			1,314,296				1,119				0.34				1,290,785				1,172				0.36
Non-interest-bearing liabilities			343,033												327,665
Total liabilities			1,657,329												1,618,450
Shareholders’ equity			189,947												171,593
Total liabilities and shareholders’ equity		$	1,847,276											$	1,790,043
Net interest income						$	14,319											$	14,021
Interest rate spread											3.31	%											3.39	%
Net interest margin (net interest income as a percent of average interest-earning assets)											3.38	%											3.46	%

 

 

 

(1)

Includes non-accrual loans.

(2)

Income presented on a tax equivalent basis using a 35.00% tax rate in 2014 and 2013. The tax equivalent adjustment was $337,000 and $313,000 in 2014 and 2013, 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 30,2014												Six Months ended June 30, 2013
		Average outstanding balance				Interest earned/ paid				Yield/ rate				Average outstanding balance				Interest earned/ paid				Yield/ rate
Interest-earning assets:
Loans receivable (1)(2)		$	1,261,997			$	26,478				4.23	%		$	1,192,612			$	26,785				4.53	%
Securities (2)			407,522				4,094				2.03				381,979				3,404				1.80
Other interest-earning assets			28,005				129				0.93				66,390				174				0.53
Total interest-earning assets			1,697,524				30,701				3.65				1,640,981				30,363				3.73
Non-interest-earning assets			150,559												159,819
Total assets		$	1,848,083											$	1,800,800
Interest-bearing liabilities:
Transaction accounts			940,614				773				0.17				887,317				754				0.17
Time deposits			299,398				920				0.62				342,714				1,224				0.72
Borrowings			76,481				486				1.28				75,149				477				1.28
Total interest-bearing liabilities			1,316,493				2,179				0.33				1,305,180				2,455				0.38
Non-interest-bearing liabilities			344,674												323,975
Total liabilities			1,661,167												1,629,155
Shareholders’ equity			186,916												171,645
Total liabilities and shareholders’ equity		$	1,848,083											$	1,800,800
Net interest income						$	28,522											$	27,908
Interest rate spread											3.32	%											3.35	%
Net interest margin (net interest income as a percent of average interest-earning assets)											3.39	%											3.43	%

 

___________________________

(1)

Includes non-accrual loans.

(2)

Income presented on a tax equivalent basis using a 35.00% tax rate in 2014 and 2013. The tax equivalent adjustment was $672,000 and $617,000 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			6 /30/14				3 /31/14				12 /31/13				9 /30/13				6 /30/13
Net interest income		$	13,981			$	13,869			$	14,041			$	13,922			$	13,708
Provision for loan losses			1,000				900				500				600				1,600
Net interest income after provision for loan losses			12,981				12,969				13,541				13,322				12,108
Service charges and fees			2,496				2,434				2,782				2,829				2,581
Gain on sale of real estate loans			248				165				165				282				672
Gain on sale of securities			305				-				-				-				-
Trust fee income			984				941				854				846				850
Bankcard transaction revenue			1,105				999				1,008				1,012				1,044
Gains/(losses) on other real estate owned			(106	)			(81	)			(22	)			(201	)			(308	)
Other non-interest income			1,262				1,124				1,466				1,288				1,001
Total non-interest income			6,294				5,582				6,253				6,056				5,840
Salaries and employee benefits expense			6,026				5,873				5,691				5,969				5,988
Occupancy and equipment expense			1,404				1,435				1,330				1,366				1,315
Data processing expense			520				535				551				533				537
State bank taxes			642				642				584				615				615
Other real estate owned and loan collection			346				342				384				457				350
Amortization of intangible assets			117				133				148				151				157
FDIC Insurance			595				554				376				317				335
Other non-interest expenses			2,498				2,604				2,528				2,311				2,368
Total non-interest expense			12,148				12,118				11,592				11,719				11,665
Net income before income tax expense			7,127				6,433				8,202				7,659				6,283
Income tax expense			2,062				1,815				2,427				2,244				1,798
Net income		$	5,065			$	4,618			$	5,775			$	5,415			$	4,485
Per Common Share Data
Diluted earnings per common share			0.66				0.60				0.76				0.72				0.59
Cash dividends declared			0.18				0.18				0.18				0.17				0.17
Weighted average common shares outstanding
Basic			7,662,927				7,640,872				7,565,121				7,516,770				7,491,619
Diluted			7,702,231				7,687,106				7,611,879				7,549,530				7,564,121
Earnings Performance Data
Return on common equity			10.70	%			10.18	%			12.86	%			12.44	%			10.48	%
Return on assets			1.10	%			1.01	%			1.25	%			1.21	%			1.00	%
Net interest margin			3.30	%			3.31	%			3.32	%			3.42	%			3.38	%
Net interest margin (tax equivalent)			3.38	%			3.39	%			3.39	%			3.50	%			3.46	%

 

 

 

 

The Bank of Kentucky Financial Corporation

Selected Consolidated Financial Data

(Dollars in thousands, except per share data)

 

Balance Sheet Data			6 /30/14				3 /31/14				12 /31/13				9 /30/13				6 /30/13
Assets:
Cash and cash equivalents		$	74,447			$	89,102			$	78,621			$	102,448			$	80,941
Investments			400,444				396,733				418,385				389,179				384,653
Loans held for sale			4,437				6,248				3,214				2,435				9,909
Total loans			1,272,152				1,261,863				1,249,645				1,201,193				1,185,449
Allowance for loan losses			(16,334	)			(16,349	)			(16,306	)			(16,632	)			(16,650	)
Premises and equipment, net			22,704				22,845				22,444				22,517				22,560
Goodwill and acquisition intangibles, net			23,620				23,737				23,871				24,018				24,169
Other assets & accrued interest receivable			76,317				75,244				77,618				77,066				74,859
Total assets		$	1,857,787			$	1,859,423			$	1,857,492			$	1,802,224			$	1,765,890
Liabilities & Shareholders’ Equity:
Total deposits		$	1,572,819			$	1,584,076			$	1,587,585			$	1,529,505			$	1,504,829
Short-term borrowings			21,012				29,220				27,643				32,167				26,934
Notes payable			55,451				45,515				45,577				50,695				50,702
Accrued interest payable & other liabilities			16,242				13,981				15,548				14,606				13,196
Total liabilities			1,665,524				1,672,792				1,676,353				1,626,973				1,595,661
Shareholders’ equity			192,263				186,631				181,139				175,251				170,229
Total liabilities and shareholders’ equity		$	1,857,787			$	1,859,423			$	1,857,492			$	1,802,224			$	1,765,890
Common shares outstanding			7,671,045				7,649,493				7,619,999				7,528,618				7,498,014
Average Balance Sheet Data
Average investments		$	403,047			$	412,047			$	404,687			$	386,644			$	387,526
Average other earning assets			26,175				29,854				55,521				29,039				46,886
Average loans			1,268,370				1,255,552				1,218,140				1,199,824				1,190,590
Average earning assets			1,697,592				1,697,453				1,678,348				1,615,507				1,625,002
Average assets			1,847,276				1,856,303				1,839,242				1,771,491				1,790,043
Average deposits			1,564,626				1,576,944				1,568,764				1,506,101				1,529,159
Average interest bearing deposits			1,234,841				1,245,241				1,215,455				1,164,947				1,215,858
Average interest bearing transaction deposits			934,082				947,221				911,075				848,512				882,084
Average interest bearing time deposits			300,759				298,020				304,380				316,435				333,774
Average borrowings			79,455				73,529				78,197				80,733				74,927
Average interest bearing liabilities			1,314,296				1,318,770				1,293,652				1,248,680				1,290,785
Average common stockholders equity			189,947				183,885				178,135				172,740				171,593

 

  

The Bank of Kentucky Financial Corporation

Selected Consolidated Financial Data

(Dollars in thousands, except per share data)

 

 

 

	Five-Quarter Comparison
Asset Quality Data		6/30/14				3/31/14				12/31/13				9/30/13				6/30/13
Allowance for loan losses to total loans			1.28	%			1.30	%			1.30	%			1.38	%			1.40	%
Allowance for loan losses to non-performing loans			94	%			105	%			106	%			101	%			88	%
Nonaccrual loans		$	17,384			$	15,531			$	15,417			$	16,197			$	18,934
Loans – 90 days past due & still accruing			24				12				21				207				11
Total non-performing loans			17,408				15,543				15,438				16,404				18,945
OREO and repossessed assets			4,931				5,557				5,305				6,141				5,207
Total non-performing assets			22,339				21,100				20,743				22,545				24,152
Restructured loans-accruing			8,154				11,825				8,816				7,109				7,204
Non-performing loans to total loans			1.37	%			1.23	%			1.24	%			1.37	%			1.60	%
Non-performing assets to total assets			1.21	%			1.14	%			1.12	%			1.26	%			1.38	%
Annualized charge-offs to average loans			0.32	%			0.27	%			0.27	%			0.21	%			0.54	%
Net charge-offs		$	1,015			$	857			$	826			$	618			$	1,591
Other Information
Total assets under management (in millions)		$	876			$	858			$	836			$	766			$	747
Full-time equivalent employees
			346				345				346				351				361

  

About BKFC

BKFC, a bank holding company with assets of approximately $1.858 billion, offers banking and related financial services to both individuals and business customers. BKFC operates thirty-two branch locations and fifty-two ATMs in the Northern Kentucky market.

For more information contact:

 

Martin Gerrety

Executive Vice President and CFO

(859) 372-5169

mgerrety@bankofky.com

###