NEWS   RELEASE

 

THE BANK OF KENTUCKY FINANCIAL CORPORATION

ANNOUNCES THIRD QUARTER EARNINGS

 

Net income of $4,561,000 for the third quarter

 

 

CRESTVIEW HILLS, KENTUCKY, October 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 third quarter ended September 30, 2014. For the third quarter of 2014, the Company reported a decrease in net income of 16% compared with the same period in 2013.

A summary of the Company’s results are as follows:

 

Third Quarter ended September 30,		2014				2013				Change
Net income		$	4,561,000			$	5,415,000				(16	)%
Earnings per common share, basic		$	0.59			$	0.72				(18	)%
Earnings per common share, diluted		$	0.59			$	0.72				(18	)%

 

Nine Months ended September 30,		2014				2013				Change
Net income		$	14,244,000			$	13,990,000				2	%
Net income per common share, basic		$	1.86				$         1. 87				(1	)%
Net income per common share, diluted		$	1.85				$         1 .85				-%

  

"Of course, the announcement on September 8 regarding the agreement with BB&T to acquire The Bank of Kentucky was the major event in the quarter," commented Robert W. Zapp, President & CEO of The Bank of Kentucky. "The process is moving forward with respect to obtaining the necessary approvals and preparation continues for a conversion in mid-2015. Aside from this, The Bank of Kentucky finished a strong third quarter, showing solid loan growth while at the same time overall credit metrics continued to improve. The Bank's Wealth Advisory Group, which includes our trust and financial services businesses, posted another strong quarter and continues to build on a great year. In addition, we are pleased to see that the Bank maintained its leading market share position in Northern Kentucky as reported by the FDIC's release of deposit totals for the industry." Zapp added, "With the announcement of the BB&T transaction, the Bank recognized at the holding company level, acquisition related expenses that impacted our numbers. However, I am pleased with the Bank's third quarter performance and confident about our ability to grow and improve the business as we approach the end of the year."

 

The decrease in net income in the third quarter of 2014 was primarily due to $736,000 in merger related expenses and a $403,000 (7%) decrease in non-interest income compared with the third quarter of 2013. Contributing to the decrease in non-interest income was a $394,000 decrease in service charges on deposits.

 

 

Net interest income increased $106,000, or 1% in the third quarter of 2014, compared with the same period in 2013. The net interest margin, on a tax equivalent basis, decreased 12 basis points from 3.50% in the third quarter of 2013 to 3.38% in the third quarter of 2014. The increase in net interest income was the result of a $70.2 million or 4% growth in earning assets compared with the third quarter of 2013. The yield on earning assets decreased 11 basis points from 3.77% in the third quarter of 2013 to 3.66% in the third quarter of 2014, while the cost of interest bearing liabilities increased one basis point from 0.35% to 0.36% in the same period.

 

Non-interest income decreased $403,000 or 7% in the third quarter of 2014 compared with the same period in 2013, while non-interest expense increased $1,310,000 or 11% from the same period last year. Contributing to the decrease in non-interest income was a $394,000 or 14% decrease service charges on deposits, which was partially offset by a $147,000 or 17% increase in trust fee income. Contributing to the increase in non-interest expense was $736,000 in expenses incurred in connection with the previously disclosed agreement and plan of merger entered into on September 8, 2014 by the Company and BB&T Corporation, pursuant to which the Company will merge into BB&T, with BB&T as the surviving entity.

 

The provision for loan losses decreased by $300,000 (50%) in the third quarter of 2014, compared with the same period in 2013. Contributing to this decrease were lower levels of non-performing loans compared with the third quarter of 2013. The Company’s non-performing loans decreased from $16.4 million (1.37% of total loans) at September 30, 2013 to $11.0 million (.86% of total loans) at September 30, 2014. On a quarterly sequential basis, the provision for loan losses of $300,000 in the third quarter of 2014 was $700,000 lower than the provision in the second quarter of 2014, while non-performing loans decreased from $17.4 million (1.37% of total loans) at June 30, 2014 to $11.0 million (.86% of total loans) at September 30, 2014. Net charge-offs on a quarterly sequential basis decreased from $1,015,000 (.32% of loans) in the second quarter of 2014 to $693,000 (.22% of loans) in the third quarter of 2014. As a result of improving credit metrics, the Allowance for Loan Losses (ALL) decreased from 1.38% of loans at the end of the third quarter of 2013 to 1.25% of loans at the end of the third quarter of 2014. On a quarterly sequential basis the ALL decreased three basis points from 1.28% at the end of the second quarter of 2014 to 1.25% at the end of the third 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 $1.827 billion at the end of the third quarter of 2014, which was $25 million or 1% higher than the end of the third quarter of 2013. The increase of $77 million (6%) in total loans was offset by a $54 million (53%) decrease in cash and cash equivalents. The increase in assets were partially funded by an increase in short term borrowings of $19 million, or 58%, and an increase in equity of $20 million or 12% from the same date in 2013.

 

 

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		9/30/14				9/30/13				% Chg				9/30/14				9/30/13				% Chg
Interest income		$	15,202			$	15,034				1	%		$	45,231			$	44,780				1	%
Interest expense			1,174				1,112				6	%			3,353				3,567				(6	)%
Net interest income			14,028				13,922				1	%			41,878				41,213				2	%
Provision for loan losses			300				600				(50	)%			2,200				4,200				(48	)%
Net interest income after provision for loan losses			13,728				13,322				3	%			39,678				37,013				7	%
Non interest income			5,653				6,056				(7	)%			17,529				17,758				(1	)%
Non  interest expense			13,029				11,719				11	%			37,295				35,153				6	%
Net income before income taxes			6,352				7,659				(17	)%			19,912				19,618				2	%
Provision for income taxes			1,791				2,244				(20	)%			5,668				5,628				1	%
Net income		$	4,561			$	5,415				(16	)%		$	14,244			$	13,990				2	%
Per Common Share Data
Diluted earnings per common share			0.59				0.72				(18	)%			1.85				1.85				-%
Cash dividends declared			0.18				0.17				6	%			0.54				0.51				6	%
Earnings Performance Data
Return on common equity			9.33	%			12.44	%			(311	)bps			10.06	%			10.87	%			(81	)bps
Return on assets			0.98	%			1.21	%			(23	)bps			1.03	%			1.04	%			(1	)bps
Net interest margin			3.30	%			3.42	%			(12	)bps			3.31	%			3.38	%			(7	)bps

 

 

The Bank of Kentucky Financial Corporation

Selected Consolidated Financial Data

(Dollars in thousands, except per share data)

 

Balance Sheet Data
		September 30, 2014				December 31, 2013
Assets:
Cash and cash equivalents		$	48,172			$	78,621
Investments			388,217				418,385
Loans held for sale			3,736				3,214
Total loans, gross			1,278,078				1,249,645
Allowance for loan losses			(15,941	)			(16,306	)
Premises and equipment, net			22,632				22,444
Goodwill and acquisition intangibles, net			23,500				23,871
Other assets and accrued interest receivable			78,336				77,618
Total assets		$	1,826,730			$	1,857,492
Liabilities & Shareholders’ Equity
Total deposits		$	1,506,996			$	1,587,585
Short-term borrowings			50,725				27,643
Notes payable			55,389				45,577
Accrued interest payable and other liabilities			18,022				15,548
Total liabilities			1,631,132				1,676,353
Common stockholders’ equity			195,598				181,139
Total liabilities and shareholders’ equity		$	1,826,730			$	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 September 30, 2014												Three Months ended September 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)		$	1,274,050			$	13,612				4.24	%		$	1,199,824			$	13,442				4.44	%
Securities (2)			395,487				1,874				1.88				386,644				1,835				1.88
Other interest-earning assets			16,232				54				1.32				29,039				73				1.00
Total interest-earning assets			1,685,769				15,540				3.66				1,615,507				15,350				3.77
Non-interest-earning assets			152,913												155,984
Total assets		$	1,838,682											$	1,771,491
Interest-bearing liabilities:
Transaction accounts			885,792				368				0.16				848,512				327				0.15
Time deposits			299,690				530				0.70				316,435				519				0.65
Borrowings			102,684				276				1.07				80,733				266				1.31
Total interest-bearing liabilities			1,288,166				1,174				0.36				1,245,680				1,112				0.35
Non-interest-bearing liabilities			356,487												353,071
Total liabilities			1,644,653												1,598,751
Shareholders’ equity			194,029												172,740
Total liabilities and shareholders’ equity		$	1,838,682											$	1,771,491
Net interest income						$	14,366											$	14,238
Interest rate spread											3.30	%											3.42	%
Net interest margin (net interest income as a percent of average interest-earning assets)											3.38	%											3.50	%

 

(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 $338,000 and $316,000 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 )
		Nine Months ended September 30, 2014												Nine Months ended September 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)		$	1,266,058			$	40,090				4.22	%		$	1,195,042			$	40,226				4.48	%
Securities (2)			403,519				5,969				1.97				383,551				5,240				1.82
Other interest-earning assets			23,985				183				1.02				53,803				247				0.61
Total interest-earning assets			1,693,562				46,242				3.65				1,632,396				45,713				3.74
Non-interest-earning assets			151,353												158,527
Total assets		$	1,844,915											$	1,790,923
Interest-bearing liabilities:
Transaction accounts			922,140				1,141				0.17				874,240				1,081				0.17
Time deposits			299,496				1,450				0.65				333,857				1,743				0.70
Borrowings			85,274				762				1.19				77,024				743				1.29
Total interest-bearing liabilities			1,306,910				3,353				0.34				1,285,121				3,567				0.37
Non-interest-bearing liabilities			348,718												333,792
Total liabilities			1,655,628												1,618,913
Shareholders’ equity			189,287												172,010
Total liabilities and shareholders’ equity		$	1,844,915											$	1,790,923
Net interest income						$	42,889											$	42,146
Interest rate spread											3.31	%											3.37	%
Net interest margin (net interest income as a percent of average interest-earning assets)											3.39	%											3.45	%

___________________________

(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 $1,011,000 and $933,000 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		9/30/14				6/30/14				3/31/14				12/31/13				9/30/13
Net interest income		$	14,028			$	13,981			$	13,869			$	14,041			$	13,922
Provision for loan losses			300				1,000				900				500				600
Net interest income after provision for loan losses			13,728				12,981				12,969				13,541				13,322
Service charges and fees			2,435				2,496				2,434				2,782				2,829
Gain on sale of real estate loans			219				248				165				165				282
Gain on sale of securities			-				305				-				-				-
Trust fee income			993				984				941				854				846
Bankcard transaction revenue			1,065				1,105				999				1,008				1,012
Gains/(losses) on other real estate owned			(167	)			(106	)			(81	)			(22	)			(201	)
Other non-interest income			1,108				1,262				1,124				1,466				1,288
Total non-interest income			5,653				6,294				5,582				6,253				6,056
Salaries and employee benefits expense			6,289				6,026				5,873				5,691				5,969
Occupancy and equipment expense			1,408				1,404				1,435				1,330				1,366
Data processing expense			507				520				535				551				533
State bank taxes			642				642				642				584				615
Other real estate owned and loan collection			247				346				342				384				457
Amortization of intangible assets			120				117				133				148				151
FDIC Insurance			586				595				554				376				317
Merger related expenses			736				-				-				-				-
Other non-interest expenses			2,494				2,498				2,604				2,528				2,311
Total non-interest expense			13,029				12,148				12,118				11,592				11,719
Net income before income tax expense			6,352				7,127				6,433				8,202				7,659
Income tax expense			1,791				2,062				1,815				2,427				2,244
Net income		$	4,561			$	5,065			$	4,618			$	5,775			$	5,415
Per Common Share Data
Diluted earnings per common share			0.59				0.66				0.60				0.76				0.72
Cash dividends declared			0.18				0.18				0.18				0.18				0.17
Weighted average common shares outstanding
Basic			7,675,428				7,662,927				7,640,872				7,565,121				7,516,770
Diluted			7,722,074				7,702,231				7,687,106				7,611,879				7,549,530
Earnings Performance Data
Return on common equity			9.33	%			10.70	%			10.18	%			12.86	%			12.44	%
Return on assets			0.98	%			1.10	%			1.01	%			1.25	%			1.21	%
Net interest margin			3.30	%			3.30	%			3.31	%			3.32	%			3.42	%
Net interest margin (tax equivalent)			3.38	%			3.38	%			3.39	%			3.39	%			3.50	%

 

 

The Bank of Kentucky Financial Corporation

Selected Consolidated Financial Data

(Dollars in thousands, except per share data)

  

Balance Sheet Data		9/30/14				6/30/14				3/31/14				12/31/13				9/30/13
Assets:
Cash and cash equivalents		$	48,172			$	74,447			$	89,102			$	78,621			$	102,448
Investments			388,217				400,444				396,733				418,385				389,179
Loans held for sale			3,736				4,437				6,248				3,214				2,435
Total loans			1,278,078				1,272,152				1,261,863				1,249,645				1,201,193
Allowance for loan losses			(15,941	)			(16,334	)			(16,349	)			(16,306	)			(16,632	)
Premises and equipment, net			22,632				22,704				22,845				22,444				22,517
Goodwill and acquisition intangibles, net			23,500				23,620				23,737				23,871				24,018
Other assets & accrued interest receivable			78,336				76,317				75,244				77,618				77,066
Total assets		$	1,826,730			$	1,857,787			$	1,859,423			$	1,857,492			$	1,802,224
Liabilities & Shareholders’ Equity:
Total deposits		$	1,506,996			$	1,572,819			$	1,584,076			$	1,587,585			$	1,529,505
Short-term borrowings			50,725				21,012				29,220				27,643				32,167
Notes payable			55,389				55,451				45,515				45,577				50,695
Accrued interest payable & other liabilities			18,022				16,242				13,981				15,548				14,606
Total liabilities			1,631,132				1,665,524				1,672,792				1,676,353				1,626,973
Shareholders’ equity			195,598				192,263				186,631				181,139				175,251
Total liabilities and shareholders’ equity		$	1,826,730			$	1,857,787			$	1,859,423			$	1,857,492			$	1,802,224
Common shares outstanding			7,687,172				7,671,045				7,649,493				7,619,999				7,528,618
Average Balance Sheet Data
Average investments		$	395,487			$	403,047			$	412,047			$	404,687			$	386,644
Average other earning assets			16,232				26,175				29,854				55,521				29,039
Average loans			1,274,050				1,268,370				1,255,552				1,218,140				1,199,824
Average earning assets			1,685,768				1,697,592				1,697,453				1,678,348				1,615,507
Average assets			1,838,682				1,847,276				1,856,303				1,839,242				1,771,491
Average deposits			1,525,841				1,564,626				1,576,944				1,568,764				1,506,101
Average interest bearing deposits			1,185482				1,234,841				1,245,241				1,215,455				1,164,947
Average interest bearing transaction deposits			885,792				934,082				947,221				911,075				848,512
Average interest bearing time deposits			299,690				300,759				298,020				304,380				316,435
Average borrowings			102,684				79,455				73,529				78,197				80,733
Average interest bearing liabilities			1,288,166				1,314,296				1,318,770				1,293,652				1,248,680
Average common stockholders equity			194,029				189,947				183,885				178,135				172,740

  

 

The Bank of Kentucky Financial Corporation

Selected Consolidated Financial Data

(Dollars in thousands, except per share data)

 

		Five-Quarter Comparison
Asset Quality Data		9/30/14				6/30/14				3/31/14				12/31/13				9/30/13
Allowance for loan losses to total loans			1.25	%			1.28	%			1.30	%			1.30	%			1.38	%
Allowance for loan losses to non-performing loans			145	%			94	%			105	%			106	%			101	%
Nonaccrual loans		$	10,940			$	17,384			$	15,531			$	15,417			$	16,197
Loans – 90 days past due & still accruing			26				24				12				21				207
Total non-performing loans			10,966				17,408				15,543				15,438				16,404
OREO and repossessed assets			6,660				4,931				5,557				5,305				6,141
Total non-performing assets			17,626				22,339				21,100				20,743				22,545
Restructured loans-accruing			6,962				8,154				11,825				8,816				7,109
Non-performing loans to total loans			0.86	%			1.37	%			1.23	%			1.24	%			1.37	%
Non-performing assets to total assets			0.96	%			1.21	%			1.14	%			1.12	%			1.26	%
Annualized charge-offs to average loans			0.22	%			0.32	%			0.27	%			0.27	%			0.21	%
Net charge-offs		$	692			$	1,015			$	857			$	826			$	618

 

Other Information
Total assets under management (in millions)		$	886			$	876			$	858			$	836			$	766
Full-time equivalent employees			347				346				345				346				351

 

About BKFC

 

BKFC, a bank holding company with assets of approximately $1.827 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

###

 

 

Forward-Looking Statements

 

The information presented herein contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 giving the Company’s expectations or predictions of future financial or business performance or conditions. Forward-looking statements are typically identified by words such as “believe,” “expect,” “anticipate,” “intend,” “target,” “estimate,” “continue,” “positions,” “prospects” or “potential,” by future conditional verbs such as “will,” “would,” “should,” “could” or “may,” or by variations of such words or by similar expressions. These forward-looking statements are subject to numerous assumptions, risks and uncertainties which change over time. Forward-looking statements speak only as of the date they are made and the Company assumes no duty to update forward-looking statements.

 

In addition to factors previously disclosed in the Company’s reports filed with the Securities and Exchange Commission (the “SEC”) and those identified elsewhere in this filing, the following factors, among others, could cause actual results to differ materially from forward-looking statements: ability to obtain regulatory approvals and meet other closing conditions to the merger (the “Merger”) of the Company with BB&T Corporation, a North Carolina corporation (“BB&T”), including approval by the Company’s shareholders, on the expected terms and schedule; delay in closing the Merger; difficulties and delays in integrating the Company and BB&T businesses or fully realizing cost savings and other benefits; business disruption following the proposed transaction; changes in asset quality and credit risk; the inability to sustain revenue and earnings growth; changes in interest rates and capital markets; inflation; customer borrowing, repayment, investment and deposit practices; customer disintermediation; the introduction, withdrawal, success and timing of business initiatives; competitive conditions; the inability to realize cost savings or revenues or to implement integration plans and other consequences associated with mergers, acquisitions and divestitures; economic conditions; and the impact, extent and timing of technological changes, capital management activities, and other actions of the Federal Reserve Board and legislative and regulatory actions and reforms.

 

Additional Information for Shareholders

 

In connection with the proposed Merger, BB&T has filed with the SEC a registration statement on Form S-4 (such registration statement, as amended, the “Registration Statement”) that includes a Proxy Statement of the Company and a Prospectus of BB&T, as well as other relevant documents concerning the proposed transaction, and the Company will also file such Proxy Statement/Prospectus with the SEC and mail such Proxy Statement/Prospectus to its shareholders. SHAREHOLDERS OF THE BANK OF KENTUCKY FINANCIAL CORPORATION ARE URGED TO READ THE REGISTRATION STATEMENT AND THE PROXY STATEMENT/PROSPECTUS REGARDING THE MERGER WHEN IT BECOMES AVAILABLE AND ANY OTHER RELEVANT DOCUMENTS FILED WITH THE SEC, AS WELL AS ANY AMENDMENTS OR SUPPLEMENTS TO THOSE DOCUMENTS, BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION.

 

A free copy of the Proxy Statement/Prospectus, as well as other filings containing information about the Company and BB&T, may be obtained at the SEC's Internet site (http://www.sec.gov). You will also be able to obtain these documents, free of charge, from the Company by accessing the Company’s website at www.bankofky.com under the heading "Investor Relations" and then under "SEC Filings," or from BB&T at www.bbt.com under the heading "About" and then under the heading "Investor Relations" and then under "BB&T Corporation SEC Filings." Copies of the Proxy Statement/Prospectus can also be obtained, free of charge, by directing a request to BB&T Corporation, 150 South Stratford Road, Suite 300, Winston-Salem, North Carolina 27104, Attention: Shareholder Services, Telephone: (336) 733-3065, or to The Bank of Kentucky Financial Corporation, 111 Lookout Farm Drive, Crestview Hills, Kentucky 41017, Attention: Executive Vice President and Chief Financial Officer, Telephone: (859) 372-5169.

 

The Company and certain of its directors and executive officers may be deemed to be participants in the solicitation of proxies from the shareholders of the Company in connection with the proposed Merger. Information about the directors and executive officers of the Company and their ownership of the Company’s common stock is set forth in the proxy statement for the Company’s 2014 annual meeting of shareholders, as filed with the SEC on Schedule 14A on March 17, 2014. Additional information regarding the interests of those participants and other persons who may be deemed participants in the transaction may be obtained by reading the Proxy Statement/Prospectus regarding the proposed merger when it becomes available. Free copies of this document may be obtained as described in the preceding paragraph.