CRESTVIEW HILLS, Ky., Oct. 22, 2009 (GLOBE NEWSWIRE) -- The Bank of Kentucky Financial Corporation (the "Company") (Nasdaq:BKYF), the holding company of The Bank of Kentucky, Inc. (the "Bank"), today reported its earnings for the third quarter and the nine months ended September 30, 2009. For the third quarter and the first nine months of 2009, the Company reported a decrease in diluted earnings per common share of 40% for the year, and 70% for the third quarter, as compared to the same periods in 2008. The third quarter results reflect the sale of $34 million in preferred stock and the issuance of a warrant for shares of common stock to the U.S. Department of Treasury ("Treasury") on February 13, 2009 in connection with the Company's participation in the Treasury's TARP Capital Purchase Program. The effect of Treasury's investment on earnings per common share includes the accrual for the payment of dividends on the preferred stock and related preferred stock amortization expense of $506,000 for the third quarter and $1,283,000 for the nine-months ended September 30, 2009. No comparable dividends were paid for the corresponding periods in 2008. With continued earnings and the Treasury investment, the Company continues to maintain a significantly higher level of capital than required by regulatory authorities to be designated as well-capitalized. The third quarter results included an additional $3,225,000 provision for loan losses as compared to the third quarter of 2008. Contributing to this increase in the provision for loan losses were higher levels of charge-offs and non-performing loans in the third quarter of 2009 as compared to the same period in 2008, and management's continuing concerns over the effect of the declining housing market, falling real estate values and overall deteriorating economic conditions will have on the Company's loan portfolio. The third quarter results also included $594,000 in losses on the sale of other real estate owned, of which $462,000 was from one property. In the third quarter of 2009, the Bank announced plans to purchase three banking offices of Integra Bank Corporation's wholly-owned bank subsidiary, Integra Bank N.A., located in Crittenden, Dry Ridge and Warsaw, Kentucky and a portfolio of selected commercial loans originated by Integra Bank's Covington, Kentucky, loan production office. This transaction is expected to add $85 million in deposits and at least $85 million in loans. As of September 30, 2009, the Bank has purchased $50 million of the loans from Integra. The remainder of the transaction is expected to close in the fourth quarter of 2009.
A summary of the Company's results follows: Third Quarter ended September 30, 2009 2008 Change --------------------------------- ---- ---- ------ Net income $1,545,000 $3,419,000 (55)% Net income available for common shareholders $1,039,000 $3,419,000 (70)% Earnings per common share, basic $ 0.19 $ 0.61 (69)% Earnings per common share, diluted $ 0.18 $ 0.61 (70)% Nine Months ended September 30, 2009 2008 Change ------------------------------ ---- ---- ------ Net income $6,432,000 $8,550,000 (25)% Net income available for common shareholders $5,149,000 $8,550,000 (40)% Net income per common share, basic $ 0.92 $ 1.52 (39)% Net income per common share, diluted $ 0.91 $ 1.52 (40)%
Net interest income increased $873,000, or 8% in the third quarter of 2009, as compared to the same period in 2008, while the net interest margin, on a tax equivalent basis, decreased 14 basis points from 3.86% in the third quarter of 2008 to 3.72% in the third quarter of 2009. The increase in net interest income was the result of the growth in earning assets, which increased $148 million or 14% on average from the third quarter of 2008. While the net interest margin decreased, the net interest spread, the difference between the Bank's yield on earning assets and the cost of interest bearing liabilities, decreased by only 1 basis point from the third quarter of 2008. The difference between the net interest margin and net interest spread is accounted for by the diminishing impact that net non interest bearing funding, net free funds, has on the margin as overall funding cost decreased.
The provision for loan losses increased by $3,225,000 (416%) in the third quarter of 2009, as compared to the same period in 2008. Contributing to this increase were higher levels of charge-offs in the third quarter of 2009, as compared to the same period in 2008, and management's concerns over the declining housing market, falling real estate values and overall deteriorating economic conditions. The Company recorded $2,038,000 in net charge-offs in the third quarter of 2009 as compared to $410,000 in the third quarter of 2008. The Company's non-performing loans as a percentage of total loans were 2.29% as of September 30, 2009, as compared to 1.17% as of September 30, 2008, and the annualized net charge-offs to average loans increased from .16% in the third quarter of 2008 to .76% in the third quarter of 2009. As a result of the stress current economic conditions have had on the Company's loan portfolio, the allowance for loan losses (ALL) increased $1,962,000 (17%) from the end of the second quarter of 2009 and $3,868,000 (39%) from the end of 2008. As a result of the added allowance, the ALL has increased from .97% of loans at the end of 2008 to 1.24% of loans at the end of the third quarter. Removing the loans purchased from Integra, the ALL would be 1.30% of loans. The loans from Integra were purchased at a discount of .98%, and current accounting does not allow this discount to be added to the ALL. The adequacy of the ALL is analyzed quarterly and adjusted as necessary to maintain appropriate reserves for probable incurred losses in the loan portfolio.
Non-interest income decreased 8% ($331,000) in the third quarter of 2009, as compared to the same period in 2008, while non-interest expense increased 3% ($264,000) from the same period last year. Contributing to the decrease in non-interest income was $594,000 in losses on the sale of other real estate owned. Non-interest expense in the third quarter of 2009 included a $235,000 (121%) increase in FDIC insurance expense.
Total assets were $1.392 billion at the end of the third quarter of 2009, which was $177 million or 15% higher than the same date a year ago. Total loans and investments grew $111 million or 11% and $56 million or 57% respectively, from September of 2008 and were funded by an increase in deposits of $158 million or 16% and an increase in preferred stock and warrants of $34 million.
Bank of Kentucky Financial Corporation
Selected Consolidated Financial Data
(Dollars in thousands, except per share data)
Third Quarter Nine months ended
Comparison September 30, Comparison
-------------- ---------------------------------
Income Statement
Data 9/30/09 9/30/08 % Chg 9/30/09 9/30/08 % Chg
------- ------- ----- ------- ------- -----
Interest income $15,787 $16,863 (6)% $46,428 $52,414 (11)%
Interest
expense 4,370 6,319 (31)% 13,797 22,146 (38)%
------- ------- ------- -------
Net interest
income 11,417 10,544 8% 32,631 30,268 8%
Provision for
loan losses 4,000 775 416% 8,325 3,175 162%
------- ------- ------- -------
Net interest
income after
provision for
loan losses 7,417 9,769 (24)% 24,306 27,093 (10)%
Non - interest
income 3,576 3,907 (8)% 11,900 11,118 7%
Non - interest
expense 8,998 8,734 3% 27,431 25,866 6%
------- ------- ------- -------
Net income
before income
taxes 1,995 4,942 (60)% 8,775 12,345 (29)%
Provision for
income taxes 450 1,523 (70)% 2,343 3,795 (38)%
------- ------- ------- -------
Net income 1,545 3,419 (55)% 6,432 8,550 (25)%
Preferred Stock
Dividends &
Amortization 506 -- 100% 1,283 -- 100%
------- ------- ------- -------
Net Income
Available to
Common
Shareholders $ 1,039 $ 3,419 (70)% $ 5,149 $ 8,550 (40)%
======= ======= ======= =======
Per Common
Share Data
Diluted
earnings
per common
share 0.18 0.61 (70)% 0.91 1.52 (40)%
Cash dividends
declared 0.28 0.28 0% 0.56 0.54 4%
Earnings
Performance
Data
Return on common
equity 3.95% 14.08% (1,013)bps 6.63% 12.08% (545)bps
Return on assets .46% 1.14% (68)bps .65% .95% (30)bps
Net interest
margin 3.64% 3.82% (18)bps 3.56% 3.64% (8)bps
Balance Sheet
Data
Investments $153,732 $97,819 57%
Total loans 1,110,202 999,393 11%
Allowance for
loan losses 13,778 9,464 46%
Total assets 1,391,669 1,214,339 15%
Total deposits 1,150,764 992,493 16%
Total borrowings 91,005 113,256 (20)%
Common
Stockholders'
equity 105,728 97,720 8%
Preferred Stock 33,142 -- 100%
Common Shares
Outstanding 5,616,707 5,606,607 --%
Five-Quarter Comparison
-----------------------
Income
Statement Data 9/30/09 6/30/09 3/31/09 12/31/08 9/30/08
------- ------- ------- -------- -------
Net interest
income 11,417 $10,978 $10,236 $10,394 $10,544
Provision for
loan losses 4,000 2,800 1,525 1,675 775
Net interest
income after
provision for
loan losses 7,417 8,178 8,711 8,719 9,769
------- ------- ------- -------- -------
Service charges
and fees 2,444 2,289 2,015 2,269 2,452
Gain on sale of
real estate
loans 223 478 526 220 116
Gain on sale of
securities -- -- 263 -- --
Trust fee income 288 271 230 252 284
Bankcard
transaction
revenue 579 551 491 489 502
Losses on Other
Real Estate
Owned (594) 39 13 (94) (71)
Other non-
interest income 636 594 564 514 624
------- ------- ------- -------- -------
Total non-
interest income 3,576 4,222 4,102 3,650 3,907
------- ------- ------- -------- -------
Salaries and
employee
benefits
expense 4,006 4,048 3,999 3,886 4,224
Occupancy and
equipment
expense 1,158 1,169 1,237 1,132 1,191
Data processing
expense 392 385 394 330 336
State bank taxes 456 456 452 336 420
Amortization of
intangible
assets 258 283 296 296 296
FDIC Insurance 429 1,027 399 194 194
Other non-
interest
expenses 2,299 2,217 2,071 2,183 2,073
------- ------- ------- -------- -------
Total non-
interest
expense 8,998 9,585 8,848 8,357 8,734
------- ------- ------- -------- -------
Net income
before income
tax expense 1,995 2,815 3,965 4,012 4,942
Income tax expense 450 744 1,149 1,221 1,523
------- ------- ------- -------- -------
Net income 1,545 2,071 2,816 2,791 3,419
Preferred Stock
Dividends &
Amortization 506 519 258 -- --
------- ------- ------- -------- -------
Net Income
Available to
Common
Shareholders $1,039 $1,552 $2,558 2,791 3,419
======= ======= ======= ======== =======
Per Common Share
Data
Diluted earnings
per common
share 0.18 0.27 0.46 0.50 0.61
Cash dividends
declared 0.28 0.00 0.28 0.00 0.28
Weighted average
common shares
outstanding
Basic 5,615,475 5,612,607 5,611,607 5,606,607 5,606,607
Diluted 5,695,096 5,658,818 5,611,607 5,606,749 5,606,980
Earnings
Performance
Data
Return on
common equity 3.95% 5.96% 10.11% 11.15% 14.08%
Return on assets .46% .62% .89% .90% 1.14%
Net interest
margin 3.64% 3.53% 3.50% 3.64% 3.82%
Net interest
margin
(tax equivalent) 3.72% 3.61% 3.58% 3.70% 3.86%
Balance Sheet
Data 9/30/09 6/30/09 3/31/09 12/31/08 9/30/08
------- ------- ------- -------- -------
Investments $153,732 $163,260 $159,192 $119,212 $97,819
Total loans 1,110,202 1,052,033 1,026,845 1,026,557 999,393
Allowance for
loan losses 13,778 11,816 10,753 9,910 9,464
Total assets 1,391,669 1,334,114 1,315,329 1,255,382 1,214,339
Total deposits 1,150,764 1,119,335 1,097,811 1,071,153 992,493
Total
borrowings 91,005 65,356 71,050 72,951 113,256
Common
Stockholders'
equity 105,728 105,325 103,711 101,448 97,720
Preferred Stock 33,142 33,057 33,007 -- --
Common Shares
Outstanding 5,616,707 5,612,607 5,612,607 5,606,607 5,606,607
Average Balance
Sheet Data
Average
investments $161,026 $159,767 $123,123 $106,903 $99,185
Average other
earning assets 20,516 36,244 35,120 17,872 7,865
Average loans 1,065,031 1,050,749 1,027,391 1,011,395 991,206
Average earning
assets 1,246,573 1,246,760 1,185,634 1,136,170 1,098,256
Average assets 1,346,674 1,344,100 1,282,008 1,236,114 1,195,289
Average
deposits 1,128,342 1,127,982 1,080,699 1,046,289 1,003,548
Average
interest
bearing
deposits 967,968 967,030 936,503 899,434 852,399
Average interest
bearing
transaction
deposits 546,114 556,248 536,141 516,082 492,501
Average interest
bearing time
deposits 421,854 410,782 400,362 383,352 359,898
Average
borrowings 67,553 67,383 73,397 78,631 79,227
Average interest
bearing
liabilities 1,035,521 1,034,413 1,009,900 978,065 931,626
Average Common
stockholders
equity 105,506 104,518 102,579 99,584 96,618
Average
Preferred
stock 33,100 33,032 16,504 -- --
Asset Quality
Data
Allowance for
loan losses to
total loans 1.24% 1.12% 1.05% .97% .95%
Allowance for
loan losses
to non-
performing
loans 54% 80% 89% 98% 85%
Nonaccrual loans $24,046 $12,105 $7,636 $8,211 $8,226
Restructured
loans -- 632 3,492 575 575
Loans - 90 days
past due &
still accruing 1,351 1,943 1,022 1,350 2,844
------- ------- ------- -------- -------
Total non-
performing
loans 25,397 14,680 12,150 10,136 11,645
OREO and
repossessed
assets 1,015 1,209 1,259 712 3,673
------- ------- ------- -------- -------
Total non-
performing
assets 26,412 15,889 13,409 10,848 15,318
======= ======= ======= ======== =======
Non-performing
loans to total
loans 2.29% 1.40% 1.18% .99% 1.17%
Non-performing
assets to total
assets 1.91% 1.20% 1.02% .87% 1.26%
Annualized
charge-offs to
average loans .76% .68% .27% .48% .16%
Net charge-offs $2,038 $1,737 $682 $1,229 $410
About BKFC
BKFC, a bank holding company with assets of approximately $1.392 billion, offers banking and related financial services to both individuals and business customers. BKFC operates twenty-eight branch locations and forty-five ATMs in the Northern Kentucky market.