CRESTVIEW HILLS, Ky., Oct. 21, 2010 (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 nine months ended September 30, 2010. For the third quarter and the first nine months of 2010, the Company reported an increase in diluted earnings per common share of 194% and 25% respectively from the same periods in 2009.
A summary of the Company's results follows:
Robert Zapp, President and Chief Executive Officer, stated, "We celebrated our twentieth year in business in August and it is equally pleasing to present our third quarter numbers. Strong revenue growth from across the organization helped boost earnings at a time when regulatory and economic pressures persist. We continue to see a steady improvement on the credit side, which allows for a lower provision. We remain proactive, however, and recognize there is much work to do. In addition to these positive trends, we were pleased to learn of the Bank's number one ranking in total market share in Northern Kentucky, according to FDIC data recently released. Our core deposit growth has been unmatched and we are proud to be in the top spot for the first time. It is a testament to our strategy and commitment to the community. Although we can enjoy these accomplishments and milestones, our management team is realistic about the challenges facing all of us. We are focused on improving all areas of the Bank to further drive revenue, find efficiencies, and expand each line of business."
Driving the increase in earnings in the third quarter was strong revenue growth and a lower provision for loan losses as compared to the third quarter of 2009. Total revenue increased $4,226,000 or 28% from the third quarter of 2009 while the provision for loan losses decreased $500,000 or 13% in the same period. The growth in revenue included a $2,175,000 or 19% increase in net interest income and a $2,051,000 or 57% increase in non interest income. The decrease in the provision for loan losses reflected improving credit metrics. Two acquisitions that were completed in the fourth quarter of 2009 also had a significant impact on the Company's balance sheet and income statement as compared to the third quarter of 2009. In the fourth quarter of 2009, the Bank completed the purchase of 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 added $76 million in deposits and $107 million in loans. The Bank also completed the purchase of Tapke Asset Management, LLC ("TAM") in the fourth quarter of 2009.
Net interest income increased $2,175,000, or 19% in the third quarter of 2010, as compared to the same period in 2009, while the net interest margin, on a tax equivalent basis, increased 25 basis points from 3.72% in the third quarter of 2009 to 3.97% in the third quarter of 2010. Contributing to the increase in net interest income was the growth in average earning assets, which increased $139 million, or 11% on average from the third quarter of 2009.
The provision for loan losses decreased by $500,000 (13%) in the third quarter of 2010, as compared to the same period in 2009. Contributing to this decrease was lower levels on non-performing loans from September 2009 and lower levels of charge-offs on a sequential basis. The Company's non-performing loans as a percentage of total loans were 1.69% as of September 30, 2010, as compared to 2.29% as of September 30, 2009, and while annualized net charge-offs to average loans increased from .76% in the third quarter of 2009 to 1.02% in the third quarter of 2010 the net charge-off ratio was lower than the levels experienced over the last three quarters. The Company recorded $2,867,000 in net charge-offs in the third quarter of 2010 as compared to $2,038,000 in the third quarter of 2009. On a sequential basis, the provision for loan losses of $3,500,000 in the third quarter of 2010 was $1,000,000 lower than the provision in the second quarter of 2010, while non-performing loans decreased from $22.4 million (1.99% of total loans) at June 30, 2010 to $18.9 million (1.69% of total loans) at September 30, 2010. Net charge-offs also on a sequential basis decreased from $3,577,000 (1.26% of loans) in the second quarter of 2010 to $2,867,000 (1.02% of loans) in the third quarter of 2010. As a result of the impact that current economic conditions have had on the Company's loan portfolio, the allowance for loan losses (ALL) increased $3,385,000 (25%) from September 30, 2009. As a result of the added allowance, the ALL has increased from 1.24% of loans at the end of the third quarter of 2009 to 1.53% of loans at the end of the third quarter of 2010. Removing the loans purchased from Integra, the ALL would be approximately 1.68% of loans at the end of third quarter 2010. The portfolio of commercial loans purchased from Integra in the fourth quarter of 2009 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 Bank's loan portfolio.
Non-interest income increased 57% ($2,051,000) in the third quarter of 2010, as compared to the same period in 2009, while non-interest expense increased 19% ($1,727,000) from the same period last year. Contributing to the increase in non-interest income was gains on the sale of real estate loans which increase $818,000 (367%) from the third quarter of 2009. These fees were driven by extremely low interest rates, which have prompted a strong demand for home mortgage loan refinancing. Also contributing to the increase in non-interest income was a lower amount of losses on other real estate owned. The third quarter of 2009 included $594,000 in losses on other real estate owned, of which $462,000 was from one property. Other increases in non-interest income included trust income, service charges and bankcard revenue. Contributing to the increase in trust fees was the TAM acquisition. Non-interest expense in the third quarter of 2010 included the full quarter effect of both the Integra branch acquisition and the TAM acquisition. Added personnel from the TAM and Integra acquisitions and higher commissions associated with the gains on the sale of real estate loans contributed to the 28% ($1,104,000) increase in salaries and benefits. Commissions accounted for $250,000 of this increase in salaries and benefits, which was 319% higher than the third quarter of 2009.
Total assets were $1.510 billion at the end of the third quarter of 2010, which was $118 million or 9% higher than the same date a year ago. Total loans and investments grew $10 million (1%) and $87 million (56%) respectively, from September of 2009 and were funded by an increase in deposits of $121 million or 10%.
BKFC, a bank holding company with assets of approximately $1.510 billion, offers banking and related financial services to both individuals and business customers. BKFC operates thirty-one branch locations and forty-seven ATMs in the Northern Kentucky market.
CONTACT: The Bank of Kentucky Financial Corp. Martin Gerrety, Executive Vice President and CFO (859) 372-5169 email@example.com