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The Bank Of Kentucky Financial Corporation Announces Fourth Quarter Earnings

The increase in earnings available to common shareholders in the fourth quarter of 2012 was primarily attributable to a $900,000 (41%) decrease in the provision for loan losses and a $195,000 (100%) decrease in preferred stock dividends and amortization as compared to the fourth quarter of 2011. Also contributing to increased earnings was a 2% increase in total revenue (net interest income and non interest income), which was offset with a 12% increase in noninterest expense. The decrease in the provision for loan losses reflected lower levels of charge-offs, lower levels of impaired loan reserves and lower levels of adversely classified loans as compared to December 2011. The reduction of preferred stock dividends and amortization reflects the November 2011 repurchase of the final $17 million of the Company's Fixed Rate Cumulative Perpetual Preferred Stock, Series A, previously issued to the U.S. Department of the Treasury as part of the TARP CPP program.

Net interest income increased $245,000 in the fourth quarter of 2012, as compared to the same period in 2011. The net interest margin, on a tax equivalent basis was 3.63% in the fourth quarter of 2012 which equaled the net interest margin in the fourth quarter of 2011.  Contributing to the increase in net interest income was a $247,000 prepayment fee received in the quarter. This prepayment fee also contributed 6 basis points to the net interest margin for the quarter. 

The provision for loan losses decreased by $900,000 (41%) in the fourth quarter of 2012, as compared to the same period in 2011. Contributing to this decrease were lower levels of charge-offs and lower levels of impaired loan reserves as compared to December 2011. The Company's annualized net charge-offs to average loans decreased from .65% in the fourth quarter of 2011 to .45% in the fourth quarter of 2012. The Company recorded $1,317,000 in net charge-offs in the fourth quarter of 2012 as compared to $1,853,000 in the fourth quarter of 2011. Net charge-offs in the fourth quarter of 2012 were reduced by a $961,000 recovery on a loan charged-off in the third quarter of 2012. The majority of the loans charged off in the fourth quarter of 2012 were reserved for in prior quarters. The reserve for impaired loans was $6,265,000 at December 31, 2012, which was $1,178,000 lower than the $7,443,000 reserve at December 31, 2011. As a result of the lower impaired loan reserves, lower charge-offs and lower levels of adversely classified loans, the Allowance for Loan Losses (ALL) has decreased from 1.62% of loans at the end of the fourth quarter of 2011 to 1.39% of loans at the end of the fourth quarter of 2012.   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. On a sequential basis, the provision for loan losses of $1,300,000 in the fourth quarter of 2012 was $900,000 lower than the provision in the third quarter of 2012.   Net charge-offs on a sequential basis decreased from $3,961,000 (1.39% of loans) in the third quarter of 2012 to $1,371,000 (.45% of loans) in the fourth quarter of 2012. Contributing to the decrease in the provision and charge-offs on a sequential basis was the $961,000 recovery discussed previously. 

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