Bank of Kentucky Financial (BKYF) 8-K Announces Fourth Quarter Earnings

Exhibit 99.1

NEWS RELEASE

THE BANK OF KENTUCKY FINANCIAL CORPORATION

ANNOUNCES FOURTH QUARTER EARNINGS

CRESTVIEW HILLS, KENTUCKY, January 22, 2010 – 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 fourth quarter and the year ended December 31, 2009. For the fourth quarter and the year, the Company reported a decrease in diluted earnings per common share of 36% for the year and 39% for the fourth quarter, as compared to the same periods in 2008. The 2009 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 of $509,000 for the fourth quarter and $1,792,000 for the year ended December 31, 2009 which reduces net income available to common shareholders. 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 fourth quarter results included an additional $2,825,000 provision for loan losses as compared to the fourth quarter of 2008 which also contributed to the decrease in earnings per share as well as net income. Contributing to this increase in the provision for loan losses were higher levels of charge-offs and non-performing loans in the fourth 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. 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 announced in the fourth quarter that the investment professionals from Tapke Asset Management, LLC joined the Bank, and as a result, the Bank now oversees in excess of $650 million in client assets. The balance sheet information presented does not include all finalized purchase accounting adjustments and any such changes are not expected to be material.

A summary of the Company’s results follows:

Fourth Quarter ended December 31,	2009		2008		Change
Net income	$	2,328,000	$	2,791,000	(17	)%
Net income available for common shareholders	$	1,819,000	$	2,791,000	(35	)%
Earnings per common share, basic	$	0.32	$	0.50	(36	)%
Earnings per common share, diluted	$	0.32	$	0.50	(36	)%

Year ended December 31,	2009		2008		Change
Net income	$	8,760,000	$	11,341,000	(23	)%
Net income available for common shareholders	$	6,968,000	$	11,341,000	(39	)%
Net income per common share, basic	$	1.24	$	2.02	(39	)%
Net income per common share, diluted	$	1.23	$	2.02	(39	)%

Net interest income increased $1,768,000, or 17% in the fourth quarter of 2009, as compared to the same period in 2008, while the net interest margin, on a tax equivalent basis, decreased 5 basis points from 3.70% in the fourth quarter of 2008 to 3.65% in the fourth quarter of 2009. The increase in net interest income was the result of the growth in earning assets, which increased $215 million or 19% on average from the fourth quarter of 2008.

The provision for loan losses increased by $2,825,000 (169%) in the fourth quarter of 2009, compared to the same period in 2008. Contributing to this increase were higher levels of charge-offs in the fourth 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 $3,125,000 in net charge-offs in the fourth quarter of 2009 as compared to $1,229,000 in the fourth quarter of 2008. The Company’s non-performing loans as a percentage of total loans were 2.21% as of December 31, 2009, as compared to .93% as of December 31, 2008, and the annualized net charge-offs to average loans increased from .48% in the fourth quarter of 2008 to 1.12% in the fourth quarter of 2009. As a result of the impact that the stressed current economic conditions have had on the Company’s loan portfolio, the allowance for loan losses (ALL) increased $5,243,000 (53%) 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 1.31% of loans at the end of the fourth quarter. Removing the loans purchased from Integra, the ALL would be 1.44% 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 increased 29% ($1,066,000) in the fourth quarter of 2009, as compared to the same period in 2008, while non-interest expense increased 11% ($889,000) from the same period last year. Contributing to the increase in non-interest income was $465,000 in gains on the sale of securities. Non-interest expense in the fourth quarter of 2009 included a $359,000 (185%) increase in FDIC insurance expense.

Total assets were $1.564 billion at the end of the fourth quarter of 2009, which was $308 million or 25% higher than the same date a year ago. Total loans, investments and fed funds sold grew $130 million (13%), $95 million (80%) and $58 million (100%) respectively, from December of 2008 and were funded by an increase in deposits of $272 million or 25% and an increase in preferred stock and warrants of $34 million.

The Bank of Kentucky Financial Corporation

Selected Consolidated Financial Data

(Dollars in thousands, except per share data)

	Fourth Quarter Comparison								Year ended December 31, Comparison
	12/31/09			12/31/08			% Chg		12/31/09			12/31/08			% Chg
Income Statement Data
Interest income	$	16,322		$	16,268		0	%	$	62,750		$	68,682		(9	)%
Interest expense		4,160			5,874		(29	)%		17,957			28,020		(36	)%
Net interest income		12,162			10,394		17	%		44,793			40,662		10	%
Provision for loan losses		4,500			1,675		169	%		12,825			4,850		164	%
Net interest income after provision for loan losses		7,662			8,719		(12	)%		31,968			35,812		(11	)%
Non – interest income		4,716			3,650		29	%		16,616			14,768		13	%
Non – interest expense		9,246			8,357		11	%		36,677			34,223		7	%
Net income before income taxes		3,132			4,012		(22	)%		11,907			16,357		(27	)%
Provision for income taxes		804			1,221		(34	)%		3,147			5,016		(37	)%
Net income		2,328			2,791		(17	)%		8,760			11,341		(23	)%
Preferred Stock Dividends & Amortization		509			—		100	%		1,792			—		100	%
Net Income Available to Common Shareholders	$	1,819		$	2,791		(35	)%	$	6,968		$	11,341		(39	)%
Per Common Share Data
Diluted earnings per common share		0.32			0.50		(36	)%		1.23			2.02		(39	)%
Cash dividends declared		0.00			0.00		0	%		0.56			0.54		4	%
Earnings Performance Data
Return on common equity		6.76	%		11.15	%	(439	)bps		6.66	%		11.80	%	(514	)bps
Return on assets		.63	%		.90	%	(27	)bps		.65	%		.93	%	(28	)bps
Net interest margin		3.57	%		3.64	%	(7	)bps		3.56	%		3.63	%	(7	)bps
Balance Sheet Data
Investments									$	214,567		$	119,212		80	%
Total loans										1,156,640			1,026,557		13	%
Allowance for loan losses										15,153			9,910		53	%
Total assets										1,563,659			1,255,382		25	%
Total deposits										1,343,003			1,071,153		25	%
Total borrowings										66,450			72,951		(9	)%
Common Stockholders’ equity										107,907			101,448		6	%
Preferred Stock										33,226			—		100	%
Common Shares Outstanding										5,666,707			5,606,607		1	%

	Five-Quarter Comparison
	12/31/09			9/30/09			6/30/09			3/31/09			12/31/08
Income Statement Data
Net interest income		12,162			11,417		$	10,978		$	10,236		$	10,394
Provision for loan losses		4,500			4,000			2,800			1,525			1,675
Net interest income after provision for loan losses		7,662			7,417			8,178			8,711			8,719
Service charges and fees		2,408			2,444			2,289			2,015			2,269
Gain on sale of real estate loans		276			223			478			526			220
Gain on sale of securities		465			—			—			263			—
Trust fee income		322			288			271			230			252
Bankcard transaction revenue		615			579			551			491			489
Gains/(Losses) on Other Real Estate Owned		14			(594	)		39			13			(94	)
Other non-interest income		616			636			594			564			514
Total non-interest income		4,716			3,576			4,222			4,102			3,650
Salaries and employee benefits expense		4,086			4,006			4,048			3,999			3,886
Occupancy and equipment expense		1,139			1,158			1,169			1,237			1,132
Data processing expense		426			392			385			394			330
State bank taxes		433			456			456			452			336
Amortization of intangible assets		258			258			283			296			296
FDIC Insurance		553			429			1,027			399			194
Other non-interest expenses		2,351			2,299			2,217			2,071			2,183
Total non-interest expense		9,246			8,998			9,585			8,848			8,357
Net income before income tax expense		3,132			1,995			2,815			3,965			4,012
Income tax expense		804			450			744			1,149			1,221
Net income		2,328			1,545			2,071			2,816			2,791
Preferred Stock Dividends & Amortization		509			506			519			258			—
Net Income Available to Common Shareholders	$	1,819		$	1,039		$	1,552		$	2,558			2,791
Per Common Share Data
Diluted earnings per common share		0.32			0.18			0.27			0.46			0.50
Cash dividends declared		0.00			0.28			0.00			0.28			0.00
Weighted average common shares outstanding
Basic		5,622,142			5,615,475			5,612,607			5,611,607			5,606,607
Diluted		5,652,722			5,695,096			5,658,818			5,611,607			5,606,749
Earnings Performance Data
Return on common equity		6.76	%		3.95	%		5.96	%		10.11	%		11.15	%
Return on assets		.63	%		.46	%		.62	%		.89	%		.90	%
Net interest margin		3.57	%		3.64	%		3.53	%		3.50	%		3.64	%
Net interest margin (tax equivalent)		3.65	%		3.72	%		3.61	%		3.58	%		3.70	%

	12/31/09			9/30/09			6/30/09			3/31/09			12/31/08
Balance Sheet Data
Investments	$	214,567		$	153,732		$	163,260		$	159,192		$	119,212
Total loans		1,156,640			1,110,202			1,052,033			1,026,845			1,026,557
Allowance for loan losses		15,153			13,778			11,816			10,753			9,910
Total assets		1,563,659			1,391,669			1,334,114			1,315,329			1,255,382
Total deposits		1,343,003			1,150,764			1,119,335			1,097,811			1,071,153
Total borrowings		66,450			91,005			65,356			71,050			72,951
Common Stockholders’ equity		107,907			105,728			105,325	��		103,711			101,448
Preferred Stock		33,226			33,142			33,057			33,007			—
Common Shares Outstanding		5,666,707			5,616,707			5,612,607			5,612,607			5,606,607
Average Balance Sheet Data
Average investments	$	182,769		$	161,026		$	159,767		$	123,123		$	106,903
Average other earning assets		44,822			20,516			36,244			35,120			17,872
Average loans		1,123,355			1,065,031			1,050,749			1,027,391			1,011,395
Average earning assets		1,350,946			1,246,573			1,246,760			1,185,634			1,136,170
Average assets		1,455,496			1,346,674			1,344,100			1,282,008			1,236,114
Average deposits		1,236,465			1,128,342			1,127,982			1,080,699			1,046,289
Average interest bearing deposits		1,064,344			967,968			967,030			936,503			899,434
Average interest bearing transaction deposits		629,018			546,114			556,248			536,141			516,082
Average interest bearing time deposits		435,326			421,854			410,782			400,362			383,352
Average borrowings		67,517			67,553			67,383			73,397			78,631
Average interest bearing liabilities		1,131,861			1,035,521			1,034,413			1,009,900			978,065
Average Common stockholders equity		106,818			105,506			104,518			102,579			99,584
Average Preferred stock		33,184			33,100			33,032			16,504			—
Asset Quality Data
Allowance for loan losses to total loans		1.31	%		1.24	%		1.12	%		1.05	%		.97	%
Allowance for loan losses to non-performing loans		59	%		54	%		80	%		89	%		98	%
Nonaccrual loans	$	23,826		$	24,046		$	12,105		$	7,636		$	8,211
Loans – 90 days past due & still accruing		1,736			1,351			1,943			1,022			1,350
Total non-performing loans		25,562			25,397			14,048			8,658			9,561
OREO and repossessed assets		1,381			1,015			1,209			1,259			712
Total non-performing assets		26,943			26,412			15,257			9,917			10,273
Restructured loans-accruing		3,568			—			632			3,492			575
Non-performing loans to total loans		2.21	%		2.29	%		1.34	%		.84	%		.93	%
Non-performing assets to total assets		1.73	%		1.91	%		1.15	%		.76	%		.82	%
Annualized charge-offs to average loans		1.12	%		.76	%		.68	%		.27	%		.48	%
Net charge-offs	$	3,125		$	2,038		$	1,737		$	682		$	1,229

About BKFC

BKFC, a bank holding company with assets of approximately $1.564 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.

For more information contact:

Martin Gerrety

Executive Vice President and CFO

(859) 372-5169

mgerrety@bankofky.com

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