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

Exhibit 99.1

NEWS RELEASE

THE BANK OF KENTUCKY FINANCIAL CORPORATION

ANNOUNCES SECOND QUARTER EARNINGS

Earnings per share up 37% for the second quarter of 2010

CRESTVIEW HILLS, KENTUCKY, July 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 second quarter and six months ended June 30, 2010. For the second quarter, the Company reported an increase in diluted earnings per common share of 37% as compared to the second quarter of 2009, while diluted earnings per share for the first six months of 2010 decreased 16% from the same period in 2009.

A summary of the Company’s results follows:

Second Quarter ended June 30,	2010		2009		Change
Net income	$	2,610,000	$	2,071,000	26	%
Net income available for common shareholders	$	2,096,000	$	1,552,000	35	%
Earnings per common share, basic	$	0.37	$	0.28	32	%
Earnings per common share, diluted	$	0.37	$	0.27	37	%
Six Months ended June 30,	2010		2009		Change
Net income	$	4,470,000	$	4,887,000	(9	)%
Net income available for common shareholders	$	3,446,000	$	4,110,000	(16	)%
Net income per common share, basic	$	0.61	$	0.73	(16	)%
Net income per common share, diluted	$	0.61	$	0.73	(16	)%

Robert Zapp, President and Chief Executive Officer stated, “The increase in earnings is not a surprise considering the proactive approach we have taken to expand our business, while addressing the realities of the economy and its impact on our loan portfolio. We leveraged our capital in 2009 by adding branches, purchasing a block of commercial loans and significantly growing our trust department. We are now seeing the positive impact on revenue and will continue to focus on increasing loans and core deposits. I am pleased with the ongoing effort from our credit and commercial teams as they aggressively work with borrowers to guide us through this very challenging environment. As the nation emerges from this cycle, the Company is well-positioned and prepared to build upon accomplishments that started twenty years ago when we opened for business in August 1990.”

Driving the increase in earnings in the second quarter was strong revenue growth, which increased $3,194,000 from the second quarter of 2009. The growth in revenue was partially offset by an additional $1,700,000 provision for loan losses and an increase of $731,000 in noninterest expense as compared to the second quarter of 2009. Contributing to this increase in the provision for loan losses were higher levels of charge-offs and non-performing loans in the second quarter of 2010 as compared to the same period in 2009, and management’s concerns over the effects that the recent recession, including the deteriorating housing market, falling real estate values and high unemployment rates, will have on the Company’s loan portfolio. Two acquisitions that were completed in the fourth quarter of 2009 had a significant impact on the Company’s balance sheet and income statement as compared

to the second 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 announced in the fourth quarter of 2009 that investment professionals from Tapke Asset Management, LLC (“TAM”) joined the Bank.

Net interest income increased $2,476,000, or 23% in the second quarter of 2010, as compared to the same period in 2009, while the net interest margin, on a tax equivalent basis, increased 20 basis points from 3.61% in the second quarter of 2009 to 3.81% in the second quarter of 2010. Contributing to the increase in net interest income was the growth in average earning assets, which increased $197 million, or 16% on average from the second quarter of 2009.

The provision for loan losses increased by $1,700,000 (61%) in the second quarter of 2010, as compared to the same period in 2009. Contributing to this increase were higher levels of charge-offs in the second quarter of 2010, as compared to the same period in 2009, and management’s concerns over the declining housing market, falling real estate values and overall deteriorating economic conditions. The Company recorded $3,577,000 in net charge-offs in the second quarter of 2010 as compared to $1,737,000 in the second quarter of 2009. The Company’s non-performing loans as a percentage of total loans were 1.99% as of June 30, 2010, as compared to 1.34% as of June 30, 2009, and the annualized net charge-offs to average loans increased from .68% in the second quarter of 2009 to 1.26% in the second quarter of 2010. On a sequential basis, the provision for loan losses of $4,500,000 in the second quarter of 2010 equaled the provision in the first quarter of 2010, while non-performing loans increased slightly from $21.8 million (1.91% of total loans) at March 31, 2010 to $22.4 million (1.99% of total loans) at June 30, 2010. Also, net charge-offs on a sequential basis decreased from $4,046,000 (1.41% of loans) in the first quarter of 2010 to $3,577,000 (1.26% of loans) in the second 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 $4,715,000 (40%) from June 30, 2009. As a result of the added allowance, the ALL has increased from 1.12% of loans at the end of the second quarter of 2009 to 1.47% of loans at the end of the second quarter of 2010. Removing the loans purchased from Integra, the ALL would be 1.62% of loans. 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 17% ($718,000) in the second quarter of 2010, as compared to the same period in 2009, while non-interest expense increased 8% ($731,000) from the same period last year. Contributing to the increase in non-interest income was trust income, service charges and bankcard revenue, which was offset by a decrease in gains on the sale of real estate loans. Contributing to the increase in trust fees was the TAM acquisition. Non-interest expense in the second 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 contributed to the 18% ($716,000) increase in salaries and benefits. Partially offsetting the increase in salaries and benefits and other expense was a $440,000 (43%) decreased in FDIC insurance from the second quarter of 2009. This decrease was the result of the FDIC’s special assessment charged to banks in the second quarter of 2009.

Total assets were $1.520 billion at the end of the second quarter of 2010, which was $186 million or 14% higher than the same date a year ago. Total loans, investments and fed funds sold grew $71 million (7%), $70 million (43%) and $29 million (1402%) respectively, from June of 2010 and were funded by an increase in deposits of $182 million or 16%.

The Bank of Kentucky Financial Corporation

Selected Consolidated Financial Data

(Dollars in thousands, except per share data)

	Second Quarter Comparison								Six months ended June 30, Comparison
Income Statement Data	6/30/10			6/30/09			% Chg		6/30/10			6/30/09			% Chg
Interest income	$	16,813		$	15,528		8	%	$	33,586		$	30,641	��	10	%
Interest expense		3,359			4,550		(26	)%		7,198			9,427		(24	)%
Net interest income		13,454			10,978		23	%		26,388			21,214		24	%
Provision for loan losses		4,500			2,800		61	%		9,000			4,325		108	%
Net interest income after provision for loan losses		8,954			8,178		10	%		17,388			16,889		3	%
Non – interest income		4,940			4,222		17	%		9,545			8,324		15	%
Non – interest expense		10,316			9,585		8	%		20,929			18,433		14	%
Net income before income taxes		3,578			2,815		27	%		6,004			6,780		(11	)%
Provision for income taxes		968			744		30	%		1,534			1,893		(19	)%
Net income		2,610			2,071		26	%		4,470			4,887		(9	)%
Preferred stock dividends & amortization		514			519		(1	)%		1,024			777		32	%
Net income available to common shareholders	$	2,096		$	1,552		35	%	$	3,446		$	4,110		(16	)%
Per Common Share Data
Diluted earnings per common share		0.37			0.27		37	%		0.61			0.73		(16	)%
Cash dividends declared		0.00			0.00		0	%		0.28			0.28		0	%
Earnings Performance Data
Return on common equity		7.59	%		5.96	%	163	bps		6.33	%		8.00	%	(167	)bps
Return on assets		.67	%		.62	%	5	bps		.57	%		.75	%	(18	)bps
Net interest margin		3.74	%		3.53	%	21	bps		3.68	%		3.52	%	16	bps

The Bank of Kentucky Financial Corporation

Selected Consolidated Financial Data

(Dollars in thousands, except per share data)

Balance Sheet Data
	June 30, 2010			December 31, 2009			June 30, 2009
Assets:
Cash and cash equivalents	$	69,094		$	98,738		$	37,478
Investments		233,817			214,667			163,360
Loans held for sale		6,795			6,798			11,989
Total loans, gross		1,122,964			1,154,984			1,052,033
Allowance for loan losses		(16,531	)		(15,153	)		(11,816	)
Premises and equipment, net		23,690			23,588			18,738
Goodwill and acquisition intangibles, net		26,178			26,936			17,182
Other assets and accrued interest receivable		53,613			54,440			45,150
Total assets	$	1,519,620		$	1,564,998		$	1,334,114
Liabilities & Shareholders’ Equity
Total deposits	$	1,300,949		$	1,343,272		$	1,119,335
Short-term borrowings		18,097			21,669			20,567
Notes payable		44,770			44,781			44,789
Accrued interest payable and other liabilities		10,894			14,143			11,041
Total liabilities		1,374,710			1,423,865			1,195,732
Common stockholders’ equity		111,510			107,907			105,325
Preferred stock		33,400			33,226			33,057
Shareholders’ equity		144,910			141,133			138,382
Total liabilities and shareholders’ equity	$	1,519,620		$	1,564,998		$	1,334,114

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 June 30, 2010						Three Months ended June 30, 2009
	Average outstanding balance		Interest earned/ paid		Yield/ rate		Average outstanding balance		Interest earned/ paid		Yield/ rate
Interest-earning assets:
Loans receivable (1)(2)	$	1,139,730	$	15,426	5.43	%	$	1,050,749	$	14,395	5.49	%
Securities (2)		243,572		1,536	2.53			159,767		1,305	3.28
Other interest-earning assets		60,416		97	0.64			36,244		72	0.80
Total interest-earning assets		1,443,718		17,059	4.74			1,246,760		15,772	5.07
Non-interest-earning assets		124,119						97,340
Total assets	$	1,567,837					$	1,344,100
Interest-bearing liabilities:
Transaction accounts		695,866		646	0.37			556,248		902	0.65
Time deposits		450,254		2,415	2.15			410,782		3,247	3.17
Borrowings		66,333		298	1.80			67,383		401	2.39
Total interest-bearing liabilities		1,212,453		3,359	1.11			1,034,413		4,550	1.76
Non-interest-bearing liabilities		212,297						172,137
Total liabilities		1,424,750						1,206,550
Shareholders’ equity		143,087						137,550
Total liabilities and shareholders’ equity	$	1,567,837					$	1,344,100
Net interest income			$	13,700					$	11,222
Interest rate spread					3.63	%					3.31	%
Net interest margin (net interest income as a percent of average interest-earning assets)					3.81	%					3.61	%

(1) Includes non-accrual loans.

(2) Income presented on a tax equivalent basis using a 34.23% and 34.70% tax rate in 2010 and 2009, respectively. The tax equivalent adjustment was $246,000 and $244,000 in 2010 and 2009, 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 )
	Six Months ended June 30, 2010						Six Months ended June 30, 2009
	Average outstanding balance		Interest earned/ paid		Yield/ rate		Average outstanding balance		Interest earned/ paid		Yield/ rate
Interest-earning assets:
Loans receivable (1)(2)	$	1,146,378	$	30,803	5.42	%	$	1,039,136	$	28,342	5.50	%
Securities (2)		230,001		3,067	2.69			141,546		2,644	3.77
Other interest-earning assets		68,735		206	0.60			35,509		140	0.80
Total interest-earning assets		1,445,114		34,076	4.76			1,216,191		31,126	5.16
Non-interest-earning assets		124,880						97,036
Total assets	$	1,569,994					$	1,313,227
Interest-bearing liabilities:
Transaction accounts		699,182		1,596	0.46			548,382		1,912	0.70
Time deposits		454,405		5,010	2.22			403,560		6,655	3.33
Borrowings		66,736		592	1.79			67,478		860	2.57
Total interest-bearing liabilities		1,220,323		7,198	1.19			1,019,420		9,427	1.86
Non-interest-bearing liabilities		207,529						165,490
Total liabilities		1,427,852						1,184,910
Shareholders’ equity		142,142						128,317
Total liabilities and shareholders’ equity	$	1,569,994					$	1,313,227
Net interest income			$	26,878					$	21,699
Interest rate spread					3.57	%					3.30	%
Net interest margin (net interest income as a percent of average interest-earning assets)					3.75	%					3.60	%

(1) Includes non-accrual loans.

(2) Income presented on a tax equivalent basis using a 34.23% and 34.70% tax rate in 2010 and 2009, respectively. The tax equivalent adjustment was $490,000 and $485,000 in 2010 and 2009, respectively.

The Bank of Kentucky Financial Corporation

Selected Consolidated Financial Data

(Dollars in thousands, except per share data)

Income Statement Data	Five-Quarter Comparison									9/30/09			6/30/09
	6/30/10			3/31/10			12/31/09
Net interest income	$	13,454		$	12,934		$	12,162		$	11,417		$	10,978
Provision for loan losses		4,500			4,500			4,500			4,000			2,800
Net interest income after provision for loan losses		8,954			8,434			7,662			7,417			8,178
Service charges and fees		2,622			2,267			2,408			2,444			2,289
Gain on sale of real estate loans		337			322			276			223			478
Gain on sale of securities		—			—			465			—			—
Trust fee income		602			550			322			288			271
Bankcard transaction revenue		747			673			615			579			551
Gains/(losses) on other real estate owned		30			141			14			(594	)		39
Other non-interest income		602			652			616			636			594
Total non-interest income		4,940			4,605			4,716			3,576			4,222
Salaries and employee benefits expense		4,764			4,565			4,086			4,006			4,048
Occupancy and equipment expense		1,187			1,450			1,139			1,158			1,169
Data processing expense		443			461			426			392			385
State bank taxes		507			490			433			456			456
Amortization of intangible assets		375			384			258			258			283
FDIC Insurance		587			585			553			429			1,027
Other non-interest expenses		2,453			2,678			2,351			2,299			2,217
Total non-interest expense		10,316			10,613			9,246			8,998			9,585
Net income before income tax expense		3,578			2,426			3,132			1,995			2,815
Income tax expense		968			566			804			450			744
Net income		2,610			1,860			2,328			1,545			2,071
Preferred stock dividends & amortization		514			510			509			506			519
Net income available to common shareholders	$	2,096		$	1,350		$	1,819		$	1,039		$	1,552
Per Common Share Data
Diluted earnings per common share		0.37			0.24			0.32			0.18			0.27
Cash dividends declared		0.00			0.28			0.00			0.28			0.00
Weighted average common shares outstanding
Basic		5,666,707			5,666,707			5,622,142			5,615,475			5,612,607
Diluted		5,666,707			5,681,515			5,652,722			5,695,096			5,658,818
Earnings Performance Data
Return on common equity		7.59	%		5.03	%		6.76	%		3.95	%		5.96	%
Return on assets		.67	%		.48	%		.63	%		.46	%		.62	%
Net interest margin		3.74	%		3.63	%		3.57	%		3.64	%		3.53	%
Net interest margin (tax equivalent)		3.81	%		3.69	%		3.65	%		3.72	%		3.61	%

The Bank of Kentucky Financial Corporation

Selected Consolidated Financial Data

(Dollars in thousands, except per share data)

Balance Sheet Data	Five-Quarter Comparison
	6/30/10			3/31/10			12/31/09			9/30/09			6/30/09
Assets:
Cash and cash equivalents	$	69,094		$	121,299		$	98,738		$	56,418		$	37,478
Investments		233,817			240,650			214,667			153,832			163,360
Loans held for sale		6,795			2,072			6,798			2,926			11,989
Total loans		1,122,964			1,142,609			1,154,984			1,110,202			1,052,033
Allowance for loan losses		(16,531	)		(15,607	)		(15,153	)		(13,778	)		(11,816	)
Premises and equipment, net		23,690			23,883			23,588			18,793			18,738
Goodwill and acquisition intangibles, net		26,178			26,552			26,936			16,925			17,182
Other assets & accrued interest receivable		53,613			54,096			54,440			46,351			45,150
Total assets		1,519,620			1,595,554			1,564,998			1,391,669			1,334,114
Liabilities & Shareholders’ Equity
Total deposits	$	1,300,949		$	1,376,468		$	1,343,272		$	1,150,764		$	1,119,335
Short-term borrowings		18,097			22,833			21,669			46,220			20,567
Notes payable		44,770			44,776			44,781			44,785			44,789
Accrued interest payable & other liabilities		10,894			10,214			14,143			11,030			11,041
Total liabilities		1,374,710			1,454,291			1,423,865			1,252,799			1,195,732
Common stockholders’ equity		111,510			107,952			107,907			105,728			105,325
Preferred stock		33,400			33,311			33,226			33,142			33,057
Shareholders’ equity		144,910			141,263			141,133			138,870			138,382
Total liabilities and shareholders’ equity		1,519,620			1,595,554			1,564,998			1,391,669			1,334,114
Common shares outstanding		5,666,707			5,666,707			5,666,707			5,616,707			5,612,607
Average Balance Sheet Data
Average investments	$	243,572		$	216,280		$	182,769		$	161,026		$	159,767
Average other earning assets		60,416			77,147			44,822			20,516			36,244
Average loans		1,139,730			1,153,099			1,123,355			1,065,031			1,050,749
Average earning assets		1,443,718			1,446,526			1,350,946			1,246,573			1,246,760
Average assets		1,567,837			1,572,174			1,455,496			1,346,674			1,344,100
Average deposits		1,347,906			1,354,035			1,236,465			1,128,342			1,127,982
Average interest bearing deposits		1,146,120			1,161,137			1,064,344			967,968			967,030
Average interest bearing transaction deposits		695,866			702,534			629,018			546,114			556,248
Average interest bearing time deposits		450,254			458,603			435,326			421,854			410,782
Average borrowings		66,333			67,144			67,517			67,553			67,383
Average interest bearing liabilities		1,212,453			1,288,281			1,131,861			1,035,521			1,034,413
Average common stockholders equity		109,732			107,929			106,818			105,506			104,518
Average preferred stock		33,355			33,269			33,184			33,100			33,032

The Bank of Kentucky Financial Corporation

Selected Consolidated Financial Data

(Dollars in thousands, except per share data

	Five-Quarter Comparison
Asset Quality Data	6/30/10			3/31/10			12/31/09			9/30/09			6/30/09
Allowance for loan losses to total loans		1.47	%		1.37	%		1.31	%		1.24	%		1.12	%
Allowance for loan losses to non-performing loans		74	%		72	%		59	%		54	%		80	%
Nonaccrual loans	$	22,184		$	21,692		$	23,826		$	24,046		$	12,105
Loans – 90 days past due & still accruing		213			114			1,736			1,351			1,943
Total non-performing loans		22,397			21,806			25,562			25,397			14,048
OREO and repossessed assets		1,397			1,535			1,381			1,015			1,209
Total non-performing assets		23,794			23,341			26,943			26,412			15,257
Restructured loans-accruing		3,441			6,332			3,568			—			632
Non-performing loans to total loans		1.99	%		1.91	%		2.21	%		2.29	%		1.34	%
Non-performing assets to total assets		1.57	%		1.47	%		1.73	%		1.91	%		1.15	%
Annualized charge-offs to average loans		1.26	%		1.41	%		1.12	%		.76	%		.68	%
Net charge-offs	$	3,577		$	4,046		$	3,125		$	2,038		$	1,737

About BKFC

BKFC, a bank holding company with assets of approximately $1.520 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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