UNITED STATES 

SECURITIES AND EXCHANGE COMMISSION 

Washington, D.C. 20549 

FORM 10-Q

☒ Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended September 30, 2019

or 

☐ Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Commission File Number: 1-13661

STOCK YARDS BANCORP, INC. 

(Exact name of registrant as specified in its charter)

Kentucky	61-1137529
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

1040 East Main Street, Louisville, Kentucky	40206
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (502) 582-2571

Securities registered pursuant to Section 12(b) of the Act: 

Title of each class	Trading symbol(s)	Name of each exchange on which registered
Common stock, no par value	SYBT	The NASDAQ Stock Market, LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  ☒ Yes   ☐ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  ☒ Yes  ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☒	Accelerated filer ☐	Non-accelerated filer ☐	Smaller reporting company ☐
Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ◻

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  ☐ Yes  ☒ No

The number of shares outstanding of the registrant’s Common Stock, no par value, as of October 31, 2019, was 22,597,716.

1

Stock Yards Bancorp, inc. and subsidiary

TABLE OF CONTENTS

Item
part I – financial information
Item 1.      Financial Statements.	4
Item 2.     Management’s Discussion and Analysis of Financial Condition and Results of Operations.	52
Item 3.    Quantitative and Qualitative Disclosures about Market Risk.	76
Item 4.    Controls and Procedures.	76
part II – other information
Item 1.   Legal Proceedings.	76
Item 2.   Unregistered Sales of Equity Securities and Use of Proceeds.	76
Item 6.   Exhibits.	77
SIGNATURES	78

2

Stock Yards Bancorp, inc. and subsidiary

PART I – FINANCIAL INFORMATION

Glossary of Acronyms and Terms

The following listing provides a comprehensive reference of common acronyms and terms used throughout the document:
             

ACH	Automated Clearing House	FDIC	Federal Deposit Insurance Corporation	NM	Not Meaningful
AFS	Available for Sale	FFP	Federal Funds Purchased	OAEM	Other Assets Especially Mentioned
Allowance	Allowance for Loan and Lease Losses	FFS	Federal Funds Sold	OCI	Other Comprehensive Income
AOCI	Accumulated Other Comprehensive Income	FFTR	Federal Funds Target Rate	OREO	Other Real Estate Owned
ASC	Accounting Standards Codification	FHA	Federal Housing Authority	OTTI	Other than Temporary Impairment
ASU	Accounting Standards Update	FHLB	Federal Home Loan Bank of Cincinnati	PCI	Purchased Credit Impaired
AUM	Assets Under Management	FHLMC	Federal Home Loan Mortgage Corporation	Prime	The Wall Street Journal Prime Interest Rate
Bancorp / the Company	Stock Yards Bancorp, Inc.	FICA	Federal Insurance Contributions Act	Provision	Provision for Loan and Lease Losses
Bank / SYB&T	Stock Yards Bank & Trust Company	FNMA	Federal National Mortgage Association	PSU	Performance Stock Unit
BOLI	Bank Owned Life Insurance	FRB	Federal Reserve Bank	ROA	Return on Average Assets
bps	Basis Point - 1/100th of one percent	FTE	Fully Tax Equivalent	ROE	Return on Average Equity
C&D	Construction and Development	GAAP	Generally Accepted Accounting Principles in the United States	RSA	Restricted Stock Award
C&I	Commercial and Industrial	GNMA	Government National Mortgage Association	RSU	Restricted Stock Unit
CD	Certificate of Deposit	HB	House Bill	SAR	Stock Appreciation Right
CECL	Current Expected Credit Loss	HELOC	Home Equity Line of Credit	SEC	Securities and Exchange Commission
CEO	Chief Executive Officer	KBST	King Bancorp Statutory Trust I	SSUAR	Securities Sold Under Agreements to Repurchase
CFO	Chief Financial Officer	KSB	King Bancorp, Inc. and King Southern Bank	TBOC	THE Bank Oldham County
COSO	Committee of Sponsoring Organizations	LIBOR	London Interbank Offered Rate	TCE	Tangible Common Equity
CRA	Community Reinvestment Act	Loans	Loans and Leases	TDR	Troubled Debt Restructuring
CRE	Commercial Real Estate	MBS	Mortgage Backed Securities	TPS	Trust Preferred Securities
EPS	Earnings Per Share	MSA	Metropolitan Statistical Area	VA	U.S. Department of Veterans Affairs
ETR	Effective Tax Rate	MSRs	Mortgage Servicing Rights	WM&T	Wealth Management and Trust
EVP	Executive Vice President	NA	Not Applicable
FASB	Financial Accounting Standards Board	NIM	Net Interest Margin

3

Stock Yards Bancorp, inc. and subsidiary

Item 1.   Financial Statements

CONSOLIDATED BALANCE SHEETS

September 30, 2019 (unaudited) and December 31, 2018

(In thousands, except share data)

	September 30,		December 31,
	2019		2018
Assets
Cash and due from banks	$	68,107	$	51,892
Federal funds sold and interest bearing due from banks		68,107		147,047
Cash and cash equivalents		136,214		198,939
Mortgage loans held for sale		6,329		1,675
Securities available for sale		375,601		436,995
Federal Home Loan Bank stock, at cost		11,316		10,370
Loans and leases		2,856,664		2,548,171
Allowance for loan and lease losses		26,877		25,534
Net loans and leases		2,829,787		2,522,637
Premises and equipment, net		62,386		44,764
Bank owned life insurance		32,376		32,273
Accrued interest receivable		8,581		8,360
Goodwill		12,593		682
Core deposit intangible		2,373		1,057
Other assets		56,370		45,172
Total assets	$	3,533,926	$	3,302,924
Liabilities
Deposits:
Non-interest bearing	$	795,793	$	711,023
Interest bearing		2,150,520		2,083,333
Total deposits		2,946,313		2,794,356
Securities sold under agreements to repurchase		33,172		36,094
Federal funds purchased		9,957		10,247
Federal Home Loan Bank advances		81,985		48,177
Accrued interest payable		712		762
Other liabilities		65,676		46,788
Total liabilities		3,137,815		2,936,424
Commitments and contingent liabilities (note 15)		—		—
Stockholders’ equity
Preferred stock, no par value. Authorized 1,000,000 shares; no shares issued or outstanding		—		—
Common stock, no par value. Authorized 40,000,000 shares; issued and outstanding 22,597,000 and 22,749,000 shares in 2019 and 2018, respectively		36,184		36,689
Additional paid-in capital		34,607		36,797
Retained earnings		323,592		298,156
Accumulated other comprehensive income (loss)		1,728		(5,142	)
Total stockholders’ equity		396,111		366,500
Total liabilities and stockholders’ equity	$	3,533,926	$	3,302,924

See accompanying notes to unaudited consolidated financial statements.

4

CONSOLIDATED STATEMENTS OF INCOME  (Unaudited)

For the three and nine months ended September 30, 2019 and 2018

	Three months ended				Nine months ended
(In thousands, except per share data)	September 30,				September 30,
	2019		2018		2019		2018
Interest income:
Loans and leases	$	35,022	$	30,359	$	99,985	$	86,877
Federal funds sold and interest bearing due from banks		566		373		2,129		804
Mortgage loans held for sale		41		42		121		121
Securities available for sale
Taxable		2,239		2,055		7,353		6,298
Tax-exempt		105		192		382		669
Total interest income		37,973		33,021		109,970		94,769
Interest expense:
Deposits		5,316		3,972		16,034		8,723
Securities sold under agreements to repurchase		26		55		79		122
Federal funds purchased and other short-term borrowing		52		245		176		728
Federal Home Loan Bank advances		509		228		1,154		692
Subordinated debentures		-		—		26		—
Total interest expense		5,903		4,500		17,469		10,265
Net interest income		32,070		28,521		92,501		84,504
Provision for loan and lease losses		400		735		1,000		2,705
Net interest income after provision		31,670		27,786		91,501		81,799
Non-interest income:
Wealth management and trust services		5,738		5,380		16,839		16,224
Deposit service charges		1,444		1,482		4,027		4,340
Debit and credit card income		2,102		1,759		6,014		4,956
Treasury management fees		1,264		1,151		3,623		3,311
Mortgage banking income		834		712		2,112		2,034
Net investment product sales commissions and fees		400		444		1,120		1,245
Bank owned life insurance		487		186		849		564
Other		1,035		312		2,045		1,096
Total non-interest income		13,304		11,426		36,629		33,770
Non-interest expenses:
Compensation		12,330		11,607		36,846		34,280
Employee benefits		2,908		2,501		8,458		7,646
Net occupancy and equipment		2,199		1,914		6,033		5,543
Technology and communication		1,841		1,595		5,462		4,910
Debit and credit card processing		662		588		1,880		1,733
Marketing and business development		732		740		2,260		2,191
Postage, printing and supplies		402		370		1,218		1,161
Legal and professional		524		501		2,581		1,498
FDIC insurance		-		238		486		718
Amortization/impairment of investments in tax credit partnerships		137		-		241		58
Capital and deposit based taxes		993		738		2,864		2,452
Other		1,229		989		3,731		2,754
Total non-interest expenses		23,957		21,781		72,060		64,944
Income before income tax expense		21,017		17,431		56,070		50,625
Income tax expense		3,783		3,555		6,652		9,766
Net income	$	17,234	$	13,876	$	49,418	$	40,859
Net income per share, basic	$	0.76	$	0.61	$	2.18	$	1.81
Net income per share, diluted	$	0.76	$	0.60	$	2.16	$	1.78
Weighted average common shares:
Basic		22,550		22,636		22,633		22,613
Diluted		22,810		22,968		22,901		22,956

See accompanying notes to unaudited consolidated financial statements. 

5

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)

For the three and nine months ended September 30, 2019 and 2018

	Three months ended						Nine months ended
	September 30,						September 30,
(In thousands)	2019			2018			2019			2018
Net income	$	17,234		$	13,876		$	49,418		$	40,859
Other comprehensive income:
Change in unrealized gain (loss) on available for sale debt securities		946			(2,068	)		9,392			(8,392	)
Change in fair value of derivatives used in cash flow hedges		(59	)		51			(589	)		543
Total other comprehensive income (loss), before income tax		887			(2,017	)		8,803			(7,849	)
Tax effect		225			(425	)		1,933			(1,649	)
Total other comprehensive income (loss), net of tax		662			(1,592	)		6,870			(6,200	)
Comprehensive income	$	17,896		$	12,284		$	56,288		$	34,659

See accompanying notes to unaudited consolidated financial statements.

6

9+

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (Unaudited)

Nine months ended September 30, 2019 and 2018 with quarterly subtotals

													Accumulated
	Common stock						Additional						other			Total
	Number of						paid-in			Retained			comprehensive			stockholders'
(In thousands, except per share data)	shares			Amount			capital			earnings			income (loss)			equity
Balance, January 1, 2019		22,749		$	36,689		$	36,797		$	298,156		$	(5,142	)	$	366,500
Activity for three months ended March 31, 2019:
Net income		—			—			—			15,641			—			15,641
Net change in accumulated other comprehensive income		—			—			—			—			2,629			2,629
Stock compensation expense		—			—			863			—			—			863
Stock issued for share-based awards, net of witholdings to satisfy employee tax obligations		74			245			2,254			(4,452	)		—			(1,953	)
Cash dividends declared, $0.25 per share		—			—			—			(5,686	)		—			(5,686	)
Balance, March 31, 2019		22,823		$	36,934		$	39,914		$	303,659		$	(2,513	)	$	377,994
Activity for three months ended June 30, 2019:
Net income		—			—			—			16,543			—			16,543
Net change in accumulated other comprehensive income		—			—			—			—			3,579			3,579
Stock compensation expense		—			—			993			—			—			993
Common stock repurchased		(107	)		(357	)		(3,308	)		—			—			(3,665	)
Stock issued for share-based awards, net of witholdings to satisfy employee tax obligations		5			19			182			(363	)		—			(162	)
Cash dividends declared, $0.26 per share		—			—			—			(5,917	)		—			(5,917	)
Shares cancelled		—			—			(5	)		5			—			—
Balance, June 30, 2019		22,721		$	36,596		$	37,776		$	313,927		$	1,066		$	389,365
Activity for three months ended September 30, 2019:
Net income		—			—			—			17,234			—			17,234
Net change in accumulated other comprehensive income		—			—			—			—			662			662
Stock compensation expense		—			—			876			—			—			876
Common stock repurchased		(152	)		(504	)		(4,995	)		—			—			(5,499	)
Stock issued for share-based awards, net of witholdings to satisfy employee tax obligations		29			97			994			(1,744	)		—			(653	)
Cash dividends declared, $0.26 per share		—			—			—			(5,874	)		—			(5,874	)
Shares cancelled		(1	)		(5	)		(44	)		49			—			—
Balance, September 30, 2019		22,597		$	36,184		$	34,607		$	323,592		$	1,728		$	396,111

See accompanying notes to unaudited consolidated financial statements.

(continued)

7

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (Unaudited) (continued)

Nine months ended September 30, 2019 and 2018 with quarterly subtotals

									Accumulated
	Common stock				Additional				other			Total
	Number of				paid-in		Retained		comprehensive			stockholders'
(In thousands, except per share data)	shares		Amount		capital		earnings		loss			Total
Balance, January 1, 2018		22,679	$	36,457	$	31,924	$	267,193	$	(1,930	)	$	333,644
Activity for three months ended March 31, 2018:
Reclassification adjustment under
Accounting Standards Update 2018-02		—		—		—		506		(506	)		—
Net income		—		—		—		13,404		—			13,404
Net change in accumulated other comprehensive income		—		—		—		—		(3,408	)		(3,408	)
Stock compensation expense		—		—