Stock Yards Bancorp Inc

Previous wording

SYB, established in 1904, is a state-chartered non-member financial institution that provides services in Louisville, central, eastern and northern Kentucky, as well as the Indianapolis, Indiana and Cincinnati, Ohio markets through 71 full service banking center locations. The Bank is registered with, and subject to supervision, regulation and examination by the FDIC and the Kentucky Department of Financial Institutions.

Current wording

SYB, established in 1904, is a state-chartered non-member financial institution that provides services in Louisville, central, eastern and northern Kentucky, as well as the Indianapolis, Indiana and Cincinnati, Ohio markets through 72 full service banking center locations. The Bank is registered with, and subject to supervision, regulation and examination by the FDIC and the Kentucky Department of Financial Institutions.

Previous wording

At March 31, 2024, Bancorp’s loan portfolio consisted of approximately 72% fixed and 28% variable rate loans. At inception, most of Bancorp’s fixed rate loans are priced in relation to the five year treasury. Bancorp’s variable rate loans are typically indexed to either Prime or SOFR, generally repricing as those rates change. At March 31, 2024, approximately 60% and 40% of Bancorp’s variable rate loan portfolio was indexed to Prime and SOFR, respectively.

Current wording

At June 30, 2024, Bancorp’s loan portfolio consisted of approximately 71% fixed and 29% variable rate loans. At inception, most of Bancorp’s fixed rate loans are priced in relation to the five year treasury. Bancorp’s variable rate loans are typically indexed to either Prime or SOFR, generally repricing as those rates change. At June 30, 2024, approximately 60% and 40% of Bancorp’s variable rate loan portfolio was indexed to Prime and SOFR, respectively.

Previous wording

The current economic outlook remains volatile, regularly changing as new economic data becomes available and the FRB’s efforts to control inflation continue. Recent projections indicate that the FRB will hold rates at a higher level longer than initially anticipated, with only one rate reduction expected to occur in the late third/early fourth quarter of 2024. While Bancorp believes ongoing pricing pressure/competition for both loans and deposits, changing levels of liquidity and an improving-but-still-inverted yield curve could possibly place pressure on NIM through the first half of 2024, NIM expansion is anticipated during the second half of the year.

Current wording

The current economic outlook remains volatile, regularly changing as new economic data becomes available and the FRB’s efforts to control inflation continue. Recent projections indicate the potential for multiple rate reductions to occur in the late third/early fourth quarter of 2024. While Bancorp has experienced NIM compression as a result of pricing pressure/competition for both loans and deposits, changing levels of liquidity and an improving-but-still-inverted yield curve, NIM expansion is anticipated during the second half of the year.

Previous wording

Net interest spread (FTE) and NIM (FTE) were 2.49% and 3.20%, for the three months ended March 31, 2024, compared to 3.13% and 3.59% for the same period in 2023, respectively. NIM during the three months ended March 31, 2024 was significantly impacted by the following:

Current wording

Net interest spread (FTE) and NIM (FTE) were 2.52% and 3.26%, for the three months ended June 30, 2024, compared to 2.84% and 3.42% for the same period in 2023, respectively. NIM during the three months ended June 30, 2024 was significantly impacted by the following:

Previous wording

Total interest income (FTE) increased $17.0 million, or 21%, to $96.6 million for the three months ended March 31, 2024, as compared to the same period of 2023.

Current wording

Total interest income (FTE) increased $17.2 million, or 21%, to $100 million for the three months ended June 30, 2024, as compared to the same period of 2023.

Previous wording

Total average interest bearing liabilities increased $727 million, or 15%, to $5.54 billion for the three-month period ended March 31, 2024 compared with the same period in 2023.

Current wording

Total average interest bearing liabilities increased $681 million, or 14%, to $5.60 billion for the three month period ended June 30, 2024 compared with the same period in 2023.

Previous wording

Total interest expense increased $20.1 million for the three months ended March 31, 2024 compared to the same period of 2023, driven by a significant rise in rates paid on deposits and increased borrowing activity. As a result, the cost of interest bearing liabilities increased 127 bps to 2.65% for the three months ended March 31, 2024 compared to the same period of 2023.

Current wording

Total interest expense increased $16.2 million for the three months ended June 30, 2024 compared to the same period of 2023, driven by a significant rise in rates paid on deposits and increased borrowing activity. As a result, the cost of interest bearing liabilities increased 94 bps to 2.75% for the three months ended June 30, 2024 compared to the same period of 2023.

Previous wording

Net interest income (FTE) decreased $3.1 million, or 5%, for the three months ended March 31, 2024 compared to the same period of 2023, as significant organic loan growth and the benefit of higher rates upon interest earning assets were outpaced by rising funding costs stemming from intense pricing pressure/competition for deposits and increased borrowing activity.

Current wording

Net interest income (FTE) decreased $2.0 million, or 2%, for the six months ended June 30, 2024 compared to the same period of 2023, as significant average loan growth and the benefit of higher rates upon average interest earning assets were outpaced by rising funding costs stemming from intense pricing pressure/competition for deposits and increased borrowing activity.

Previous wording

Total average interest earning assets increased $413 million, or 6%, for the three months ended March 31, 2024, as compared to the same period of 2023, attributed to substantial average loan growth that was only partially offset by a decline in average investment securities associated with normal amortization and contractual maturities. However, as a result of a significantly higher interest rate environment, the average rate earned on total interest earning assets climbed 63 bps to 5.14%.

Current wording

Total average interest earning assets increased $451 million, or 6%, for the six months ended June 30, 2024, as compared to the same period of 2023, attributed to substantial average loan growth that was only partially offset by a decline in average investment securities associated with normal amortization and contractual maturities. As a result of a higher interest rate environment, the average rate earned on total interest earning assets climbed 62 bps to 5.20%.

Previous wording

The results of the interest rate sensitivity analysis performed as of March 31, 2024 were derived from conservative assumptions Bancorp uses in its model, particularly in relation to deposit betas, which measure how responsive management’s deposit repricing may be to changes in market rates based on historical data. Management uses different betas in the rising and falling rate scenarios in an effort to best simulate expected earnings trends. The results presented below reflect an interest rate sensitivity analysis that incorporates a deposit beta of approximately 45% for rising rate scenarios and 39% for falling rate scenarios, respectively. The beta used in the falling rate scenario is the result of management’s expectations of deposit rate decreases given the current characteristics of the deposit portfolio. The analysis performed as of March 31, 2024 suggests a slightly asset sensitive interest rate risk profile, which represents a change from the more neutral profile rendered from the prior quarter analysis. This change is the result of update to the assumptions incorporated in the model, the most notable being deposit betas.

Current wording

The results of the interest rate sensitivity analysis performed as of June 30, 2024 were derived from conservative assumptions Bancorp uses in its model, particularly in relation to deposit betas, which measure how responsive management’s deposit repricing may be to changes in market rates based on historical data. Management uses different betas in the rising and falling rate scenarios in an effort to best simulate expected earnings trends. The results presented below reflect an interest rate sensitivity analysis that incorporates a deposit beta of approximately 45% for rising rate scenarios and 39% for falling rate scenarios, respectively. The beta used in the falling rate scenario is the result of management’s expectations of deposit rate decreases given the current characteristics of the deposit portfolio.

Previous wording

Bancorp’s interest rate simulation sensitivity analysis details that increases in interest rates of 100 and 200 bps would have a positive effect on net interest income, while decreases in interest rates of 100 and 200 bps would have a negative impact. These results depict an asset sensitive interest rate risk profile. The increase in net interest income in the rising rate scenarios is primarily due to variable rate loans and short-term investments repricing more quickly than deposits and short-term borrowings. Net interest income decreases in the falling rate scenarios because rates on non-maturity deposits cannot be lowered sufficiently to offset the decline in interest income associated with assets that immediately reprice as rates fall.

Current wording

Bancorp’s interest rate sensitivity analysis details that increases in interest rates of 100 and 200 bps would have a positive effect on net interest income, while decreases in interest rates of 100 and 200 bps would have a negative impact. These results depict an asset sensitive interest rate risk profile. The increase in net interest income in the rising rate scenarios is primarily due to variable rate loans and short-term investments repricing more quickly than deposits and short-term borrowings. Net interest income decreases in the falling rate scenarios because rates on non-maturity deposits cannot be lowered sufficiently to offset the decline in interest income associated with assets that immediately reprice as rates fall.

Previous wording

Bancorp’s loan portfolio is currently composed of approximately 72% fixed and 28% variable rate loans, with the fixed rate portion pricing generally based on a spread to the five year treasury curve at the time of origination and the variable portion pricing based on an on-going spread to Prime (approximately 60%) or SOFR (approximately 40%).

Current wording

Bancorp’s loan portfolio is currently composed of approximately 71% fixed and 29% variable rate loans, with the fixed rate portion pricing generally based on a spread to the five year treasury curve at the time of origination and the variable portion pricing based on an on-going spread to Prime (approximately 60%) or SOFR (approximately 40%).

Previous wording

The ACL for loans totaled $81 million as of March 31, 2024 compared to $76 million at March 31, 2023, representing an ACL to total loans ratio of 1.38% and 1.44% for the respective periods.

Current wording

The ACL for loans totaled $82 million as of June 30, 2024 compared to $78 million at June 30, 2023, representing an ACL to total loans ratio of 1.35% and 1.43% for the respective periods.

Previous wording

Provision expense on loans of $1.2 million was recorded for the three month period ended March 31, 2024, consistent with modest loan growth, annual CECL model methodology updates, a slight improvement in the unemployment forecast and a reduction in specific reserves. Net recoveries of $348,000 were recorded for the three months ended March 31, 2024.

Current wording

Provision expense on loans of $1.1 million and $2.3 million was recorded for the three and six month periods ended June 30, 2024, consistent with strong loan growth, slight deterioration in the unemployment forecast and offset by CECL model methodology updates, including a thorough evaluation of qualitative factors. Net recoveries of $183,000 and $531,000 were recorded for the three and six month periods ended June 30, 2024, serving to increase the ACL for loans.

Previous wording

Provision expense on loans of $2.3 million was recorded for the three months ended March 31, 2023, driven by the establishment of a $1.4 million specific reserve for a large C&I relationship, annual CECL model updates and qualitative factor adjustments. Further, net charge off activity for the three months ended March 31, 2023 totaled $108,000, serving to reduce the ACL for loans.

Current wording

Provision of $2.2 million and $4.4 million was recorded to provision for credit losses on loans for the three and six month periods ended June 30, 2023, respectively. Provision expense for the first half of 2023 was driven by strong loan growth, the establishment of a $1.4 million specific reserve for a large C&I relationship, and qualitative factor adjustments associated with the rising rate environment. Further, net charge off activity for the three and six months ended June 30, 2023 totaled $113,000 and $221,000, respectively, which slightly reduced the ACL for loans.

Previous wording

While separate from the ACL for loans and recorded in other liabilities on the consolidated balance sheets, the ACL for off balance sheet credit exposures also experienced an increase between December 31, 2023 and March 31, 2024. Provision for credit loss expense for off balance sheet credit exposures of $250,000 was recorded for the three months ended March 31, 2024, driven by a decline in C&I utilization and increased availability stemming from the addition of new lines of credit. The ACL for off balance sheet credit exposures totaled $6.1 million as of March 31, 2024.

Current wording

While separate from the ACL for loans and recorded in other liabilities on the consolidated balance sheets, the ACL for off balance sheet credit exposures also experienced an increase between December 31, 2023 and June 30, 2024. Provision for credit loss expense for off balance sheet credit exposures of $225,000 and $475,000 was recorded for the three and six month periods ended June 30, 2024, driven largely by increased availability within the C&D portfolio. The ACL for off balance sheet credit exposures totaled $6.3 million as of June 30, 2024.

Previous wording

Provision for credit loss expense for off balance sheet credit exposures of $375,000 was recorded for the three months ended March 31, 2023. The expense recorded for the first quarter of the prior year was driven largely by a decline in C&I line utilization. The ACL for off balance sheet credit exposures was $4.9 million as of March 31, 2023.

Current wording

Provision for credit loss expense for off balance sheet credit exposures of $200,000 and $575,000 was recorded for the three and six month periods ended June 30, 2023. The ACL for off balance sheet credit exposures was $5 million as of June 30, 2023.

Previous wording

Total non-interest income increased $1.2 million or 6%, for the three month period ended March 31, 2024 compared to the same period of 2023. Non-interest income comprised 27.9% of total revenues, defined as net interest income and non-interest income, for the three month period ended March 31, 2024 compared to 25.9% for the same period of 2023. WM&T services comprised 46.3% of total non-interest income for the three month period ended March 31, 2024 compared to 43.2% for the same period of 2023.

Current wording

Total non-interest income increased $795,000, or 3%, and $2.0 million, or 4%, for the three and six month periods ended June 30, 2024 compared to the same periods of 2023, respectively. Non-interest income comprised 27.6% and 27.8% of total revenues, defined as net interest income and non-interest income, for the three and six month periods ended June 30, 2024 compared to 27.3% and 26.6%% for the same periods of 2023. WM&T services comprised 45.6% and 46.0% of total non-interest income for the three and six month periods ended June 30, 2024 compared to 44.4% and 43.8% for the same periods of 2023.

Previous wording

The magnitude of WM&T revenue distinguishes Bancorp from other community banks of similar asset size. WM&T revenue increased $1.2 million, or 13%, for the three month period ended March 31, 2024, as compared with the same period of 2023, consistent with strong first quarter equity market appreciation, net new business expansion and higher quarterly fee income.

Current wording

The magnitude of WM&T revenue distinguishes Bancorp from other community banks of similar asset size. WM&T revenue increased $649,000, or 6%, and $1.9 million, or 10%, for the three and six month periods ended June 30, 2024, as compared with the same periods of 2023, consistent with strong equity market appreciation, net new business expansion and higher quarterly fee income.

Previous wording

Recurring fees earned for managing accounts are based on a percentage of market value of AUM and are typically assessed on a monthly basis. Recurring fees, which generally comprise the vast majority of WM&T revenue, increased $1.1 million, or 12%, for the three month period ended March 31, 2024, as compared with the same period of 2023. The increase was driven largely by the factors noted in the preceding paragraph.

Current wording

Recurring fees earned for managing accounts are based on a percentage of market value of AUM and are typically assessed on a monthly basis. Recurring fees, which generally comprise the vast majority of WM&T revenue, increased $527,000, or 5%, and $1.6 million, or 9% for the three and six month periods ended June 30, 2024, as compared with the same periods of 2023. The increases were driven largely by the factors noted in the preceding paragraph.

Previous wording

A portion of WM&T revenue, most notably executor and certain employee benefit plan-related fees, are non-recurring in nature and the timing of these revenues corresponds with the related administrative activities. For this reason, such fees are subject to greater period over period fluctuation. Total non-recurring fees increased $125,000 for the three month period ended March 31, 2024, as compared with the same period of 2023, which was driven by increased estate fee income.

Current wording

A portion of WM&T revenue, most notably executor and certain employee benefit plan-related fees, are non-recurring in nature and the timing of these revenues corresponds with the related administrative activities. For this reason, such fees are subject to greater period over period fluctuation. Total non-recurring fees increased $121,000 and $246,000 for the three and six month periods ended June 30, 2024, as compared with the same periods of 2023, driven by increased estate fee income.

Previous wording

AUM, stated at market value, totaled $7.50 billion at March 31, 2024 compared with $6.76 billion at March 31, 2023 and $7.16 billion at December 31, 2023. The increase in AUM between March 31, 2023 and March 31, 2024 is attributed to strong equity market appreciation experienced over the past year in addition to net new business expansion.

Current wording

AUM, stated at market value, totaled $7.48 billion at June 30, 2024 compared with $6.98 billion at June 30, 2023 and $7.16 billion at December 31, 2023. The increase in AUM between June 30, 2023 and June 30, 2024 is attributed to strong equity market appreciation experienced over the past year in addition to net new business expansion.

Previous wording

AUM (not included on balance sheet) increased from $7.16 billion at December 31, 2023 to $7.50 billion at March 31, 2024 as follows:

Current wording

AUM (not included on balance sheet) increased from $7.16 billion at December 31, 2023 to $7.48 billion at June 30, 2024 as follows:

Previous wording

As of both March 31, 2024 and December 31, 2023, approximately 82% of AUM were actively managed. Company retirement plan accounts consist primarily of participant-directed assets. The amount of custody and safekeeping accounts are insignificant to WM&T operations.

Current wording

As of June 30, 2024 and December 31, 2023, approximately 81% and 82% of AUM were actively managed, respectively. Company retirement plan accounts consist primarily of participant-directed assets. The amount of custody and safekeeping accounts are insignificant to overall WM&T operations.

Previous wording

(1) Includes client directed instruments including rights, warrants, annuities, insurance policies, unit investment trusts, and oil and gas rights.

Current wording

(1) Includes client directed instruments such as rights, warrants, annuities, insurance policies, unit investment trusts, and oil and gas rights.

Previous wording

Deposit service charges, which consist of non-sufficient funds charges and to a lesser extent, other activity based charges, decreased $13,000, or 1%, for the three month period ended March 31, 2024, as compared with the same period of 2023. Consistent with the banking industry generally, Bancorp has experienced a decline in the volume of fees earned on overdrawn checking accounts has been experienced over the past several years. This trend has been driven by lower check presentment volume, which has in turn led to fewer overdrawn accounts in general. Further, Bancorp anticipates that future growth of this revenue stream could be significantly impacted by changing industry practices. Bancorp could be faced with strategic decisions surrounding deposit-related service charges in the future, which could negatively impact the contributions made by this, or similar, revenue streams.

Current wording

Deposit service charges, which consist of non-sufficient funds charges and to a lesser extent, other activity based charges, decreased $21,000, or 1%, and $34,000, or 1%, for the three and six month periods ended June 30, 2024, as compared with the same periods of 2023. Consistent with the banking industry generally, Bancorp has experienced a steady decline in the volume of fees earned on overdrawn checking accounts over the past several years. This trend has been driven by lower check presentment volume, which has in turn led to fewer overdrawn accounts in general. Further, Bancorp anticipates that future growth of this revenue stream could be significantly impacted by changing industry practices. Bancorp could be faced with strategic decisions surrounding deposit-related service charges in the future, which could negatively impact the contributions made by this, or similar, revenue streams.

Previous wording

Debit and credit card income consists of interchange revenue, ancillary fees and incentives received from card processors. Debit and credit card revenue increased $200,000, or 4%, for the three month period ended March 31, 2024, as compared with the same period of 2023. The increase was driven by interchange income expansion and higher transaction volume. Total debit card income increased $18,000, or less than 1%, and total credit card income increased $182,000, or 13%, for the three month period ended March 31, 2024, compared the same period of the prior year. While Bancorp generally expects this revenue stream to grow with continued expansion of the customer base, interchange rate compression and fluctuations in business and consumer spend levels could serve as challenges to future growth.

Current wording

Debit and credit card income consists of interchange revenue, ancillary fees and incentives received from card processors. Debit and credit card revenue increased $211,000, or 4%, and $411,000, or 4%, for the three and six month periods ended June 30, 2024, as compared with the same periods of 2023. The increases were driven by interchange income expansion and higher transaction volume. Total debit card income increased $32,000, or less than 1%, and $50,000, or 1%, and total credit card income increased $179,000, or 13%, and $361,000, or 13% for the three and six month periods ended June 30, 2024, compared the same periods of the prior year. While Bancorp generally expects this revenue stream to grow with continued expansion of the customer base, interchange rate compression and fluctuations in business and consumer spend levels could serve as challenges to future growth.

Previous wording

Treasury management fees primarily consist of fees earned for cash management services provided to commercial customers. This category continues to stand out as a consistent, growing source of revenue for Bancorp and increased $307,000, or 13%, for the three month period ended March 31, 2024, as compared with the same period of 2023, driven by organic expansion, increased transaction volume, growing international services and new product sales. Bancorp anticipates this income category will continue to increase based on continued customer base growth and the expanding suite of services offered within Bancorp’s treasury management platform.

Current wording

Treasury management fees primarily consist of fees earned for cash management services provided to commercial customers. This category continues to stand out as a consistent, growing source of revenue for Bancorp and increased $276,000, or 11%, and $583,000, or 12%, for the three and six month periods ended June 30, 2024, as compared with the same periods of 2023, driven by expansion, increased transaction volume, growing international services and new product sales. Bancorp anticipates this income category will continue to increase based on continued customer base growth and the expanding suite of services offered within Bancorp’s treasury management platform.

Previous wording

Mortgage banking income primarily includes gains on sales of mortgage loans and net loan servicing income offset by MSR amortization. Bancorp’s mortgage banking department predominantly originates residential mortgage loans to be sold in the secondary market, primarily to FNMA and FHLMC. Bancorp offers conventional, VA, FHA and GNMA financing for purchases and refinances, as well as programs for first-time homebuyers. Interest rates on mortgage loans directly influence the volume of business transacted by the mortgage-banking department. Mortgage banking revenue decreased $90,000, or 9%, for the three month period ended March 31, 2024, as compared with the same period of 2023, the variance from the prior year period being attributed to changing levels of mortgage volume.

Current wording

Mortgage banking income primarily includes gains on sales of mortgage loans and net loan servicing income offset by MSR amortization. Bancorp’s mortgage banking department predominantly originates residential mortgage loans to be sold in the secondary market, primarily to FNMA and FHLMC. Bancorp offers conventional, VA, FHA and GNMA financing for purchases and refinances, as well as programs for first-time homebuyers. Interest rates on mortgage loans directly influence the volume of business transacted by the mortgage-banking department. Mortgage banking revenue decreased $13,000, or 1%, and $103,000, or 5%, for the three and six month periods ended June 30, 2024, as compared with the same periods of 2023, driven by an overall decline in origination volume stemming from higher interest rates and generally low housing inventory compared to prior periods.

Previous wording

Net investment product sales commissions and fees are generated primarily on stock, bond and mutual fund sales, as well as wrap fees earned on brokerage accounts. Wrap fees represent charges for investment programs that bundle together a suite of services, such as brokerage, advisory, research and management and are based on a percentage of account assets. Bancorp deploys its financial advisors primarily through its branch network via an arrangement with a third party broker-dealer, while larger managed accounts are generally serviced by Bancorp’s WM&T group. Net investment product sales commissions and fees increased $111,000, or 15%, for the three month period ended March 31, 2024, as compared with the same period of 2023 as a result of higher trading volume and equity market appreciation.

Current wording

Net investment product sales commissions and fees are generated primarily on stock, bond and mutual fund sales, as well as wrap fees earned on brokerage accounts. Wrap fees represent charges for investment programs that bundle together a suite of services, such as brokerage, advisory, research and management and are based on a percentage of account assets. Bancorp deploys its financial advisors primarily through its branch network via an arrangement with a third party broker-dealer, while larger managed accounts are generally serviced by Bancorp’s WM&T group. Net investment product sales commissions and fees were unchanged for the three month period ended June 30, 2024 and increased $111,000, or 7%, for the six month periods ended June 30, 2024, as compared with the same periods of 2023.

Previous wording

BOLI assets represent the cash surrender value of life insurance policies on certain active and non-active employees who have provided consent for Bancorp to be the beneficiary for a portion of such policies. The related change in cash surrender value and any death benefits received under the policies are recorded as non-interest income and serves to offset the cost of various employee benefits. BOLI income increased $39,000, or 7%, for the three month period ending March 31, 2024 compared to the same period of the prior year, which was attributed to general market appreciation within the policy plans over the past year.

Current wording

BOLI assets represent the cash surrender value of life insurance policies on certain active and non-active employees who have provided consent for Bancorp to be the beneficiary for a portion of such policies. The related change in cash surrender value and any death benefits received under the policies are recorded as non-interest income and serves to offset the cost of various employee benefits. BOLI income increased $36,000, or 6%, and $75,000, or 7%, for the three and six month periods ending June 30, 2024 compared to the same periods of the prior year, which was attributed to general market appreciation within the policy plans over the past year.

Previous wording

No gain/loss activity on the sale of premises and equipment was recorded for the three months ended March 31, 2024. Activity for the three months ended March 31, 2023 was the result of the sale of certain acquired properties that overlapped with existing locations.

Current wording

A gain of $20,000 on the sale of premises and equipment was recorded for the three and six month periods ended June 30, 2024. Activity for the three and six month periods ended June 30, 2023 was the result of the sale of certain acquired properties that overlapped with existing locations.

Previous wording

Other non-interest income decreased $576,000, or 47%, for the three month period ended March 31, 2024 compared with the same period of 2023. The decrease was driven largely by Bancorp’s decision not to renew the insurance captive in late 2023, which contributed approximately $538,000 of other non-interest income for the three months ended March 31, 2023.

Current wording

Other non-interest income decreased $588,000, or 54%, and $1.2 million, or 50%, for the three and six month periods ended June 30, 2024 compared with the same periods of 2023. The decrease was driven largely by Bancorp’s decision not to renew the insurance captive in late 2023, which contributed approximately $536,000 and $1.1 million of other non-interest income for the three and six month periods ended June 30, 2023.

Previous wording

Total non-interest expenses increased $3.6 million, or 8%, for the three month period ended March 31, 2024 compared to the same period of 2023. Compensation and employee benefits comprised 61.5% of Bancorp’s total non-interest expenses for the three month period ended March 31, 2024, compared to 59.5% for the same period of 2023.

Current wording

Total non-interest expenses increased $3.3 million, or 7%, and $7.0 million, or 8%, for the three and six month periods ended June 30, 2024 compared to the same periods of 2023. Compensation and employee benefits comprised 60.5% and 61.0% of Bancorp’s total non-interest expenses for the three and six month periods ended June 30, 2024, compared to 59.3% and 59.4% for the same periods of 2023.

Previous wording

Compensation, which includes salaries, incentives, bonuses and stock based compensation, increased $2.3 million, or 11%, for the three month period ended March 31, 2024, as compared with the same period of 2023. The increase was attributed to annual merit-based salary increases and growth in full time equivalent employees. Net full time equivalent employees totaled 1,062 at March 31, 2024 compared to 1,075 at December 31, 2023 and 1,028 at March 31, 2023.

Current wording

Compensation, which includes salaries, incentives, bonuses and stock based compensation, increased $2.5 million, or 11%, and $4.9 million, or 11%, for the three and six month periods ended June 30, 2024, as compared with the same periods of 2023. The increases were attributed to annual merit-based salary increases, higher bonus accruals and to a lesser extent, increased incentive compensation. Net full time equivalent employees totaled 1,062 at June 30, 2024 compared to 1,075 at December 31, 2023 and 1,056 at June 30, 2023.

Previous wording

Employee benefits consists of all personnel-related expense not included in compensation, with the most significant items being health insurance, payroll taxes and employee retirement plan contributions. Employee benefits increased $823,000, or 16%, for the three month period ended March 31, 2024, as compared with the same period of 2023, driven by an increase in health insurance claims activity and the overall increase in full time equivalent employees noted above.

Current wording

Employee benefits consists of all personnel-related expense not included in compensation, with the most significant items being health insurance, payroll taxes and employee retirement plan contributions. Employee benefits increased $25,000, or less than 1%, and $848,000, or 8%, for the three and six month periods ended June 30, 2024, as compared with the same periods of 2023, driven mainly by an increase in health insurance claims activity.

Previous wording

Net occupancy and equipment expenses primarily include depreciation, rent, property taxes, utilities and maintenance. Costs of capital asset additions flow through the statement of income over the lives of the assets in the form of depreciation expense. Net occupancy expense decreased $229,000, or 6%, for the three month period ended March 31, 2024, as compared with the same period of 2023. The decrease was attributed to the benefit of consolidating WM&T employees from the Louisville market into one centralized location in the fourth quarter of 2023.** **At March 31, 2024, Bancorp’s branch network consisted of 71 locations throughout Louisville, central, eastern and Northern Kentucky, as well as the MSAs of Indianapolis, Indiana and Cincinnati, Ohio.

Current wording

Net occupancy and equipment expenses primarily include depreciation, rent, property taxes, utilities and maintenance. Costs of capital asset additions flow through the statement of income over the lives of the assets in the form of depreciation expense. Net occupancy expense increased $305,000, or 9%, and $76,000, or 1%, for the three and six month periods ended June 30, 2024, as compared with the same periods of 2023. The increase for the three month period was attributed largely to the centralization of WM&T employees from the Louisville market into one location in the fourth quarter of 2023. The increase for the six month period was marginal.** **At June 30, 2024, Bancorp’s branch network consisted of 72 locations throughout Louisville, central, eastern and Northern Kentucky, as well as the MSAs of Indianapolis, Indiana and Cincinnati, Ohio.

Previous wording

Technology and communication expenses include computer software usage and licensing fees, equipment depreciation and expenditures related to investments in technology needed to maintain and improve the quality of customer delivery channels, information security and internal resources. Technology expense increased $818,000, or 19%, for the three month period ended March 31, 2024 compared to the same period of 2023, consistent with Bancorp’s growth and continued investment in technology, including various software upgrades and cyber-security enhancements.

Current wording

Technology and communication expenses include computer software usage and licensing fees, equipment depreciation and expenditures related to investments in technology needed to maintain and improve the quality of customer delivery channels, information security and internal resources. Technology expense increased $675,000, or 16%, and $1.5 million, or 18%, for the three and six month periods ended June30, 2024 compared to the same periods of 2023, consistent with Bancorp’s growth and continued investment in technology, including various security and compliance-related software upgrades.

Previous wording

Bancorp outsources processing for debit and commercial credit card operations, which generate significant revenue for the Company. These expenses typically fluctuate consistent with transaction volumes. Debit and credit card processing expense increased $327,000, or 23%, for the three month period ending March 31, 2024 compared to the same period of last year, driven by increased transaction volume and customer base expansion.

Current wording

Bancorp outsources processing for debit and commercial credit card operations, which generate significant revenue for the Company. These expenses typically fluctuate consistent with transaction volumes. Debit and credit card processing expense increased $105,000, or 6%, and $432,000, or 14%, for the three and six month periods ending June 30, 2024 compared to the same periods of last year, driven by increased transaction volume and customer base expansion.

Previous wording

Marketing and business development expenses include all costs associated with promoting Bancorp, including community support, retaining customers and acquiring new business. Marketing and business development expenses decreased $20,000, or 2%, for the three month period ending March 31, 2024, as compared to the same period of 2023.

Current wording

Marketing and business development expenses include all costs associated with promoting Bancorp, including community support, retaining customers and acquiring new business. Marketing and business development expenses decreased $188,000, or 11%, and $208,000, or 7%, for the three and six month periods ending June 30, 2024, as compared to the same periods of 2023. The decreases stemmed largely from lower advertising and to a lesser extent, lower customer entertainment expenses compared to the prior year.