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 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.

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 73 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

As a result of its acquisition of KB on May 31, 2021, Bancorp became the 100% successor owner of a Nevada-based insurance captive taxed under Section 831(b) of the Internal Revenue Code. On April 10, 2023, the IRS issued a proposed regulation that would potentially classify section 831(b) captive activity as a “listed transaction,” and possibly disallow the related tax benefits, both prospectively and retroactively, for a period to be determined. While the regulation has not been finalized, it is expected to be finalized in 2025. Bancorp elected not to renew the Captive in August of 2023 and ultimately dissolved the Captive in December of 2023.

Current wording

As a result of its acquisition of Kentucky Bancshares, Inc. on May 31, 2021, Bancorp became the 100% successor owner of a Nevada-based insurance captive taxed under Section 831(b) of the Internal Revenue Code. On April 10, 2023, the IRS issued a proposed regulation that would potentially classify section 831(b) captive activity as a, “listed transaction,” and possibly disallow the related tax benefits, both prospectively and retroactively. The regulation was finalized on January 10, 2025, clarifying what is considered a listed transaction or a transaction of interest. Based on the final regulations, there is no change in the status for the captive insurance structure in place previously, which Bancorp dissolved in 2023. The captive remains classified as a transaction of interest for the open tax years and there is no reserve for an uncertain tax position based on the final regulation.

Previous wording

NIM and net interest spread calculations above exclude the sold portion of certain participation loans, which totaled $2 million and $4 million at September 30, 2024 and December 31, 2023, respectively. These sold loans are on Bancorp’s balance sheet as required by GAAP because Bancorp retains some form of effective control; however, Bancorp receives no interest income on the sold portion. These participation loans sold are excluded from NIM and spread analysis, as Bancorp believes it provides a more accurate depiction of loan portfolio performance.

Current wording

NIM and net interest spread calculations above exclude the sold portion of certain participation loans, which totaled $2 million at both March 31, 2025 and December 31, 2024, respectively. These sold loans are on Bancorp’s balance sheet as required by GAAP because Bancorp retains some form of effective control; however, Bancorp receives no interest income on the sold portion. These participation loans sold are excluded from NIM and spread analysis, as Bancorp believes it provides a more accurate depiction of loan portfolio performance.

Previous wording

At September 30, 2024, Bancorp’s loan portfolio consisted of approximately 69% fixed and 31% variable rate loans. At inception, most of Bancorp’s fixed rate loans are generally priced in relation to the five year treasury. Bancorp’s variable rate loans are typically indexed to either Prime or SOFR, repricing as those rates change. At September 30, 2024, approximately 60% and 40% of Bancorp’s variable rate loan portfolio was indexed to Prime and SOFR, respectively.

Current wording

At March 31, 2025, Bancorp’s loan portfolio consisted of approximately 66% fixed and 34% variable rate loans. At inception, most of Bancorp’s fixed rate loans are generally priced in relation to the five year treasury note. Bancorp’s variable rate loans are typically indexed to either Prime or one month term SOFR, repricing as those rates change. At March 31, 2025, approximately 59% and 41% of Bancorp’s variable rate loan portfolio was indexed to Prime and SOFR, respectively.

Previous wording

Prime rate, the five year Treasury note rate and one month term SOFR are included in the preceding tables to provide a general indication of the interest rate environment in which Bancorp has operated during the past 12 months. The FRB increased the FFTR a total of 100 bps in 2023 via four separate 25 bps rate hikes, two of which occurred during the first quarter of 2023. These increases took the FFTR to a range of 5.25% - 5.50%, and Prime to 8.50%, in July of 2023, where each remained until September 18, 2024. On September 18, 2024, the FRB reduced the FFTR 50 bps, representing the first rate reduction in over four years. This action lowered the FFTR to a range of 4.75% - 5.00% and Prime to 8.00% as of September 30, 2024.

Current wording

Prime rate, the five year treasury note rate and one month term SOFR are included in the preceding tables to provide a general indication of the interest rate environment in which Bancorp has operated during the past 12 months. The FRB increased the FFTR a total of 100 bps in 2023 via four separate 25 bps rate hikes, two of which occurred during the first quarter of 2023. These increases took the FFTR to a range of 5.25% - 5.50%, and Prime to 8.50%, in July of 2023. Interest rates remained at these levels until September 2024, when the FRB implemented its first rate reduction in over four years, beginning its attempt to avoid recession and pilot a “soft landing,” with three separate decreases of the FFTR over the final four months of 2024, ultimately lowering the FFTR a total of 100 bps to a range of 4.25% - 4.50%, and Prime to 7.50%, as of December 31, 2024. The FFTR and Prime rate remained at these levels through the first quarter of 2025.

Previous wording

Net interest spread (FTE) and NIM (FTE) were 2.57% and 3.33%, for the three months ended September 30, 2024, compared to 2.68% and 3.34% for the same period in 2023, respectively. NIM during the three months ended September 30, 2024 was significantly impacted by the following:

Current wording

Net interest spread (FTE) and NIM (FTE) were 2.83% and 3.46%, for the three months ended March 31, 2025, compared to 2.49% and 3.20% for the same period in 2024, respectively. NIM during the three months ended March 31, 2025 was significantly impacted by the following:

Previous wording

Net interest income (FTE) increased $3.6 million, or 6%, for the three months ended September 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 managed to outpace rising funding costs stemming from intense pricing pressure/competition for deposits and increased borrowing activity.

Current wording

Net interest income (FTE) increased $10.5 million, or 17%, for the three months ended March 31, 2025 compared to the same period of 2024, as significant average loan growth and the benefit of higher rates upon average interest earning assets far surpassed increased interest expense tied to interest bearing liability growth.

Previous wording

Total average interest earning assets increased $479 million, or 7%, for the three months ended September 30, 2024, as compared to the same period of 2023, attributed to substantial average loan growth that was partially offset by a decline in average investment securities driven by scheduled maturities and normal amortization. However, as a result of a higher interest rate environment, the average rate earned on total average interest earning assets climbed 57 bps to 5.41%.

Current wording

Total average interest earning assets increased $703 million, or 9%, for the three months ended March 31, 2025, as compared to the same period of 2024, attributed to substantial average loan growth that was partially offset by a decline in average investment securities driven by scheduled maturities and normal amortization. However, as a result of a higher interest rate environment, the average rate earned on total average interest earning assets climbed 32 bps to 5.46%.

Previous wording

Total average interest bearing liabilities increased $625 million, or 12%, to $5.70 billion for the three month period ended September 30, 2024 compared with the same period in 2023.

Current wording

Total average interest bearing liabilities increased $719 million, or 13%, to $6.25 billion for the three month period ended March 31, 2025 compared with the same period in 2024.

Previous wording

Bancorp’s interest rate sensitivity analysis details that increases in interest rates of 100 and 200 bps would have a slightly positive effect on net interest income, while decreases in interest rates of 100 and 200 bps would have a slightly negative impact. These results depict a relatively neutral 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 69% fixed and 31% 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 66% fixed and 34% 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 59%) or SOFR (approximately 41%).

Previous wording

The ACL for loans totaled $85 million as of September 30, 2024 compared to $78 million at September 30, 2023, representing an ACL to total loans ratio of 1.36% and 1.39% for the respective periods.

Current wording

The ACL for loans totaled $89 million as of March 31, 2025 compared to $81 million at March 31, 2024, representing an ACL to total loans ratio of 1.34% and 1.38% for the respective periods.

Previous wording

Provision expense on loans of $4.3 million and $6.6 million was recorded for the three and nine month periods ended September 30, 2024, attributed mainly to strong loan growth and deterioration in the FRB unemployment forecast. Net charge offs of $1.1 million and $606,000 were recorded for the three and nine month periods ended September 30, 2024, serving to decrease the ACL for loans.

Current wording

Provision expense on loans of $900,000 was recorded for the three month period ended March 31, 2025. Expense for the first quarter was attributed mainly to strong loan growth, increased specific reserves, and to a lesser extent, slight deterioration within the unemployment forecast, which were partially offset by annual CECL model updates. Additionally, net recoveries of $971,000 were recorded for the three month period ended March 31, 2025, serving to increase 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 September 30, 2024. While no provision for off balance sheet credit exposures was recorded for the three month period ended September 30, 2024 due to increased utilization (and thus a decrease in availability), provision of $475,000 was recorded for the nine month period ended September 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 September 30, 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 remained unchanged between December 31, 2024 and March 31, 2025. No provision for off balance sheet credit exposures was recorded for the three month period ended March 31, 2025, as overall utilization was flat during the first quarter. The ACL for off balance sheet exposures totaled $6.8 million as of March 31, 2025.

Previous wording

Provision for credit loss expense for off balance sheet credit exposures of $475,000 and $1.1 million was recorded for the three and nine month periods ended September 30, 2023. The ACL for off balance sheet credit exposures was $5.6 million as of September 30, 2023.

Current wording

Provision for credit loss expense for off balance sheet credit exposures of $250,000 was recorded for the three month period ended March 31, 2024. The ACL for off balance sheet credit exposures was $6.1 million as of March 31, 2024.

Previous wording

Total non-interest income increased $1.9 million, or 8%, and $3.9 million, or 6%, for the three and nine month periods ended September 30, 2024 compared to the same periods of 2023, respectively. Non-interest income comprised 27.6% and 27.7% of total revenues, defined as net interest income and non-interest income, for the three and nine month periods ended September 30, 2024 compared to 27.2% and 26.8%% for the same periods of 2023. WM&T services comprised 44.1% and 45.3% of total non-interest income for the three and nine month periods ended September 30, 2024 compared to 43.8% for both the three and nine month periods ended September 30, 2023.

Current wording

Total non-interest income decreased $275,000, or 1%, for the three month period ended March 31, 2025 compared to the same period of 2024. Non-interest income comprised 24.6% and 27.9% of total revenues, defined as net interest income and non-interest income, for the three month periods ended March 31, 2025 and 2024, respectively, the decrease from prior year being attributed to the sharp rise in net interest income compared to prior year. WM&T services comprised 46.3% of total non-interest income for the three periods ended both March 31, 2025 and 2024, respectively.

Previous wording

The magnitude of WM&T revenue distinguishes Bancorp from other community banks of similar asset size. WM&T revenue increased $901,000, or 9%, and $2.8 million, or 9%, for the three and nine month periods ended September 30, 2024, as compared with the same periods of 2023, consistent with strong equity market appreciation and higher estate fee income that more than offset a decline in net new business expansion.

Current wording

The magnitude of WM&T revenue distinguishes Bancorp from other community banks of similar asset size. WM&T revenue decreased $124,000, or 1%, for the three month period ended March 31, 2025, as compared with the same period of 2024, attributed largely to the significant market depreciation experienced during the first quarter, which more than offset an increase in net new business for the period.

Previous wording

Net new business refers to revenue generated from newly acquired customers or reactivated accounts, excluding revenue from upselling or cross-selling to existing active customers. It plays a crucial role in expanding Bancorp’s financial base and ensuring long-term sustainability and success. During the third quarter of 2024, the WM&T department experienced negative net new business for the first time in a few years, which was driven in large part to attrition associated with employee retirements and market competition. Despite negative net new business for the quarter, total WM&T income is currently projected to increase over the next twelve months, as projected moderate market growth would more than offset the potential negative impact from the previously mentioned attrition and an expected decline in non-recurring estate fees.

Current wording

Net new business refers to revenue generated from newly acquired customers, excluding revenue from upselling or cross-selling to existing active customers. It plays a crucial role in expanding Bancorp’s financial base and ensuring long-term sustainability and success. In the latter part of 2024, the WM&T department experienced negative net new business for the first time in several years, driven in large part to attrition associated with employee retirements and market competition. Positions impacted by attrition have since been filled and Bancorp experienced positive net new business during the first quarter.

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 $613,000, or 6%, and $2.3 million, or 8% for the three and nine month periods ended September 30, 2024, as compared with the same periods of 2023. The increases were driven largely by equity market appreciation over the past year.

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, decreased $170,000, or 2%, for the three and month period ended March 31, 2025, as compared with the same period of 2024. The decrease was driven largely by the previously mentioned market depreciation.

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 $288,000 and $534,000 for the three and nine month periods ended September 30, 2024, as compared with the same periods of 2023, 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 $45,000 for the three month period ended March 31, 2025, as compared with the same period of 2024, driven by increased estate fee income.

Previous wording

AUM, stated at market value, totaled $7.32 billion at September 30, 2024 compared with $7.16 billion at December 31, 2023 and $6.67 billion at September 30, 2023. The increase in AUM between September 30, 2023 and September 30, 2024 is attributed mainly to strong equity market appreciation experienced over the past year.

Current wording

AUM, stated at market value, totaled $6.80 billion at March 31, 2025 compared with $7.07 billion at December 31, 2024 and $7.50 billion at March 31, 2024. The decrease in AUM between March 31, 2024 and March 31, 2025 is attributed mainly to the recent market downturn and to and decline in net new business experienced over the past year.

Previous wording

The preceding table demonstrates that WM&T fee revenue is concentrated within investment advisory and personal trust accounts. WM&T fees are predominantly based on AUM and tailored for individual/company accounts and/or relationships with fee structures customized based on account type and other factors, with larger relationships paying a lower percentage of AUM in fees. For example, recurring AUM fee structures are in place for investment management, irrevocable and revocable trusts, personal investment retirement accounts and accounts holding only fixed income securities. WM&T also provides company retirement plan services, which can consist of a one-time conversion fee with recurring AUM fees to follow. While there are also fee structures for estate settlements, income received is typically non-recurring in nature. Fee structures are agreed upon at the time of account opening and any subsequent revisions are communicated in writing to the customer. As previously mentioned, WM&T fees earned are not performance-based nor are they based on investment strategy or transactions. Bancorp also earns management fees on in-house investments funds acquired from CB.

Current wording

The preceding table demonstrates that WM&T fee revenue is concentrated within investment advisory and personal trust accounts. WM&T fees are predominantly based on AUM and tailored for individual/company accounts and/or relationships with fee structures customized based on account type and other factors, with larger relationships paying a lower percentage of AUM in fees. For example, recurring AUM fee structures are in place for investment management, irrevocable and revocable trusts, personal investment retirement accounts and accounts holding only fixed income securities. WM&T also provides company retirement plan services, which can consist of a one-time conversion fee with recurring AUM fees to follow. While there are also fee structures for estate settlements, income received is typically non-recurring in nature. Fee structures are agreed upon at the time of account opening and any subsequent revisions are communicated in writing to the customer. As previously mentioned, WM&T fees earned are not performance-based nor are they based on investment strategy or transactions. Bancorp also earns management fees on in-house investments funds added through bank acquisitions.

Previous wording

AUM (not included on balance sheet) increased from $7.16 billion at December 31, 2023 to $7.32 billion at September 30, 2024 as follows:

Current wording

AUM (not included on balance sheet) decreased from $7.07 billion at December 31, 2024 to $6.80 billion at March 31, 2025 as follows:

Previous wording

As of September 30, 2024 and December 31, 2023, approximately 80% 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.

Current wording

As of March 31, 2025 and December 31, 2024, approximately 80% and 79% 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

Managed assets are invested in instruments for which market values can be readily determined, the majority of which are sensitive to market fluctuations and consist of approximately 67% in equities and 33% in fixed income securities as of September 30, 2024, compared to 64% and 36% as of December 31, 2023. This composition has remained relatively consistent from period to period.

Current wording

Managed assets are invested in instruments for which market values can be readily determined, the majority of which are sensitive to market fluctuations and consist of approximately 65% in equities and 35% in fixed income securities as of both March 31, 2025 and December 31, 2024. This composition has remained relatively consistent from period to period.

Previous wording

Deposit service charges, which consist of non-sufficient funds charges and to a lesser extent, other activity based charges, increased $42,000, or 2%, and $8,000, or less than 1%, for the three and nine month periods ended September 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.

Current wording

Deposit service charges, which consist of non-sufficient funds charges and to a lesser extent, other activity based charges, decreased $57,000, or 3%, for the three month period ended March 31, 2025, as compared with the same period of 2024. 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 $213,000, or 4%, and $624,000, or 4%, for the three and nine month periods ended September 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 $110,000, or 3%, and $161,000, or 2%, and total credit card income increased $103,000, or 13%, and $463,000, or 11% for the three and nine month periods ended September 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.

Current wording

Debit and credit card income consists of interchange revenue, ancillary fees and incentives received from card processors. Debit and credit card revenue decreased $174,000, or 4%, for the three month period ended March 31, 2025, as compared with the same period of 2024, attributed at least in part to severe weather during the first quarter within Bancorp’s markets. Total debit card income decreased $118,000, or 4%, and total credit card income decreased $56,000, or 4%, for the three month period ended March 31, 2025, 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.

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 $304,000, or 12%, and $887,000, or 12%, for the three and nine month periods ended September 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.

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 $48,000, or 2%, for the three month period ended March 31, 2025, as compared with the same period of 2024, organic growth, increased transaction volume and new product sales. Bancorp remains optimistic about the growth prospects for this revenue stream as the customer base continues to grow and the suite of services offered within Bancorp’s treasury management platform expands.

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 increased $298,000, or 37%, and $195,000, or 7%, for the three and nine month periods ended September 30, 2024, as compared with the same periods of 2023, driven by an increase in origination volume during the third quarter of this year in addition to slowing MSR amortization.

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 $31,000, or 3%, for the three month period ended March 31, 2025, as compared with the same period of 2024, driven by slower origination volumes.

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 via an arrangement with a third party broker-dealer. 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, while larger managed accounts are generally serviced by Bancorp’s WM&T group. Net investment product sales commissions and fees increased $124,000, or 16%, and $235,000, or 10%, for the three and nine month periods ended September 30, 2024 compared to the same periods of 2023 due to organic growth and general market appreciation over the respective period.

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 via an arrangement with a third party broker-dealer. 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, while larger managed accounts are generally serviced by Bancorp’s WM&T group. Net investment product sales commissions and fees increased $145,000, or 17%, for the three month period ended March 31, 2025 compared to the same period of 2024, attributed to the addition of a new broker and a general shift towards more wrap fee-based business.

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 $65,000, or 11%, and $140,000, or 8%, for the three and nine month periods ending September 30, 2024 compared to the same periods of the prior year, which was attributed to general market appreciation and a reallocation of investments 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 $34,000, or 6%, for the three month period ending March 31, 2025 compared to the same period of the prior year, which was attributed to generally higher yields within the policy plans compared to the prior year.

Previous wording

Total non-interest expenses increased $1.8 million, or 4%, and $8.7 million, or 6%, for the three and nine month periods ended September 30, 2024 compared to the same periods of 2023. Compensation and employee benefits comprised 62.3% and 61.4% of Bancorp’s total non-interest expenses for the three and nine month periods ended September 30, 2024, compared to 59.7% and 59.5% for the same periods of 2023.

Current wording

Total non-interest expenses increased $2.1 million, or 4%, for the three month period ended March 31, 2025 compared to the same period of 2024. Compensation and employee benefits comprised 62.2% of Bancorp’s total non-interest expenses for the three period ended March 31, 2025, compared to 61.5% for the same period of 2024.

Previous wording

Compensation, which includes salaries, incentives, bonuses and stock based compensation, increased $2.2 million, or 9%, and $7.0 million, or 10%, for the three and nine month periods ended September 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 1,068 at September 30, 2024 compared to 1,075 at December 31, 2023 and 1,056 at September 30, 2023.

Current wording

Compensation, which includes salaries, incentives, bonuses and stock based compensation, increased $1.7 million, or 7%, for the three month period ended March 31, 2025, as compared with the same period of 2024, the increase attributed primarily to annual merit-based salary increases and growth in full time equivalent employees. Net full time equivalent employees totaled 1,089 at March 31, 2025 compared to 1,080 at December 31, 2024 and 1,062 at March 31, 2024.

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 $121,000, or 3%, and $969,000, or 7%, for the three and nine month periods ended September 30, 2024, as compared with the same periods of 2023, driven mainly by an increase in health insurance claims activity.

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 decreased $91,000, or 2%, for the three month period ended March 31, 2025, as compared with the same period of 2024, driven mainly by lower 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 $46,000, or 1%, and increased $30,000, or less than 1%, for the three and nine month periods ended September 30, 2024, as compared with the same periods of 2023. At September 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.

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 $453,000, or 12%, for the three month period ended March 31, 2025, as compared with the same period of 2024, driven by elevated snow removal activity stemming from severe winter weather in addition to higher rent and depreciation expense. At March 31, 2025, Bancorp’s branch network consisted of 73 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 $264,000, or 6%, and $1.8 million, or 14%, for the three and nine month periods ended September 30, 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.

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 decreased $241,000, or 5%, for the three month period ended March 31, 2025 compared to the same period of 2024, due to lower depreciation levels, temporarily lower technology spending and various upgrade expenses incurred in the prior year.

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 $208,000, or 13%, and $640,000, or 13%, for the three and nine month periods ending September 30, 2024 compared to the same periods 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 $73,000, or 4%, for the three month period ending March 31, 2025 compared to the same period of last year, driven by higher processing fees.

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 increased $81,000, or 6%, and decreased $127,000, or 3%, for the three and nine month periods ending September 30, 2024, as compared to the same periods of 2023. The increase for the three month period related to higher advertising expense tied to time deposit product promotions, while the decrease for the nine month period stemmed largely from lower customer entertainment expenses compared to the prior year.

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 increased $440,000, or 41%, for the three month period ending March 31, 2025, as compared to the same period of 2024, which was the result of higher advertising expense tied to deposit product promotions.

Previous wording

Postage, printing and supplies expense decreased $37,000, or 4%, and increased $39,000, or 1%, for the three and nine month periods ended September 30, 2024 compared to the same periods of 2023.

Current wording

Postage, printing and supplies expense increased $43,000, or 5%, for the three month period ended March 31, 2025 compared to the same period of 2024, consistent with the previously mentioned deposit product promotions.

Previous wording

Legal and professional fees decreased $81,000, or 8%, and increased $603,000, or 23%, for the three and nine month periods ended September 30, 2024 compared to the same periods of the prior year. The decrease for the three month period is attributed mainly to lower collections-related expenses while the increase for the nine month period was driven primarily by compliance-related consulting projects associated with Bancorp approaching $10 billion in total assets.

Current wording

Legal and professional fees decreased $208,000, or 19%, for the three month period ended March 31, 2025 compared to the same period of the prior year, driven primarily by lower compliance-related consulting expense associated with Bancorp approaching $10 billion in total assets in addition to generally lower legal expenses.