Stock Yards Bancorp (SYBT) risk factors, FY2024 10-K

Other

1. 01Issued but Not Yet Effective Accounting Standards Updates
2. 02Critical Accounting Policies and Estimates
3. 03Allowance for Credit Losses on Loans and Provision for Credit Losses
4. 04Business Segment Overview
5. 05Overview – Operating Results (FTE)
6. 06Additional discussion follows under the section titled “Results of Operations.”
7. 07Interest income experienced a $66.0 million, or 19%, increase over the prior year associated with the benefits of higher yields and average earning asset growth, outpacing the $56.5 million, or 57%, increase in interest expense driven by the rising cost of funds and growth in interest-bearing liabilities
8. 08Provision for the year ended December 31, 2024 was attributed mainly to substantial loan growth and to a lesser extent, an improved unemployment forecast and other factors within the CECL model. Further, net charge offs of $1.2 million were recorded for the year ended December 31, 2024
9. 09Total deposits increased $496 million, or 7%, at December 31, 2024 compared to December 31, 2023. While total deposit growth was experienced compared to the prior year, a continued shift in the deposit base mix was also experienced, as pricing pressure/competition for deposits remained strong during the year
10. 10Non-interest income increased $3.0 million, or 3%, for the year ended December 31, 2024, compared to the prior year, attributed largely to strong WM&T revenue, treasury management fees and card income
11. 11Net income totaled $107.7 million for year ended December 31, 2023, resulting in diluted EPS of $3.67, compared to net income of $93.0 million for the year ended December 31, 2022, which resulted in diluted EPS of $3.21. The year ended December 31, 2022 was significantly impacted by the CB acquisition
12. 12While interest income benefitted from rising interest rates in 2023, an increase in the cost of funds stemming from deposit contraction and pricing pressure, as well as increased borrowing activity, had a substantial impact on results for the year ended December 31, 2023 compared to the prior year
13. 13Bancorp’s ACL on loans increased $6 million, or 8%, compared to December 31, 2022. Provision for credit losses on loans totaled $12.5 million for the year ended December 31, 2023, compared to $9.7 million for the prior year
14. 14Provision for credit losses on loans for the prior year period included $4.4 million of expense related to the acquired loan portfolio, and to a lesser extent, a deteriorating economic forecast
15. 15Interest-bearing deposits increased $681 million, or 15%, for the year ended December 31, 2023 compared to the prior year, led by a $511 million increase in time deposits associated with Bancorp’s successful promotional product offerings, offsetting a $402 million, or 21%, decline in non-interest bearing deposits
16. 16Pricing pressure and competition for both loans and deposits will continue to present challenges in 2025, driven by uncertainty within the current interest rate environment, a flattened/inverted yield curve and overall liquidity management
17. 17Net Interest Income - Overview
18. 185.11 % 5.07 % 1.99 % 4 bps 308 bps
19. 19While recent projections indicate that the FRB will slow or halt interest rate reductions in 2025, Bancorp expects ongoing pricing pressure/competition for both loans and deposits and general liquidity management to be the primary challenges to NIM and net interest income growth in 2025
20. 20Significant loan growth over the past 12 months has positively impacted interest income and average interest-earning asset growth, which Bancorp elected to fund with deposit and non-deposit sources, namely scheduled investment security maturities and FHLB borrowings
21. 21Average total loan balances increased $663 million, or 12%, for the year ended December 31, 2024, compared to the prior year, driven by contributions from every loan category and every market
22. 22Total interest income (FTE) increased $66.0 million, or 19%, to $413.2 million for the year ended December 31, 2024, as compared to the prior year
23. 23Total average interest bearing liabilities increased $660 million, or 13%, to $5.71 billion for the year ended December 31, 2024 compared to the prior year
24. 24Average SSUAR increased $31 million, or 25%, for the year ended December 31, 2024 compared to the prior year, as customers were attracted to the collateralized protection provided by this product
25. 25Interest expense on SSUAR increased $1.3 million, or 64%, for the year ended December 31, 2024 compared to the prior year, consistent with average balance growth and rising rates
26. 26The positive impact of rising interest rates on interest-earning assets, which drove a substantial increase in interest income across all interest-earning asset categories
27. 27Balance sheet expansion stemming from both organic growth and the full year impact of acquisition-related activity for the year ended December 31, 2023 compared to the prior year
28. 28Total average interest earning assets increased $316 million, or 5%, to $7.30 billion for the year ended December 31, 2023, as compared to year ended December 31, 2022, with the average rate earned on total interest earning assets increasing 114 bps to 4.75%
29. 29Total interest income (FTE) increased $94.7 million, or 37%, to $347.2 million for the year ended December 31, 2023, as compared to the year ended December 31, 2022
30. 30Total average interest bearing liabilities increased $513.2 million, or 11%, to $5.05 billion for the year ended December 31, 2023 compared with the year ended December 31, 2022, with the total average cost increasing 157 bps to 1.97%
31. 31Average subordinated debentures totaled $26.6 million for the year ended December 31, 2023. The subordinated debentures were added as a result of the CB acquisition during the first quarter of 2022
32. 32Total interest bearing deposit expense increased $65.2 million, mainly as a result aforementioned deposit rate increases, resulting in a 140 bps increase in the cost of interest bearing deposits for the year ended December 31, 2023 compared to the prior year
33. 335,508 232 4.21 6,822 211 3.09 8,835 190 2.15
34. 34$ 8,376,739 $ 7,775,574 $ 7,438,880
35. 355,712,522 155,839 2.73 5,052,106 99,364 1.97 4,538,911 18,269 0.40
36. 36Supplemental Information - Total Company Average Balance Sheets and Interest Rates (FTE)
37. 37The fair market value adjustment on investment securities resulting from ASC 320, Investments – Debt and Equity Securities is included as a component of other assets
38. 3866,006 30,211 35,795 94,697 70,987 23,710
39. 39Asset/Liability Management and Interest Rate Risk
40. 40Interest Rate Simulation Sensitivity Analysis
41. 41% Change from base net interest income at December 31, 2024
42. 42Provision for Credit Losses
43. 43Acquired PCD loans (goodwill adjustment)
44. 44Provision for credit losses on loans - acquired loans
45. 45Net loan (charge-offs) recoveries to average total loans (1)
46. 46Provision expense for credit losses on loans of $8.8 million was recorded for the year ended December 31, 2024, which was driven mainly by strong loan growth, net charge offs of $1.2 million, and to a much lesser extent, an improved unemployment forecast and other factors within the CECL model
47. 47Provision for credit loss expense for off balance sheet credit exposures of $1.3 million was recorded for the year ended December 31, 2023, driven largely by the addition of new C&D and C&I lines of credit. The ACL for off balance sheet credit exposures totaled $5.9 million as of December 31, 2023
48. 48Loss on sale of securities AFS
49. 49$ 95,230 $ 92,220 $ 89,149 $ 3,010 3 % $ 3,071 3 %
50. 50Contracts between WM&T and their customers do not permit performance-based fees and accordingly, none of the WM&T revenue is performance based. Management believes the WM&T department will continue to factor significantly in Bancorp’s financial results and provide strategic diversity to revenue streams
51. 51$ 42,843 $ 39,802 $ 36,111
52. 52(1) Non-managed assets represent those for which the WM&T department does not hold investment discretion
53. 53Common trust funds and collective investment funds
54. 54Includes client directed instruments such as rights, warrants, annuities, insurance policies, unit investment trusts, and oil and gas rights
55. 55Losses on the sale of premises and equipment totaling $100,000 were recorded for the year ended December 31, 2024 and were the result of sales/disposals of various nominal fixed assets. Activity for the prior year was the result of the sale of an acquired property in addition to other merger-related disposal activity
56. 56Deposit service charges, which consist of non-sufficient funds charges and to a lesser extent, other activity based charges, increased $580,000, or 7%, for the year ended December 31, 2023, as compared with the prior year
57. 57BOLI income increased $656,000, or 41%, for the year ended December 31, 2023 compared to the prior year, which was attributed mainly to the additional $30 million BOLI investment made in 2022, in addition to general market appreciation within the policy plans during the year
58. 58Loss on disposition of LFA
59. 59Total non-interest expenses increased $10.4 million, or 6%, for the year ended December 31, 2024 compared to the same period of 2023. Compensation and employee benefits comprised 61% of Bancorp’s total non-interest expenses for the year ended December 31, 2024, compared to 59% for the same period of 2023
60. 60FDIC insurance expense increased $628,000, or 16%, for the year ended December 31, 2024, as compared to the same period of 2023, consistent with Bancorp’s growth in addition to changes in loan mix, as higher assessments are levied on C&D lending concentrations, a segment which grew as a percentage of total loans
61. 61Employee benefits increased $1.9 million, or 11%, for the year ended December 31, 2023 compared to the prior year, consistent with the overall increase in full time equivalent employees previously noted
62. 62Debit and credit card processing expense increased $572,000, or 10%, for the year ended December 31, 2023 compared to the prior year, consistent with the increase in transaction volume and customer base expansion resulting from both organic growth and the full year impact of acquisition-related activity
63. 63Legal and professional fees increased $1.0 million, or 34%, for the year ended December 31, 2023 compared to the prior year. The increase related to compliance-related consulting projects associated with Bancorp approaching $10 billion in total assets
64. 64Amortization expense associated with tax credit investments increased $941,000 for the year ended December 31, 2023 compared to the prior year stemming from Bancorp’s investment in several larger tax credit projects during 2023
65. 65Other non-interest expenses increased $869,000, or 8%, for the year ended December 31, 2023 compared to the prior year, the most notable drivers being increased card reward expense, higher fraud and theft-related expenses and other ancillary expenses tied to Bancorp’s growth over the past year
66. 66Tax-exempt interest income earned on loans and investment securities reduced the ETR by 0.43% and 0.50% for the years ended December 31, 2024 and 2023, respectively
67. 67The ETR for the year ended December 31, 2023 and 2022 was reduced by 0.34% and increased by 0.34%, respectively, based on tax credit activity
68. 68Cash and Cash Equivalents
69. 69The primary purpose of the investment securities portfolio is to provide another source of interest income, as well as a tool for liquidity management. In managing the composition of the balance sheet, Bancorp seeks a balance between earnings sources, credit and liquidity considerations
70. 70Government sponsored enterprise obligations
71. 71Total loans increased $749 million, or 13%, from December 31, 2023 to December 31, 2024. While the substantial loan growth experienced during 2024 was well-spread across loan categories, CRE , C&D and C&I lines of credit stood out, with growth of 15%, 17% and 26%, respectively
72. 72$ 1,213,924 $ 2,842,928 $ 1,506,739 $ 956,811 $ 6,520,402 100 %
73. 73Non-performing Loans and Assets
74. 74In total, non-performing assets as of December 31, 2024 were comprised of 125 loans ranging in individual amounts up to $4.5 million and one residential real estate property held as OREO
75. 75Commercial and industrial - lines of credit
76. 76Allowance for Credit Losses on Loans
77. 77The ACL for loans calculation and resulting credit loss expense is significantly impacted by changes in forecasted economic conditions. Should the forecast for economic conditions change, Bancorp could experience further adjustments in its required ACL for loans credit loss expense
78. 78Commercial and industrial - term - PPP
79. 79Construction and land development
80. 80$ (1,231 ) $ 6,085,782 -0.02 % $ (6,628 ) $ 5,422,865 -0.12 % $ 1 $ 4,819,124 0.00 %
81. 81$ 86,943 100 % 1.33 % $ 79,374 100 % 1.38 %
82. 82Net (charge offs)/recoveries to average total loans
83. 83Premises held for sale totaling $2.3 million and $2.5 million was recorded on Bancorp’s consolidated balance sheets as of December 31, 2024 and December 31, 2023, which consists of three undeveloped parcels of land, a former administrative building and one former branch location
84. 84Core Deposit and Customer List Intangibles
85. 85Other Assets and Other Liabilities
86. 86Total deposits increased $496 million, or 7%, from December 31, 2023 to December 31, 2024. Interest bearing deposits increased $588 million, or 11%, outpacing the $92 million, or 6%, decrease in non-interest bearing deposits, as depositors continued shifting into higher-yielding alternatives in the current environment
87. 87$ 6,658,033 $ 6,371,732 $ 6,438,606
88. 88Securities Sold Under Agreement to Repurchase
89. 89Federal Funds Purchased and Other Short-Term Borrowing
90. 90Included in total deposit balances at December 31, 2024 are $663 million in public funds generally comprised of accounts with local government agencies and public school districts in the markets in which Bancorp operates. At December 31, 2023, public funds deposits totaled $613 million
91. 91In addition to owned banking facilities, Bancorp has entered into long-term leasing arrangements for certain branch facilities. Bancorp also has required future payments for a non-qualified defined benefit retirement plan, time deposit maturities and other obligations
92. 92Non-GAAP Financial Measures
93. 93Less: Amortization of investments in tax credit partnerships
94. 94Less: Loss on sale of securities
95. 95Financial Statements and Supplementary Data
96. 96Years Ended December 31, (in thousands, except per share data)
97. 97Loss on sale of securities AFS debt securities
98. 98Less net income attributed to non-controlling interest
99. 99$ 114,539 $ 107,748 $ 93,294
100. 100Reclassification adjustment for loss realized on AFS debt securities
101. 101Less comprehensive income attributed to non-controlling interest
102. 10226,596 $ 49,501 $ 243,107 $ 391,201 $ (7,940 ) $ 675,869 $ - $ 675,869
103. 103Stock compensation expense
104. 104Cash dividends declared, $1.14 per share
105. 105Disposition of non-controlling interest
106. 106Other comprehensive income
107. 107Cash dividends declared, $1.18 per share
108. 10829,329 $ 58,602 $ 385,955 $ 506,344 $ (92,798 ) $ 858,103 $ - $ 858,103
109. 109Reclassification adjustment - ASU 2023-02
110. 110Cash dividends declared, $1.22 per share
111. 111(Gain)/loss on the sale of other real estate owned
112. 112Proceeds from sales of acquired available for sale debt securities
113. 113Purchases of held to maturity debt securities
114. 114Purchase of bank owned life insurance
115. 115Proceeds from the disposition of LFA
116. 116Purchase of loans from broker
117. 117(677,057 ) (424,049 ) (384,425 )
118. 118Cash disbursements to non-controlling interest
119. 119Loans transferred to OREO
120. 120Common stock issued in acquisition
121. 121(1) Summary of Significant Accounting Policies
122. 122Established in 1904, SYB 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 metropolitan markets through 72 full service banking center locations
123. 123WM&T provides investment management, financial & retirement planning and trust & estate services, as well as retirement plan management for businesses and corporations in all markets in which Bancorp operates. The magnitude of WM&T revenue distinguishes Bancorp from other community banks of similar asset size
124. 124Cash and Cash Equivalents – Cash and cash equivalents include cash and due from banks, FFS and interest bearing due from banks as segregated in the accompanying consolidated balance sheets
125. 125Changes in the ACL for AFS debt securities are recorded as expense. Losses are charged against the ACL for AFS debt securities when management believes the uncollectability of an AFS debt security is confirmed or when either of the criteria regarding intent or requirement to sell is met
126. 126Interest income is accrued on the unpaid principal balance. Loan origination fees, net of certain direct origination costs, are deferred and recognized in interest income over the life of the loan without anticipating prepayments
127. 127ACL – Loans – Under the CECL model, the ACL on loans represents a valuation allowance estimated at each balance sheet date in accordance with GAAP that is deducted from the loans’ amortized cost basis to represent the net amount expected to be collected on the loan portfolio
128. 128Home Equity Lines of Credit – Similar to residential real estate above, however these are revolving (open-ended) lines of credit
129. 129Credit Cards – Represents revolving short-term loans to businesses and, to a lesser extent, consumers
130. 130Premises held for sale are carried at the lower of fair value or cost, less accumulated depreciation and amortization. Premises held for sale represent properties owned by Bancorp that are currently listed for sale due mainly to location overlap and/or lack of necessity stemming from acquisition-related activity
131. 131Other Assets – BOLI and other life insurance policies are carried at net realizable value, which considers applicable surrender charges. Also, Bancorp maintains life insurance policies in conjunction with its non-qualified defined benefit and non-qualified compensation plans
132. 132Bancorp recognizes interest and/or penalties related to income tax matters in income tax expense, if any
133. 133Dividend Restriction – Banking regulations require maintaining certain capital levels and may limit the dividends paid by the Bank to the Holding Company or by the Holding Company to shareholders
134. 134Accounting Standards Updates – Generally, if an issued but not yet effective ASU with an expected immaterial impact to Bancorp has been disclosed in prior SEC filings, it will not be re-disclosed
135. 135(2) Cash and Due from Banks
136. 136$ 439,837 $ 1 $ (31,319 ) $ 408,519
137. 137Debt Securities by Contractual Maturity
138. 138$ 1,114,961 $ 990,114 $ 370,171 $ 341,357
139. 139Securities with a carrying value of $852 million and $991 million were pledged at December 31, 2024 and 2023, respectively, to secure accounts of commercial depositors in cash management accounts, public deposits and uninsured cash balances for WM&T accounts
140. 140Unrealized and Unrecognized Loss Analysis on Debt Securities
141. 141Mortgage-backed securities - government agencies
142. 142$ 455 $ (1 ) $ 407,798 $ (31,318 ) $ 408,253 $ (31,319 )
143. 143(4) Loans and ACL for Loans
144. 144Fees and costs of originating loans are deferred at origination and amortized over the life of the loan. At December 31, 2024 and 2023, net deferred loan origination fees exceeded deferred loan origination costs, resulting in a net reduction of loan balances totaling $3 million and $2 million, respectively
145. 145Loans with carrying amounts of $3.48 billion and $3.15 billion were pledged to secure FHLB borrowing capacity at December 31, 2024 and December 31, 2023, respectively
146. 146$ 53,898 $ 9,950 $ 9,682 $ (2,307 ) $ 2,308 $ 73,531
147. 147Residential real estate - non-owner occupied
148. 148Home equity lines of credit
149. 149Commercial real estate - owner occupied
150. 150For the years ended December 31, 2024 and 2023, no interest income was recognized on loans on non-accrual status
151. 151There have been no significant changes to the types of collateral securing Bancorp’s collateral dependent loans
152. 152OAEM – Loans classified as OAEM have potential weaknesses requiring management's heightened attention. These potential weaknesses may result in deterioration of repayment prospects for the loan or of Bancorp's credit position at some future date
153. 153$ - $ - $ - $ - $ - $ - $ - $ -
154. 154Substandard non-performing
155. 155$ 80,717 $ 66,330 $ 72,580 $ 70,585 $ 41,874 $ 47,578 $ - $ 379,664
156. 156$ - $ - $ - $ - $ - $ - $ 246,336 $ 246,336
157. 157$ 22,895 $ 18,200 $ 12,822 $ 6,294 $ 1,095 $ 1,023 $ 81,943 $ 144,272
158. 158$ 4,935 $ 5,439 $ 1,864 $ 1,462 $ 597 $ 3 $ - $ 14,300
159. 159$ - $ - $ - $ - $ - $ - $ 24,540 $ 24,540
160. 160$ (1,054 ) $ (618 ) $ (573 ) $ (119 ) $ (9 ) $ (52 ) $ (351 ) $ (2,776 )
161. 161$ 30,553 $ 22,409 $ 3,232 $ 348 $ 8,931 $ 1,783 $ 356,237 $ 423,493
162. 162$ 170,446 $ 178,088 $ 175,561 $ 86,105 $ 24,354 $ 70,213 $ - $ 704,767
163. 163$ 83,913 $ 84,278 $ 77,868 $ 49,555 $ 31,325 $ 30,546 $ - $ 357,485
164. 164$ 157,832 $ 239,807 $ 69,131 $ 34,591 $ 478 $ 3,711 $ 15,623 $ 521,173
165. 165$ - $ - $ - $ - $ - $ - $ 210,886 $ 210,886
166. 166$ 30,823 $ 18,399 $ 10,148 $ 2,832 $ 1,931 $ 1,765 $ 79,105 $ 145,003
167. 167$ 6,801 $ 3,442 $ 3,117 $ 1,723 $ 155 $ 265 $ - $ 15,503
168. 168$ - $ - $ - $ - $ - $ - $ 23,622 $ 23,622
169. 169$ (1,998 ) $ (756 ) $ (66 ) $ (136 ) $ (78 ) $ (152 ) $ (4,326 ) $ (7,512 )
170. 170Modifications to Borrowers Experiencing Financial Difficulty
171. 171(5) Premises & Equipment and Premises Held for Sale
172. 172Depreciation expense related to premises and equipment was $6.6 million in 2024, $7.7 million in 2023 and $6.5 million in 2022, respectively
173. 173In addition to the premises and equipment detailed above, premises held for sale totaling $2.3 million was also recorded on Bancorp’s consolidated balance sheets as of December 31, 2024, which consists of three undeveloped parcels of land, a former administrative building and one former branch location
174. 174As of December 31, 2024 and 2023, goodwill totaled $194 million, of which $172 million was attributed to the commercial banking segment and $22 million was attributed to WM&T
175. 175Note: The acquisition of The Bank Oldham County in 2013 resulted in a bargain purchase gain
176. 176Bancorp recorded initial CDI assets of $13 million, $4 million, $2 million and $3 million in association with the acquisition of CB in 2022, KB in 2021, KSB in 2019 and TBOC in 2013, respectively
177. 177As a result of the CB acquisition, Bancorp also recorded an initial intangible asset totaling $14 million associated with the customer list of the acquired WM&T business. Similar to CDI assets, this intangible asset also amortizes over its estimated useful life
178. 178Bancorp maintains life insurance policies other than BOLI in conjunction with its non-qualified defined benefit retirement and non-qualified compensation plans
179. 179Years Ended December 31, (in thousands)
180. 180$ 29,827 $ 30,179 $ 27,190
181. 181$ 642 $ 7,341 $ (35,197 )
182. 182Amortization of investment in tax credit partnerships
183. 183Current state income tax expense for 2024, 2023 and 2022 represents tax owed to the states of Kentucky, Indiana and Illinois. Ohio state taxes are based on capital levels and are recorded as other non-interest expense
184. 184December 31, (in thousands)
185. 185Bancorp’s investments in tax credit partnerships, including the related unfunded contributions, totaled $185 million and $175 million as of December 31, 2024 and December 31, 2023, respectively, and are included in other assets on the condensed consolidated balance sheets
186. 186Amortization expense in other non-interest expense
187. 187Interest expense related to time deposits in denominations of $250,000 or more was $9.5 million, $5.1 million and $472,000 for the years ended December 31, 2024, 2023 and 2022, respectively
188. 188(11) Securities Sold Under Agreements to Repurchase
189. 189(12) Subordinated Debentures
190. 190(13) FHLB Advances and Other Borrowings
191. 191(14) Accumulated Other Comprehensive Income (Loss)
192. 192(16) Net Income per Share
193. 193(17) Employee Benefit Plans
194. 194The fair value of all stock-based awards granted, net of estimated forfeitures, is recognized as compensation expense over the respective service period
195. 195SAR Grants – SARs granted have a vesting schedule of 20% per year and expire ten years after the grant date unless forfeited due to termination of employment
196. 196Bancorp utilized cash of $203,000 and $175,000 during 2024 and 2023, respectively, for the purchase of shares upon the vesting of RSUs
197. 197$ 297 $ 1,084 $ 262 $ 1,827 $ 3,470
198. 198$ 975 $ 4,105 $ 1 $ 1,874 $ 6,955
199. 199Aggregate intrinsic value for SARs is defined as the amount by which the current market price of the underlying stock exceeds the exercise or grant price
200. 200At December 31, 2024, approximately 340,000 SARs were outstanding at a weighted average grant price of $43.41. The number of shares to be issued upon exercise will be determined based on the difference between the grant price and the market price at the date of exercise
201. 201(20) Commitments and Contingent Liabilities
202. 202(21) Assets and Liabilities Measured and Reported at Fair Value
203. 203Level 1 – Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date
204. 204Level 3 – Significant unobservable inputs that reflect a company’s own assumptions about the assumptions that market participants would use in pricing an asset or liability
205. 205Mortgage loans held for sale - The fair value of mortgage loans held for sale is determined using quoted secondary market prices (Level 2 inputs)
206. 206Interest rate swap agreements – Interest rate swaps are valued using valuations received from the relevant dealer counterparty. These valuations consider multiple observable market inputs, including interest rate yield curves, time value and volatility factors (Level 2 inputs)
207. 207Obligations of states and political subdivisions
208. 208$ 198,215 $ 810,933 $ — $ 1,009,148
209. 209$ 116,269 $ 926,273 $ — $ 1,042,542
210. 210Bancorp had no financial instruments classified within Level 3 of the valuation hierarchy for assets and liabilities measured at fair value on a recurring basis at December 31, 2024 or 2023. There were no transfers into or out of Level 3 of the fair value hierarchy during 2024 or 2023
211. 211There were no liabilities measured at fair value on a non-recurring basis at December 31, 2024 and December 31, 2023
212. 212(22) Disclosure of Financial Instruments Not Reported at Fair Value
213. 213Effective March 31, 2022, Bancorp began carrying mortgages originated and intended for sale in the secondary market at fair value, as determined by outstanding commitments from investors
214. 214Loans held for sale acquired
215. 215Change in mortgage servicing rights valuation allowance
216. 216$ 11,333 $ 13,082 $ 15,219
217. 217Total outstanding principal balances of loans serviced for others were $1.82 billion and $1.93 billion at December 31, 2024 and December 31, 2023, respectively
218. 218$ 6,199 $ 6,286 $ 5,965 $ 6,056
219. 219(24) Derivative Financial Instruments
220. 220$ 8,589 $ 5,133 $ 8,589 $ 5,142
221. 221Banking regulators have categorized the Bank as well-capitalized. To meet the definition of well-capitalized, a bank must have a minimum 6.5% Common Equity Tier 1 Risk-Based Capital ratio, 8.0% Tier 1 Risk-Based Capital ratio, 10.0% Total Risk-Based Capital ratio and 5.0% Tier 1 Leverage ratio
222. 222Bancorp continues to exceed the regulatory requirements for all calculations. Bancorp and the Bank intend to maintain a capital position that meets or exceeds the “well-capitalized” requirements as defined by the FRB and the FDIC, in addition to the capital conservation buffer
223. 223Less income attributed to non-controlling interest
224. 224$ 114,539 $ 107,748 $ 92,972
225. 225Decrease (increase) in receivable from subsidiaries
226. 226Net cash used in investing activities
227. 227Subordinated debentures acquired
228. 228WM&T AUM, which the primary driver of WM&T revenue, are not included on the consolidated balance sheets of Bancorp. WM&T AUM totaled $7.07 billion, $7.16 billion and $6.59 billion as of December 31, 2024, 2023 and 2022, respectively
229. 229Wealth management and trust services
230. 230(28) Revenue from Contracts with Customers
231. 231Gain (loss) on sale of securities (1)
232. 232(2) Outside of the scope of ASC 606, with the exception of safe deposit fees which were nominal for all periods
233. 233Opinion on the Consolidated Financial Statements
234. 234We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud
235. 235Allowances for Credit Losses on Loans
236. 236How We Addressed the Matter in Our Audit
237. 237Management’s Report on Consolidated Financial Statements
238. 238Management also seeks to assure the objectivity and integrity of Bancorp’s financial data by the careful selection and training of qualified personnel, an internal audit function and organizational arrangements that provide an appropriate division of responsibility
239. 239Disclosure Controls and Procedures
240. 240Management’s Report on Internal Control over Financial Reporting
241. 241Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of Bancorp’s assets that could have a material effect on the financial statements
242. 242Opinion on the Internal Control over Financial Reporting
243. 243Definitions and Limitations of Internal Control over Financial Reporting
244. 244Item 9B. Other Information
245. 245Item 10. Directors, Executive Officers and Corporate Governance
246. 246Information regarding the Audit Committee is incorporated herein by reference to the discussion under the headings, “CORPORATE GOVERNANCE – COMMITTEES OF THE BOARD,” and “REPORT OF THE AUDIT COMMITTEE,” in Bancorp’s Proxy Statement
247. 247The Board of Directors of Bancorp has adopted a code of ethics for its CEO and financial executives included under Exhibit 14
248. 248The information required by this Item is incorporated herein by reference to the discussion under the heading, “EXECUTIVE COMPENSATION AND OTHER INFORMATION – REPORT ON EXECUTIVE COMPENSATION” in Bancorp’s Proxy Statement
249. 249Item 13. Certain Relationships and Related Transactions, and Director Independence
250. 250Item 15. Exhibits and Financial Statement Schedules
251. 251Financial statement schedules are omitted because the information is NA
252. 252Articles of Amendment to the Second Amended and Restated Articles of Incorporation to change the name of the company to Stock Yards Bancorp, Inc., filed with the Secretary of State of Kentucky on April 23, 2014. Exhibit 3.1 to Form 8-K filed April 25, 2014, is incorporated by reference herein
253. 253Annual Report on Form 10-K, filed on February 27, 2025, formatted in inline eXtensible
254. 254The cover page from Stock Yards Bancorp Inc.’s Annual Report on Form 10-K for the year ended December 31, 2024, formatted in inline XBRL and contained in Exhibit 101
255. 255The exhibits listed in response to Item 15(a) 3 are filed or furnished as part of this report