GlobeNewswire Inc | Oct 28, 2020 07:00AM EDT

October 28, 2020

LOUISVILLE, Ky., Oct. 28, 2020 (GLOBE NEWSWIRE) -- Stock Yards Bancorp, Inc. (NASDAQ: SYBT), parent company of Stock Yards Bank & Trust Company, with offices in the Louisville, Indianapolis and Cincinnati metropolitan markets, today reported stable results for the third quarter ended September 30, 2020. Net income for the third quarter was $14.5 million, or $0.64 per diluted share, compared with net income of $17.2 million, or $0.76 per diluted share for the third quarter of 2019. Operating results were lower compared to the record results posted in the third quarter of 2019, primarily due to increased loan loss provisioning and reserves for off-balance sheet credit exposures.

(dollar amounts in thousands, 3Q20 2Q20 3Q19except per share data)Net interest income $ 33,695 $ 33,528 $ 32,106 Provision for credit losses 4,418 5,550 400 Non-interest income 13,043 12,622 13,209 Non-interest expenses 26,196 24,884 23,898 Income before income tax expense 16,124 15,716 21,017 Income tax expense 1,591 2,348 3,783 Net income $ 14,533 $ 13,368 $ 17,234 Net income per share, diluted $ 0.64 $ 0.59 $ 0.76 Net interest margin 3.26 % 3.27 % 3.87 %Efficiency ratio 55.96 % 53.87 % 52.67 %Tangible common equity to tangible 9.52 % 9.39 % 10.83 %assets^(1)Annualized return on average 13.57 % 12.90 % 17.41 %equityAnnualized return on average 1.34 % 1.25 % 1.95 %assets

Given the ongoing impacts of a global pandemic, we remain focused on supporting our customers, communities and employees while prudently managing risk. We delivered solid earnings in the third quarter, led by improved net interest income, record mortgage banking income and controlled non-interest expenses, said James A. (Ja) Hillebrand, Chief Executive Officer. Additionally, credit quality metrics remain stable, and loan deferrals improved dramatically.

Our active participation in the Small Business Administrations (SBA) Paycheck Protection Program (PPP) has helped service the needs of our customers and our local communities. As a community bank, our expertise, agility and ultimate success in executing this relief effort allowed us to assist over 3,300 customers and originate $657 million in loans while adding new relationships with strong future growth opportunities. We have started processing applications for PPP loan forgiveness for customers. The Bank has nearly $15 million in net unrecognized fees related to the PPP that would be recognized in income immediately once the loan is paid off or forgiven by the SBA. We expect the timing of such forgiveness will add volatility to fourth quarter 2020 and early 2021 operating results for us and all participating financial institutions.

Uncertainty and volatility have been the common themes so far for 2020, as the magnitude of the economic ramifications of the COVID-19 pandemic are still largely unknown. Despite sound traditional credit metrics, under the CECL methodology, we recorded a significant provision for credit losses during the third quarter based on the predicted impact of the pandemic upon current unemployment forecasts and changing macro-economic conditions, as well as qualitative factor adjustments. We feel that we are well positioned as we navigate through the pandemic, having built up significant loan loss reserves, excluding PPP loans, of 1.78%(2) at September 30, 2020.

Additional key factors impacting the third quarter of 2020 results included:

-- Deposit balances remained at record levels, as consumers/businesses continued to build cash reserves. -- Net interest margin (NIM) compressed 61 basis points to 3.26% compared to the third quarter a year ago. NIM was significantly impacted by loan yield contraction driven by the PPP, the 225-basis point drop in the Federal Funds Target Rate from September 30, 2019 to September 30, 2020 and excess balance sheet liquidity. However, NIM remained consistent on a linked quarter basis. -- The commercial and industrial (C&I) portfolio continued to contract during the third quarter of 2020; however, the pace slowed significantly compared to the second quarter, as borrowers paid down their operating lines of credit. The overall decline in line utilization led to the recording of $550,000 in additional non-interest expense related to credit exposures for unfunded off-balance sheet commitments. The Bank had a total liability of $6 million accrued at September 30, 2020 related to such exposures. -- COVID-19 related loan deferrals declined significantly to 4% of total loans at the end of the third quarter of 2020 from 18% of total loans three months earlier. As of October 27th, loan deferrals represented 3% of total loans. -- Net interest income increased $1.6 million, or 5%, over the third quarter of 2019, driven by PPP loans and related fees and a significant decline in cost of funds. -- Non-interest income decreased $166,000 over the third quarter of 2019. Record mortgage banking results, higher debit/credit card income and treasury management fees were offset by lower deposit service charges, which were significantly impacted by the pandemic and changes in customer behavior. -- Non-interest expenses reflected moderate increases in compensation, technology and communication, FDIC insurance and credit loss expense for off-balance sheet exposures.

Hillebrand added, We continue to execute our growth trajectory through our expanded branch network. In July we opened our Evendale branch, bringing our total Cincinnati MSA branches to six, and earlier this month we opened our Valley Station branch, bringing total Louisville MSA branches to 33. These two distinct areas and expansion within our existing MSAs provide us great market potential for expanding our deposit base and increasing top line revenue growth.

During the quarter we were recognized nationally for our customer service and for our performance metrics. We were named to Newsweeks Americas Best Banks 2021 list as the best small bank in Kentucky. In choosing the best small bank state winners, 55 separate factors were assessed, covering a wide variety of fees, current and historical interest rates, account terms, consumer service features, mobile app satisfaction and bank profile. Additionally, in September we were named once again to the prestigious Piper Sandler Bank and Thrift Sm-All Stars: Class of 2020 list, being one of only 35 institutions to receive this honor. In making their selections, Piper Sandler focused on growth, profitability, credit quality and capital strength. The receipt of these two awards is an honor and a testament to the dedication and commitment of our employees who continue to work diligently to support those in the communities we serve.

Against the backdrop of the pandemic and disruptions in our geographic locations, we are working to enact and strengthen programs and policies to prepare for whatever the future may bring. We have also continued our conservative stance towards credit, preparing our balance sheet for the potential impacts of the pandemic while mitigating risk. With solid asset quality backed by strong reserves, robust technologies, resourceful employees, loyal customers and strong community partners, we are well-positioned to meet the challenges ahead.

Results of Operations Third Quarter 2020 Compared with Third Quarter 2019

Net interest income the Companys largest source of revenue increased $1.6 million, or 5%, to $33.7 million driven primarily by PPP loans and related fees and a significant decline in cost of funds.

-- Total interest income declined $1.9 million, or 5%, to $36.1 million, as an increase in average earning assets was more than offset by interest rate contraction. -- Interest expense decreased $3.5 million, or 59%, to $2.4 million. Interest expense on deposits decreased $3.2 million, or 60%, as the interest bearing cost of deposits declined to 0.33% in the third quarter of 2020 from 0.99% in the third quarter a year ago. The decline in interest bearing deposit costs more than offset the significant increase in average balances, as the Bank has benefited from the strategic lowering of stated deposit rates. -- NIM decreased 61 basis points to 3.26% from 3.87% in the third quarter of 2019. The NIM contraction was primarily driven by lower interest rates, as the Federal Reserve dropped short-term rates 225 basis points from September 30, 2019 to September 30, 2020, coupled with higher levels of excess balance sheet liquidity. The Company has maintained significantly higher levels of balance sheet liquidity driven in part by the funding of PPP loans which were funded from deposit growth. The PPP loans had a 12-basis point negative impact to NIM, while excess liquidity had a similar impact.

Loan loss provisioning for the third quarter of 2020 was positively impacted by the downward adjustment of the future unemployment forecast offset by qualitative factors in the allowance for credit loss model based on the current economic conditions related to the pandemic.

Non-interest income decreased $166,000, or 1%, to $13.0 million.

-- Deposit service charges decreased $358,000, or 26%, primarily related to the decline in non-sufficient funds fees collected and an overall shift in pandemic related customer behavior. -- Debit/credit card income increased $116,000, or 6%, as interchange income, which lagged in April due to the pandemic and rebounded significantly and continued to increase through the end of the third quarter. -- Treasury management fees increased by $104,000, or 8%, bolstered by record treasury management product sales partially offset by lower transaction volume resulting from the pandemic. -- Mortgage banking revenue increased $1.2 million, or 149%, to a record level of $2.0 million at the end of the third quarter of 2020. Sustained low mortgage rates continued to entice mortgage refinancing, resulting in a record number of loans closed and sold during the quarter.

Non-interest expenses increased $2.3 million, or 10%, to $26.2 million.

-- Compensation expense for the third quarter of 2020 increased $970,000, or 8%, primarily due to annual merit increases, increased incentive compensation and a slight increase in full time equivalent employees. -- Technology and communication expense for the third quarter of 2020 increased $424,000, or 23%, compared with the prior year quarter, consistent with expanding customer facing software/system functionality and the migration to a hosted core environment. Also, treasury management customer expansion has led to elevated hardware related expense. -- Marketing and business development expense, which includes all costs associated with promoting the Bank, community investment, retaining customers and acquiring new business, decreased $209,000 in the third quarter of 2020, mainly due to less travel and active prospective customer entertainment due to the pandemic.

Financial Condition September 30, 2020 Compared with December 31, 2019

Total loans increased $627 million, or 22%, to $3.5 billion. Excluding the PPP loan portfolio, total loans contracted $15 million, with $101 million of growth in the commercial real estate portfolio completely offset by a $107 million decline in the C&I portfolio primarily operating lines of credit.

The Company has made short-term loan modifications involving primarily full-payment deferrals in response to requests from borrowers who experienced business or personal cash flow interruptions related to the pandemic. Through the close of the third quarter, there were approximately $120 million in full payment deferral balances, with the largest concentration in the commercial real estate segment. Pursuant to the CARES Act, these loan deferrals are not included in non-performing loan statistics.

Full payment loan deferral balances have fluctuated as follows:

(in millions) Total Deferrals % of Total Loans*October 27, 2020 $ 82 3 %September 30, 2020 120 4 %July 31, 2020 280 10 %June 30, 2020 502 18 %April 30, 2020 413 14 % * - Excluding PPP loans

The Companys management team continues to analyze the evolving economic conditions in its markets while closely monitoring credit metrics, particularly related to the following segments comprising deferrals in the Banks portfolio:

(in millions) September 30, 2020 October 27, 2020Lodging/hotel $ 30 $ 30Residential real estate secured 18 9Real estate/land development 12 11Retail center 12 1Parking lot/parking garage/storage 11 9Tradeshows/events 10 9Other 27 13 Total Deferrals $ 120 $ 82

Asset quality, which has trended within a narrow range over the past several years, remained sound. Non-performing loans (NPLs) were $13.5 million, or 0.39% of total loans outstanding versus $12.1 million, or 0.42% of total loans outstanding at December 31, 2019.

During the third quarter of 2020, the Company recorded charge-offs totaling $1.6 million related to loans that were acquired in the prior year acquisition and fully allocated for through purchase accounting adjustments at the time of acquisition. While these are reflected as charge-offs, there was no impact to the provision for credit losses nor to the income statement for the third quarter of 2020.

Total deposits increased $621 million, or 20%, from December 31, 2019, to September 30, 2020, with non-interest bearing deposits representing $370 million of the increase. The mix of deposits has also improved with higher costing time deposits declining $35 million during 2020. Both period end and average deposit balances ended at record levels at September 30, 2020. Federal programs such as the PPP, stimulus checks and increased weekly unemployment benefits have boosted deposit balances.

At September 30, 2020, the Company remained well capitalized the highest regulatory capital rating for financial institutions with increases in all capital ratios. Total equity to assets was 9.82% and the tangible common equity ratio was 9.52%(1) at September 30, 2020, compared to 10.91% and 10.55%(1), respectively, at December 31, 2019, with the decline attributable to the January 1, 2020 CECL adoption, the prior year acquisition and the impact of loan growth especially PPP. The Company expects to continue to build capital levels given the current environment.

In September 2020, the Board of Directors continued the dividend rate of $0.27 per common share initially set in November 2019. Given the current economic uncertainty, the Company is committed to maintaining its current dividend level and will continue to evaluate the related impact on capital levels quarterly.

Based on recent economic developments and the increased importance of capital preservation, no shares were repurchased in 2020. Approximately 741,000 shares remain eligible for repurchase under the current buy-back plan.

Results of Operations Third Quarter 2020 Compared with Second Quarter 2020

Net interest income increased $167,000 over the prior quarter to $33.7 million, led by the continued decline in cost of funds primarily time deposits.

Loan provisioning in 2020 has been significantly impacted by the economic crisis and its impact upon the national unemployment forecast within the CECL model and changes in loan mix.

Non-interest income increased $421,000 to $13.0 million.

-- A significant increase in mortgage banking income, debit/credit card income and higher treasury management fees more than offset a modest reduction in Wealth Management and Trust service fees.

Non-interest expenses increased $1.3 million, or 5%, to $26.2 million.

-- Compensation expense increased $1.5 million to $13.3 million compared with the second quarter of 2020, due to increased incentive compensation and the deferred salary costs associated with the volume of PPP loan originations in the second quarter. -- Technology and communication expense increased $318,000 due to the third quarter migration to a hosted core environment and elevated treasury management expenses. -- Credit loss expense of $550,000 for off-balance sheet credit exposures was recorded during the third quarter of 2020 due to qualitative loss factor adjustments within the CECL model and a rise in unused commitments. On a linked quarter basis, this expense category improved by $925,000.

Financial Condition September 30, 2020, Compared with June 30, 2020

Total loans increased $8 million during the quarter to $3.5 billion at quarter end. Excluding the PPP portfolio, total loans contracted $4 million. The commercial real estate portfolio increased $33 million during the quarter, which was offset by contraction in the C&I category. Total line of credit usage declined to 37% as of September30, 2020, from 39% at June 30, 2020. C&I line usage declined to 26% as of September 30, 2020, compared to 29% at June 30, 2020.

Total deposits increased $27 million on a linked quarter basis. The economic slow-down and uncertainty surrounding the pandemic has resulted in the customer base maintaining generally higher deposit balances.

Stockholders equity increased $8 million in the third quarter of 2020 compared with the prior quarter, with net income of $14.5 million and the positive change in equity related to the Banks investment portfolio offset by dividends declared.

Asset quality remained at strong levels. The allowance for credit losses was 1.45% of total loans, and the allowance for credit losses, excluding PPP loans, was 1.78%(2) of total loans, at September 30, 2020.

Recent Events

On October 21, 2020, the Company announced the election of James A. (Ja) Hillebrand as Chairman of the Board for Stock Yards Bancorp, effective January 1, 2021. Hillebrand will succeed David P. Heintzman, who was named Non-Executive Chairman on October 1, 2018. These changes complete the succession plan for Heintzman, who had been the Chairman and CEO of Stock Yards through October 1, 2018 and became the Non-Executive Chairman of the board when Hillebrand was promoted from President to CEO. Hillebrand will now serve as Chairman and CEO of the company and Heintzman will continue to serve on the board of the Company.

About the Company

Louisville, Kentucky-based Stock Yards Bancorp, Inc., with $4.4billion in assets, was incorporated in 1988 as a bank holding company. It is the parent company of Stock Yards Bank & Trust Company, which was established in 1904. TheCompanys common shares trade on The NASDAQStock Market under the symbol SYBT.

This report contains forward-looking statements under the Private Securities Litigation Reform Act that involve risks and uncertainties. Although the Companys management believes the assumptions underlying the forward-looking statements contained herein are reasonable, any of these assumptions could be inaccurate. Therefore, there can be no assurance the forward-looking statements included herein will prove to be accurate. Factors that could cause actual results to differ from those discussed in forward-looking statements include, but are not limited to: economic conditions both generally and more specifically in the markets in which the Company and its subsidiary operates; competition for the Companys customers from other providers of financial services; government legislation and regulation, which change and over which the Company has no control; changes in interest rates; material unforeseen changes in liquidity, results of operations, or financial condition of the Companys customers; the effects of the FRBs benchmark interest rate cuts on liquidity and margins; the potential adverse effects of the coronavirus or any other pandemic on the ability of borrowers to satisfy their obligations to the Company, the level of the Companys non-performing assets, the demand for the Companys loans or its other products and services, other aspects of the Companys business and operations, and financial markets and economic growth, and other risks detailed in the Companys filings with the Securities and Exchange Commission, all of which are difficult to predict and many of which are beyond the control of the Company. See Risk Factors outlined in the Companys Form 10-Q for the three and six months ended June 30, 2020 and Form 10-K for the year ended December31, 2019.

Contact: T. Clay Stinnett Executive Vice President, Treasurer and Chief Financial Officer (502) 625-0890

Stock YardsBancorp, Inc.Financial Information(unaudited)Third Quarter2020 Earnings Release(In thousandsunless otherwisenoted) Three Months Ended Nine Months Ended September 30, September 30, Income 2020 2019 2020 2019 Statement Data Net interestincome, fully $ 33,768 $ 32,167 $ 99,834 $ 92,763 tax equivalent(3)Interest income:Loans $ 33,844 $ 35,058 $ 101,692 $ 100,075 Federal fundssold andinterest 54 566 673 2,129 bearing duefrom banksMortgage loans 173 41 359 121 held for saleSecurities 2,073 2,344 6,808 7,735 Total interest 36,144 38,009 109,532 110,060 incomeInterest expense:Deposits 2,107 5,316 8,676 16,034 Securitiessold under agreements torepurchase andothershort-term 9 78 64 255 borrowingsFederal HomeLoan Bank(FHLB) 333 509 1,123 1,180 advances andotherlong-term debtTotal interest 2,449 5,903 9,863 17,469 expenseNet interest 33,695 32,106 99,669 92,591 incomeProvision for 4,418 400 15,518 1,000 credit lossesNet interestincome after 29,277 31,706 84,151 91,591 provision forcredit lossesNon-interest income:Wealthmanagement and 5,657 5,738 17,601 16,839 trust servicesDepositservice 998 1,356 3,081 3,793 chargesDebit andcredit card 2,218 2,102 6,261 6,014 incomeTreasurymanagement 1,368 1,264 3,901 3,623 feesMortgage 1,979 794 4,447 2,004 banking incomeNet investmentproduct sales 431 400 1,288 1,120 commissionsand feesBank owned 172 487 527 849 life insuranceOther 220 1,068 1,095 2,199 Totalnon-interest 13,043 13,209 38,201 36,441 incomeNon-interest expenses:Compensation 13,300 12,330 37,296 36,846 Employee 2,853 2,819 8,891 8,182 benefitsNet occupancy 2,235 2,189 6,205 6,005 and equipmentTechnology and 2,265 1,841 6,225 5,462 communicationDebit andcredit card 649 662 1,908 1,880 processingMarketing andbusiness 523 732 1,548 2,260 developmentPostage,printing and 472 402 1,355 1,218 suppliesLegal and 544 524 1,795 2,581 professionalAmortizationof investments 52 137 141 241 in tax creditpartnershipsCapital anddeposit based 1,076 993 3,331 2,864 taxesCredit lossexpense foroff-balance 550 - 2,400 - sheetexposuresOther 1,677 1,269 3,935 4,423 Totalnon-interest 26,196 23,898 75,030 71,962 expensesIncome beforeincome tax 16,124 21,017 47,322 56,070 expenseIncome tax 1,591 3,783 6,189 6,652 expenseNet income $ 14,533 $ 17,234 $ 41,133 $ 49,418 Net income per $ 0.64 $ 0.76 $ 1.82 $ 2.18 share - BasicNet income pershare - 0.64 0.76 1.81 2.16 DilutedCash dividenddeclared per 0.27 0.26 0.81 0.77 share Weightedaverage shares 22,582 22,550 22,553 22,633 - BasicWeightedaverage shares 22,802 22,810 22,759 22,901 - Diluted September 30, Balance Sheet 2020 2019 Data Loans $ 3,472,481 $ 2,856,664 Allowance for 50,501 26,877 credit lossesTotal assets 4,365,129 3,533,926 Non-interestbearing 1,180,001 795,793 depositsInterestbearing 2,574,517 2,150,520 depositsFHLB advances 56,536 81,985 Stockholders' 428,598 396,111 equityTotal shares 22,692 22,597 outstandingBook value per $ 18.89 $ 17.53 share (1)Tangiblecommon equity 18.25 16.87 per share (1)Market value 34.04 36.69 per share Stock YardsBancorp, Inc.Financial Information(unaudited)Third Quarter2020 Earnings Release Three Months Ended Nine Months Ended September 30, September 30, AverageBalance Sheet 2020 2019 2020 2019 Data Federal fundssold andinterest $ 194,100 $ 98,569 $ 216,014 $ 119,210 bearing duefrom banksMortgage loans 28,520 3,887 17,202 3,144 held for saleSecuritiesavailable for 442,089 396,686 433,744 423,082 saleFHLB stock 11,284 11,317 11,284 10,704 Loans 3,444,407 2,791,389 3,245,011 2,660,328 Total earning 4,120,400 3,301,848 3,923,255 3,216,468 assetsTotal assets 4,325,500 3,502,267 4,118,441 3,404,080 Interestbearing 2,521,838 2,127,769 2,446,585 2,096,745 depositsTotal deposits 3,707,845 2,912,631 3,514,554 2,841,850 Securitiessold under agreement torepurchase andothershort-term 49,709 48,376 47,803 49,690 borrowingsFHLB advancesand other 59,487 83,386 65,751 68,075 long-termborrowingsTotal interestbearing 2,631,034 2,259,531 2,560,139 2,215,153 liabilitiesTotalstockholders' 426,049 392,840 415,595 381,743 equity Performance RatiosAnnualizedreturn on 1.34% 1.95% 1.33% 1.94% average assetsAnnualizedreturn on 13.57% 17.41% 13.22% 17.31% average equityNet interestmargin, fully 3.26% 3.87% 3.40% 3.86% tax equivalentNon-interestincome tototal revenue, 27.86% 29.11% 27.67% 28.20% fully taxequivalentEfficiencyratio, fully 55.96% 52.67% 54.36% 55.70% tax equivalent(4) Capital Ratios Totalstockholders'equity to 9.82% 11.21% total assets(1)Tangiblecommon equity 9.52% 10.83% to tangibleassets (1)Averagestockholders' 10.09% 11.21% equity toaverage assetsTotalrisk-based 13.79% 12.53% capitalCommon equitytier 1 12.61% 11.69% risk-basedcapitalTier 1risk-based 12.61% 11.69% capitalLeverage 9.70% 10.90% Loan SegmentationCommercialreal estate - $ 828,328 $ 737,464 non-owneroccupiedCommercialreal estate - 492,825 458,526 owner occupiedCommercial and 731,850 853,901 industrialCommercial andindustrial - 642,056 - PPPResidentialreal estate - 211,984 221,411 owner occupiedResidentialreal estate - 143,149 127,934 non-owneroccupiedConstructionand land 257,875 278,910 developmentHome equitylines of 97,150 105,935 creditConsumer 44,161 43,568 Leases 13,981 19,934 Credit cards - 9,122 9,081 commercialTotal loans $ 3,472,481 $ 2,856,664 and leases Asset Quality DataNon-accrual $ 12,358 $ 2,722 loansTroubled debt 18 35 restructuringsLoans past due90 days or 1,152 487 more and stillaccruingTotalnon-performing 13,528 3,244 loansOther real 612 563 estate ownedTotalnon-performing $ 14,140 $ 3,807 assetsNon-performingloans to total 0.39% 0.11% loansNon-performingassets to 0.32% 0.11% total assetsAllowance forcredit losses 1.45% 0.94% to total loansAllowance forcredit losses 1.56% 1.01% to averageloansAllowance forcredit lossesto 373% 829% non-performingloansNet(charge-offs) $ (1,625) $ 61 $ (1,664) $ 343 recoveriesNet(charge-offs)recoveries to -0.05% 0.00% -0.05% 0.01% average loans(5) Stock YardsBancorp, Inc.Financial Information(unaudited)Third Quarter2020 Earnings Release Quarterly Comparison Income 9/30/20 6/30/20 3/31/20 12/31/19 9/30/19 Statement Data Net interestincome, fully $ 33,768 $ 33,573 $ 32,494 $ 32,808 $ 32,167 tax equivalent(3)Net interest $ 33,695 $ 33,528 $ 32,446 $ 32,756 $ 32,106 incomeProvision for 4,418 5,550 5,550 - 400 credit lossesNet interestincome after 29,277 27,978 26,896 32,756 31,706 provision forcredit lossesNon-interest income:Wealthmanagement and 5,657 5,726 6,218 5,804 5,738 trust servicesDepositservice 998 800 1,283 1,399 1,356 chargesDebit andcredit card 2,218 2,063 1,980 2,109 2,102 incomeTreasurymanagement 1,368 1,249 1,284 1,369 1,264 feesMortgage 1,979 1,622 846 930 794 banking incomeNet investmentproduct sales 431 391 466 378 400 commissionsand feesBank owned 172 176 179 182 487 life insuranceOther 220 595 280 816 1,068 Totalnon-interest 13,043 12,622 12,536 12,987 13,209 incomeNon-interest expenses:Compensation 13,300 11,763 12,233 13,473 12,330 Employee 2,853 2,871 3,167 2,510 2,819 benefitsNet occupancy 2,235 2,089 1,881 2,374 2,189 and equipmentTechnology and 2,265 1,947 2,013 1,636 1,841 communicationDebit andcredit card 649 603 656 613 662 processingMarketing andbusiness 523 465 560 1,367 732 developmentPostage,printing and 472 442 441 434 402 suppliesLegal and 544 628 623 433 524 professionalAmortizationof investments 52 53 36 837 137 in tax creditpartnershipsCapital anddeposit based 1,076 1,225 1,030 1,006 993 taxesCredit lossexpense foroff-balance 550 1,475 375 - - sheetexposuresOther 1,677 1,323 935 1,470 1,269 Totalnon-interest 26,196 24,884 23,950 26,153 23,898 expensesIncome beforeincome tax 16,124 15,716 15,482 19,590 21,017 expenseIncome tax 1,591 2,348 2,250 2,941 3,783 expenseNet income $ 14,533 $ 13,368 $ 13,232 $ 16,649 $ 17,234 Net income per $ 0.64 $ 0.59 $ 0.59 $ 0.74 $ 0.76 share - BasicNet income pershare - 0.64 0.59 0.58 0.73 0.76 DilutedCash dividenddeclared per 0.27 0.27 0.27 0.27 0.26 share Weightedaverage shares 22,582 22,560 22,516 22,493 22,550 - BasicWeightedaverage shares 22,802 22,739 22,736 22,760 22,810 - Diluted Quarterly Comparison Balance Sheet 9/30/20 6/30/20 3/31/20 12/31/19 9/30/19 Data Cash and due $ 49,517 $ 46,362 $ 47,662 $ 46,863 $ 68,107 from banksFederal fundssold andinterest 241,486 178,032 206,849 202,861 68,107 bearing duefrom banksMortgage loans 23,611 17,364 8,141 8,748 6,329 held for saleSecuritiesavailable for 429,184 485,249 445,813 470,738 375,601 saleFHLB stock 11,284 11,284 11,284 11,284 11,284 Loans 3,472,481 3,464,077 2,937,366 2,845,016 2,856,664 Allowance for 50,501 47,708 42,143 26,791 26,877 credit lossesTotal assets 4,365,129 4,334,533 3,784,586 3,724,197 3,533,926 Non-interestbearing 1,180,001 1,205,253 858,883 810,475 795,793 depositsInterestbearing 2,574,517 2,521,903 2,339,995 2,323,463 2,150,520 depositsSecuritiessold under 40,430 42,722 32,366 31,985 33,172 agreements torepurchaseFederal funds 9,179 8,401 9,747 10,887 9,957 purchasedFHLB advances 56,536 61,432 69,191 79,953 81,985 Stockholders' 428,598 420,231 409,702 406,297 396,111 equityTotal shares 22,692 22,667 22,665 22,604 22,597 outstandingBook value per $ 18.89 $ 18.54 $ 18.08 $ 17.97 $ 17.53 share (1)Tangiblecommon equity 18.25 17.89 17.43 17.32 16.87 per share (1)Market value 34.04 40.20 28.93 41.06 36.69 per share Capital Ratios Totalstockholders'equity to 9.82% 9.69% 10.83% 10.91% 11.21% total assets(1)Tangiblecommon equity 9.52% 9.39% 10.48% 10.55% 10.83% to tangibleassets (1)Averagestockholders' 9.85% 9.66% 10.88% 10.81% 11.22% equity toaverage assetsTotalrisk-based 13.79% 13.50% 12.75% 12.85% 12.53% capitalCommon equitytier 1 12.61% 12.39% 11.81% 12.02% 11.69% risk-basedcapitalTier 1risk-based 12.61% 12.39% 11.81% 12.02% 11.69% capitalLeverage 9.70% 9.50% 10.78% 10.60% 10.90% Stock YardsBancorp, Inc.Financial Information(unaudited)Third Quarter2020 Earnings Release Quarterly Comparison AverageBalance Sheet 9/30/20 6/30/20 3/31/20 12/31/19 9/30/19 Data Federal fundssold andinterest $ 194,100 $ 285,617 $ 168,563 $ 187,865 $ 98,569 bearing duefrom banksMortgage loans 28,520 18,010 4,953 5,889 3,887 held for saleSecuritiesavailable for 442,089 412,368 449,610 476,360 396,686 saleLoans 3,444,407 3,396,767 2,891,668 2,828,142 2,791,389 Total earning 4,120,400 4,124,046 3,526,078 3,509,573 3,301,848 assetsTotal assets 4,325,500 4,317,430 3,710,119 3,709,250 3,502,267 Interestbearing 2,521,838 2,500,315 2,316,774 2,284,195 2,127,769 depositsTotal deposits 3,707,845 3,713,451 3,120,242 3,108,640 2,912,631 Securitiessold under agreement torepurchase andothershort-term 49,709 49,940 43,739 49,881 48,376 borrowingsFHLB advances 59,487 63,896 73,939 80,457 83,386 Total interestbearing 2,631,034 2,614,151 2,434,452 2,414,533 2,259,531 liabilitiesTotalstockholders' 426,049 416,920 403,702 400,870 392,840 equity Performance RatiosAnnualizedreturn on 1.34% 1.25% 1.43% 1.78% 1.95% average assetsAnnualizedreturn on 13.57% 12.90% 13.18% 16.48% 17.41% average equityNet interestmargin, fully 3.26% 3.27% 3.71% 3.71% 3.87% tax equivalentNon-interestincome tototal revenue, 27.86% 27.32% 27.84% 28.36% 29.11% fully taxequivalentEfficiencyratio, fully 55.96% 53.87% 53.19% 57.11% 52.67% tax equivalent(4) Loans SegmentationCommercialreal estate - $ 828,328 $ 815,464 $ 799,284 $ 746,283 $ 737,464 non-owneroccupiedCommercialreal estate - 492,825 472,457 476,534 474,329 458,526 owner occupiedCommercial and 731,850 764,480 883,868 838,800 853,901 industrialCommercial andindustrial - 642,056 630,082 - - - PPPResidentialreal estate - 211,984 215,891 219,221 217,606 221,411 owner occupiedResidentialreal estate - 143,149 139,121 134,734 134,995 127,934 non-owneroccupiedConstructionand land 257,875 255,447 246,040 255,816 278,910 developmentHome equitylines of 97,150 103,672 107,121 103,854 105,935 creditConsumer 44,161 43,758 44,939 47,467 43,568 Leases 13,981 14,843 15,476 16,003 19,934 Credit cards - 9,122 8,862 10,149 9,863 9,081 commercialTotal loans $ 3,472,481 $ 3,464,077 $ 2,937,366 $ 2,845,016 $ 2,856,664 and leases Asset Quality DataNon-accrual $ 12,358 $ 14,262 $ 4,235 $ 11,494 $ 2,722 loansTroubled debt 18 45 52 34 35 restructuringsLoans past due90 days or 1,152 48 1,762 535 487 more and stillaccruingTotalnon-performing 13,528 14,355 6,049 12,063 3,244 loansOther real 612 493 493 493 563 estate ownedTotalnon-performing $ 14,140 $ 14,848 $ 6,542 $ 12,556 $ 3,807 assetsNon-performingloans to total 0.39% 0.41% 0.21% 0.42% 0.11% loansNon-performingassets to 0.32% 0.34% 0.17% 0.34% 0.11% total assetsAllowance forcredit losses 1.45% 1.38% 1.43% 0.94% 0.94% to total loansAllowance forcredit losses 1.47% 1.40% 1.46% 0.95% 0.96% to averageloansAllowance forcredit lossesto 373% 332% 697% 222% 829% non-performingloansNet(charge-offs) $ (1,625) $ 15 $ (54) $ (86) $ 61 recoveriesNet(charge-offs)recoveries to -0.05% 0.00% 0.00% 0.00% 0.00% average loans(5) Other InformationTotal assetsunder $ 3,414 $ 3,204 $ 2,961 $ 3,320 $ 3,116 management (inmillions)Full-timeequivalent 626 620 618 615 622 employees (1) - The following table provides a reconciliation of total stockholders?equity in accordance with U.S. Generally Accepted Accounting Principles(?GAAP?) to tangible stockholders? equity, a non-GAAP disclosure. Bancorp provides the tangible book value per share, a non-GAAP measure, in addition tothose defined by banking regulators, because of its widespread use by investorsas a means to evaluate capital adequacy: Quarterly Comparison (In thousands,except per 9/30/20 6/30/20 3/31/20 12/31/19 9/30/19 share data) Totalstockholders' $ 428,598 $ 420,231 $ 409,702 $ 406,297 $ 396,111 equity - GAAP(a)Less: (12,513) (12,513) (12,513) (12,513) (12,593) GoodwillLess: Coredeposit (2,042) (2,122) (2,203) (2,285) (2,373) intangibleTangiblecommon equity $ 414,043 $ 405,596 $ 394,986 $ 391,499 $ 381,145 - Non-GAAP (c) Total assets - $ 4,365,129 $ 4,334,533 $ 3,784,586 $ 3,724,197 $ 3,533,926 GAAP (b)Less: (12,513) (12,513) (12,513) (12,513) (12,593) GoodwillLess: Coredeposit (2,042) (2,122) (2,203) (2,285) (2,373) intangibleTangibleassets - $ 4,350,574 $ 4,319,898 $ 3,769,870 $ 3,709,399 $ 3,518,960 Non-GAAP (d) Totalstockholders'equity to 9.82% 9.69% 10.83% 10.91% 11.21% total assets -GAAP (a/b)Tangiblecommon equityto tangible 9.52% 9.39% 10.48% 10.55% 10.83% assets -Non-GAAP (c/d) Total sharesoutstanding 22,692 22,667 22,665 22,604 22,597 (e) Book value pershare - GAAP $ 18.89 $ 18.54 $ 18.08 $ 17.97 $ 17.53 (a/e)Tangiblecommon equity 18.25 17.89 17.43 17.32 16.87 per share -Non-GAAP (c/e) (2) - Allowance to total non-PPP loans represents the allowance for creditlosses, divided by total loans less PPP loans. Bancorp believes this non-GAAPratio is important because it provides a comparable ratio after eliminating the PPP loans, which are fully guaranteed by the U.S. SBA and have not beenallocated for within the allowance for credit losses. Quarterly Comparison (Dollars in 9/30/20 6/30/20 3/31/20 12/31/19 9/30/19 thousands) Total Loans - $ 3,472,481 $ 3,464,077 $ 2,937,366 $ 2,845,016 $ 2,856,664 GAAP (b)Less: PPP (642,056) (630,082) - - - loansTotal non-PPPLoans - 2,830,425 $ 2,833,995 $ 2,937,366 $ 2,845,016 $ 2,856,664 Non-GAAP (c) Allowance forcredit losses $ 50,501 $ 47,708 $ 42,143 $ 26,791 $ 26,877 (a) Allowance forcredit losses 1.45% 1.38% 1.43% 0.94% 0.94% to total loans- GAAP (a/b)Allowance forcredit lossesto total loans 1.78% 1.68% 1.43% 0.94% 0.94% - Non-GAAP (a/c) (3) - Interest income on a fully tax equivalent basis includes the additionalamount of interest income that would have been earned if investments in certain tax-exempt interest earning assets had been made in assets subject to federal,state and local taxes yielding the same after-tax income. (4) - The efficiency ratio, a non-GAAP measure, equals total non-interestexpenses divided by the sum of fully tax equivalent net interest income andnon-interest income. The ratio excludes net gains (losses) on sales, calls, andimpairment of investment securities, if applicable. In addition to the efficiency ratio normally presented, Bancorp considers an adjusted efficiencyratio. Bancorp believes this ratio is important because it provides acomparable ratio after eliminating the fluctuation in non-interest expensesrelated to amortization of investments in tax credit partnerships. Quarterly Comparison (Dollars in 9/30/20 6/30/20 3/31/20 12/31/19 9/30/19 thousands) Totalnon-interest $ 26,196 $ 24,884 $ 23,950 $ 26,153 $ 23,898 expenses -GAAP (a)Less:Amortizationof investments (52) (53) (36) (837) (137) in tax creditpartnershipsTotalnon-interest $ 26,144 $ 24,831 $ 23,914 $ 25,316 $ 23,761 expenses -Non-GAAP (c) Total netinterest $ 33,768 $ 33,573 $ 32,494 $ 32,808 $ 32,167 income, fullytax equivalentTotalnon-interest 13,043 12,622 12,536 12,987 13,209 incomeLess: Gain/loss on sale - - - - - of securitiesTotal revenue $ 46,811 $ 46,195 $ 45,030 $ 45,795 $ 45,376 - GAAP (b) Efficiencyratio - GAAP 55.96% 53.87% 53.19% 57.11% 52.67% (a/b)Efficiencyratio - 55.85% 53.75% 53.11% 55.28% 52.36% Non-GAAP (c/b) (5) - Quarterly net(charge-offs) recoveries to average loans ratios are notannualized.