# Stock Yards Bancorp, Inc.: Form 10-Q for the period ended Mar 31, 2025

- Company: [Stock Yards Bancorp, Inc.](/companies/sybt.md) (CIK 835324)
- Form: 10-Q
- Filed: 2025-05-06
- Accepted by EDGAR: May 6, 2025, 13:03 ET
- Period: 2025-03-31
- Accession: 0001437749-25-014698
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/835324/000143774925014698/sybt20250331_10q.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/835324/000143774925014698/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2025-03-31.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Income tax | 3 months, 2025-01-01 to 2025-03-31 | $8.3m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2025-01-01 to 2025-03-31 | $33.3m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2025-01-01 to 2025-03-31 | $1.13 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2025-01-01 to 2025-03-31 | $1.13 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2025-01-01 to 2025-03-31 | 29,501,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 3 months, 2025-01-01 to 2025-03-31 | $19.8m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 3 months, 2025-01-01 to 2025-03-31 | $1.9m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Dividends paid | 3 months, 2025-01-01 to 2025-03-31 | $9.1m | us-gaap:PaymentsOfDividends |
| Share repurchases | 3 months, 2025-01-01 to 2025-03-31 | $1.6m | us-gaap:PaymentsForRepurchaseOfCommonStock |
| Total assets | at 2025-03-31 | $9.00bn | us-gaap:Assets |
| Total liabilities | at 2025-03-31 | $8.02bn | us-gaap:Liabilities |
| Long-term debt | at 2025-03-31 | $26.8m | us-gaap:LongTermDebt |
| Shareholders' equity | at 2025-03-31 | $975.5m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 99,796 characters.

Stock Yards Bancorp, Inc. (“Bancorp” or “the Company”), is a FHC headquartered in Louisville, Kentucky and is engaged in the business of banking through its wholly owned subsidiary, Stock Yards Bank & Trust Company (“SYB” or “the Bank”). Bancorp, which was incorporated in 1988 in Kentucky, is registered with, and subject to supervision, regulation and examination by, the Board of Governors of the Federal Reserve System. As Bancorp has no significant operations of its own, its business and the business of SYB are essentially the same. The operations of SYB are fully reflected in the consolidated financial statements of Bancorp. Accordingly, references to “Bancorp” in this document may encompass both the holding company and the Bank. All significant inter-company transactions and accounts have been eliminated in consolidation.

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.

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.

As a result of its acquisition of Commonwealth Bancshares, Inc. on March 7, 2022, Bancorp became the 100% successor owner of three unconsolidated Delaware trust subsidiaries: Commonwealth Statutory Trust III, Commonwealth Statutory Trust IV and Commonwealth Statutory Trust V. The sole assets of the trust subsidiaries represent the proceeds of offerings exchanged for subordinated debentures with similar terms to the TPS.

Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the consolidated financial statements and accompanying Footnotes presented in Part 1 Item 1 “*Financial Statements”* and other information appearing in Bancorp’s Annual Report on Form 10-K for the year ended December 31, 2024. To the extent that this discussion describes prior performance, the descriptions relate only to the periods listed, which may not be indicative of Bancorp’s future financial outcomes. In addition to historical information, this discussion contains forward-looking statements that involve risks, uncertainties and assumptions that could cause results to differ materially from management’s expectations.

### Cautionary Statement Regarding Forward-Looking Statements

This document contains statements relating to future results of Bancorp that are considered “forward-looking” as defined by Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. The forward-looking statements are principally, but not exclusively, contained in Part I Item 2 “*Management’s Discussion and Analysis of Financial Condition and Results of Operations.”*

Forward-looking statements involve known and unknown risks, uncertainties, and other factors that may cause actual results, performance, or achievements to be materially different from future results, performance, or achievements expressed or implied by the statement. These statements are often, but not always, made through the use of words or phrases such as “anticipate,” “believe,” “can,” “conclude,” “continue,” “could,” “estimate,” “expect,” “foresee,” “goal,” “intend,” “may,” “might,” “outlook,” “possible,” “plan,” “predict,” “project,” “potential,” “seek,” “should,” “target,” “will,” “will likely,” “would,” or other similar expressions. These forward-looking statements are not historical facts and are based on current expectations, estimates and projections about our industry, management’s beliefs and certain assumptions made by management, many of which, by their nature, are inherently uncertain and beyond our control.

Forward-looking statements detail management’s expectations regarding the future and are based on information known to management only as of the date the statements are made and management undertakes no obligation to update forward-looking statements to reflect events or circumstances that occur after the date forward-looking statements are made, except as required by applicable regulation.

There is no assurance that any list of risks and uncertainties or risk factors is complete. Factors that could cause actual results to differ materially from those expressed or implied in forward-looking statements include, among other things:

- Changes in, or forecasts of, future political and economic conditions, inflation or recession and efforts to control related developments;
- changes in laws and regulations or the interpretation thereof;
- accuracy of assumptions and estimates used in establishing the ACL for loans, ACL for off-balance sheet credit exposures and other estimates;
- impairment of investment securities;
- impairment of goodwill, MSRs, other intangible assets and/or DTAs;
- ability to effectively navigate an economic slowdown or other economic or market disruptions;
- changes in fiscal, monetary, and/or regulatory policies;
- changes in tax polices including but not limited to changes in federal and state statutory rates;
- behavior of securities and capital markets, including changes in interest rates, market volatility and liquidity;
- ability to effectively manage capital and liquidity;
- long-term and short-term interest rate fluctuations, as well as the shape of the U.S. Treasury yield curve;
- the magnitude and frequency of changes to the FFTR implemented by the Federal Open Market Committee of the FRB;
- competitive product and pricing pressures;
- projections of revenue, expenses, capital expenditures, losses, EPS, dividends, capital structure, etc.;
- integration of acquired financial institutions, businesses or future acquisitions;
- changes in the credit quality of Bancorp’s customers and counterparties, deteriorating asset quality and charge-off levels;
- changes in technology instituted by Bancorp, its counterparties or competitors;
- changes to or the effectiveness of Bancorp’s overall internal control environment;
- adequacy of Bancorp’s risk management framework, disclosure controls and procedures and internal control over financial reporting;
- changes in applicable accounting standards, including the introduction of new accounting standards;
- changes in investor sentiment or behavior;
- changes in consumer/business spending or savings behavior;
- ability to appropriately address social, environmental and sustainability concerns that may arise from business activities;
- occurrence of natural or man-made disasters or calamities, including health emergencies, the spread of infectious diseases, pandemics or outbreaks of hostilities, and Bancorp’s ability to deal effectively with disruptions caused by the foregoing;
- ability to maintain the security of its financial, accounting, technology, data processing and other operational systems and facilities;
- ability to withstand disruptions that may be caused by any failure of its operational systems or those of third parties;
- ability to effectively defend itself against cyberattacks or other attempts by unauthorized parties to access information of Bancorp, its vendors or its customers or to disrupt systems; and
- other risks and uncertainties reported from time-to-time in Bancorp’s filings with the SEC, including Part I Item 1A “*Risk Factors”* of Bancorp’s Annual Report on Form 10-K for the year ended December 31, 2024.

### Issued but Not Yet Effective Accounting Standards Updates

For disclosure regarding the impact to Bancorp’s financial statements of issued-but-not-yet-effective ASUs, see the footnote titled “*Summary of Significant Accounting Policies”* of Part I Item 1 “*Financial Statements.”*

### Business Segment Overview

Bancorp is divided into two reportable segments: Commercial Banking and WM&T:

Commercial Banking provides a full range of loan and deposit products to individual consumers and businesses in all its markets through retail lending, mortgage banking, deposit services, online banking, mobile banking, private banking, commercial lending, commercial real estate lending, treasury management services, merchant services, international banking, correspondent banking and other banking services. The Bank also offers securities brokerage services via its banking center network through an arrangement with a third party broker-dealer in the Commercial Banking segment.

WM&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.

**Overview – Operating Results (FTE)**

The following table presents an overview of Bancorp’s financial performance for the three months ended March 31, 2025 and 2024:

*(dollars in thousands, except per share data)*

| Three months ended March 31, | 2025 | 2024 | Variance $/bp% |  |
| --- | ---: | ---: | ---: | ---: |
| Net income | $33,271 | $25,887 | $7,384 | 29% |
| Diluted earnings per share | $1.13 | $0.88 | $0.25 | 28% |
| ROA | 1.52% | 1.28% | 24 bps | 19% |
| ROE | 14.14% | 12.09% | 205 bps | 17% |

Additional discussion follows under the section titled “*Results of Operations.”*

### General highlights for the three months ended March 31, 2025 compared to March 31, 2024:

- Net income totaled $33.3 million for the three months ended March 31, 2025, resulting in diluted EPS of $1.13, compared to net income of $25.9 million for the three months ended March 31, 2024, which resulted in diluted EPS of $0.88.
- Total loans increased $797 million, or 14%, compared to March 31, 2024, driven by growth that was well spread amongst the loan portfolio segments over the past 12 months. Average loans increased $789 million, or 14%, for the three months ended March 31, 2025 compared to the same period of the prior year.
- Bancorp’s ACL on loans increased $8 million, or 10%, compared to March 31, 2024. The increase over the past 12 months was attributed to significant loan growth, increased specific reserves, and slight deterioration within the unemployment forecast, which were partially offset by annual CECL model updates.
- Provision for credit losses on loans totaled $900,000 for the three months ended March 31, 2025, compared to $1.2 million for the three months ended March 31, 2024.
- Deposit balances increased $685 million, or 13%, compared to March 31, 2024, driven in large part by growth in time deposits tied to the success of promotional rate offerings.
- Net interest income (FTE) totaled $70.6 million for the three months ended March 31, 2025, representing an increase of $10.5 million, or 17%, compared to the three months ended March 31, 2024.
- Interest income experienced a $14.6 million, or 15%, increase over this period associated with the benefits of higher rates and average earning asset growth, far surpassing the $4.1 million, or 11%, increase in interest expense driven by growth in interest-bearing liabilities. Interest income for the first quarter of 2025 also benefitted from the payoff of a large non-accrual relationship, including interest income.
- Bancorp has continued to experience a significant shift in the deposit mix, as non-interest bearing deposits and lower-yielding deposits have migrated to higher-yielding options, particularly time deposits. As a result, the overall cost of deposits, including non-interest bearing deposits, increased 5 bps to 2.00% compared to the first quarter of 2024.
- NIM increased 26 bps to 3.46% for the three months ended March 31, 2025, compared to the same period of the prior year, driven by the previously mentioned benefit of higher rates on interest earning assets.
- Non-interest income decreased $275,000, or 1%, for the three months ended March 31, 2025, compared to the three months ended March 31, 2024, as significant equity market depreciation weighed on WM&T fee income and generally lower transaction volumes drove decreases for deposit services charges and card income.
- Non-interest expenses increased $2.1 million, or 4%, for the three months ended March 31, 2025, compared to the three months ended March 31, 2024, driven mainly by higher compensation expenses associated with annual merit-based salary increases and growth in full time equivalent employees, increased net occupancy expenses tied to severe winter weather and elevated marketing expenses related to promotional deposit campaigns.
- Bancorp’s efficiency ratio (FTE) for the three months ended March 31, 2025 was 54.50% compared to 58.68% for the three months ended March 31, 2024. This improvement is attributed to strong net interest income growth, which outpaced growth in non-interest expenses.
- As of March 31, 2025, Bancorp continued to be “well-capitalized,” the highest regulatory capital rating for financial institutions, with capital ratios experiencing growth compared to both December 31, 2024 and March 31, 2024. Total stockholders’ equity to total assets was 10.84% as of March 31, 2025, compared to 10.61% and 10.77% at December 31, 2024 and March 31, 2024, respectively. Tangible common equity to tangible assets was 8.72% at March 31, 2025, compared to 8.44% and 8.36% at December 31, 2024 and March 31, 2024, respectively.

### Results of Operations

### Net Interest Income - Overview

As is the case with most banks, Bancorp’s primary revenue sources are net interest income and fee income from various financial services provided to customers. Net interest income is the difference between interest income earned on loans, investment securities and other interest earning assets less interest expense on deposit accounts and other interest bearing liabilities. Loan volume and interest rates earned on those loans are critical to overall profitability. Similarly, deposit volume is crucial to funding loans and rates paid on deposits directly impact profitability. New business volume is influenced by numerous economic factors including market interest rates, business spending, liquidity, consumer confidence and competitive conditions within the marketplace. The discussion that follows is based on FTE net interest income data.

Comparative information regarding net interest income follows:

*(dollars in thousands)*

| As of and for the three months ended March 31, | 2025 | 2024 | Variance $/bp% |  |
| --- | ---: | ---: | --- | ---: |
| Net interest income | $70,552 | $60,070 | $10,482 | 17% |
| Net interest income (FTE)\* | 70,636 | 60,167 | 10,469 | 17% |
| Net interest spread (FTE)\* | 2.83% | 2.49% | 34 bps | 14% |
| Net interest margin (FTE)\* | 3.46% | 3.20% | 26 bps | 8% |
| Average interest earning assets | $8,270,323 | $7,567,065 | $703,258 | 9% |
| Average interest bearing liabilities | 6,253,712 | 5,535,128 | 718,584 | 13% |
| Five year Treasury note rate at period end | 3.96% | 4.21% | (25) bps | -6% |
| Average five year Treasury note rate | 4.25% | 4.12% | 13 bps | 3% |
| Prime rate at period end | 7.50% | 8.50% | (100) bps | -12% |
| Average Prime rate | 7.50% | 8.50% | (100) bps | -12% |
| One month term SOFR at period end | 4.32% | 5.33% | (101) bps | -19% |
| Average one month term SOFR | 4.31% | 5.33% | (102) bps | -19% |

*\*See table titled, "Average Balance Sheets and Interest Rates (FTE)" for detail of Net interest income (FTE).*

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.

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.

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.

While the FRB decided against further rate reductions during the first quarter of 2025, recent projections indicate the likelihood for rate reductions over the rest of 2025. Bancorp expects the potential for pricing pressure/competition for both loans and deposits to increase in the coming quarters.

**Net Interest Income (FTE) – Three months ended March 31, 2025 compared to March 31, 2024:**

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:

- Significant 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 a combination of scheduled investment security maturities and FHLB borrowings.
- Bancorp has continued to experience a shift in it's deposit mix, as depositors seek higher yielding deposit alternatives. While the cost of deposits moderated in tandem with the rate decreases enacted by the Fed in the latter part of 2024, interest expense increased consistent with interest bearing deposit growth.

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.

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%.

- Average total loan balances increased $789 million, or 14%, for the three months ended March 31, 2025, compared to the same period of 2024, with significant growth driven by contributions from almost every loan category.
- Average investment securities declined $123 million, or 8%, for the three months ended March 31, 2025 compared to the same period of 2024, mainly the result of significant scheduled maturities within the treasury portfolio, and to a lesser extent, normal amortization activity. The funding provided by this activity has benefitted interest-earning asset yields and overall NIM, as the low-yielding treasury securities shifted into higher-yielding interest-bearing cash and helped fund Bancorp’s substantial loan growth.
- Average FFS and interest bearing due from bank balances increased $26 million, or 17%, for the three months ended March 31, 2025, which was largely the result of the previously mentioned liquidity provided by the investment securities portfolio.

Total interest income (FTE) increased $14.6 million, or 15%, to $111 million for the three months ended March 31, 2025, as compared to the same period of 2024.

- Interest and fee income (FTE) on loans increased $13.7 million, or 16%, to $99.6 million for the three months ended March 31, 2025, compared to the same period of 2024, driven by the higher rate environment and significant average loan growth. The yield on the overall loan portfolio increased 18 bps to 6.13% for the three months ended March 31, 2025 compared to 5.95% for the same period of the prior year. The first quarter of 2025 also benefitted from the payoff of a large non-accrual loan, which included approximately $628,000 of interest income, helping to increase loan yields by approximately 4 bps.
- Despite the decline in average investment securities, there was a $854,000, or 10%, increase in interest income (FTE) on the portfolio for the three months ended March 31, 2025 compared to the same period of 2024. This increase was driven by reinvesting a portion of lower-yielding maturities at significantly higher rates, largely during the fourth quarter of 2024, to satisfy collateral pledging requirements. As a result, the corresponding yield on the portfolio was 2.51% for the three months ended March 31, 2025, compared to 2.07% for the prior year period, the increase being attributed to the maturity of low-yielding treasury securities.
- Interest income on FFS and interest bearing due from bank balances decreased $95,000 for the three months ended March 31, 2025, stemming mainly from rate cuts to the FFTR during the latter part of 2024. The yield on these assets decreased 97 bps to 4.50% for the three months ended March 31, 2025 compared to the same period of 2024.

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.

- Average interest bearing deposits increased $536 million, or 11%, for the three months ended March 31, 2025 compared to the same period in 2024. Bancorp experienced a $317 million, or 31%, increase in average time deposits and increases of $131 million, or 6%, and $101 million, or 8%, increase in average interest bearing demand and money market deposits, respectively, as a result of depositors seeking higher-yielding deposit products in the current environment.
- Average FHLB advances increased $192 million, or 70%, for the three months ended March 31, 2025 compared to the same period of the prior year. Bancorp currently utilizes a $300 million term advance in conjunction with four separate interest rate swaps of varying maturities in an effort to secure longer-term funding at a more favorable rate. Bancorp has also utilized overnight borrowings more heavily during the first quarter of 2025 to fund loan growth, but all overnight borrowings were paid off prior to period end, attributed largely to interest bearing deposit growth.
- Average SSUAR decreased $6 million, or 4%, for the three months ended March 31, 2025 compared to the same period of the prior year, representing normal fluctuation.

Total interest expense increased $4.1 million, or 11%, for the three months ended March 31, 2025 compared to the same period of 2024, driven by average interest bearing deposit and FHLB advance growth. Despite this growth, the cost of interest bearing liabilities decreased 2 bps to 2.63% for the three months ended March 31, 2025 compared to the same period of 2024, driven by the interest rate cuts enacted by the Fed in the latter part of 2024.

- Total interest bearing deposit expense increased $2.7 million, or 9%, driven by growth in the time deposit portfolio associated with successful promotional campaigns, which was only partially offset by decreases in interest expense for the other interest-bearing deposit categories. While the cost of interest bearing deposits declined 2 bps to 2.63% compared to the first quarter of 2024, the cost of total deposits increased 5 bps to 2.00% over the same period, which is the result of the continued deposit mix shift towards more interest bearing deposits.
- Interest expense on FHLB borrowings increased $1.7 million, or 58%, for the three months ended March 31, 2025, as compared to same period of the prior year, driven by increased borrowing activity.
- Interest expense on SSUAR decreased $117,000, or 13%, for the three months ended March 31, 2025, as compared to the same period of the prior year, consistent with the average balance decrease.

**Average Balance Sheets and Interest Rates (FTE) – Three-Month Comparison**

*(dollars in thousands)*

| Interest earning assets: | Three months ended March 31, 2025 Average Balance | Interest | Average Rate | 2024 Average Balance | Interest | Average Rate |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Federal funds sold and interest bearing due from banks | $180,439 | $2,001 | 4.50% | $153,990 | $2,096 | 5.47% |
| Mortgage loans held for sale | 5,732 | 77 | 5.45 | 4,629 | 31 | 2.69 |
| Investment securities: |  |  |  |  |  |  |
| Taxable | 1,382,322 | 8,495 | 2.49 | 1,497,641 | 7,657 | 2.06 |
| Tax-exempt | 73,604 | 498 | 2.74 | 80,760 | 482 | 2.40 |
| Total securities | 1,455,926 | 8,993 | 2.51 | 1,578,401 | 8,139 | 2.07 |
| Federal Home Loan Bank stock | 30,838 | 532 | 7.00 | 21,121 | 468 | 8.91 |
| Loans | 6,597,388 | 99,647 | 6.13 | 5,808,924 | 85,908 | 5.95 |
| **Total interest earning assets** | 8,270,323 | 111,250 | 5.46 | 7,567,065 | 96,642 | 5.14 |
| Less allowance for credit losses on loans | 89,624 |  |  | 82,470 |  |  |
| **Non-interest earning assets:** |  |  |  |  |  |  |
| Cash and due from banks | 76,170 |  |  | 71,275 |  |  |
| Premises and equipment, net | 115,772 |  |  | 108,081 |  |  |
| Bank owned life insurance | 89,611 |  |  | 87,164 |  |  |
| Goodwill | 194,074 |  |  | 194,074 |  |  |
| Accrued interest receivable and other | 237,581 |  |  | 208,175 |  |  |
| **Total assets** | $8,893,907 |  |  | $8,153,364 |  |  |
| **Interest bearing liabilities:** |  |  |  |  |  |  |
| Deposits: |  |  |  |  |  |  |
| Interest bearing demand | $2,492,759 | $11,594 | 1.89% | $2,361,515 | $11,921 | 2.03% |
| Savings | 421,431 | 293 | 0.28 | 434,411 | 299 | 0.28 |
| Money market | 1,352,387 | 9,335 | 2.80 | 1,251,125 | 9,490 | 3.05 |
| Time | 1,328,163 | 13,359 | 4.08 | 1,011,692 | 10,156 | 4.04 |
| Total interest bearing deposits | 5,594,740 | 34,581 | 2.51 | 5,058,743 | 31,866 | 2.53 |
| Securities sold under agreements to repurchase | 158,985 | 814 | 2.08 | 164,979 | 931 | 2.27 |
| Federal funds purchased | 6,514 | 70 | 4.36 | 10,161 | 136 | 5.38 |
| Federal Home Loan Bank advances | 466,667 | 4,741 | 4.12 | 274,451 | 2,997 | 4.39 |
| Subordinated debentures | 26,806 | 408 | 6.17 | 26,794 | 545 | 8.18 |
| **Total interest bearing liabilities** | 6,253,712 | 40,614 | 2.63 | 5,535,128 | 36,475 | 2.65 |
| **Non-interest bearing liabilities:** |  |  |  |  |  |  |
| Non-interest bearing demand deposits | 1,426,088 |  |  | 1,500,602 |  |  |
| Accrued interest payable and other | 260,067 |  |  | 256,605 |  |  |
| **Total liabilities** | 7,939,867 |  |  | 7,292,335 |  |  |
| Stockholders’ equity | 954,040 |  |  | 861,029 |  |  |
| **Total liabilities and stockholders' equity** | $8,893,907 |  |  | $8,153,364 |  |  |
| **Net interest income** |  | $70,636 |  |  | $60,167 |  |
| **Net interest spread** |  |  | 2.83% |  |  | 2.49% |
| **Net interest margin** |  |  | 3.46% |  |  | 3.20% |

61

### Supplemental Information - Average Balance Sheets and Interest Rates (FTE)

- *Average loan balances include the principal balance of non-accrual loans, as well as unearned income such as loan premiums, discounts, fees/costs and exclude participation loans accounted for as secured borrowings. Participation loans accounted for as secured borrowings averaged $2 million and $4 million for the three month periods ended March 31, 2025 and 2024, respectively.*
- *Interest income on a FTE basis includes additional amounts 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 taxes yielding the same after-tax income. Interest income on municipal securities and tax-exempt loans has been calculated on a FTE basis using a federal income tax rate of 21%. Approximate tax equivalent adjustments to interest income were $84,000 and $97,000 for the three month periods ended March 31, 2025 and 2024, respectively.*
- *Interest income includes loan fees of $1.8 million and $1.5 million for the three month periods ended March 31, 2025 and 2024 respectively. Interest income on loans may be materially impacted by the level of prepayment fees collected and net accretion income related to acquired loans. Net accretion income related to acquired loans totaled $430,000 and $819,000 for the three-month periods ended March 31, 2025 and 2024, respectively.*
- *Net interest income, the most significant component of Bancorp's earnings, represents total interest income less total interest expense. The level of net interest income is determined by mix and volume of interest earning assets, interest bearing deposits and borrowed funds, and changes in interest rates.*
- *NIM represents net interest income on a FTE basis as a percentage of total average interest earning assets.*
- *Net interest spread (FTE) is the difference between taxable equivalent rates earned on total interest earning assets less the cost of interest bearing liabilities.*
- *The fair market value adjustment on investment securities resulting from ASC 320, “Investments – Debt and Equity Securities” is included as a component of other assets.*

### Asset/Liability Management and Interest Rate Risk

Managing interest rate risk is fundamental for the financial services industry. The primary objective of interest rate risk management is to neutralize effects of interest rate changes on net income. By considering both on and off-balance sheet financial instruments, management evaluates interest rate sensitivity with the goal of optimizing net interest income within the constraints of prudent capital adequacy, liquidity needs, market opportunities and customer funding requirements.

### Interest Rate Simulation Sensitivity Analysis

Bancorp uses an earnings simulation model to estimate and evaluate the impact of an immediate change in interest rates on earnings in a one-year forecast. The simulation model is designed to reflect dynamics of interest earning assets and interest bearing liabilities. By estimating effects of interest rate fluctuations, the model can approximate interest rate risk exposure. This simulation model is used by management to gauge approximate results given a specific change in interest rates at a given point in time. The model is therefore a tool to indicate earnings trends in given interest rate scenarios and may not indicate actual or expected results.

The results of the interest rate sensitivity analysis performed as of March 31, 2025 were derived from conservative assumptions Bancorp uses in its model, particularly in relation to deposit betas, which measure how responsive management’s deposit repricing may be to changes in market rates based on historical data. Management uses different betas in the rising and falling rate scenarios in an effort to best simulate expected earnings trends.

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.

|  |  |  |  |  |
| --- | ---: | ---: | --- | --- |
|  | **-200** | **-100** | **+100** | **+200** |
|  | **Basis Points** | **Basis Points** | **Basis Points** | **Basis Points** |
| % Change from base net interest income at March 31, 2025 | -6.22% | -3.21% | 3.72% | 7.64% |

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%).

Periodically, Bancorp enters into interest rate swap transactions with borrowers who desire to hedge exposure to rising interest rates, while at the same time entering into an offsetting interest rate swap, with substantially matching terms, with another approved independent counterparty. These are undesignated derivative instruments and are recognized on the balance sheet at fair value, with changes in fair value recorded in other non-interest income as interest rates fluctuate. Because of matching terms of offsetting contracts, in addition to collateral provisions which mitigate the impact of non-performance risk, changes in fair value subsequent to initial recognition have a minimal effect on earnings and are therefore not included in the simulation analysis results above. For additional information see the Footnote titled “*Assets and Liabilities Measured and Reported at Fair Value.”*

In addition, Bancorp periodically uses derivative financial instruments as part of its interest rate risk management, including interest rate swaps. These interest rate swaps are designated as cash flow hedges as described in the Footnote titled “*Derivative Financial Instruments.”* For these derivatives, the effective portion of gains or losses is reported as a component of OCI and is subsequently reclassified into earnings as an adjustment to interest expense in periods in which the hedged forecasted transaction affects earnings.

### Provision for Credit Losses

Provision for credit losses on loans at March 31, 2025 represents the amount of expense that, based on management’s judgment, is required to maintain the ACL for loans at an appropriate level under the CECL model. The determination of the amount of the ACL for loans is complex and involves a high degree of judgment and subjectivity. See the Footnote titled “*Basis of Presentation and Summary of Significant Accounting Policies”* in Bancorp’s Annual Report on Form 10-K for the year ended December 31, 2024 for detailed discussion regarding Bancorp’s ACL methodology by loan segment.

An analysis of the changes in the ACL for loans, including provision, and selected ratios follow:

*(dollars in thousands)*

|  | Three months ended March 31, 2025 | 2024 |
| --- | ---: | ---: |
| Beginning balance | $86,943 | $79,374 |
| Provision for credit losses on loans | 900 | 1,175 |
| Total charge-offs | (614) | (262) |
| Total recoveries | 1,585 | 610 |
| Net loan recoveries | 971 | 348 |
| Ending balance | $88,814 | $80,897 |
| Average total loans | $6,597,388 | $5,808,924 |
| Provision for credit losses on loans to average total loans (1) | 0.01% | 0.02% |
| Net loan recoveries to average total loans (1) | 0.01% | 0.01% |
| ACL for loans to total loans | 1.34% | 1.38% |
| ACL for loans to average total loans | 1.35% | 1.39% |

#### (1) Ratios are not annualized

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.

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.

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

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.

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.

Bancorp’s loan portfolio is well-diversified with no significant concentrations of credit. Geographically, most loans are extended to borrowers in Louisville, central, eastern and northern Kentucky, as well as the Indianapolis, Indiana and Cincinnati, Ohio metropolitan markets. The adequacy of the ACL is monitored on an ongoing basis and it is the opinion of management that the balance of the ACL at March 31, 2025 is adequate to absorb probable losses inherent in the loan portfolio as of the financial statement date.

### Non-interest Income

*(dollars in thousands)*

|  | Three months ended March 31, 2025 | 2024 | $ Variance | % Variance |
| --- | ---: | ---: | ---: | ---: |
| Wealth management and trust services | $10,647 | $10,771 | $(124) | (1)% |
| Deposit service charges | 2,079 | 2,136 | (57) | (3) |
| Debit and credit card income | 4,508 | 4,682 | (174) | (4) |
| Treasury management fees | 2,673 | 2,625 | 48 | 2 |
| Mortgage banking income | 917 | 948 | (31) | (3) |
| Net investment product sales commissions and fees | 1,010 | 865 | 145 | 17 |
| Bank owned life insurance | 622 | 588 | 34 | 6 |
| Other | 540 | 656 | (116) | (18) |
| Total non-interest income | $22,996 | $23,271 | $(275) | (1)% |

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.

### WM&T Services:

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.

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.

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.

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.

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.

Contracts 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.

#### Detail of WM&T Service Income by Account Type:

*(in thousands)*

|  | Three months ended March 31, 2025 | 2024 |
| --- | ---: | ---: |
| Investment advisory | $4,269 | $4,312 |
| Personal trust | 3,467 | 3,774 |
| Personal investment retirement | 2,016 | 1,820 |
| Company retirement | 411 | 411 |
| Foundation and endowment | 339 | 330 |
| Custody and safekeeping | 68 | 59 |
| Brokerage and insurance services | 7 | 2 |
| Other | 70 | 63 |
| Total WM&T services income | $10,647 | $10,771 |

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.

#### AUM by Account Type:

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:

*(in thousands)*

|  | March 31, 2025 Managed | Non-managed (1) | Total | December 31, 2024 Managed | Non-managed (1) | Total |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Investment advisory | $2,564,650 | $38,584 | $2,603,234 | $2,645,233 | $66,026 | $2,711,259 |
| Personal trust | 1,435,423 | 367,426 | 1,802,849 | 1,475,683 | 408,602 | 1,884,285 |
| Personal investment retirement | 924,083 | 20,726 | 944,809 | 937,493 | 21,536 | 959,029 |
| Company retirement | 50,666 | 651,342 | 702,008 | 54,626 | 679,539 | 734,165 |
| Foundation and endowment | 481,390 | 7,568 | 488,958 | 497,890 | 7,383 | 505,273 |
| Subtotal | $5,456,212 | $1,085,646 | $6,541,858 | $5,610,925 | $1,183,086 | $6,794,011 |
| Custody and safekeeping | — | 261,720 | 261,720 | — | 271,491 | 271,491 |
| Total AUM | $5,456,212 | $1,347,366 | $6,803,578 | $5,610,925 | $1,454,577 | $7,065,502 |

*(1) Non-managed assets represent those for which the WM&T department does not hold investment discretion.*

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.

#### Managed AUM by Class of Investment:

*(in thousands)*

|  | March 31, 2025 | December 31, 2024 |
| --- | ---: | ---: |
| Interest bearing deposits | $415,249 | $460,521 |
| Treasury and government agency obligations | 224,110 | 194,461 |
| State, county and municipal obligations | 351,062 | 341,940 |
| Money market mutual funds | 33,708 | 36,657 |
| Equity mutual funds | 1,166,981 | 1,183,611 |
| Other mutual funds - fixed, balanced and municipal | 589,038 | 561,218 |
| Other notes and bonds | 170,982 | 167,548 |
| Common and preferred stocks | 2,314,841 | 2,437,672 |
| Real estate mortgages | 167 | 167 |
| Real estate | 21,228 | 42,250 |
| Other miscellaneous assets (1) | 168,846 | 184,880 |
| Total managed assets | $5,456,212 | $5,610,925 |

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

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.

### Additional Sources of Non-interest income:

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.

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.

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.

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.

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.

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.

Other non-interest income decreased $116,000, or 18%, for the three months ended March 31, 2025 compared with the same period of 2024, which was attributed mainly to a decline in revenue generated by insurance policies outside of traditional BOLI policies as a result of the general equity and fixed income market depreciation experienced during the first quarter.

### Non-interest Expenses

*(dollars in thousands)*

|  | Three months ended March 31, 2025 | 2024 | $ Variance | % Variance |
| --- | ---: | ---: | ---: | ---: |
| Compensation | $25,932 | $24,221 | $1,711 | 7% |
| Employee benefits | 5,785 | 5,876 | (91) | (2) |
| Net occupancy and equipment | 4,123 | 3,670 | 453 | 12 |
| Technology and communication | 4,828 | 5,069 | (241) | (5) |
| Debit and credit card processing | 1,819 | 1,746 | 73 | 4 |
| Marketing and business development | 1,515 | 1,075 | 440 | 41 |
| Postage, printing and supplies | 969 | 926 | 43 | 5 |
| Legal and professional | 907 | 1,115 | (208) | (19) |
| FDIC insurance | 1,223 | 1,112 | 111 | 10 |
| Capital and deposit based taxes | 700 | 630 | 70 | 11 |
| Intangible amortization | 914 | 1,052 | (138) | (13) |
| Other | 2,312 | 2,469 | (157) | (6) |
| Total non-interest expenses | $51,027 | $48,961 | $2,066 | 4% |

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.

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.

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.

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.

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.

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.

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.

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.

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.

FDIC insurance expense increased $111,000, or 10%, for the three month period ended March 31, 2025, as compared to the same period of 2024, 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.

Capital and deposit based taxes, which consist primarily of capital-based local income taxes and franchise taxes, increased $70,000, or 11%, for the three month period ended March 31, 2025 compared to the same period of 2024. Bancorp’s capital and deposit based tax expense is based on deposits held within various local taxing districts, as well as gross revenues generated within/appropriated to the state of Ohio, which is the only state Bancorp operates in with a capital-based deposit tax.

Intangible amortization expense consists of amortization associated with the CDI of acquired deposit portfolios, as well as an intangible related to customer list of the WM&T business line added through a past acquisition. The intangibles are amortized on an accelerated basis over a period of approximately ten years. Intangible amortization expense decreased $138,000, or 13%, for the three month period ended March 31, 2025 compared to the same period of the prior year, which is attributed to the accelerated depreciation method for which intangible assets are amortized.

Other non-interest expenses decreased $157,000, or 6%, for the three month period ended March 31, 2025, as compared to the same period of 2024, driven by significant declines in fraudulent check and card losses in addition to lower collections-related expenses.

### Income Tax Expense

A comparison of income tax expense and ETR follows:

*(dollars in thousands)*

|  | Three months ended March 31, 2025 | 2024 | $/bp Variance | % Variance |
| --- | ---: | ---: | ---: | ---: |
| Income before income tax expense | $41,621 | $32,955 | $8,666 | 26% |
| Income tax expense | 8,350 | 7,068 | 1,282 | 18 |
| Effective tax rate | 20.06% | 21.45% | (139) bps | (6) |

Fluctuations in the ETR are primarily attributed to the following:

- The impact of state income taxes, net of federal benefit, serves to increase the overall ETR and fluctuates consistent with the level of pre-tax income that is taxable at the state level. The ETR was increased by 2.84% for the three months ended March 31, 2025, compared to an increase of 3.27% for the three months ended March 31, 2024. The impact to the ETR attributed to state income taxes for the current year was lower compared to the prior year, despite higher pre-tax income, due to recognizing more interest income from U.S. treasury securities, which is tax-exempt at the state level.
- The stock based compensation component of the ETR fluctuates consistent with the level of SAR exercise activity in addition to the levels of PSU, RSA and RSU vesting. The ETR was reduced by 0.65% for the three months ended March 31, 2025 compared to an increase of 0.32% for the same period of 2024, consistent with exercise and vesting activity.
- The cash surrender value of life insurance policies can vary widely from period to period, driven largely by market changes. The related impact is inversely correlated with the ETR generally, with cash surrender value declines typically serving to increase the ETR and vice versa. Changes in the cash surrender value of life insurance policies decreased the ETR by 0.22% and 0.96% for the three months ended March 31, 2025 and 2024, respectively.
- Bancorp invests in certain partnerships that yield federal income tax credits. Taken as a whole, the tax benefit of these investments exceeds amortization expense, resulting in a positive impact on net income. The timing and magnitude of these transactions may vary widely from period to period. Cumulative tax credit activity for the three months ended March 31, 2025 and 2024 served to reduce the ETR 2.70% and 0.69%, respectively.
- Tax-exempt interest income earned on loans and investment securities reduced the ETR by 0.34% and 0.49% for the three months ended March 31, 2025 and 2024, respectively.

**Financial Condition – March 31, 2025 Compared to December 31, 2024**

### Overview

Total assets increased $134 million, or 2%, to $9.00 billion at March 31, 2025 from $8.86 billion at December 31, 2024. The increase for the first quarter of 2025 was attributed to solid loan growth of $126 million, or 2%, and a $113 million, or 39%, increase in cash and cash equivalents, which was partially offset by a decline of $114 million, or 8%, in the investment securities portfolio attributed mainly to scheduled maturity activity.

Total liabilities increased $99 million, or 1%, to $8.02 billion at March 31, 2025 from $7.92 billion at December 31, 2024, with total deposits growing $128 million, or 2%, driven mainly by successful deposit promotions, and offset partially by smaller declines in SSURA and other liabilities.

Stockholders’ equity increased $35 million, or 4%, to $975 million at March 31, 2025 from $940 million at December 31, 2024, as net income of $33.3 million and a $11.3 million improvement in AOCI was offset by $9.1 million of cash dividends declared during the first quarter of 2025. The improvement in AOCI was associated with changes in the interest rate environment and the corresponding impact on the valuation of the AFS debt securities portfolio and cash flow hedging derivatives.

### Cash and Cash Equivalents

Cash and cash equivalents increased $113 million, or 39%, ending at $404 million at March 31, 2025 compared to $291 million at December 31, 2024, which was attributed largely to the previously mentioned deposit growth and maturity activity within the investment securities portfolio.

### Investment Securities

The 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.

Investment securities decreased $114 million, or 8%, to $1.25 billion at March 31, 2025 compared to $1.36 billion at December 31, 2024. This decline was driven mainly by scheduled maturities within the treasury portfolio specifically, and to a lesser extent, normal pay down activity. Investment in the securities portfolio during the first quarter of 2025 consisted of purchasing short term treasury securities to put excess liquidity to work and provide collateral to meet pledging requirements, while still offering the funding flexibility allowed by their short duration.

### FHLB Stock

FHLB stock holdings increased $7 million to $29 million at March 31, 2025 compared to $22 million at December 31, 2024. The increase was driven by fluctuations in FHLB borrowing activity during the first quarter of 2025, as FHLB members are required to hold certain levels of FHLB stock in relation to the amount of their borrowings. While period end FHLB borrowings were unchanged, average borrowing activity increased during the first quarter of 2025, as overnight borrowings were utilized amidst solid loan growth and deposit fluctuations. Bancorp’s FHLB stock holdings will fluctuate consistent with borrowing activity from period to period.

### Loans

Total loans increased $126 million, or 2%, from December 31, 2024 to March 31, 2025. The loan growth experienced during the first quarter of 2025 was well spread across loan categories, with C&D, CRE and C&I line of credit growth leading the way.

Total line of credit utilization has experienced steady improvement over the past several quarters. While relatively flat at 45.7% as of March 31, 2025 compared to 45.9% at December 31, 2024, recent utilization has experienced strong improvement from 38.9% at March 31, 2024. Similarly, utilization within the C&I portfolio was 33.7% at both March 31, 2025 and December 31, 2024, compared to 27.3% at March 31, 2024.

Bancorp’s credit exposure is diversified between businesses and individuals. No specific industry concentration exceeds 10% of loans outstanding. While Bancorp has a diversified loan portfolio, a customer’s ability to honor loan agreements is somewhat dependent upon the economic stability and/or industry in which that customer does business. Loans outstanding and related unfunded commitments are primarily concentrated within Bancorp’s current market areas, which encompass the Louisville, Kentucky MSA, central, eastern and northern Kentucky, as well as the Indianapolis, Indiana and Cincinnati, Ohio MSAs.

CRE represents the largest segment of Bancorp’s loan portfolio, totaling $2.88 billion, or 43%, of total loans as of March 31, 2025. While a combination of sustained higher interest rates and rising central business district vacancies across the country have created credit and collateral concerns within the CRE sector generally, Bancorp believes the quality of its CRE portfolio, and the overall loan portfolio, remains solid.

Office building exposure, which is a sub-segment of CRE and perceived to be of particular risk in the current environment, is a smaller component of Bancorp’s loan portfolio, totaling $584 million, or 9%, of total loans as of March 31, 2025. Approximately $242 million, or 41%, of Bancorp’s office building exposure is medical-related, which in management’s opinion presents reduced risk compared to other CRE uses. In addition, approximately $307 million, or 53%, of the office building exposure is owner-occupied and is generally accompanied by a full commercial banking relationship. This sub-segment is concentrated in Bancorp’s primary markets, with no exposure to large office towers and minimal exposure to central business districts, and continues to perform well with minimal substandard/non-accrual and past due loans as of March 31, 2025.

Bancorp occasionally enters into loan participation agreements with other banks to diversify credit risk. For certain participation loans sold, Bancorp has retained effective control of the loans, typically by restricting the participating institutions from pledging or selling their ownership share of the loan without permission from Bancorp. GAAP requires the participated portion of these loans to be recorded as secured borrowings. These participated loans are included in the C&I and CRE loan portfolio segments with a corresponding liability recorded in other liabilities. At both March 31, 2025 and December 31, 2024, the total participated portion of loans of this nature totaled $2 million.

The following table presents the maturity distribution (based on contractual maturity) and rate sensitivity of the total loan portfolio as of March 31, 2025:

| March 31, 2025 (in thousands) | Maturity Within one year | After one but within five years | After five but within fifteen years | Ater fifteen years | Total | % of Total |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Fixed rate | $431,025 | $2,126,033 | $899,853 | $929,645 | $4,386,556 | 66% |
| Variable rate | 786,209 | 839,264 | 603,459 | 30,872 | 2,259,804 | 34% |
| Total loans | $1,217,234 | $2,965,297 | $1,503,312 | $960,517 | $6,646,360 | 100% |

In the event where Bancorp structures a loan with a maturity exceeding five years (typically CRE loans), an automatic rate adjustment will typically be set in place at five years from origination date to limit interest rate sensitivity.

### Non-performing Loans and Assets

Information summarizing non-performing loans and assets follows:

*(dollars in thousands)*

|  | March 31, 2025 | December 31, 2024 |
| --- | ---: | ---: |
| Non-accrual loans | $15,865 | $21,727 |
| Modifications to borrowers experiencing financial difficulty | - | - |
| Loans past due 90 days or more and still accruing | 283 | 487 |
| Total non-performing loans | 16,148 | 22,214 |
| Other real estate owned | 85 | 10 |
| Total non-performing assets | $16,233 | $22,224 |
| Non-performing loans to total loans | 0.24% | 0.34% |
| Non-performing assets to total assets | 0.18% | 0.25% |
| ACL for loans to total non-performing loans | 550% | 391% |

As of March 31, 2025, non-accrual loans totaled $16 million compared to $22 million at December 31, 2024. The decrease in total non-accrual loans between December 31, 2024 and March 31, 2025 stemmed mainly from the payoff of two CRE relationships during the first quarter.

Non-performing assets as of March 31, 2025 consisted of 112 loans, ranging in individual amounts up to $4 million, and two residential real estate properties held as OREO.

### Delinquent Loans

Delinquent loans (consisting of all loans 30 days or more past due) totaled $34 million and $32 million at March 31, 2025 and December 31, 2024. Delinquent loans to total loans were 0.50% at both March 31, 2025 and December 31, 2024, respectively. The increase in delinquent loans over this period was primarily driven by two unrelated CRE relationships totaling $4 million that went past due during the first quarter.

### Allowance for Credit Losses on Loans

The ACL for loans is a valuation allowance for loans estimated at each balance sheet date in accordance with GAAP. When Bancorp deems all or a portion of a loan to be uncollectible, the appropriate amount is written off and the ACL is reduced by the same amount. Subsequent recoveries, if any, are credited to the ACL when received. Allocations of the ACL may be made for specific loans, but the entire ACL for loans is available for any loan that, in Bancorp’s judgment, should be charged-off. See the Footnote titled “*Summary of Significant Accounting Policies”* from Bancorp’s most recent Annual Report on Form 10-K for discussion of Bancorp’s ACL methodology on loans.

Bancorp’s ACL for loans was $89 million as of March 31, 2025 compared to $87 million as of December 31, 2024. Provision expense for credit losses on loans of $900,000 was recorded for the first quarter of 2025, consistent with solid loan growth, and to a lesser extent, offset by a stable FRB unemployment forecast and annual CECL model updates. Further, net recoveries of $971,000 were recorded for the three months ended March 31, 2025, serving to increase the ACL for loans.

The 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.

The following table sets forth the ACL by category of loan:

*(dollars in thousands)*

|  | March 31, 2025 Allocated Allowance | % of Total ACL on loans | ACL for loans to Total Loans | December 31, 2024 Allocated Allowance | % of Total ACL on loans | ACL for loans to Total Loans |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Commercial real estate - non-owner occupied | $14,616 | 17% | 0.78% | $13,935 | 16% | 0.76% |
| Commercial real estate - owner occupied | 11,839 | 13% | 1.18% | 10,192 | 12% | 1.02% |
| Total commercial real estate | 26,455 | 30% | 0.92% | 24,127 | 28% | 0.85% |
| Commercial and industrial - term | 21,677 | 25% | 2.42% | 21,284 | 25% | 2.41% |
| Commercial and industrial - lines of credit | 6,629 | 8% | 1.18% | 6,496 | 7% | 1.17% |
| Total commercial and industrial | 28,306 | 33% | 1.94% | 27,780 | 32% | 1.93% |
| Residential real estate - owner occupied | 13,438 | 15% | 1.65% | 14,468 | 17% | 1.80% |
| Residential real estate - non-owner occupied | 4,487 | 5% | 1.18% | 5,154 | 6% | 1.35% |
| Total residential real estate | 17,925 | 20% | 1.50% | 19,622 | 23% | 1.65% |
| Construction and land development | 11,387 | 13% | 1.68% | 10,981 | 13% | 1.76% |
| Home equity lines of credit | 1,280 | 1% | 0.51% | 1,277 | 1% | 0.52% |
| Consumer | 2,844 | 3% | 2.03% | 2,531 | 3% | 1.75% |
| Leases | 341 | 0% | 2.36% | 370 | 0% | 2.38% |
| Credit cards | 276 | 0% | 1.05% | 255 | 0% | 1.04% |
| Total | $88,814 | 100% | 1.34% | $86,943 | 100% | 1.33% |

The table below details net charge-offs to average loans outstanding by category of loan for the three month periods ended March 31, 2025 and 2024, respectively.

| Three months ended March 31, (dollars in thousands) | 2025 Net (charge offs)/ recoveries | Average Loans | Net (charge offs)/ recoveries to average loans | 2024 Net (charge offs)/ recoveries | Average Loans | Net (charge offs)/ recoveries to average loans |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Commercial real estate - non-owner occupied | $18 | $1,857,086 | 0.00% | $16 | $1,585,189 | 0.00% |
| Commercial real estate - owner occupied | - | 1,005,949 | 0.00% | 4 | 919,469 | 0.00% |
| Total commercial real estate | 18 | 2,863,035 | 0.00% | 20 | 2,504,658 | 0.00% |
| Commercial and industrial - term | 1,157 | 894,005 | 0.13% | 230 | 865,611 | 0.03% |
| Commercial and industrial - lines of credit | - | 560,284 | 0.00% | 204 | 434,476 | 0.05% |
| Total commercial and industrial | 1,157 | 1,454,289 | 0.08% | 434 | 1,300,087 | 0.03% |
| Residential real estate - owner occupied | (47) | 811,174 | -0.01% | 1 | 715,884 | 0.00% |
| Residential real estate - non-owner occupied | - | 382,899 | 0.00% | - | 359,747 | 0.00% |
| Total residential real estate | (47) | 1,194,073 | 0.00% | 1 | 1,075,631 | 0.00% |
| Construction and land development | - | 652,560 | 0.00% | - | 531,620 | 0.00% |
| Home equity lines of credit | (10) | 250,310 | 0.00% | 2 | 211,864 | 0.00% |
| Consumer | (90) | 142,629 | -0.06% | (99) | 145,145 | -0.07% |
| Leases | - | 15,019 | 0.00% | - | 16,057 | 0.00% |
| Credit cards | (57) | 25,473 | -0.22% | (10) | 23,862 | -0.04% |
| Total | $971 | $6,597,388 | 0.01% | $348 | $5,808,924 | 0.01% |

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 credit loss expense for off balance sheet credit exposures was recorded for the three months ended March 31, 2025, as overall utilization was flat during the first quarter. The ACL for off balance sheet credit exposures totaled $6.8 million as of March 31, 2025 and December 31, 2024.

### Premises and Equipment

Premises and equipment are presented on the consolidated balance sheets net of related depreciation on the respective assets, as well as fair value adjustments associated with purchase accounting. Premises and equipment increased $1 million, or 1%, between December 31, 2024 and March 31, 2025. Bancorp’s branch network currently consists of 73 locations throughout Louisville, central, eastern and northern, Kentucky, as well as the Indianapolis, Indiana and Cincinnati, Ohio markets.

Premises held for sale totaling $2.3 million was recorded on Bancorp’s consolidated balance sheets as of both March 31, 2025 and December 31, 2024, respectively, and consisted of three vacant parcels of land, a former administrative building and one former branch location.

### BOLI

Bank-owned life insurance assets increased $621,000, or 1%, to $90 million at March 31, 2025, compared to $89 million at December 31, 2024, the increase being attributed to general appreciation of the cash surrender values within the policy plans experienced during the first quarter.

### Goodwill

At March 31, 2025 and December 31, 2024, Bancorp had $194 million in goodwill recorded on its balance sheet. Goodwill of $58 million and $123 million is attributed to the acquisitions of CB and KB in 2022 and 2021, respectively. Additionally, goodwill totaling $12 million and $682,000 is attributed to the acquisitions of KSB and Austin State Bank in 2019 and 1996, respectively. The acquisition of TBOC in 2013 resulted in a bargain purchase gain.

Events that may trigger goodwill impairment include deterioration in economic conditions, a decline in market-dependent multiples or metrics (i.e. stock price declining below tangible book value), negative trends in overall financial performance and regulatory actions. At September 30, 2024, Bancorp performed its annual qualitative assessment to determine if it was more-likely-than-not that the fair value of the reporting units exceeded their carrying value, including goodwill. The qualitative assessment indicated that it was not more-likely-than-not that the carrying value of the reporting units exceeded their fair value.

### Core Deposit and Customer List Intangibles

CDIs and CLIs arising from business acquisitions are initially measured at fair value and are then amortized on an accelerated method based on their useful lives. As of March 31, 2025 and December 31, 2024, Bancorp’s CDI assets totaled $8.4 million and $9.0 million, respectively. As of March 31, 2025 and December 31, 2024, Bancorp’s CLI assets were $6.5 million and $6.8 million, respectively, and attributed entirely to the WM&T segment.

### Other Assets and Other Liabilities

Other assets increased $1 million, or less than 1%, to $310 million between December 31, 2024 and March 31, 2025. Other liabilities decreased $17 million, or 7%, to $241 million over the same period. The increase in other assets stems from the largely offsetting impact of recording additional tax credit investment assets and market value declines for interest rate swap assets. The decrease in other liabilities was driven largely by a reduction in various accrued liabilities, such as employee incentive compensation and other benefit-related accruals.

### Deposits

Total deposits increased $128 million, or 2%, from December 31, 2024 to March 31, 2025. Interest bearing deposits increased $84 million, or 2%, tied primarily to the success of deposit promotions during the first quarter, which more than offset declines in interest bearing demand and money market deposits. While non-interest bearing deposits increased $43 million, or 3%, as of period end, average non-interest bearing deposits decreased $67 million, or 4% decrease for the three months ended March 31, 2025 compared to the three months ended December 31, 2024.

Bancorp continues to experience a shift in the deposit portfolio mix, as customers continue to seek higher-yielding alternatives to low-rate or non-interest bearing deposits in the higher rate environment. While the cost of interest-bearing deposits has moderated in recent quarters, the cost of total deposits (including non-interest deposits) increased to 2.00% from 1.95% for the three months ended March 31, 2025 compared to the same period of the prior year. Bancorp expects deposit costs to potentially weigh on NIM in the coming quarters due to deposit pricing pressure/competition and the continued shift in deposit mix.

### Securities Sold Under Agreements to Repurchase

SSUAR declined $12 million, or 7%, between December 31, 2024 and March 31, 2025, as the result of normal fluctuations.

SSUAR represent a funding source of Bancorp and are used by commercial customers in conjunction with collateralized corporate cash management accounts. Such repurchase agreements are considered financing agreements and mature within one business day from the transaction date. At March 31, 2025 and December 31, 2024, all of these financing arrangements had overnight maturities and were secured by government sponsored enterprise obligations and government agency mortgage-backed securities that were owned and controlled by Bancorp.

SSUAR are collateralized by securities and are treated as financings; accordingly, the securities involved with the agreements are recorded as assets and are held by a safekeeping agent and the obligations to repurchase the securities are reflected as liabilities. All securities underlying the agreements are under Bancorp’s control.

### Federal Funds Purchased

FFP and other short-term borrowing balances were relatively flat between December 31, 2024 and March 31, 2025, increasing less than 1%. At March 31, 2025, FFP related mainly to excess liquidity held by downstream correspondent bank customers of Bancorp.

### Subordinated Debentures

Bancorp owns the following unconsolidated trust subsidiaries: Commonwealth Statutory Trust III, Commonwealth Statutory Trust IV and Commonwealth Statutory Trust V. The sole assets of the trust subsidiaries represent the proceeds of offerings loaned in exchange for subordinated debentures with similar terms to the TPS. The TPS are treated as part of Tier 1 Capital. The subordinated note and related interest expense are included in Bancorp’s consolidated financial statements. The subordinated notes are currently redeemable at Bancorp’s option on a quarterly basis. As of March 31, 2025 and December 31, 2024, subordinated notes totaled $27 million, respectively.

### FHLB Advances

FHLB advances outstanding totaled $300 million at both March 31, 2025 and December 31, 2024, and consisted entirely of a $300 million three-month rolling advance related to four separate interest rate swaps (cash flow hedges) entered into in an effort to secure longer-term funding at more attractive rates. For more information related to the interest rate swaps noted above, see the footnote titled, “*Derivative Financial Instruments.”*

Average FHLB advances increased $192 million, or 70%, for the three months ended March 31, 2025 compared to the same period of the prior year, attributed mainly to utilization of overnight borrowings to fund loan growth and deposit fluctuations during the first quarter of 2025. However, no overnight borrowings were outstanding as of March 31, 2025, nor December 31, 2024.

### Liquidity

The role of liquidity management is to ensure funds are available to meet depositors’ withdrawal and borrowers’ credit demands while at the same time maximizing profitability. This is accomplished by balancing changes in demand for funds with changes in supply of those funds. Liquidity is provided by short-term assets that can be converted to cash, AFS debt securities, various lines of credit available to Bancorp, and the ability to attract funds from external sources, principally deposits. Management believes it has the ability to increase deposits at any time by offering rates slightly higher than market rate.

Bancorp’s Asset/Liability Committee is comprised of senior management and has direct oversight responsibility for Bancorp’s liquidity position and profile. A combination of reports provided to management details internal liquidity metrics, composition and level of the liquid asset portfolio, timing differences in short-term cash flow obligations, and exposure to contingent draws on Bancorp’s liquidity.

Bancorp’s most liquid assets are comprised of cash and due from banks, FFS and AFS debt securities. FFS and interest bearing deposits totaled $294 million and $212 million at March 31, 2025 and December 31, 2024, respectively. The increase experienced for the three months of 2025 was attributed largely to maturity activity within the investment securities portfolio and deposit growth associated with successful deposit promotions. FFS normally have overnight maturities while interest-bearing deposits in banks are accessible on demand. These investments are generally used for daily liquidity purposes.

The fair value of the AFS debt security portfolio was $1.0 billion and $990 million at March 31, 2025 and December 31, 2024, respectively. The increase in AFS debt security portfolio for the first three months of 2025 was attributed mainly to reinvesting a portion of scheduled treasury maturities on a short-term basis for collateral pledging purposes. The investment portfolio (HTM and AFS) includes total cash flows on amortizing debt securities of approximately $416 million (based on assumed prepayment speeds as of March 31, 2025) expected over the next 12 months, including $255 million of contractual maturities. Combined with FFS and interest bearing deposits from banks, AFS debt securities offer substantial resources to meet either loan growth or reductions in Bancorp’s deposit funding base. Bancorp pledges portions of its investment securities portfolio to secure public funds, cash balances of certain WM&T accounts and SSUAR. At March 31, 2025, the total carrying value of investment securities pledged for these purposes comprised 71% of the debt securities portfolio, leaving approximately $365 million of unpledged debt securities, compared to 63% and $508 million at December 31, 2024, respectively.

Bancorp’s deposit base consists mainly of core deposits, which are defined as demand, savings, and money market deposit accounts, time deposits less than or equal to $250,000, and excludes public funds and brokered deposits. At March 31, 2025, such deposits totaled $6.17 billion and represented 85% of Bancorp’s total deposits, as compared with $6.14 billion, or 86% of total deposits at December 31, 2024. Because these core deposits are less volatile and are often tied to other products of Bancorp through long lasting relationships, they do not place undue pressure on liquidity.

As of March 31, 2025 and December 31, 2024, Bancorp held no brokered deposits.

Included in total deposit balances at March 31, 2025 are $639 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, 2024, public funds deposits totaled $663 million. The decrease experienced during the first quarter of 2025 was attributed to normal seasonal public funds run-off.

Bancorp is a member of the FHLB of Cincinnati. As a member of the FHLB, Bancorp has access to credit products of the FHLB. Bancorp views these borrowings as a potential low cost alternative to brokered deposits. At March 31, 2025 and December 31, 2024, available credit from the FHLB totaled $1.27 billion and $1.25 billion, respectively. Bancorp also had unsecured FFP lines with correspondent banks totaling $80 million at both March 31, 2025 and December 31, 2024, respectively.

During the normal course of business, Bancorp enters into certain forms of off-balance sheet transactions, including unfunded loan commitments and letters of credit. These transactions are managed through Bancorp’s various risk management processes. Management considers both on-balance sheet and off-balance sheet transactions in its evaluation of Bancorp’s liquidity.

Bancorp’s principal source of cash is dividends paid to it as the sole shareholder of the Bank. As discussed in the Footnote titled “*Commitments and Contingent Liabilities,”* as of January 1st of any year, the Bank may pay dividends in an amount equal to the Bank’s net income of the prior two years less any dividends paid for the same two years. At March 31, 2025, the Bank could pay an amount equal to $182 million in dividends to Bancorp without regulatory approval subject to ongoing capital requirements of the Bank.

S**ources and Uses of Cash**

Cash flow is provided primarily through financing activities of Bancorp, which include raising deposits and borrowing funds from institutional sources such as advances from FHLB and FFP, as well as scheduled loan repayments and cash flows from debt securities. These funds are primarily used to facilitate investment activities of Bancorp, which include making loans and purchasing securities for the investment portfolio. Another important source of cash is net income of the Bank from operating activities. For further detail regarding the sources and uses of cash, see the “*Condensed Consolidated Statements of Cash Flows”* in Bancorp’s consolidated financial statements.

### Commitments

In the normal course of business, Bancorp is party to activities that contain credit, market and operational risk that are not reflected in whole or in part in Bancorp’s consolidated financial statements. Such activities include traditional off-balance sheet credit-related financial instruments, commitments under operating leases and long-term debt.

Bancorp provides customers with off-balance sheet credit support through loan commitments and standby letters of credit. Unused loan commitments decreased $66 million, or 3%, as of March 31, 2025 compared to December 31, 2024, largely as a result of a decline in future loan commitments.

Most commitments to extend credit are an agreement to lend to a customer as long as collateral is available as agreed upon and there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses. Since some of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. Bancorp uses the same credit and collateral policies in making commitments and conditional guarantees as for on-balance sheet instruments. Bancorp evaluates each customer’s creditworthiness on a case-by-case basis. The amount of collateral obtained is based on management’s credit evaluation of the customer. Collateral held varies, but may include accounts receivable, inventory, securities, equipment and real estate. However, should the commitments be drawn upon and should our customers default on their resulting obligation to us, our maximum exposure to credit loss, without consideration of collateral, is represented by the contractual amount of those instruments.

The ACL for off balance sheet credit exposures, which is separate from the ACL for loans and recorded in other liabilities on the consolidated balance sheets, was $6.8 million as of both March 31, 2025 and December 31, 2024, respectively. No provision expense for off balance sheet credit exposures of was recorded for the three month period ended March 31, 2025, as overall utilization was flat.

Standby letters of credit are conditional commitments issued by Bancorp to guarantee the performance of a customer to a third party beneficiary. Those guarantees are primarily issued to support commercial transactions. Standby letters of credit generally have maturities of one to two years.

In addition to owned banking facilities, Bancorp has entered into long-term leasing arrangements for certain facilities. Bancorp also has required future payments for a non-qualified defined benefit retirement plan, TPS and the maturity of time deposits.

See the footnote titled “Commitments and Contingent Liabilities” for additional information regarding commitments.

### Capital

At March 31, 2025, stockholders’ equity totaled $975 million, representing an increase of $35 million, or 4%, compared to December 31, 2024, as net income of $33.3 million and an $11.3 million improvement in AOCI was offset by $9.1 million of dividends declared during the first quarter of 2025. The improvement in AOCI was associated with changes in the interest rate environment and the corresponding impact on the valuation of the AFS debt securities portfolio and cash flow hedging derivatives. See the “*Condensed Consolidated Statement of Changes in Stockholders’ Equity”* for further detail of changes in equity.

Bancorp’s TCE ratio and tangible book value per share, both non-GAAP disclosures, experienced improvement between December 31, 2024 and March 31, 2025, which stemmed largely from recording net income of $33.3 million. TCE was 8.72% at March 31, 2025 compared to 8.44% at December 31, 2024, while tangible book value per share was $26.01 at March 31, 2025, compared to $24.82 at December 31, 2024. See the section titled “*Non-GAAP Financial Measures”* for reconcilement of non-GAAP to GAAP measures.

In May 2023, Bancorp’s Board of Directors extended its share repurchase program authorizing the repurchase of up to 1 million shares, or approximately 4% of Bancorp’s total common shares outstanding at the time. The plan, which will expire in May 2025 unless otherwise extended or completed at an earlier date, does not obligate Bancorp to repurchase any specific dollar amount or number of shares prior to the plan’s expiration. No shares were repurchased in 2024, nor the first three months of 2025, as Bancorp continues to prioritize capital preservation and liquidity management. As of March 31, 2025, approximately 741,000 shares remain eligible for repurchase under the current repurchase plan.

Bank holding companies and their subsidiary banks are required by regulators to meet risk-based capital standards. These standards, or ratios, measure the relationship of capital to a combination of balance sheet and off-balance sheet risks. The value of both balance sheet and off-balance sheet items are adjusted to reflect credit risks. See the Footnote titled “*Regulatory Matters”* for additional detail regarding regulatory capital requirements, as well as capital ratios of Bancorp and the Bank. The Bank exceeds regulatory capital ratios required to be well-capitalized. Regulatory framework does not define well capitalized for holding companies. Management considers the effects of growth on capital ratios as it contemplates plans for expansion.

Capital ratios as of March 31, 2025 increased compared December 31, 2024, as a result of strong operating results, which helped offset risk-weighted asset growth within the loan portfolio. Bancorp 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.

Banking regulators have categorized the Bank as well-capitalized. To meet the definition of well-capitalized for prompt corrective action requirements, 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.

Additionally, in order to avoid limitations on capital distributions, including dividend payments and certain discretionary bonus payments to executive officers, Bancorp and the Bank must hold a 2.5% capital conservation buffer composed of Common Equity Tier 1 Risk-Based Capital above the minimum risk-based capital requirements for the Common Equity Tier 1 Risk-Based Capital ratio, Tier 1 Risk-Based Capital ratio and Total Risk-Based Capital ratio necessary to be considered adequately-capitalized. At March 31, 2025, the adequately-capitalized minimums, including the capital conservation buffer, were a 7.0% Common Equity Tier 1 Risk-Based Capital ratio, 8.5% Tier 1 Risk-Based Capital ratio and 10.5% Total Risk-Based Capital ratio.

As previously noted, Bancorp is the 100% owner of three unconsolidated trust subsidiaries. The sole assets of the trust subsidiaries represent the proceeds of offerings loaned in exchange for subordinated debentures with similar terms to the TPS. The TPS are treated as part of Tier 1 Capital. The subordinated note and related interest expense are included in Bancorp’s consolidated financial statements. The subordinated notes are currently redeemable at Bancorp’s option on a quarterly basis. As of March 31, 2025 and December 31, 2024, subordinated notes totaled $27 million, respectively.

As permitted by the interim final rule issued on March 27, 2020 by the federal banking regulatory agencies, Bancorp elected the option to delay the estimated impact on regulatory capital related to the adoption of ASC 326 “*Financial Instruments – Credit Losses,”* or CECL, which was effective January 1, 2020. The initial impact of adoption of ASC 326, as well as 25% of the quarterly increases in the ACL subsequent to adoption of ASC 326 (collectively the “transition adjustments”) were delayed for two years. After two years, the cumulative amount of the transition adjustments became fixed and was phased out of the regulatory capital calculations evenly over a three-year period, with 75% recognized in year three, 50% recognized in year four and 25% recognized in year five. 2024 represented the fifth and final year of the transition period for Bancorp and the temporary capital benefits became fully reversed as of December 31, 2024. Had Bancorp not elected to defer the regulatory capital impact of CECL, the post ASC 326 adoption capital ratios of Bancorp and the Bank would still have exceeded the well-capitalized level.

### Non-GAAP Financial Measures

The following table provides a reconciliation of total stockholders’ equity in accordance with GAAP to tangible stockholders’ equity (TCE), a non-GAAP disclosure. Bancorp provides the TCE per share, a non-GAAP measure, in addition to those defined by banking regulators, based on its widespread use by investors as a means to evaluate capital adequacy:

*(dollars in thousands, except per share data)*

|  | March 31, 2025 | December 31, 2024 |
| --- | ---: | ---: |
| Total stockholders' equity - GAAP (a) | $975,473 | $940,476 |
| Less: Goodwill | (194,074) | (194,074) |
| Less: Core deposit and other intangibles | (14,904) | (15,818) |
| Tangible common equity - Non-GAAP (c) | $766,495 | $730,584 |
| Total assets - GAAP (b) | $8,997,478 | $8,863,419 |
| Less: Goodwill | (194,074) | (194,074) |
| Less: Core deposit and other intangibles | (14,904) | (15,818) |
| Tangible assets - Non-GAAP (d) | $8,788,500 | $8,653,527 |
| Total stockholders' equity to total assets - GAAP (a/b) | 10.84% | 10.61% |
| Tangible common equity to tangible assets - Non-GAAP (c/d) | 8.72% | 8.44% |
| Total shares outstanding (e) | 29,469 | 29,431 |
| Book value per share - GAAP (a/e) | $33.10 | $31.96 |
| Tangible common equity per share - Non-GAAP (c/e) | 26.01 | 24.82 |

The efficiency ratio, a non-GAAP measure, equals total non-interest expenses divided by the sum of net interest income (FTE) and non-interest income. In addition to the efficiency ratio presented, Bancorp considers an adjusted efficiency ratio. Bancorp believes it is important because it provides a comparable ratio after eliminating net gains (losses) on sales, calls, and impairment of investment securities, as well as net gains (losses) on sales of premises and equipment and disposition of any acquired assets, if applicable, and the fluctuation in non-interest expenses related to amortization of investments in tax credit partnerships and non-recurring merger expenses, if applicable.

*(dollars in thousands)*

|  | Three months ended March 31, 2025 | 2024 |
| --- | ---: | ---: |
| Total non-interest expenses (a) | $51,027 | $48,961 |
| Total net interest income, FTE | $70,636 | $60,167 |
| Total non-interest income | 22,996 | 23,271 |
| Total revenue - Non-GAAP (b) | 93,632 | 83,438 |
| Efficiency ratio - Non-GAAP (a/b) | 54.50% | 58.68% |

80

## Market risk

As filed, 154 characters.

Information required by this item is included in Part I Item 2, “*Management’s Discussion and Analysis of Financial Condition and Results of Operations.”*

## Controls and procedures

As filed, 837 characters.

As of the end of the period covered by this report, an evaluation was carried out by Stock Yards Bancorp, Inc.’s management, with the participation of its CEO and CFO, of the effectiveness of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934). Based upon that evaluation, the Company’s CEO and CFO concluded that these disclosure controls and procedures were effective as of the end of the period covered by this report. In addition, no change in the Company’s internal control over financial reporting (as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934) occurred during the fiscal quarter covered by this report that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

Filed May 6, 2025.
Source: SEC EDGAR, the filing index for accession 0001437749-25-014698. Last ingested by Listed: Oct 28, 2026, 07:31 ET. No prices; not investment advice.