Stock Yards Bancorp, Inc.: Form 10-Q for the period ended Mar 31, 2026

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 75 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 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, 2025. 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;

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• 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, 2025.

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, 2026 and 2025:

(dollars in thousands, except per share data)

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

General highlights for the three months ended March 31, 2026 compared to March 31, 2025:

• Net income totaled $36.6 million for the three months ended March 31, 2026, resulting in diluted EPS of $1.24, compared to net income of $33.3 million for the three months ended March 31, 2025, which resulted in diluted EPS of $1.13.
• Total loans increased $580 million, or 9%, compared to March 31, 2025, with growth driven by increases from virtually every loan segment and led by the CRE and C&I categories. Average loans increased $520 million, or 8%, for the three months ended March 31, 2026 compared to the same period of the prior year.
• Bancorp’s ACL on loans increased $4.8 million, or 5%, compared to March 31, 2025. The increase over the past 12 months was attributed to strong loan growth, which was only partially offset by an improved unemployment forecast and a decline in specific reserves.
• Provision for credit losses on loans totaled $1.6 million for the three months ended March 31, 2026, compared to $900,000 for the three months ended March 31, 2025.
• Deposit balances increased $463 million, or 6%, compared to March 31, 2025, which was driven by interest bearing demand and time deposit growth, the latter of which was attributed to the success of the prior year’s promotional CD offerings.
• Net interest income (FTE) totaled $78.5 million for the three months ended March 31, 2026, representing an increase of $7.9 million, or 11%, compared to the three months ended March 31, 2025.
• Interest income experienced a $6.5 million, or 6%, increase over this period as a result of strong average loan growth, which was coupled with a $1.4 million, or 3%, decrease in interest expense stemming from an inflow of liquidity that eliminated the need for more expensive overnight borrowings that were utilized in the prior year period.
• NIM increased 19 bps to 3.65% for the three months ended March 31, 2026, compared to the same period of the prior year despite several rate reductions implemented by the FRB in the latter part of 2025, attributed to a 24 bp decline in the cost of interest-bearing liabilities and the scheduled maturity of lower-yielding investment securities whose liquidity helped fund strong, higher-yielding loan growth.

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• Non-interest income increased $1.6 million, or 7%, for the three months ended March 31, 2026, compared to the three months ended March 31, 2025, driven by increases from virtually every non-interest revenue stream in addition to recording a $479,000 gain on the sale of a former branch location.
• Non-interest expenses increased $4.2 million, or 8%, for the three months ended March 31, 2026, compared to the three months ended March 31, 2025, driven mainly by higher compensation and employee benefit expenses associated with FTE growth, merit-based salary increases and higher bonus accrual levels in addition to continued investment in technology.
• Bancorp’s efficiency ratio (FTE) for the three months ended March 31, 2026 was 53.58% compared to 54.50% for the three months ended March 31, 2025. This improvement is attributed to strong net interest income growth, which outpaced growth in non-interest expenses.
• As of March 31, 2026, Bancorp continued to be “well-capitalized,” the highest regulatory capital rating for financial institutions, with capital ratios experiencing growth compared to both December 31, 2025 and March 31, 2025. Total stockholders’ equity to total assets was 11.65% as of March 31, 2026, compared to 11.28% and 10.84% at December 31, 2025 and March 31, 2025, respectively. Tangible common equity to tangible assets was 9.69% at March 31, 2026, compared to 9.32% and 8.72% at December 31, 2025 and March 31, 2025, respectively.

Results of Operations

Net Interest Income - Overview

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)

*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, 2026 and December 31, 2025. 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, 2026, Bancorp’s loan portfolio consisted of approximately 63% fixed and 37% 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, 2026, approximately 54% and 46% 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.

While the yield curve was challenged by flatness and/or inversion during 2025, continued loan growth at higher rates and the benefit of repricing on portions of the loan portfolio that had been carrying lower pandemic-era rates drove NIM expansion during the prior year. These positive forces were coupled with a decline in overall funding costs attributed to deposit rate cuts and improved liquidity, the latter of which ended the need for more expensive overnight borrowings that had been utilized more heavily in the first part of last year.

Towards the end of 2025, slight steepness on the longest portion of the yield curve began to be experienced, as three consecutive 25 bps rate reductions from the FRB in September, October and December resulted in the FFTR falling to a range of 3.50% - 3.75%, and Prime to 6.75%, as of December 31, 2025. These levels were maintained through March 31, 2026. However, despite a slight improvement in the overall yield curve’s trajectory, the shorter end of the curve that is most critical to Bancorp’s business (overnight through 5 years) remained relatively flat through the first quarter of this year.

The NIM expansion experienced during the three months ended March 31, 2026 compared to recent quarters was attributed mainly to a continued decline in the cost of interest-bearing deposits. Bancorp strategically lowered deposit rates in tandem with FRB rate reductions and the repricing of the time deposit portfolio as the prior year’s promotional rates have adjusted to lower current offerings has provided significant benefit to NIM. In addition, while earning-asset yields have been challenged by lower rates, excess liquidity provided by deposit growth and the scheduled maturity of lower-yielding investment securities over the past 12 months has been used to fund higher-yielding loan growth, serving to buoy yields.

Recent projections indicate a likelihood that the FRB may halt rate reductions for the remainder of 2026. However, given current geopolitical uncertainty and regularly changing economic data/conditions, interest rate volatility could present challenges throughout the year.

Net Interest Income (FTE) – Three months ended March 31, 2026 compared to March 31, 2025:

Net interest spread (FTE) and NIM (FTE) were 3.08% and 3.65%, for the three months ended March 31, 2026, compared to 2.83% and 3.46% for the same period of 2025, respectively.

Net interest income (FTE) increased $7.9 million, or 11%, for the three months ended March 31, 2026 compared to the same period of 2025, driven by the impact of strong average loan growth on interest income and a decline in interest expense related to eliminating the need for the more expensive overnight borrowings that were utilized through the first quarter of 2025.

Total average interest earning assets increased $464 million, or 6%, for the three months ended March 31, 2026, as compared to the same period of 2025, attributed to average loan and interest-bearing cash balance growth that was partially offset by a decline in average investment securities driven by scheduled maturities and normal amortization. The rate earned on average earning assets increased 1 bp to 5.47% despite the impact of rate reductions implemented by the FRB in the latter part of 2025, as liquidity provided by the scheduled maturity of lower-yielding securities helped fund higher-yielding loan growth.

• Average total loan balances increased $520 million, or 8%, for the three months ended March 31, 2026, compared to the same period of 2025. While the CRE and C&I segments drove a significant portion of the period over period growth, virtually every loan portfolio segment experienced an increase over the past 12 months.
• Average investment securities declined $422 million, or 29%, for the three months ended March 31, 2026 compared to the same period of 2025, mainly as 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 related liquidity has helped fund Bancorp’s substantial loan growth or shifted into higher-yielding interest-bearing cash balances.
• Average FFS and interest bearing due from bank balances increased $377 million, or 209%, for the three months ended March 31, 2026, which was largely the result of the previously mentioned liquidity provided by the investment securities portfolio in addition to deposit growth outpacing loan growth.

Total interest income (FTE) increased $6.5 million, or 6%, to $117.7 million for the three months ended March 31, 2026, as compared to the same period of 2025.

• Interest and fee income (FTE) on loans increased $6.9 million, or 7%, to $106.5 million for the three months ended March 31, 2026, compared to the same period of 2025, driven by average loan balance growth. The yield on the overall loan portfolio decreased 6 bps to 6.07% for the three months ended March 31, 2026 compared to 6.13% for the same period of the prior year, as a result of rate reductions enacted by the FRB in the latter part of 2025.
• Interest income (FTE) on the investment securities portfolio declined $3.3 million, or 36%, for the three months ended March 31, 2026 compared to the same period of 2025. This decrease was driven primarily by large, scheduled maturities within the treasury portfolio, and to a lesser extent, normal amortization activity. As a result, the corresponding yield on the portfolio declined 26 bps to 2.25% for the three months ended March 31, 2026 compared to the same period of 2025.
• Interest income on FFS and interest bearing due from bank balances increased $3.0 million, or 151% for the three months ended March 31, 2026, consistent with the increase in corresponding average balances. The yield on these assets decreased 84 bps to 3.66% for the three months ended March 31, 2026 compared to the same period of 2025 due to the previously mentioned FRB rate reductions.

Total average interest bearing liabilities increased $394 million, or 6%, to $6.65 billion for the three month period ended March 31, 2026 compared with the same period in 2025.

• Average interest bearing deposits increased $626 million, or 11%, for the three months ended March 31, 2026 compared to the same period in 2025, driven by a $411 million, or 31%, increase in average time deposits and a $276 million, or 11%, increase in average interest bearing demand deposits, consistent with the success of Bancorp’s competitive CD offerings and depositors seeking higher-yielding deposit products over the past 12 months.
• Average FHLB advances decreased $167 million, or 36%, for the three months ended March 31, 2026 compared to the same period of the prior year, as significant interest-bearing deposit growth and liquidity provided from the investment securities portfolio eliminated the need for more expensive overnight borrowings through the FHLB. 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 more favorable rates. This advance represents the only outstanding FHLB borrowing as of March 31, 2026.
• Average SSUAR decreased $66 million, or 41%, for the three months ended March 31, 2026 compared to the same period of the prior year, attributed largely to a number of clients moving into other deposit products.

Total interest expense decreased $1.4 million, or 3%, for the three months ended March 31, 2026 compared to the same period of 2025, driven primarily by the decrease in average FHLB advances due to the need for overnight borrowings utilized in the prior year period being eliminated.

• Total interest bearing deposit expense increased $881,000, or 3%, driven by growth in the time deposit portfolio associated with successful promotional campaigns. However, each interest bearing deposit category experienced a decline in cost for the three months ended March 31, 2026 compared to the same period of the prior year, which was driven by Bancorp’s ability to reduce deposit rates consistent with rate reductions enacted by the FRB. Total interest-bearing deposit cost decreased 20 bps to 2.31% compared to the prior year period.
• Interest expense on FHLB borrowings decreased $1.8 million, or 38%, for the three months ended March 31, 2026, as compared to same period of the prior year, consistent with the $167 million decrease in average FHLB advances.
• Interest expense on SSUAR decreased $413,000, or 51%, for the three months ended March 31, 2026, 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)

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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 for the three month periods ended both March 31, 2026 and 2025.
• 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 $95,000 and $84,000 for the three month periods ended March 31, 2026 and 2025, respectively.
• Interest income includes loan fees of $1.1 million and $1.8 million for the three month periods ended March 31, 2026 and 2025, 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 $304,000 and $430,000 for the three month periods ended March 31, 2026 and 2025, 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, 2026 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 indicates 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.

Bancorp’s loan portfolio is currently composed of approximately 63% fixed and 37% 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 54%) or SOFR (approximately 46%).

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 transaction affects earnings.

Provision for Credit Losses

Provision for credit losses on loans at March 31, 2026 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, 2025 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)

(1) Ratios are not annualized

The ACL for loans totaled $94 million as of March 31, 2026 compared to $89 million at March 31, 2025, representing an ACL to total loans ratio of 1.30% and 1.34% for the respective periods.

Provision expense on loans of $1.6 million was recorded for the three month period ended March 31, 2026, driven primarily by strong loan growth, which was only partially offset by improvement in the unemployment forecast and decreased specific reserves. Net recoveries of $104,000 were recorded for the three month period ended March 31, 2026.

Provision expense on loans of $900,000 was recorded for the three month period ended March 31, 2025. Expense for the prior year period 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.

The ACL for off balance sheet credit exposures, which is separate from the ACL for loan and recorded in other liabilities on the consolidated balance sheets, was unchanged between December 31, 2025 and March 31, 2026. No provision expense was recorded for off balance sheet credit exposures for the three months ended March 31, 2026, as line of credit availability decreased with improved overall utilization. The ACL for off balance sheet exposures totaled $7.9 million as of March 31, 2026.

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 prior year period. The ACL for off balance sheet exposures totaled $6.8 million as of March 31, 2025.

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, 2026 is adequate to absorb probable losses inherent in the loan portfolio as of the financial statement date.

Non-interest Income

(dollars in thousands)

Total non-interest income increased $1.6 million, or 7%, for the three month period ended March 31, 2026 compared to the same period of 2025. Non-interest income comprised 23.9% of total revenues, defined as net interest income and non-interest income, for the three month period ended March 31, 2026 compared to 24.6% for the same period of 2025. The decrease from prior year were attributed to the increase in net interest income compared to prior year. WM&T services comprised 46.1% of total non-interest income for the three month period ended March 31, 2026 compared to 46.3% for the same period of the prior year.

WM&T Services:

The magnitude of WM&T revenue distinguishes Bancorp from other community banks of similar asset size. WM&T revenue increased $688,000, or 6%, for the three month period ended March 31, 2026, as compared with the same period of 2025, attributed to AUM expansion over the past 12 months, which has been driven by both general market appreciation and new business development.

Recurring fees earned for managing accounts are based on a percentage of market value of AUM and are typically assessed on a monthly basis. Recurring fees, which generally comprise the vast majority of WM&T revenue, increased $801,000, or 8%, for the three month period ended March 31, 2026, as compared with the same period of 2025, consistent with AUM expansion and general market appreciation.

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 decreased $113,000, or 36%, for the three month period ended March 31, 2026, as compared with the same period of 2025, due to the prior year period experiencing stronger estate fee revenue.

AUM, stated at market value, totaled $7.60 billion at March 31, 2026 compared with $7.64 billion at December 31, 2025 and $6.80 billion at March 31, 2025. The increase in AUM between March 31, 2025 and March 31, 2026 was attributed to appreciation within the equity and fixed income markets in addition to new business development over the past 12 months.

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)

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. 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.

AUM by Account Type:

AUM (not included on balance sheet) increased from $7.64 billion at December 31, 2025 to $7.60 billion at March 31, 2026 as follows:

(in thousands)

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

As of March 31, 2026 and December 31, 2025, approximately 81% and 80% 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)

(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 63% in equities and 37% in fixed income securities as of March 31, 2026, compared to 65% and 35% as of December 31, 2025. 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, increased $77,000, or 4%, for the three month period ended March 31, 2026, as compared with the same period of 2025. 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 increased $130,000, or 3%, for the three month period ended March 31, 2026, as compared with the same period of 2025, driven mainly by higher debit card transaction volume. Total debit card income increased $141,000, or 5%, and total credit card income decreased $11,000, or less than 1% for the three month period ended March 31, 2026, 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. Treasury management fees increased $315,000, or 12%, for the year ended March 31, 2026, as compared with the same period of 2025, driven by broad fee increases implemented towards the end of the first quarter of 2025 in addition to organic growth and new product sales. Treasury management fees have seen significant annual growth over the past several years, due in large part to acquisition-related customer base expansion and organic growth that was augmented by new product sales, including increased demand for fraud prevention services. To the extent such activity cannot be replicated, future treasury management fee revenue will likely grow at a slower pace than has been experienced in recent years.

Mortgage banking income primarily includes gains on sales of mortgage loans and net loan servicing income offset by MSR amortization. Bancorp’s mortgage banking department predominantly originates residential mortgage loans to be sold in the secondary market, primarily to FNMA and FHLMC. Bancorp offers conventional, VA, FHA and GNMA financing for purchases and refinances, as well as programs for first-time homebuyers. Interest rates on mortgage loans directly influence the volume of business transacted by the mortgage-banking department. Mortgage banking revenue increased $13,000, or 1%, for the three month period ended March 31, 2026, as compared with the same period of 2025.

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 $51,000, or 5%, for the three month period ended March 31, 2026 compared to the same period of 2025.

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 $10,000, or 2%, for the year ended March 31, 2026 compared to the same period of 2025, consistent with yields within the policy plans.

Gains on the sale of premises and equipment totaled $479,000 for the three months ended March 31, 2026, which was attributed entirely to the sale of a former branch location. No activity was recorded for the prior year period.

Other non-interest income decreased $165,000, or 31%, for the three month period ended March 31, 2026 compared with the same period of 2025, driven largely by lower swap fee and letter of credit fee income. The prior year period also benefitted from a miscellaneous tax credit investment distribution.

Non-interest Expenses

(dollars in thousands)

Total non-interest expenses increased $4.2 million, or 8%, for the three month period ended March 31, 2026 compared to the same period of 2025. Compensation and employee benefits comprised 64.0% of Bancorp’s total non-interest expenses for the three month period ended March 31, 2026, compared to 62.2% for the same period of 2025, the increase being attributed to general FTE growth and higher bonus accrual levels compared to the prior year.

Compensation, which includes salaries, incentives, bonuses and stock based compensation, increased $3.2 million, or 12%, for the three month period ended March 31, 2026, as compared with the same period of 2025. The increase was attributed primarily to growth in full time equivalent employees, which included a focus on sales team expansion, annual merit-based salary increases and higher bonus accrual levels. Net full time equivalent employees totaled 1,144 at March 31, 2026 compared to 1,089 at March 31, 2025.

Employee benefits consists of all personnel-related expense not included in compensation, with the most significant items being health insurance, payroll taxes and employee retirement plan contributions. Employee benefits increased $384,000, or 7%, for the three month period ended March 31, 2026, as compared with the same period of 2025, driven mainly by the previously mentioned growth in FTEs and higher 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 $197,000, or 5%, for the three month period ended March 31, 2026, as compared with the same period of 2025, consistent with branch network expansion in addition to higher rent and depreciation expense. Three new branch locations were opened over the past 12 months. At March 31, 2026, Bancorp’s branch network consisted of 75 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 increased $507,000, or 11%, for the three month period ended March 31, 2026 compared to the same period of 2025, consistent with several planned investments, including the development of advanced data analytics capabilities.

Bancorp outsources processing for debit and 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 $103,000, or 6%, for the three month period ended March 31, 2026 compared to the same period of 2025, driven by higher processing fees, including increased fraud-mitigation and prevention expenses.

Marketing and business development expenses include all costs associated with promoting Bancorp, including community support, retaining customers and acquiring new business. Marketing and business development expenses decreased $237,000, or 16%, for the three month period ended March 31, 2026, as compared to the same period of 2025, driven by the higher advertising expense incurred in the prior year tied to deposit product promotions.

Postage, printing and supplies expense decreased $56,000, or 6%, for the three month period ended March 31, 2026 compared to the same period of 2025, consistent with higher expenses in the prior year related to the previously mentioned deposit product promotions.

Legal and professional fees decreased $31,000, or 3%, for the three month period ended March 31, 2026 compared to the same period of 2025, driven by lower collections-related expenses and professional fees, which were partially offset by an increase in general corporate legal matters.

FDIC insurance expense decreased $77,000, or 6%, for the three month period ended March 31, 2026, as compared to the same period of 2025, attributed in part to a lower assessment rate related mainly to improvement in Bancorp’s leverage ratio.

Capital and deposit based taxes, which consist primarily of capital-based local income taxes and franchise taxes, increased $178,000, or 25%, for the three month period ended March 31, 2026 compared to the same period of 2025. 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. The increase over the prior year stemmed mainly from the substantial deposit growth experienced over the past 12 months.

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 $115,000, or 13%, for the three month period ended March 31, 2026 compared to the same period of 2025, which is attributed to the accelerated depreciation method for which intangible assets are amortized.

Other non-interest expenses increased $128,000, or 6%, for the three month period ended March 31, 2026, as compared to the same period of 2025, driven mainly by costs associated with the new ICS deposit product offering in addition to other miscellaneous expenses.

Income Tax Expense

A comparison of income tax expense and ETR follows:

(dollars in thousands)

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 3.15% for the three month period ended March 31, 2026, compared to an increase of 2.84% for the same period of 2025.
• 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 increased by 0.08% for the three month period ended March 31, 2026 compared to an decrease of 0.65% for the same period of 2025, 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 0.06% and 0.22% for the three month periods ended March 31, 2026 and 2025, 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 month periods ended March 31, 2026 and 2025 served to reduce the ETR 2.95% and 2.70%, respectively.
• Tax-exempt interest income earned on loans and investment securities reduced the ETR by 0.28% and 0.34% for the three month period ended March 31, 2026 and 2025, respectively.

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Financial Condition – March 31, 2026 Compared to December 31, 2025

Overview

Total assets decreased $69 million, or 1%, to $9.47 billion at March 31, 2026 from $9.54 billion at December 31, 2025. The decrease for the first three months of 2026 was attributed to a $220 million, or 25%, decrease in cash and cash equivalents and a $35 million, or 4%, decline in investment securities, as liquidity was used to fund $185 million, or 3%, of net loan growth and deposit contraction.

Total liabilities decreased $97 million, or 1%, to $8.36 billion at March 31, 2026 from $8.46 billion at December 31, 2025, driven by combined contraction of $59 million, or less than 1%, for total deposits and SSURA in addition to a $37 million, or 17%, decrease in other liabilities.

Stockholders’ equity increased $27 million, or 3%, to $1.10 billion at March 31, 2026 from $1.08 billion at December 31, 2025, as net income of $36.6 million was only partially offset by $9.4 million of cash dividends declared during the first three months of 2026.

Cash and Cash Equivalents

Cash and cash equivalents decreased $220 million, or 25%, ending at $667 million at March 31, 2026 compared to $886 million at December 31, 2025, which was attributed to a combination of strong loan growth and contraction in total deposits and SSURA. Despite the decrease cash levels currently held by Bancorp remain elevated and consistent with balance sheet management strategies implemented in preparation for approaching the $10 billion regulatory threshold.

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 $35 million, or 4%, to $886 million at March 31, 2026 compared to $921 million at December 31, 2025. This decline was driven mainly by scheduled maturities and normal amortization activity. The liquidity provided by the investment portfolio during the first quarter was used primarily to fund continued loan growth.

FHLB Stock

FHLB stock holdings were unchanged from year-end at $21 million at March 31, 2026. FHLB members are required to hold certain levels of FHLB stock in relation to the amount of their borrowings, which were also unchanged during the first quarter. Bancorp’s FHLB stock holdings are expected to fluctuate consistent with borrowing activity from period to period.

Loans

Total loans increased $185 million, or 3%, from December 31, 2025 to March 31, 2026. The loan growth experienced during the first three months of 2026 was well spread across loan portfolio segments, with CRE and C&I leading the way.

Total line of credit utilization has experienced steady improvement over the past several quarters, ending at 48.5% as of March 31, 2026 compared to 48.0% at December 31, 2025 and 45.7% at March 31, 2025. Similarly, utilization within the C&I portfolio improved to 38.3% at March 31, 2026 compared to 37.0% at December 31, 2025 and 33.7% at March 31, 2025, which was evidenced by the solid growth seen within the C&I line of credit segment of the loan portfolio.

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.

During the latter part of 2025, additional credit concerns surrounding lending to non-depository financial institutions (NDFIs) arose within the banking industry generally as a result of a few regional banks experiencing larger loan losses related to such borrowers and alleged fraud. In response, the FDIC implemented new reporting requirements related to NDFI lending, which were aimed mainly at institutions with $10 billion or more in total assets, to enable more insight into the underlying risks an institution may be exposed to.

While NDFIs include bank holding companies, mortgage companies and insurance companies, they can also include real estate investment trusts, private equity firms and hedge funds, which are perceived to carry greater risk. Bancorp’s exposure to NDFIs is minimal, totaling approximately $51 million, or less than 1% of total loans, as of March 31, 2026, and relates entirely to bank holding companies that maintain correspondent banking relationships with Bancorp.

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, 2026 and December 31, 2025, 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, 2026:

In the event where Bancorp structures a loan with a maturity exceeding five years, 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)

As of March 31, 2026, non-accrual loans totaled $11 million compared to $13 million at December 31, 2025. The decrease in total non-accrual loans between December 31, 2025 and March 31, 2026 stemmed mainly from the payoff of a larger CRE relationship during the first quarter.

Non-performing assets as of March 31, 2026 consisted of approximately 90 loans, ranging in individual amounts up to $708,000, and one residential real estate property held as OREO.

Delinquent Loans

Delinquent loans (consisting of all loans 30 days or more past due) totaled $30 million and $26 million at March 31, 2026 and December 31, 2025. Delinquent loans to total loans were 0.42% and 0.38% at March 31, 2026 and December 31, 2025, respectively.

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 $94 million as of March 31, 2026 compared to $92 million as of December 31, 2025. Provision expense for credit losses on loans of $1.6 million was recorded for the three months ended March 31, 2026, consistent with strong loan growth and only partially offset by improvement in the FRB’s national unemployment forecast and decreased specific reserves. Further, net recoveries of $104,000 were recorded for the three months ended March 31, 2026.

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)

70

The table below details net charge-offs to average loans outstanding by category of loan for the three month periods ended March 31, 2026 and 2025, respectively.

The ACL for off balance sheet credit exposures, which is separate from the ACL for loan and recorded in other liabilities on the consolidated balance sheets, was unchanged between December 31, 2025 and March 31, 2026. No provision expense was recorded for off balance sheet credit exposures for the three months ended March 31, 2026, as line of credit availability decreased with improved overall utilization. The ACL for off balance sheet credit exposures totaled $7.9 million as of both March 31, 2026 and December 31, 2025.

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 $1.2 million, or 1%, between December 31, 2025 and March 31, 2026. Bancorp’s branch network currently consists of 75 locations throughout Louisville, central, eastern and northern, Kentucky, as well as the Indianapolis, Indiana and Cincinnati, Ohio markets.

Premises held for sale totaling $896,000 and $1.7 million was recorded on Bancorp’s consolidated balance sheets as of March 31, 2026 and December 31, 2025, respectively. The decrease during the first three months of 2026 was attributed to the sale of a former branch location during the quarter. Premises held for sale consisted of three vacant parcels of land as of March 31, 2026.

BOLI

Bank-owned life insurance assets increased to $93 million at March 31, 2026 compared to $92 million at December 31, 2025, due to general appreciation of the cash surrender values within the policy plans experienced during the three month period ended March 31, 2026.

Goodwill

At March 31, 2026 and December 31, 2025, Bancorp had $194 million in goodwill recorded on its balance sheet.

Events that could potentially 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 October 1, 2025, 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, 2026 and December 31, 2025, Bancorp’s CDI assets totaled $6 million and $7 million, respectively, and are attributed entirely to the Commercial segment. As of both March 31, 2026 and December 31, 2025, Bancorp’s CLI assets were $5 million, and attributed entirely to the WM&T segment.

Other Assets and Other Liabilities

Other assets increased $3 million, or 1%, to $308 million between December 31, 2025 and March 31, 2026. Other liabilities decreased $38 million, or 17%, to $183 million over the same period. While the increase for other assets was minimal, the decrease in other liabilities was driven by a reduction in various accrued liabilities, such as employee incentive compensation and other benefit-related accruals in addition to accrued tax credit investment contributions.

Deposits

Total deposits decreased $34 million, or less than 1%, from December 31, 2025 to March 31, 2026. Interest bearing deposits decreased $54 million, or 1%, driven by normal fluctuations tied in part to seasonal public funds deposits. Non-interest bearing deposits increased $20 million, or 1%, during the first quarter.

Bancorp continues to experience a shift in the deposit portfolio mix, as customers have sought higher-yielding alternatives in the current interest rate environment. However, the cost of interest-bearing deposits experienced a favorable decline during the first three months of 2026, ending at 2.31% compared to 2.43% for the fourth quarter of 2025, as Bancorp strategically lowered deposit rates in tandem with the rate reductions implemented by the FRB in the latter part of 2025 and the higher-rate time deposit portfolio continued to reprice favorably to the promotional rates offered in the prior year. The cost of total deposits also decreased during the three months ended March 31, 2026 compared to the fourth quarter, declining 7 bps to 1.88%. However, despite the decreases, Bancorp remains cautious regarding deposit costs due to potential pricing pressure/competition.

During 2025, Bancorp implemented ICS (insured cash sweep), a deposit product offering for larger depositors that require collateralization. This product was added to the portfolio of offerings to allow flexibility for both liquidity needs and strategic balance sheet management, as we continue to grow towards $10 billion in total assets. ICS allows us to provide the necessary collateralization for public funds clients and other larger depositors in the form of a reciprocal network of other banks, which effectively spreads large deposit balances amongst enough participating banks to achieve FDIC coverage for each client. In turn, we receive deposits from other banks, helping them to achieve a similar goal. As collateral is provided to our clients through this network, the investments securities we would have otherwise had to pledge as collateral are now unrestricted from a liquidity perspective.

Additionally, the ICS network provides a one-way sell service, which will enable us to move large deposit balances off balance sheet temporarily by sending an equivalent amount of cash to the same network of participating banks. In this scenario, we do not receive any deposits, effectively helping us lower total assets (and total liabilities by lowering total deposits) to remain under the $10 billion threshold. Such activity occurs overnight and the deposits (and cash) are brought back on balance sheet the next day.

While both the reciprocal and one-way sell services offered by the ICS network may be utilized by Bancorp, the deposit customers of the Bank remain our customers. ICS effectively sweeps balances back and forth, so customers are minimally affected by the operational requirements and are provided the security of FDIC coverage.

Securities Sold Under Agreements to Repurchase

SSUAR declined $25 million, or 22%, between December 31, 2025 and March 31, 2026, driven by a combination of normal balance fluctuations a small number of clients within the product switching into other deposit offerings, primarily the previously mentioned ICS offering.

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, 2026 and December 31, 2025, 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 increased $56,000, or 1%, between December 31, 2025 and March 31, 2026. At March 31, 2026, 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, 2026 and December 31, 2025, subordinated notes totaled $27 million, respectively.

FHLB Advances

FHLB advances outstanding totaled $300 million at both March 31, 2026 and December 31, 2025, and consisted entirely of a $300 million three-month rolling advance that is hedged with 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.”

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 $581 million and $816 million at March 31, 2026 and December 31, 2025, respectively. The decrease experienced for the first three months of 2026 was attributed largely to strong loan growth and to a lesser extent, slight deposit contraction. 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 $693 million and $722 million at March 31, 2026 and December 31, 2025, respectively. The decrease in AFS debt security portfolio for the first three months of 2026 was attributed primarily to normal amortization activity. The investment portfolio (HTM and AFS) includes total cash flows on amortizing debt securities of approximately $184 million (based on assumed prepayment speeds and contractual maturities as of March 31, 2026) expected over the next 12 months. 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, 2026, the total carrying value of investment securities pledged for these purposes comprised 73% of the debt securities portfolio, leaving approximately $241 million of unpledged debt securities, compared to 77% and $214 million at December 31, 2025.

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, 2026, such deposits totaled $6.49 billion and represented 84% of Bancorp’s total deposits, as compared with $6.44 billion, or 83% of total deposits at December 31, 2025. Because these core deposits are less volatile and are often tied to other products of Bancorp through long lasting relationships, they are not expected to place undue pressure on liquidity.

As of March 31, 2026 and December 31, 2025, Bancorp held no brokered deposits.

Included in total deposit balances at March 31, 2026 are $691 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, 2025, public funds deposits totaled $781 million. The decrease experienced during the first three months of 2026 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, 2026 and December 31, 2025, available credit from the FHLB totaled $1.52 billion and $1.47 billion, respectively. Bancorp also had unsecured FFP lines with correspondent banks totaling $80 million at both March 31, 2026 and December 31, 2025, 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, 2026, the Bank could pay an amount equal to $213 million in dividends to Bancorp without regulatory approval subject to ongoing capital requirements of the Bank.

Sources 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 increased $64 million, or 3%, as of March 31, 2026 compared to December 31, 2025, largely as a result of an increase 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 $7.9 million at both March 31, 2026 and December 31, 2025. No provision expense of was recorded for off balance sheet credit exposures for the three month period ended March 31, 2026, as line of credit availability decreased consistent with improved utilization.

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, 2026, stockholders’ equity totaled $1.10 billion, representing an increase of $27.2 million, or 3%, compared to December 31, 2025, as net income of $36.6 million was only partially offset by $9.4 million of dividends declared during the first three months of 2026. 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, 2025 and March 31, 2026, which stemmed largely from recording net income of $36.6 million. TCE was 9.69% at March 31, 2026 compared to 9.32% at December 31, 2025, while tangible book value per share was $30.41 at March 31, 2026, compared to $29.50 at December 31, 2025. See the section titled “Non-GAAP Financial Measures” for reconcilement of non-GAAP to GAAP measures.

In July 2025, Bancorp’s Board of Directors adopted a share repurchase program authorizing the repurchase of up to 1 million shares, or approximately 4%, of Bancorp’s total common shares outstanding. This share repurchase program replaces the program that expired in May and will expire in two years unless otherwise extended or completed at an earlier date. The plan does not obligate Bancorp to repurchase any specific dollar amount or number of shares prior to the plan’s expiration. Bancorp has not repurchased shares under any share repurchase program since 2019.

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, 2026 increased compared December 31, 2025, 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, 2026, 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, 2026 and December 31, 2025, subordinated notes totaled $27 million, respectively.

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)

76

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)

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

Stock Yards Bancorp, Inc.’s management, under the supervision and with the participation of the Chief Executive Officer (who is the principal executive officer) and Chief Financial Officer (who is the principal financial officer), evaluated the effectiveness of Bancorp’s disclosure controls and procedures, as defined in Rule 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as of March 31, 2026. The term “disclosure controls and procedures” means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the Company’s management, including its principal executive officer and principal financial officer, or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure. Based on that evaluation, Bancorp’s Chief Executive Officer and Chief Financial Officer concluded that as of March 31, 2026, Bancorp’s disclosure controls and procedures were effective.