Strong Loan Growth Drives Higher Earnings as Stock Yards Bancorp Reports Second Quarter 2014 Net Income Up 25% to $8.0 Million or $0.55 Per Diluted Share

Stock Yards Bancorp, Inc. (NASDAQ: SYBT), parent company of Stock Yards Bank & Trust Company, with offices in the Louisville, Indianapolis and Cincinnati metropolitan markets, today reported results for the second quarter and six months ended June 30, 2014, highlighted by a 25% increase in net income versus the same quarter last year along with a 22% increase in diluted earnings per share. The Company's performance continued to reflect several key drivers, including:

• Strong momentum in loan growth, with portfolio loans up nearly 5% – all organic – for the first half of the year, or 9% on an annualized basis;
• Ongoing growth in income from investment management and trust services, which generates a level of non-interest income for Stock Yards Bancorp that is significantly above peer banks and which augments the positive impact of an expanding loan portfolio;
• Stable net interest margin as the Company continues to deploy its strong capital base to grow its balance sheet;
• Further improvements in overall credit quality, with steadily declining credit costs; and
• Strong returns on average equity and assets.

"We are pleased to report a solid performance for Stock Yards in the second quarter of 2014, reflecting great execution on our plans for the year and our success in capitalizing on opportunities in our markets," said David P. Heintzman, Chairman and Chief Executive Officer. "We are excited to note that key among these opportunities was our excellent loan growth during the second quarter, after solid loan production for first quarter was offset by an increased level of early loan repayments. With annualized loan growth for the first half of 9%, all of which was organic, we anticipate our increased volume will continue to have a stabilizing effect on net interest income and drive higher earnings for all of 2014."

Heintzman also noted that the Company's investment management and trust department, which highly differentiates Stock Yards from most other community banks, continues to contribute significantly to earnings growth. "With almost $2.4 billion of assets under management, our investment management and trust department has experienced fee income growth of 16% through the first half of 2014," Heintzman added, "which strongly complements our loan growth. By way of illustration, last year this department generated a $2 million increase in revenue compared with 2012, and that increase would have been equivalent to income from an additional $54 million or 3.5% of loan growth on top of the 6% core loan growth we achieved year over year."

Heintzman pointed out that the Company's investment management and trust department provides an enviable level of non-interest income and is a significant element of overall fee income. With it, the Company's non-interest income has historically exceeded 30% of the Company's total revenue and was 33% for the second quarter of 2014. In contrast, many peer banks have witnessed increasing pressure on fee income with declining service charges, mortgage banking revenue and interchange income. Median fee income at banks with $2-$5 billion in assets declined to 19% of total revenue for the first quarter of 2014 from 25% for the first quarter of 2013.

The Company's credit quality metrics continued to improve in the second quarter. Over the past year, non-performing loans (NPLs) have declined 38%, while non-performing assets (NPAs) have declined 43%. On a linked-quarter basis, NPLs declined a further 5% since March 31, 2014, while NPAs declined 4%.

Concluding, Heintzman said, "We are pleased with the Company's performance through the first six months of 2014 and consider it to be a firm foundation for us as we move into the back half of the year. In our view, Stock Yards Bancorp remains well situated to participate in the continued economic improvement in our home market and new opportunities in our expansion markets. Additionally, we are excited about the opportunities we have to generate similarly attractive and complementary growth through our investment management and trust department. We believe this growth profile and other important investor considerations, such as our strong capital position and our record of uninterrupted and increasing dividend payments, not only demonstrate the success of our bank, but also present a solid investment rationale for our stockholders."

Total assets increased $153 million or 7% at June 30, 2014, reaching $2.41 billion compared with $2.26 billion at June 30, 2013. The Company's loan portfolio increased $133 million or 8% to $1.80 billion at June 30, 2014, compared with $1.67 billion at June 30, 2013. Total deposits increased $123 million or 7% to $1.99 billion at June 30, 2014, from $1.86 billion at June 30, 2013.

The Company's capital levels remained strong during the second quarter of 2014 and exceeded the required minimums necessary to be deemed a "well-capitalized" institution – the highest capital rating for financial institutions. By maintaining a strong capital position, Stock Yards Bancorp has continued to enhance stockholder value through steadily increased cash dividends, raising the dividend rate five times over the past four years, and maintain its flexibility to pursue expansion and other opportunities that may arise.

Net interest income – the Company's largest source of revenue – increased $1.7 million or 9% to $20.7 million in the second quarter of 2014 from $19.0 million in the prior-year quarter. In the second quarter of 2014, net interest margin was 3.77% versus 3.76% in the first quarter of 2014 and 3.72% in the second quarter of 2013.

NPLs totaled $19.5 million or 1.08% of total loans outstanding at June 30, 2014, down from $20.5 million or 1.18% of total loans outstanding at March 31, 2014, and $31.5 million or 1.89% of total loans at June 30, 2013. NPAs, which include NPLs and repossessed assets, were $22.4 million or 0.93% of total assets at June 30, 2014, down from $23.4 million or 0.99% of total assets at March 31, 2014, and $39.1 million or 1.73% of total assets at June 30, 2013.

Net charge-offs in the second quarter of 2014 totaled $180 thousand or 0.01% of average loans, down from $281 thousand or 0.02% of average loans in the first quarter of 2014 and $1.4 million or 0.08% of average loans in the year-earlier period.

The Company's loan loss provision for the second quarter of 2014 was $1.4 million, up from $350 thousand in the first quarter of 2014 and from $1.3 million in the prior-year quarter. The allowance for loan losses remained at 1.65% of total loans at June 30, 2014, compared with March 31, 2014, and decreased from 1.92% of total loans at June 30, 2013. While overall credit metrics have continued to improve, the downgrade of a commercial and industrial lending relationship during the second quarter caused management to pause what has been a steady reduction of the allowance coverage over the past year. Management believes that by year end there will be greater clarity regarding the ultimate risk presented by this loan.

Total non-interest income decreased $254 thousand or 3% to $10.1 million in the second quarter of 2014 from $10.3 million for the prior-year quarter, with the decline primarily reflecting higher mortgage banking revenue in the year-earlier quarter along with a non-recurring gain on acquisition in the second quarter 2013. These were largely offset by continued growth in investment management and trust services income.

Total non-interest expense decreased $1.1 million or 6% to $17.7 million in the second quarter of 2014 from $18.8 million in the same period last year. The change primarily reflected the non-recurring acquisition costs reported in the year-earlier quarter.

In May 2014, Stock Yards Bancorp's Board of Directors raised its quarterly cash dividend 5% to $0.22 per common share. The latest dividend was distributed on July 1, 2014, to stockholders of record as of June 9, 2014.

Louisville, Kentucky-based Stock Yards Bancorp, Inc., with $2.41 billion in assets, was incorporated in 1988 as a bank holding company. It is the parent company of Stock Yards Bank & Trust Company, which was established in 1904. The Company's common shares trade on the NASDAQ Global Select Market under the symbol SYBT.

The following table provides a reconciliation of total stockholders' equity, in accordance with US GAAP, to tangible common equity. The Company provides the tangible common equity ratio, in addition to those defined by banking regulators, because of its widespread use by investors as a means to evaluate capital adequacy.

This report contains forward-looking statements under the Private Securities Litigation Reform Act that involve risks and uncertainties. Although the Company's management believes the assumptions underlying the forward-looking statements contained herein are reasonable, any of these assumptions could be inaccurate. Therefore, there can be no assurance the forward-looking statements included herein will prove to be accurate. Factors that could cause actual results to differ from those discussed in forward-looking statements include, but are not limited to: economic conditions both generally and more specifically in the markets in which the Company and its subsidiaries operate; competition for the Company's customers from other providers of financial services; government legislation and regulation, which change from time to time and over which the Company has no control; changes in interest rates; material unforeseen changes in liquidity, results of operations, or financial condition of the Company's customers; and other risks detailed in the Company's filings with the Securities and Exchange Commission, all of which are difficult to predict and many of which are beyond the control of the Company. See Risk Factors outlined in the Company's Form 10-K for the year ended December 31, 2013.