Stock Yards Bancorp Reports First Quarter 2015 Net Income up 13% to $9.3 Million or $0.62 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 that net income for the quarter ended March 31, 2015, increased 13% to $9,255,000 or $0.62 per diluted share. The Company's strong performance for the first quarter of 2015 continued to reflect several highlights, including:

• Ongoing improvements in overall credit quality that enabled the Company to again forego a provision for loan losses;
• Continued stability in fee income, with higher mortgage banking revenue;
• A generally stable net interest margin coupled with the benefit of loan growth over the last year; and
• Strong returns on average assets and equity.

"We are pleased to report higher earnings for the first quarter of 2015," said David P. Heintzman, Chairman and Chief Executive Officer. "Much of the momentum we witnessed in our business in 2014 continued into the new year against the backdrop of solid economies in our three markets. A key driver for our continued earnings expansion included strong credit quality, which has reduced our credit costs significantly. Another factor in our success has been the strength and sustainability of our fee-based activities. During the first quarter, we saw improvement in the performance of our mortgage banking activities, with a 41% increase in revenue over the prior-year period. This helped offset essentially flat revenue from our investment management and trust services against an unusually strong comparable quarter last year. Still, our investment management and trust revenue remained ahead of the past two sequential quarters, demonstrating the department as a significant and reliable source of recurring revenue. Together, these two sources of fee income – along with other activities – continue to promote an exceptional level of non-interest income for our Company."

Heintzman noted that while loan production was in line with the year-earlier quarter, management was disappointed that the Company's loan portfolio did not grow as expected. On a year-over-year basis, however, the loan portfolio has increased more than 8%. Given management's view of the Bank's lending pipeline, the Company believes it remains well positioned to post solid portfolio expansion in 2015.

Commenting on the interest rate environment, Heintzman said that Stock Yards Bancorp expects that net interest margin, while relatively stable in 2014, will remain under pressure in the coming year. Management believes any near-term increases in prevailing interest rates will not immediately benefit the Company since approximately 20% of its loan portfolio has variable rates with floors of 4%. A rise in rates would have a short-term negative impact on net interest income since rates would have to increase more than 75 bps before the rates on such loans will rise.

"We are pleased with the overall progress we achieved in the first quarter of 2015 and are excited about the opportunities we are capitalizing on with expansion in our Cincinnati and Indianapolis markets," Heintzman added. "Because of market disruption in northern Kentucky, we have been able to hire highly talented and experienced lenders there and, as a result, we will open two new branches in northern Kentucky by midyear to provide the infrastructure and support needed for that area. These new locations, which follow the branch we recently opened in the Indianapolis market, represent an attractive investment for us in strengthening our franchise and growing market share, and we expect them to ramp up to profitability in 2016."

Concluding, Heintzman said, "We remain positive about the potential for loan growth in the second quarter that, combined with the outlook for a continued solid performance from our fee-based activities, provides us with a firm footing for the balance of the year. We continue to work diligently to enhance our total return to stockholders and build on our reputation as one of the top-performing community banks in the country. Underscoring these objectives, we recently learned that Stock Yards Bancorp once again has been named to the KBW Bank Honor Roll, an annual ranking based on a bank's 10-year performance record. Only 25 banks were named to this exclusive ranking for 2014, and of those 25 selected, 23 – including Stock Yards Bancorp – repeated from the 2013 honor roll. Additionally, we also received the third annual Raymond James Community Bankers Cup, for the third consecutive year. It recognized top performance in 2014 by 31 exchange-traded banks with assets between $500 million and $10 billion. While these recognitions point to an impressive track record for our company, they also reflect our dedication to prudent and consistent growth over the long term, a principle that continues to guide us. As a result, we remain confident that Stock Yards Bancorp is well positioned to achieve further growth, attractive profitability and solid stockholder returns."

Total assets increased $158 million or 7% at March 31, 2015, reaching $2.51 billion compared with $2.35 billion at March 31, 2014. The Company's loan portfolio increased $145.4 million or 8% to $1.87 billion at March 31, 2015, compared with $1.73 billion at March 31, 2014. Total deposits increased $123 million or 6% to $2.11 billion at March 31, 2015, from $1.99 billion at March 31, 2014. Core deposits as a percentage of total deposits held steady at 98.0% as of March 31, 2015.

The Company's capital levels remained strong during the first quarter of 2015 and significantly exceeded the required minimums necessary to be considered a "well-capitalized" institution – the highest capital rating for financial institutions. Considering its consistently solid capital position, Stock Yards Bancorp has remained on a steady course to enhance stockholder value by increasing cash dividends while maintaining its financial flexibility to pursue expansion and other opportunities that may arise. In February 2015, Stock Yards Bancorp's Board of Directors declared a quarterly cash dividend of $0.23 per common share, continuing the 5% increase first declared in November 2014. The latest dividend was distributed on April 1, 2015, to stockholders of record as of March 16, 2015.

Net interest income – the Company's largest source of revenue – increased $1.4 million or 7% to $21.6 million in the first quarter of 2015 from $20.2 million in the prior-year quarter.

In the first quarter of 2015, net interest margin was 3.72%, up from 3.67% in the fourth quarter of 2014, but down from 3.76% in the first quarter of 2014. The Company's normalized or core net interest margin (core net interest margin is a non-GAAP financial measure, see Reconciliation of Net Interest Margin to Core later in this release), which excludes the effect of prepayment penalties, late charges, interest adjustments on loans, and the accretion of fair value adjustments, was 3.68% for the first quarter of 2015, up four basis points from the fourth quarter of 2014, but down four basis points from the first quarter of 2014. The increase in core net interest margin in the first quarter of 2015 versus the linked fourth quarter was due primarily, as anticipated, to an improvement in liquidity as temporary public funds deposited at the end of 2014 were withdrawn.

Non-performing loans (NPLs) totaled $11.5 million or 0.62% of total loans outstanding at March 31, 2015, down from $11.9 million or 0.64% of total loans outstanding at December 31, 2014, and $20.5 million or 1.18% of total loans at March 31, 2014. This further improvement in NPLs is consistent with broad trends witnessed over the past two years, as the Company has reached asset quality levels not seen on a regular basis since 2008. Similarly, non-performing assets, which include NPLs and repossessed assets, were $17.4 million or 0.69% of total assets at March 31, 2015, down from $17.9 million or 0.70% of total assets at December 31, 2014, and $23.4 million or 0.99% of total assets at March 31, 2014. Net charge-offs in the first quarter of 2015 totaled $38 thousand, a significant decrease from $2.2 million or 0.12% of average loans in the fourth quarter of 2014 and $281 thousand or 0.02% of average loans in the prior-year quarter.

Because of ongoing improvements in asset quality and with management's overall assessment of risk in the loan portfolio, the Company did not record a loan loss provision for the first quarter of 2015, similar to the fourth quarter of 2014. In the first quarter of 2014, the loan loss provision was $350 thousand. The allowance for loan losses was 1.33% of total loans as of March 31, 2015, unchanged from that at December 31, 2014, and down from 1.65% of total loans at March 31, 2014.

Total non-interest income in the first quarter of 2015 increased $198 thousand or 2.1% to $9.7 million from $9.5 million in the prior-year quarter, primarily reflecting a $240 thousand or 41% increase in mortgage banking revenue, which more than offset relatively flat revenue from investment management and trust services, along with lower brokerage fees and commissions. Total non-interest expense for the first quarter of 2015 increased $235 thousand or 1.3% to $17.8 million from $17.5 million in the prior-year quarter, primarily because of a $20 thousand loss on the disposition of other real estate owned (OREO) versus a $343 thousand gain on the disposal of OREO in the year-earlier quarter.

Louisville, Kentucky-based Stock Yards Bancorp, Inc., with $2.51 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, which is a non-GAAP financial measure. 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.

The following table provides a reconciliation of net interest margin in accordance with US GAAP to core net interest margin, which is a non-GAAP financial measure. The Company provides this information to illustrate sequentially the trend in quarterly net interest margin to show the impact of prepayment fees and late charges on net interest margin.

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, 2014.

(1) - Interest income on a fully tax equivalent basis includes the additional amount of interest income that would have been earned if investments in certain tax-exempt interest earning assets had been made in assets subject to federal, state and local taxes yielding the same after-tax income.

(2) - Regulatory agencies updated capital rules and calculations effective January 1, 2015. The new rules established a new "Common equity tier 1 capital" ratio which was not previously defined.

(3) - Interim ratios not annualized