Stock Yards Bancorp Inc.
Annual Report 2016

Plain-text annual report

2 0 1 6 S U M M A R Y A N N U A L R E P OR T PAGE 1 2016 Financial Highlights FOR THE YEAR Net income Cash dividends declared PER COMMON SHARE Net income per share, basic Net income per share, diluted Cash dividends declared Book value at year end Market price at year end AVERAGES FOR THE YEAR Total assets Loans Deposits Stockholders’ equity AT YEAR END Total assets Loans Deposits Stockholders’ equity RATIOS Return on average assets Return on average equity Efficiency 2016 2015 Change 37,187 14,248 % 10.3 13.3 $ $ 41,027 16,140 1.84 1.80 0.72 13.88 46.95 $ 2,886,396 2,159,153 2,413,894 304,151 $ 3,039,481 2,305,375 2,520,548 313,872 $ $ 1.68 1.65 0.64 12.80 25.19 $ 2,573,901 1,919,201 2,152,411 274,451 $ 2,816,801 2,033,007 2,371,702 286,519 % % % 9.5 9.1 12.5 8.4 86.4 12.1 12.5 12.1 10.8 7.9 13.4 6.3 9.5 % 1.42 13.49 57.56 % 1.44 13.55 56.81 bp (2) (6) 75 bp = basis point = 1/100 of a percent TOTAL REVENUE (in millions of dollars) $ 45 NET INCOME (in millions of dollars) $ 150 135 120 105 $ 90 75 60 45 30 15 0 2.0 1.8 1.6 1.4 1.2 1.0 0.8 0.6 0.4 0.2 0.0 36 27 18 9 0 0.8 0.7 0.6 0.5 0.4 0.3 0.2 0.1 0.0 07 08 09 10 11 12 13 14 15 16 DILUTED EPS $ 07 08 09 10 11 12 13 14 15 16 $ 3,100 2,790 2,480 2,170 1,860 1,550 1,240 930 620 310 0 TOTAL ASSETS (in millions of dollars) 07 08 09 10 11 12 13 14 15 16 STOCK PRICE 07 08 09 10 11 12 13 14 15 16 07 08 09 10 11 12 13 14 15 16 DIVIDENDS PER SHARE $ 07 08 09 10 11 12 13 14 15 16 50 45 40 35 30 25 20 15 10 5 0 STOCK YARDS BANCORP, INC. 2016 SUMMARY ANNUAL REPORT Per share information has been adjusted for the May 2016 stock split. “As a banking institution with more than 110 years of history, we have come to see the Company’s performance as a marathon, so to us a consistent pace is important.”PAGE 2 three-for-two stock split distributed in May 2016, which I’ll say more about later. Returns on average equity and assets for the year, at 13.49% and 1.42%, respectively, remained strong and in line with those for 2015, which were 13.55% and 1.44%, respectively. Likewise, the Company ended 2016 with solid capital levels, once again well above thresholds required to be considered “well capitalized” – the top capital rating for financial institutions. Additionally, we added more than $200 million in assets to our balance sheet during 2016 to surpass $3 billion for the first time. For reference, that’s an increase of $1 billion in the past five years. With its balance sheet strength, Stock Yards Bancorp has continued to pursue capital strategies to enhance stockholder value, including a substantial and sustained dividend payout ratio, so that stockholders may participate directly in the Company’s growth. Nine dividend increases during the past five years, including two during 2016, underscore these efforts and result in a cumulative increase of approximately 58% since 2011. Meanwhile, the Company has maintained its financial flexibility to pursue strategic expansion and acquisition opportunities that may arise. Also in 2016, the Board of Directors declared a three-for-two stock split, which was effected in the form of a 50% stock dividend. This dividend was distributed in May 2016. The Board’s decision to split Stock Yards Bancorp’s stock reflected our continued strong performance as well as the Board’s confidence in future earnings growth. Our intention was to reduce the market price of the Company’s common stock to a more attractive trading range for investors and, by increasing the number of shares available for sale to the public, help increase the liquidity of the Company’s common stock. As CEO of a company that strives for attractive returns over time and to build its record for consistent growth – in order to remain at the forefront of the nation’s best-performing community banks – I continue to believe that the most accurate assessment of a company’s performance is gleaned over a lengthy timeframe. To suit its purposes, any bank STOCK YARDS BANCORP, INC. 2016 SUMMARY ANNUAL REPORT David P. Heintzman Chairman and Chief Executive Officer To Our Stockholders For several years now, you have read my remarks on the Company’s improving and industry-leading performance, and I have told you of our goal to provide consistent and predictable results. I am pleased to report yet another exemplary year for Stock Yards Bancorp in 2016. To avoid repetitiveness in my assessment of the Company’s results for the year, let me get the word “record” in front of the following terms: net interest income, loan production and portfolio growth, credit quality, fee-based income, net income, and earnings per share. All of this is good news for you, our stockholders, as it enables Stock Yards Bancorp to continue to provide solid and growing returns, including steadily higher cash dividends. FINANCIAL HIGHLIGHTS Net income for the year ended December 31, 2016, increased 10% to $41.0 million or $1.80 per diluted share from $37.2 million or $1.65 per diluted share. Per share information has been adjusted for a could point to shorter metrics are exceptionally positive and, recognizing the cyclical periods – one, three or five nature of the lending business, we know they will normalize over years – as an attempt to the long term. validate its performance, selectively including or excluding market cycles to make the math work. While our total return for each of those periods exceeded those of our peers, we remain Stock Yards Bancorp continued to provide substantial support for its balance sheet growth through increased deposits. Total deposits increased 6% to $2.52 billion at December 31, 2016, reflecting growth across most deposit account categories, including non-interest bearing accounts, for both existing and new customers. FEE-BASED INCOME The substantial amount and multiple sources of our fee-based income convinced that stockholders most value long-term performance. For continued to set us apart from most other community banks in 2016. The the 10-year period ended with 2016, Stock Yards Bancorp total Company’s results for 2016 reflected a 9% increase in fee-based income, return increased 235% versus a 29% increase for a commonly used which comprised 31% of our total revenue for the year. This level is well NASDAQ bank benchmark. As a banking institution with more than ahead of peers and even more impressive considering our higher net 110 years of history, we have come to see the Company’s interest income for 2016 associated with loan portfolio growth. performance as a marathon, so to us a consistent pace is important. LOAN GROWTH Our most significant source of fee income, wealth management and trust, produced almost one-half of the year’s total. Providing us with A key driver for the Company’s performance in 2016 can be readily rare competitive differentiation within the community banking seen in our significant loan growth, which marked a new high point space, it grew assets under management 13% to $2.5 billion in for the Bank and, importantly, reflected advances across all three of 2016. This increase reflected not only a rising stock market, but also the best year ever in terms of adding new clients. Also contributing to wealth management and trust’s fee income for 2016 was an increase in non-recurring revenue related to estate settlement and corporate retirement plans. Because of this our markets. Additionally, some customers, previously cautious after the last financial crisis, increasingly have begun to utilize their credit facilities, resulting in increased conversion of loan production into loans outstanding. This progress, along with our many new customers, pushed our loan portfolio 13% higher for the year to $2.31 billion at December 31, 2016, and powered a 10% increase in net interest income for 2016. As we have grown our portfolio, we have continued to focus on loan categories, such as commercial and industrial lending and owner-occupied commercial real estate. Commercial real estate lending also was up significantly during 2016. While we see many opportunities to participate in this sector, we continue to be very selective, approving transactions where relationships can be forged, and we remain well below the regulatory guidelines for commercial real estate lending and their higher risk exposures. During 2016, the Company’s solid asset quality metrics still trended within a narrow range and exceeded solid benchmarks of the past several years to reach historically strong levels. While we are gratified by this success, we realize that present asset quality momentum and with an impressive pipeline of new business opportunities, we look for another solid performance from wealth management and trust in the coming year. In tandem with this, our other platforms for fee-based service also posted higher revenue in 2016. These multiple sources included service charges on deposit accounts, bank card income, mortgage banking, and securities brokerage. ANALYST VIEWS CONCLUSION The strategies we embrace and the efforts we make to build our We believe that the Company’s accomplishments in 2016 continued company are always directed, first and foremost, at enhancing to affirm the strategies we pursue to grow our business, build our stockholder value. That is how we measure our performance. Still, it reputation in the industry, and extend our record of success. Even is gratifying to find our work noticed and commended by others and, though we still consider and pursue attractive acquisition as a publicly held company, these observations and benchmarks opportunities as they arise, we have long considered that the best come from Wall Street. For many years now, Stock Yards Bancorp has been named to the KBW Bank Honor Roll, an annual selection based on a bank’s 10-year performance record. Those banks recognized for the Honor Roll, having at least $500 million in total assets, typically number less way to build our business is through organic growth, one relationship at a time. Our entire organization is aligned on this philosophy and we believe it shows in the loyalty that our customers express, which, in turn, was reflected in the Company’s record performance for 2016. than 50 nationwide, and often less than 25. The Company also has Coming off of a year of exceptional loan growth and significantly received the Raymond James Community Bankers Cup several times, higher fee-based income, and the high expectations they may which recognizes the top 10% of community banks in the country foster, we nonetheless are pleased to begin 2017 with strong with assets between $500 million and $10 billion. momentum throughout our business and across our markets. The BOARD CHANGES During 2016, the composition of our Board of Directors changed somewhat, triggered by the unexpected and untimely death of Nicholas X. Simon. A director of the Company since 2002, Nick was attractive banking footprint we have established across three economically attractive markets supports this, as does our multiple streams fee-based income. Considering this, and the Company’s strong capital base, we look forward to future success and growth. President and Chief Executive Officer of Shepherdsville-based As always, we thank you for your continued support for the Publishers Printing Company, a fifth-generation printing company. Company. All of us at Stock Yards Bancorp appreciate your continued confidence as we strive to enhance stockholder value. David P. Heintzman Chairman and Chief Executive Officer Ever the entrepreneur, he was a source of inspiration for our management team, and he challenged us all with his energy, dedication and insight, which will endure as his lasting legacy at Stock Yards Bancorp. We miss him. After a careful and extensive search for a highly experienced business professional to fill the director vacancy created by Nick’s passing, we were pleased to name Donna L. Heitzman to our Board. While there is a similarity between our surnames, you will see that Donna’s is spelled differently, thus we are not related. A CPA and a CFA Charterholder, Donna most recently was a portfolio manager for New York City-based KKR Prisma Capital, where she helped construct and manage customized portfolios. We are indeed fortunate to have someone with Donna’s knowledge and deep understanding of capital markets, finance and accounting with us. “I am pleased to report yet another exemplary year for Stock Yards Bancorp in 2016.” three-for-two stock split distributed in May 2016, which I’ll say more about later. Returns on average equity and assets for the year, at 13.49% and 1.42%, respectively, remained strong and in line with those for 2015, which were 13.55% and 1.44%, respectively. Likewise, the Company ended 2016 with solid capital levels, once again well above thresholds required to be considered “well capitalized” – the top capital rating for financial institutions. Additionally, we added more than $200 million in assets to our balance sheet during 2016 to surpass $3 billion for the first time. For reference, that’s an increase of $1 billion in the past five years. With its balance sheet strength, Stock Yards Bancorp has continued to pursue capital strategies to enhance stockholder value, including a substantial and sustained dividend payout ratio, so that stockholders may participate directly in the Company’s growth. Nine dividend increases during the past five years, including two during 2016, underscore these efforts and result in a cumulative increase of approximately 58% since 2011. Meanwhile, the Company has maintained its financial flexibility to pursue strategic expansion and acquisition opportunities that may arise. Also in 2016, the Board of Directors declared a three-for-two stock split, which was effected in the form of a 50% stock dividend. This dividend was distributed in May 2016. The Board’s decision to split Stock Yards Bancorp’s stock reflected our continued strong performance as well as the Board’s confidence in future earnings growth. Our intention was to reduce the market price of the Company’s common stock to a more attractive trading range for investors and, by increasing the number of shares available for sale to the public, help increase the liquidity of the avoid repetitiveness in my assessment of the Company’s results for the Company’s common stock. For several years now, you have read my remarks on the Company’s improving and industry-leading performance, and I have told you of our goal to provide consistent and predictable results. I am pleased to report yet another exemplary year for Stock Yards Bancorp in 2016. To year, let me get the word “record” in front of the following terms: net interest income, loan production and portfolio growth, credit quality, fee-based income, net income, and earnings per share. All of this is good news for you, our stockholders, as it enables Stock Yards Bancorp to continue to provide solid and growing returns, including steadily higher cash dividends. FINANCIAL HIGHLIGHTS As CEO of a company that strives for attractive returns over time and to build its record for consistent growth – in order to remain at the forefront Net income for the year ended December 31, 2016, increased 10% to $41.0 million or $1.80 per diluted share from $37.2 million or $1.65 per diluted share. Per share information has been adjusted for a of the nation’s best-performing community banks – I continue to believe that the most accurate assessment of a company’s performance is gleaned over a lengthy timeframe. To suit its purposes, any bank PAGE 3 could point to shorter periods – one, three or five years – as an attempt to validate its performance, selectively including or excluding market cycles to make the math work. While our total return for each of those periods exceeded those of our peers, we remain convinced that stockholders most value long-term performance. For the 10-year period ended with 2016, Stock Yards Bancorp total return increased 235% versus a 29% increase for a commonly used NASDAQ bank benchmark. As a banking institution with more than 110 years of history, we have come to see the Company’s performance as a marathon, so to us a consistent pace is important. LOAN GROWTH A key driver for the Company’s performance in 2016 can be readily seen in our significant loan growth, which marked a new high point for the Bank and, importantly, reflected advances across all three of our markets. Additionally, some customers, previously cautious after the last financial crisis, increasingly have begun to utilize their credit facilities, resulting in increased conversion of loan production into loans outstanding. This progress, along with our many new customers, pushed our loan portfolio 13% higher for the year to $2.31 billion at December 31, 2016, and powered a 10% increase in net interest income for 2016. As we have grown our portfolio, we have continued to focus on loan categories, such as commercial and industrial lending and owner-occupied commercial real estate. Commercial real estate lending also was up significantly during 2016. While we see many opportunities to participate in this sector, we continue to be very selective, approving transactions where relationships can be forged, and we remain well below the regulatory guidelines for commercial real estate lending and their higher risk exposures. During 2016, the Company’s solid asset quality metrics still trended within a narrow range and exceeded solid benchmarks of the past several years to reach historically strong levels. While we are gratified by this success, we realize that present asset quality STOCK YARDS BANCORP, INC. 2016 SUMMARY ANNUAL REPORT metrics are exceptionally positive and, recognizing the cyclical nature of the lending business, we know they will normalize over the long term. Stock Yards Bancorp continued to provide substantial support for its balance sheet growth through increased deposits. Total deposits increased 6% to $2.52 billion at December 31, 2016, reflecting growth across most deposit account categories, including non-interest bearing accounts, for both existing and new customers. FEE-BASED INCOME The substantial amount and multiple sources of our fee-based income continued to set us apart from most other community banks in 2016. The Company’s results for 2016 reflected a 9% increase in fee-based income, which comprised 31% of our total revenue for the year. This level is well ahead of peers and even more impressive considering our higher net interest income for 2016 associated with loan portfolio growth. competitive differentia- “Providing us with rare Our most significant source of fee income, wealth management and trust, produced almost one-half of the year’s total. Providing us with rare competitive differentiation within the community banking space, it grew assets under management 13% to $2.5 billion in 2016. This increase reflected not only a rising stock market, but also the best year ever in terms of adding new clients. Also contributing to wealth management and trust’s fee income for 2016 was an increase in non-recurring revenue related to estate settlement and corporate retirement plans. Because of this momentum and with an impressive pipeline of new business opportunities, we look for another solid performance from wealth management and trust in the coming year. under management 13% tion within the commu- to $2.5 billion in 2016.” and trust grew assets wealth management nity banking space, In tandem with this, our other platforms for fee-based service also posted higher revenue in 2016. These multiple sources included service charges on deposit accounts, bank card income, mortgage banking, and securities brokerage. ANALYST VIEWS CONCLUSION The strategies we embrace and the efforts we make to build our We believe that the Company’s accomplishments in 2016 continued company are always directed, first and foremost, at enhancing to affirm the strategies we pursue to grow our business, build our stockholder value. That is how we measure our performance. Still, it reputation in the industry, and extend our record of success. Even is gratifying to find our work noticed and commended by others and, though we still consider and pursue attractive acquisition as a publicly held company, these observations and benchmarks opportunities as they arise, we have long considered that the best come from Wall Street. For many years now, Stock Yards Bancorp has been named to the KBW Bank Honor Roll, an annual selection based on a bank’s 10-year performance record. Those banks recognized for the Honor Roll, having at least $500 million in total assets, typically number less way to build our business is through organic growth, one relationship at a time. Our entire organization is aligned on this philosophy and we believe it shows in the loyalty that our customers express, which, in turn, was reflected in the Company’s record performance for 2016. than 50 nationwide, and often less than 25. The Company also has Coming off of a year of exceptional loan growth and significantly received the Raymond James Community Bankers Cup several times, higher fee-based income, and the high expectations they may which recognizes the top 10% of community banks in the country foster, we nonetheless are pleased to begin 2017 with strong with assets between $500 million and $10 billion. momentum throughout our business and across our markets. The BOARD CHANGES During 2016, the composition of our Board of Directors changed somewhat, triggered by the unexpected and untimely death of Nicholas X. Simon. A director of the Company since 2002, Nick was attractive banking footprint we have established across three economically attractive markets supports this, as does our multiple streams fee-based income. Considering this, and the Company’s strong capital base, we look forward to future success and growth. President and Chief Executive Officer of Shepherdsville-based As always, we thank you for your continued support for the Publishers Printing Company, a fifth-generation printing company. Company. All of us at Stock Yards Bancorp appreciate your continued confidence as we strive to enhance stockholder value. David P. Heintzman Chairman and Chief Executive Officer Ever the entrepreneur, he was a source of inspiration for our management team, and he challenged us all with his energy, dedication and insight, which will endure as his lasting legacy at Stock Yards Bancorp. We miss him. After a careful and extensive search for a highly experienced business professional to fill the director vacancy created by Nick’s passing, we were pleased to name Donna L. Heitzman to our Board. While there is a similarity between our surnames, you will see that Donna’s is spelled differently, thus we are not related. A CPA and a CFA Charterholder, Donna most recently was a portfolio manager for New York City-based KKR Prisma Capital, where she helped construct and manage customized portfolios. We are indeed fortunate to have someone with Donna’s knowledge and deep understanding of capital markets, finance and accounting with us. “A key driver for the Company’s performance in 2016 can be readily seen in our significant loan growth...”three-for-two stock split distributed in May 2016, which I’ll say more about later. Returns on average equity and assets for the year, at 13.49% and 1.42%, respectively, remained strong and in line with those for 2015, which were 13.55% and 1.44%, respectively. Likewise, the Company ended 2016 with solid capital levels, once again well above thresholds required to be considered “well capitalized” – the top capital rating for financial institutions. Additionally, we added more than $200 million in assets to our balance sheet during 2016 to surpass $3 billion for the first time. For reference, that’s an increase of $1 billion in the past five years. With its balance sheet strength, Stock Yards Bancorp has continued to pursue capital strategies to enhance stockholder value, including a substantial and sustained dividend payout ratio, so that stockholders may participate directly in the Company’s growth. Nine dividend increases during the past five years, including two during 2016, underscore these efforts and result in a cumulative increase of approximately 58% since 2011. Meanwhile, the Company has maintained its financial flexibility to pursue strategic expansion and acquisition opportunities that may arise. Also in 2016, the Board of Directors declared a three-for-two stock split, which was effected in the form of a 50% stock dividend. This dividend was distributed in May 2016. The Board’s decision to split Stock Yards Bancorp’s stock reflected our continued strong performance as well as the Board’s confidence in future earnings growth. Our intention was to reduce the market price of the Company’s common stock to a more attractive trading range for investors and, by increasing the number of shares available for sale to the public, help increase the liquidity of the avoid repetitiveness in my assessment of the Company’s results for the Company’s common stock. For several years now, you have read my remarks on the Company’s improving and industry-leading performance, and I have told you of our goal to provide consistent and predictable results. I am pleased to report yet another exemplary year for Stock Yards Bancorp in 2016. To year, let me get the word “record” in front of the following terms: net interest income, loan production and portfolio growth, credit quality, fee-based income, net income, and earnings per share. All of this is good news for you, our stockholders, as it enables Stock Yards Bancorp to continue to provide solid and growing returns, including steadily higher cash dividends. FINANCIAL HIGHLIGHTS As CEO of a company that strives for attractive returns over time and to build its record for consistent growth – in order to remain at the forefront Net income for the year ended December 31, 2016, increased 10% to $41.0 million or $1.80 per diluted share from $37.2 million or $1.65 per diluted share. Per share information has been adjusted for a of the nation’s best-performing community banks – I continue to believe that the most accurate assessment of a company’s performance is gleaned over a lengthy timeframe. To suit its purposes, any bank could point to shorter metrics are exceptionally positive and, recognizing the cyclical periods – one, three or five nature of the lending business, we know they will normalize over years – as an attempt to the long term. validate its performance, selectively including or excluding market cycles to make the math work. While our total return for each of those periods exceeded those of our peers, we remain Stock Yards Bancorp continued to provide substantial support for its balance sheet growth through increased deposits. Total deposits increased 6% to $2.52 billion at December 31, 2016, reflecting growth across most deposit account categories, including non-interest bearing accounts, for both existing and new customers. FEE-BASED INCOME The substantial amount and multiple sources of our fee-based income convinced that stockholders most value long-term performance. For continued to set us apart from most other community banks in 2016. The the 10-year period ended with 2016, Stock Yards Bancorp total Company’s results for 2016 reflected a 9% increase in fee-based income, return increased 235% versus a 29% increase for a commonly used which comprised 31% of our total revenue for the year. This level is well NASDAQ bank benchmark. As a banking institution with more than ahead of peers and even more impressive considering our higher net 110 years of history, we have come to see the Company’s interest income for 2016 associated with loan portfolio growth. performance as a marathon, so to us a consistent pace is important. LOAN GROWTH Our most significant source of fee income, wealth management and trust, produced almost one-half of the year’s total. Providing us with A key driver for the Company’s performance in 2016 can be readily rare competitive differentiation within the community banking seen in our significant loan growth, which marked a new high point space, it grew assets under management 13% to $2.5 billion in for the Bank and, importantly, reflected advances across all three of 2016. This increase reflected not only a rising stock market, but also the best year ever in terms of adding new clients. Also contributing to wealth management and trust’s fee income for 2016 was an increase in non-recurring revenue related to estate settlement and corporate retirement plans. Because of this our markets. Additionally, some customers, previously cautious after the last financial crisis, increasingly have begun to utilize their credit facilities, resulting in increased conversion of loan production into loans outstanding. This progress, along with our many new customers, pushed our loan portfolio 13% higher for the year to $2.31 billion at December 31, 2016, and powered a 10% increase in net interest income for 2016. As we have grown our portfolio, we have continued to focus on loan categories, such as commercial and industrial lending and owner-occupied commercial real estate. Commercial real estate lending also was up significantly during 2016. While we see many opportunities to participate in this sector, we continue to be very selective, approving transactions where relationships can be forged, and we remain well below the regulatory guidelines for commercial real estate lending and their higher risk exposures. During 2016, the Company’s solid asset quality metrics still trended within a narrow range and exceeded solid benchmarks of the past several years to reach historically strong levels. While we are gratified by this success, we realize that present asset quality momentum and with an impressive pipeline of new business opportunities, we look for another solid performance from wealth management and trust in the coming year. In tandem with this, our other platforms for fee-based service also posted higher revenue in 2016. These multiple sources included service charges on deposit accounts, bank card income, mortgage banking, and securities brokerage. PAGE 4 CONCLUSION We believe that the Company’s accomplishments in 2016 continued to affirm the strategies we pursue to grow our business, build our reputation in the industry, and extend our record of success. Even though we still consider and pursue attractive acquisition opportunities as they arise, we have long considered that the best way to build our business is through organic growth, one relationship at a time. Our entire organization is aligned on this philosophy and we believe it shows in the loyalty that our customers express, which, in turn, was reflected in the Company’s record performance for 2016. Coming off of a year of exceptional loan growth and significantly higher fee-based income, and the high expectations they may foster, we nonetheless are pleased to begin 2017 with strong momentum throughout our business and across our markets. The attractive banking footprint we have established across three economically attractive markets supports this, as does our multiple streams fee-based income. Considering this, and the Company’s strong capital base, we look forward to future success and growth. As always, we thank you for your continued support for the Company. All of us at Stock Yards Bancorp appreciate your continued confidence as we strive to enhance stockholder value. David P. Heintzman Chairman and Chief Executive Officer ANALYST VIEWS The strategies we embrace and the efforts we make to build our company are always directed, first and foremost, at enhancing stockholder value. That is how we measure our performance. Still, it is gratifying to find our work noticed and commended by others and, as a publicly held company, these observations and benchmarks come from Wall Street. For many years now, Stock Yards Bancorp has been named to the KBW Bank Honor Roll, an annual selection based on a bank’s 10-year performance record. Those banks recognized for the Honor Roll, having at least $500 million in total assets, typically number less than 50 nationwide, and often less than 25. The Company also has received the Raymond James Community Bankers Cup several times, which recognizes the top 10% of community banks in the country with assets between $500 million and $10 billion. BOARD CHANGES During 2016, the composition of our Board of Directors changed somewhat, triggered by the unexpected and untimely death of Nicholas X. Simon. A director of the Company since 2002, Nick was President and Chief Executive Officer of Shepherdsville-based Publishers Printing Company, a fifth-generation printing company. Ever the entrepreneur, he was a source of inspiration for our management team, and he challenged us all with his energy, dedication and insight, which will endure as his lasting legacy at Stock Yards Bancorp. We miss him. After a careful and extensive search for a highly experienced business professional to fill the director vacancy created by Nick’s passing, we were pleased to name Donna L. Heitzman to our Board. While there is a similarity between our surnames, you will see that Donna’s is spelled differently, thus we are not related. A CPA and a CFA Charterholder, Donna most recently was a portfolio manager for New York City-based KKR Prisma Capital, where she helped construct and manage customized portfolios. We are indeed fortunate to have someone with Donna’s knowledge and deep understanding of capital markets, finance and accounting with us. STOCK YARDS BANCORP, INC. 2016 SUMMARY ANNUAL REPORT “We believe that the Company’s accomplishments in 2016 continued to affirm the strategies we pursue to grow our business, build our reputation in the industry, and extend our record of success.”PAGE 5 STOCK YARDS BANCORP, INC. Selected Consolidated Financial Data (Dollars in thousands, except per share data) 2016 2015 2014 2013 2012 As of and for the year ended December 31, INCOME STATEMENT Net interest income Provision for loan losses Non-interest income Non-interest expenses Net income PER SHARE Basic EPS Diluted EPS Cash dividends declared Book value Market value BALANCE SHEET Total loans Allowance for loan losses Total assets Total deposits Stockholders’ equity AVERAGE BALANCE SHEET Total loans Total assets Total deposits Stockholders’ equity EARNINGS PERFORMANCE Return on average assets Return on average equity Net interest margin, fully tax equivalent KEY RATIOS Non-performing loans to total loans Non-performing assets to total assets Net loan charge-offs to average loans Allowance for loan losses to avg loans Avg stockholder’s equity to avg assets Tier 1 risk-based capital Common equity tier 1 capital 1 Total risk-based capital Leverage $ $ $ $ $ $ $ 97,254 3,000 43,537 81,520 41,027 1.84 1.80 0.72 13.88 46.95 $ $ 88,318 750 39,950 73,398 37,187 1.68 1.65 0.64 12.80 25.19 2,305,375 24,007 3,039,481 2,520,548 313,872 $ 2,033,007 22,441 2,816,801 2,371,702 286,519 83,757 (400) 39,155 73,209 34,822 1.59 1.57 0.59 11.75 22.23 $ $ 77,298 6,550 39,002 71,352 27,170 1.27 1.26 0.54 10.47 21.28 $ $ 73,950 11,500 38,457 65,472 25,801 1.24 1.23 0.51 9.83 14.95 1,868,550 24,920 2,563,868 2,123,627 259,895 $ 1,721,350 28,522 2,389,262 1,980,937 229,444 $ 1,584,594 31,881 2,148,262 1,781,693 205,075 2,159,153 2,886,396 2,413,894 304,151 $ 1,919,201 2,573,901 2,152,411 274,451 $ 1,773,011 2,398,430 2,010,823 245,425 $ 1,656,777 2,232,868 1,843,426 220,107 $ 1,563,918 2,070,967 1,659,594 197,551 % 1.42 13.49 3.59 % 0.29 0.39 0.07 1.11 10.54 12.10 12.10 13.04 10.54 % 1.44 13.55 3.67 % 0.44 0.48 0.17 1.17 10.66 12.32 12.32 13.31 10.53 % 1.45 14.19 3.75 % 0.64 0.70 0.18 1.41 10.23 12.63 - 13.86 10.26 % 1.22 12.34 3.74 % 1.33 1.19 0.60 1.72 9.86 12.29 - 13.54 9.75 % 1.25 13.06 3.94 % 1.90 1.74 0.60 2.04 9.54 13.17 - 14.42 10.79 1. New ratio established in 2015 Per share information has been adjusted for the May 2016 stock split. STOCK YARDS BANCORP, INC. 2016 SUMMARY ANNUAL REPORT PAGE 6 DIRECTORS J. McCauley Brown Retired Vice President, Brown-Forman Corporation Charles R. Edinger III President, J. Edinger & Son, Inc. David P. Heintzman Chairman and Chief Executive Officer, Stock Yards Bancorp, Inc. and Stock Yards Bank & Trust Company Donna L. Heitzman Former Portfolio Manager, KKR Prisma Capital Carl G. Herde Vice President / Finance, Kentucky Hospital Association James A. Hillebrand President, Stock Yards Bancorp, Inc. and Stock Yards Bank & Trust Company Richard A. Lechleiter President, Catholic Education Foundation of Louisville Richard Northern Partner, Wyatt, Tarrant & Combs LLP Stephen M. Priebe President, Hall Contracting of Kentucky Norman Tasman President, Tasman Industries, Inc. and Tasman Hide Processing, Inc. Kathy C. Thompson Senior Executive Vice President, Stock Yards Bancorp, Inc. and Stock Yards Bank & Trust Company SHAREHOLDER INFORMATION Transfer Agent The transfer agent for the common stock of Stock Yards Bancorp, Inc. is: Computershare P.O. Box 30170 College Station, TX 77842-3170 (800) 368-5948 Automatic Dividend Reinvestment Service The Company’s automatic dividend reinvestment service enables stockholders to reinvest cash dividends in additional shares of Stock Yards Bancorp, Inc. stock. For additional information, contact the Transfer Agent. Mailing And Street Addresses The mailing address for Stock Yards Bancorp, Inc. is: P.O. Box 32890, Louisville, Kentucky 40232-2890. The street address is: 1040 E. Main Street, Louisville, Kentucky 40206. Internet Address The Internet address for Stock Yards Bancorp, Inc. is www.syb.com. Stockholders can find share prices, trading volume, insider trading information, and other pertinent information (see “Investor Relations”). Common Stock Stock Yards Bancorp, Inc.’s common stock trades on the NASDAQ Global Select Market under the symbol SYBT. Forms 10-K And 10-Q Stock Yards Bancorp, Inc.’s annual report on Form 10-K and quarterly reports on Form 10-Q, as filed with the Securities and Exchange Commission, can be found at www.syb.com (see “Investor Relations”) or by writing or calling Nancy B. Davis, Executive Vice President, Stock Yards Bancorp, Inc., nancy.davis@syb.com, (502) 625-9176. EXECUTIVE OFFICERS David P. Heintzman Chairman and Chief Executive Officer LOUISVILLE - Corporate Center 1048 East Main Street Louisville, Kentucky 40206 (502) 582-2571 INDIANAPOLIS - Regional Center 136 East Market Street Indianapolis, Indiana 46204 (317) 238-2800 CINCINNATI - Regional Center 101 West Fourth Street Cincinnati, Ohio 45202 (513) 824-6100 James A. Hillebrand President Kathy C. Thompson Senior Executive Vice President Wealth Management Group Michael J. Croce Executive Vice President Retail Banking Group Nancy B. Davis Executive Vice President Chief Financial Officer William M. Dishman III Executive Vice President Chief Risk Officer Philip S. Poindexter Executive Vice President Chief Lending Officer T. Clay Stinnett Executive Vice President Chief Strategic Officer STOCK YARDS BANCORP, INC. 2016 SUMMARY ANNUAL REPORT 2 0 1 6 S U M M A R Y A N N U A L R E P OR T 

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