Stock Yards Bancorp Inc.
11/05/2026 | Press release | Distributed by Public on 11/05/2026 13:13
Quarterly Report for Quarter Ending September 30, 2026 (Form 10-Q)
Management's Discussion and Analysis of Financial Condition and Results of Operations
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 throughout the state of Kentucky, as well as the Indianapolis, Indiana and Cincinnati, Ohio markets through 82 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;
•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.
| Acquisition of Field & Main Bancorp, Inc. and its Subsidiary Field & Main Bank | ||
On May 1, 2026, Bancorp completed its acquisition of Field & Main Bancorp, Inc. and its wholly owned subsidiary, Field & Main Bank, a Henderson, Kentucky-based commercial bank and trust company, which operated 6 retail branches, including three in Henderson County, Kentucky and one each in Lexington, Kentucky, Cynthiana, Kentucky and Evansville, Indiana. At the time of acquisition and including purchase accounting adjustments, FM had $838 million in assets, including $624 million in net loans, $56 million in investment securities, and $765 million in deposits in addition to maintaining a Wealth Management and Trust Department with total assets under management of approximately $825 million. Bancorp acquired all outstanding common stock of Field & Main Bancorp, Inc. in an all-stock transaction that resulted in total consideration paid to Field & Main Bancorp, Inc. shareholders of $112 million.
Bancorp recorded goodwill of $46 million and incurred pre-tax merger related expenses totaling $3.0 million for the nine months ended September 30, 2026 as a result of the FM acquisition.
Further, the FM acquisition served to increase the ACL on loans by $18 million at acquisition date. This increase consisted of $11 million attributed to the acquired PCD loan portfolio and $5 million attributed to the acquired non-PCD portfolio recognized as part of the initial purchase accounting for the acquisition.
| 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.
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Overview - Operating Results (FTE)
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The following table presents an overview of Bancorp's financial performance for the three months ended September 30, 2026 and 2025:
| (dollars in thousands, except per share data) | Variance | |||||||||||||||||||||||||
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Three months ended September 30,
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2026 | 2025 | $/bp | % | ||||||||||||||||||||||
| Net income | $ | 43,508 | $ | 36,241 | $ | 7,267 | 20 | % | ||||||||||||||||||
| Diluted earnings per share | $ | 1.40 | $ | 1.23 | $ | 0.17 | 14 | % | ||||||||||||||||||
| ROA | 1.69 | % | 1.56 | % | 13 bps | 8 | % | |||||||||||||||||||
| ROE | 13.72 | % | 14.16 | % | (44) bps | -3 | % | |||||||||||||||||||
Additional discussion follows under the section titled "Results of Operations."
General highlights for the three months ended September 30, 2026 compared to September 30, 2025:
•Net income totaled a record $43.5 million for the three months ended September 30, 2026, resulting in diluted EPS of $1.40, compared to net income of $36.2 million for the three months ended September 30, 2025, which resulted in diluted EPS of $1.23.
•The three months ended September 30, 2026 represented the first full quarter of activity associated with the FM acquisition, which contributed approximately $7.8 million in net interest income, $2.0 million in non-interest income and $6.2 million in non-interest expense, including $678,000 of non-recurring merger-related charges.
•Total loans increased $1.06 billion, or 15%, compared to September 30, 2025, driven by the loan portfolio acquired from FM in addition to solid organic growth. Average loans also increased $1.06 million, or 15%, for the three months ended September 30, 2026 compared to the same period of the prior year.
•Bancorp's ACL on loans increased $16 million, or 17%, compared to September 30, 2025, driven by organic and acquisition-related loan growth.
◦Provision for credit losses on loans of $700,000 was recorded for the three months ended September 30, 2026, consistent with moderate loan growth that was partially offset by an improved unemployment forecast and strong credit quality metrics.
◦The ACL on loans was increased $18 million as a result of the loan portfolio added through the FM acquisition.
•Deposit balances increased $746 million, or 10%, compared to September 30, 2025, which was attributed primarily to the deposit portfolio assumed through the FM acquisition.
•Net interest income (FTE) totaled $92.7 million for the three months ended September 30, 2026, representing an increase of $15.6 million, or 20%, compared to the three months ended September 30, 2025.
◦Interest income experienced a $14.1 million, or 12%, increase over this period as a result of strong average loan growth, which was coupled with a $1.5 million, or 3%, decrease in interest expense stemming from lower deposit costs that were the result of strategically lowering rates in tandem with interest rate reductions implemented by the FRB in the latter part of 2025, despite the interest expense added as a result of the FM acquisition.
◦NIM increased 32 bps to 3.88% for the three months ended September 30, 2026, compared to the same period of the prior year, driven by a 31 bps decline in the cost of interest-bearing liabilities and a 7 bps improvement in earning asset yields.
•Non-interest income increased $3.2 million, or 13%, for the three months ended September 30, 2026, compared to the three months ended September 30, 2025, which was the result of both organic growth and acquisition-related activity.
•Non-interest expenses increased $10.3 million, or 19%, for the three months ended September 30, 2026, compared to the three months ended September 30, 2025, attributed to higher compensation and employee benefit expense in addition to continued investment in technology and the impact of the FM acquisition.
•Bancorp's efficiency ratio (FTE) for the three months ended September 30, 2026 was 53.29% compared to 52.99% for the three months ended September 30, 2025, the higher ratio being attributed to the impact of the FM acquisition. Bancorp also considers an adjusted efficiency ratio, which eliminates certain non-recurring activity, such as one-time merger-related expenses. Bancorp's adjusted efficiency ratio (FTE) for the three months ended September 30, 2026 was 52.72%.
•As of September 30, 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 September 30, 2025. Total stockholders' equity to total assets was 12.35% as of September 30, 2026, compared to 11.28% and 11.19% at December 31, 2025 and September 30, 2025, respectively. Tangible common equity to tangible assets was 9.98% at September 30, 2026, compared to 9.32% and 9.16% at December 31, 2025 and September 30, 2025, respectively.
The following table presents an overview of Bancorp's financial performance for the nine months ended September 30, 2026 and 2025:
| (dollars in thousands, except per share data) | Variance | |||||||||||||||||||||||||
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Nine months ended September 30,
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2026 | 2025 | $/bp | % | ||||||||||||||||||||||
| Net income | $ | 120,160 | $ | 103,536 | $ | 16,624 | 16 | % | ||||||||||||||||||
| Diluted earnings per share | $ | 3.95 | $ | 3.51 | $ | 0.44 | 13 | % | ||||||||||||||||||
| ROA | 1.63 | % | 1.53 | % | 10 bps | 7 | % | |||||||||||||||||||
| ROE | 13.62 | % | 14.17 | % | (55) bps | -4 | % | |||||||||||||||||||
General highlights for the nine months ended September 30, 2026 compared to September 30, 2025:
•Net income totaled $120.2 million for the nine months ended September 30, 2026, resulting in diluted EPS of $3.95, compared to net income of $103.5 million for the nine months ended September 30, 2025, which resulted in diluted EPS of $3.51.
•Bancorp completed its acquisition of FM on May 1, 2026. At the time of acquisition, and net of purchase accounting adjustments, approximately $838 million in total assets were acquired, including $624 million in net loans and total deposits of $765 million were assumed.
◦The nine months ended September 30, 2026 included five months of activity associated with the FM acquisition, which contributed approximately $13.2 million in net interest income, $3.3 million in non-interest income and $12.3 million in non-interest expense, including $3.0 million of non-recurring merger-related charges.
•Total loans increased $1.06 billion, or 15%, compared to September 30, 2025, driven by the loan portfolio acquired from FM in addition to solid organic growth. Average loans increased $840 million, or 12%, for the nine months ended September 30, 2026 compared to the same period of the prior year.
•Bancorp's ACL on loans increased $16 million, or 17%, compared to September 30, 2025, driven primarily by organic and acquisition-related loan growth.
◦Provision for credit losses on loans of $2.3 million was recorded for the nine months ended September 30, 2026, consistent with moderate loan growth that was partially offset by annual CECL model updates, an improved unemployment forecast and strong credit quality metrics.
◦Further, the ACL on loans was increased $18 million as a result of the loan portfolio added through the FM acquisition.
•Deposit balances increased $746 million, or 10%, compared to September 30, 2025, which was attributed primarily to the deposit portfolio assumed through the FM acquisition.
•Net interest income (FTE) totaled $259.1 million for the nine months ended September 30, 2026, representing an increase of $37.8 million, or 17%, compared to the nine months ended September 30, 2025.
◦Interest income experienced a $33.9 million, or 10%, increase over this period as a result of strong average loan growth, which was coupled with a $3.9 million, or 3%, decrease in interest expense attributed to eliminating more expensive overnight borrowings that had been utilized in the prior year and the strategic reduction of deposit rates in tandem with the FRB's interest rate decreases over the past 12 months.
◦NIM increased 27 bps to 3.79% for the nine months ended September 30, 2026, compared to the same period of the prior year, driven by a 29 bps decline in the cost of interest-bearing liabilities and a 6 bps improvement in earning asset yields.
•Non-interest income increased $7.2 million, or 10%, for the nine months ended September 30, 2026, compared to the nine months ended September 30, 2025, which was attributed in large part to organic growth, but was also bolstered by acquisition-related activity.
•Non-interest expenses increased $25.6 million, or 16%, for the nine months ended September 30, 2026, compared to the nine months ended September 30, 2025, attributed to higher compensation and employee benefits expense in addition to a continued investment in technology, as well as the impact of the FM acquisition, the latter of which included $3.0 million of one-time merger-related expenses.
•Bancorp's efficiency ratio (FTE) for the nine months ended September 30, 2026 was 54.17% compared to 53.75% for the nine months ended September 30, 2025, the higher ratio being attributed to the impact of the FM acquisition. Bancorp also considers an adjusted efficiency ratio, which eliminates certain non-recurring activity, such as one-time merger-related expenses. Bancorp's adjusted efficiency ratio (FTE) for the nine months ended September 30, 2026 was 53.37%.
| 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) | Variance | |||||||||||||||||||||||||
| As of and for the three months ended September 30, | 2026 | 2025 | $/bp | % | ||||||||||||||||||||||
| Net interest income | $ | 92,604 | $ | 77,037 | $ | 15,567 | 20 | % | ||||||||||||||||||
| Net interest income (FTE)* | 92,689 | 77,119 | 15,570 | 20 | % | |||||||||||||||||||||
| Net interest spread (FTE)* | 3.28 | % | 2.90 | % | 38 bps | 13 | % | |||||||||||||||||||
| Net interest margin (FTE)* | 3.88 | % | 3.56 | % | 32 bps | 9 | % | |||||||||||||||||||
| Average interest earning assets | $ | 9,474,431 | $ | 8,586,419 | $ | 888,012 | 10 | % | ||||||||||||||||||
| Average interest bearing liabilities | 7,064,909 | 6,439,410 | 625,499 | 10 | % | |||||||||||||||||||||
| Five year Treasury note rate at period end | 5.09 | % | 3.74 | % | 135 bps | 36 | % | |||||||||||||||||||
| Average five year Treasury note rate | 4.50 | % | 3.80 | % | 70 bps | 18 | % | |||||||||||||||||||
| Prime rate at period end | 7.00 | % | 7.25 | % | (25) bps | -3 | % | |||||||||||||||||||
| Average Prime rate | 6.79 | % | 7.46 | % | (67) bps | -9 | % | |||||||||||||||||||
| One month term SOFR at period end | 3.91 | % | 4.13 | % | (22) bps | -5 | % | |||||||||||||||||||
| Average one month term SOFR | 3.73 | % | 4.29 | % | (56) bps | -13 | % | |||||||||||||||||||
| (dollars in thousands) | Variance | |||||||||||||||||||||||||
| As of and for the nine months ended September 30, | 2026 | 2025 | $/bp | % | ||||||||||||||||||||||
| Net interest income | $ | 258,853 | $ | 221,062 | $ | 37,791 | 17 | % | ||||||||||||||||||
| Net interest income (FTE)* | 259,129 | 221,315 | 37,814 | 17 | % | |||||||||||||||||||||
| Net interest spread (FTE)* | 3.21 | % | 2.86 | % | 35 bps | 12 | % | |||||||||||||||||||
| Net interest margin (FTE)* | 3.79 | % | 3.52 | % | 27 bps | 8 | % | |||||||||||||||||||
| Average interest earning assets | $ | 9,130,616 | $ | 8,408,159 | $ | 722,457 | 9 | % | ||||||||||||||||||
| Average interest bearing liabilities | 6,877,128 | 6,326,894 | 550,234 | 9 | % | |||||||||||||||||||||
| Five year Treasury note rate at period end | 5.09 | % | 3.74 | % | 135 bps | 36 | % | |||||||||||||||||||
| Average five year Treasury note rate | 4.13 | % | 4.00 | % | 13 bps | 3 | % | |||||||||||||||||||
| Prime rate at period end | 7.00 | % | 7.25 | % | (25) bps | -3 | % | |||||||||||||||||||
| Average Prime rate | 6.76 | % | 7.49 | % | (73) bps | -10 | % | |||||||||||||||||||
| One month term SOFR at period end | 3.91 | % | 4.13 | % | (22) bps | -5 | % | |||||||||||||||||||
| Average one month term SOFR | 3.68 | % | 4.31 | % | (63) bps | -15 | % | |||||||||||||||||||
*See table titled, "Average Balance Sheets and Interest Rates (FTE)" for detail of Net interest income (FTE).
At September 30, 2026, Bancorp's loan portfolio consisted of approximately 64% fixed and 36% 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 September 30, 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 September 16, 2026, when the FRB implemented a rate increase that took the FFTR to a range of 3.75% - 4.00% and Prime to 7.00%. The yield curve has gradually improved during 2026, with spreads on the portion of the curve that is most critical to Bancorp's business (overnight through 5 years) showing a semblance of normalization after battling flatness/inversion ephor the past several years.
The NIM expansion experienced this year has been 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, providing gradual improvement to yields. While the FRB's recent interest increase had minimal impact on the third quarter given it's mid-September timing, Bancorp does expect it to provide a net benefit to NIM in coming months, as improved earning asset yields should outpace increasing deposit costs.
Recent projections indicate the potential for another 25 bps rate increase from the FRB towards the end of 2026. However, given current geopolitical uncertainty and regularly changing economic data/conditions, projections remain volatile. Further, Bancorp remains cautious regarding both loan and deposit rates as pricing related to competitive pressures could intensify in the coming quarters.
Net Interest Income (FTE) - Three months ended September 30, 2026 compared to September 30, 2025:
Net interest spread (FTE) and NIM (FTE) were 3.28% and 3.88%, for the three months ended September 30, 2026, compared to 2.90% and 3.56% for the same period of 2025, respectively.
Net interest income (FTE) increased $15.6 million, or 20%, for the three months ended September 30, 2026 compared to the same period of 2025, driven by solid organic average loan growth, a decline in interest expense related to the strategic reduction of deposit rates in tandem with FRB rate cuts and the impact of the FM acquisition. The third quarter of 2026 represents the first full quarter of activity associated with the FM acquisition.
Total average interest earning assets increased $888 million, or 10%, for the three months ended September 30, 2026, as compared to the same period of 2025, attributed to both organic average earning asset growth and the impact of the FM acquisition, which 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 7 bps to 5.63% 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 organic loan growth and earning assets added through the FM acquisition benefitted yields.
•Average total loan balances increased $1.06 billion, or 15%, for the three months ended September 30, 2026, compared to the same period of 2025, driven by the impact of the FM acquisition and solid organic loan growth.
•Average investment securities declined $313 million, or 25%, for the three months ended September 30, 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 loan growth and/or shifted into higher-yielding interest-bearing cash balances. The FM acquisition had minimal impact on the investment securities portfolio, as Bancorp immediately sold virtually the entire acquired securities portfolio upon acquisition.
•Average FFS and interest bearing due from bank balances increased $140 million, or 31%, for the three months ended September 30, 2026, which was largely the result of the previously mentioned liquidity provided by the investment securities portfolio in addition to interest-bearing cash acquired from FM.
Total interest income (FTE) increased $14.1 million, or 12%, to $134.5 million for the three months ended September 30, 2026, as compared to the same period of 2025.
•Interest and fee income (FTE) on loans increased $16.1 million, or 15%, to $123.4 million for the three months ended September 30, 2026, compared to the same period of 2025, driven by average loan balance growth. The yield on the overall loan portfolio decreased 2 bps to 6.17% for the three months ended September 30, 2026 compared to 6.19% for the same period of the prior year due to rate reductions enacted by the FRB in the latter part of 2025.
•Interest income (FTE) on the investment securities portfolio declined $2.6 million, or 34%, for the three months ended September 30, 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 28 bps to 2.14% for the three months ended September 30, 2026 compared to the same period of 2025.
•Interest income on FFS and interest bearing due from bank balances increased $593,000, or 12% for the three months ended September 30, 2026, consistent with the increase in corresponding average balances. The yield on these assets decreased 65 bps to 3.77% for the three months ended September 30, 2026 compared to the same period of 2025 due to the previously mentioned FRB rate reductions.
Total average interest bearing liabilities increased $625 million, or 10%, to $7.06 billion for the three month period ended September 30, 2026 compared with the same period in 2025, driven by the impact of the FM acquisition and organic growth.
•Average interest bearing deposits increased $661 million, or 11%, for the three months ended September 30, 2026 compared to the same period in 2025, driven by a $564 million, or 22%, increase in average interest bearing demand deposits and a $115 million, or 7%, increase in average time deposits, driven primarily by the addition of the deposit portfolio acquired from FM.
•Average FHLB advances declined $30 million, or 10%, for the three months ended September 30, 2026 as the result of a $50 million maturity of an advance associated with a cash flow hedge interest rate swap. The swap contract matured and as such, the related advance was not renewed.
•Average SSUAR decreased $6 million, or 6%, for the three months ended September 30, 2026 compared to the same period of the prior year, attributed to normal balance fluctuations.
Total interest expense decreased $1.5 million, or 3%, for the three months ended September 30, 2026 compared to the same period of 2025 despite additional costs related to the acquired deposit portfolio, consistent with the strategic reduction of deposit rates in tandem with FRB rate decreases.
•Total interest bearing deposit expense decreased $1.1 million, or 3%, driven by a $2.1 million, or 22%, decrease in expense on money market deposits and a $931,000, or 5% decrease in expense on time deposits, both of which were driven primarily by strategic deposit rate reductions. This activity more than offset a $1.9 million, or 15% increase in expense on interest bearing demand deposits, which was driven by both organic and acquisition-related average balance growth. The cost of total interest bearing deposits declined 32 bps to 2.28%, and the cost of total deposits (including average non-interest bearing deposits) declined 25 bps to 1.82%, consistent with previously mentioned deposit rate reductions.
•Interest expense on FHLB advances declined $216,000, or 8%, as a result of the previously mentioned maturity of a $50 million advance associated with a cash flow hedge interest rate swap.
•Interest expense on SSUAR decreased $126,000, or 21%, for the three months ended September 30, 2026, as compared to the same period of the prior year, consistent with rate reductions, and to a lesser extent, the average balance decrease.
Net Interest Income (FTE) - Nine months ended September 30, 2026 compared to September 30, 2025:
Net interest spread (FTE) and NIM (FTE) were 3.21% and 3.79%, for the nine months ended September 30, 2026, compared to 2.86% and 3.52% for the same period of 2025, respectively.
Net interest income (FTE) increased $37.8 million, or 17%, for the nine months ended September 30, 2026 compared to the same period of 2025, driven by the impact of strong average loan balance growth on interest income, a decline in interest expense related to both eliminating the need for the more expensive overnight borrowings that were utilized in the prior year and strategically lowering deposit rates, as well as the impact of the FM acquisition, the latter of which represents five months worth of activity.
Total average interest earning assets increased $722 million, or 9%, for the nine months ended September 30, 2026, as compared to the same period of 2025, attributed primarily to average organic loan balance growth, interest-bearing cash balance growth and the impact of the FM acquisition. This growth was only partially offset by a decline in average investment securities driven by scheduled maturities and normal amortization. The rate earned on average earning assets increased 6 bps to 5.57% 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 loan growth and/or moved into higher-yielding cash balances. The earning assets added through the FM acquisition also provided benefit to earning asset yields for the nine months ended September 30, 2026.
•Average total loan balances increased $840 million, or 12%, for the nine months ended September 30, 2026, compared to the same period of 2025, driven by both solid organic growth and the impact of the FM acquisition.
•Average investment securities declined $371 million, or 28%, for the nine months ended September 30, 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 loan growth or shifted into higher-yielding interest-bearing cash balances. As previously noted, the FM acquisition had minimal impact on the investment securities portfolio, as Bancorp immediately sold virtually the entire acquired securities portfolio upon acquisition.
•Average FFS and interest bearing due from bank balances increased $254 million, or 86%, for the nine months ended September 30, 2026, which was largely the result of the previously mentioned liquidity provided by the investment securities portfolio and interest bearing cash balances added through the FM acquisition.
Total interest income (FTE) increased $33.9 million, or 10%, to $380.6 million for the nine months ended September 30, 2026, as compared to the same period of 2025.
•Interest and fee income (FTE) on loans increased $37.9 million, or 10%, to $347.9 million for the nine months ended September 30, 2026, compared to the same period of 2025, driven by organic average loan balance growth the loan portfolio added through FM. The yield on the overall loan portfolio decreased 1 bp to 6.14% for the nine months ended September 30, 2026 compared to 6.15% for the same period of the prior year, as rate reductions enacted by the FRB in the latter part of 2025 created a hurdle for loan yield expansion.
•Interest income (FTE) on the investment securities portfolio declined $9.2 million, or 36%, for the nine months ended September 30, 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 31 bps to 2.19% for the nine months ended September 30, 2026 compared to the same period of 2025.
•Interest income on FFS and interest bearing due from bank balances increased $5.6 million, or 57% for the nine months ended September 30, 2026, consistent with the increase in corresponding average balances. The yield on these assets decreased 70 bps to 3.73% for the nine months ended September 30, 2026 compared to the same period of 2025 due to the previously mentioned FRB rate reductions.
Total average interest bearing liabilities increased $550 million, or 9%, to $6.88 billion for the nine month period ended September 30, 2026 compared with the same period in 2025, attributed to organic growth and the impact of the FM acquisition.
•Average interest bearing deposits increased $656 million, or 11%, for the nine months ended September 30, 2026 compared to the same period in 2025, driven by a $438 million, or 18%, increase in average interest bearing demand deposits and a $250 million, or 16%, increase in average time deposits, which were driven by organic growth and the impact of the FM acquisition.
•Average FHLB advances decreased $66 million, or 19%, for the nine months ended September 30, 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. Further, a $50 million advance associated with a cash flow hedge interest rate swap matured during the three months ended September 30, 2026, also contributing to the average balance decline. Bancorp currently utilizes a $250 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 September 30, 2026.
•Average SSUAR decreased $40 million, or 31%, for the nine months ended September 30, 2026 compared to the same period of the prior year, attributed largely to a number of clients moving into other deposit products in addition to normal balance fluctuations.
Total interest expense decreased $3.9 million, or 3%, for the nine months ended September 30, 2026 compared to the same period of 2025 despite the added costs associated with the FM acquisition, driven in large part by eliminating the necessity of more expensive overnight borrowings from the FHLB and the strategic reduction of deposit rates in tandem with FRB rate cuts in the latter part of 2025.
•Total interest bearing deposit expense decreased $930,000, or 1%, as expense related to the acquired deposit portfolio and the impact of organic growth was more than offset by the favorable repricing of the time deposit portfolio. Total interest-bearing deposit cost decreased 27 bps to 2.29% compared to the prior year period and the cost of total deposits (including average non-interest bearing deposits) declined 20 bps to 1.84%, driven largely by the strategic reduction of deposit rates.
•Interest expense on FHLB borrowings decreased $2.0 million, or 19%, for the nine months ended September 30, 2026, as compared to same period of the prior year, consistent with the $66 million decrease in average FHLB advances.
•Interest expense on SSUAR decreased $820,000, or 40%, for the nine months ended September 30, 2026, as compared to the same period of the prior year, consistent with a $40 million average balance decrease and lower rates.
Average Balance Sheets and Interest Rates (FTE) - Three-Month Comparison
| Three months ended September 30, | ||||||||||||||||||||||||||||||||||||||
| 2026 | 2025 | |||||||||||||||||||||||||||||||||||||
| (dollars in thousands) |
Average Balance |
Interest |
Average Rate |
Average Balance |
Interest |
Average Rate |
||||||||||||||||||||||||||||||||
| Interest earning assets: | ||||||||||||||||||||||||||||||||||||||
| Federal funds sold and interest bearing due from banks | $ | 589,179 | $ | 5,596 | 3.77 | % | $ | 448,969 | $ | 5,003 | 4.42 | % | ||||||||||||||||||||||||||
| Mortgage loans held for sale | 7,975 | 97 | 4.83 | 6,051 | 74 | 4.85 | ||||||||||||||||||||||||||||||||
| Investment securities: | ||||||||||||||||||||||||||||||||||||||
| Taxable | 865,363 | 4,518 | 2.07 | 1,165,522 | 7,033 | 2.39 | ||||||||||||||||||||||||||||||||
| Tax-exempt | 58,082 | 457 | 3.12 | 71,193 | 506 | 2.82 | ||||||||||||||||||||||||||||||||
| Total securities | 923,445 | 4,975 | 2.14 | 1,236,715 | 7,539 | 2.42 | ||||||||||||||||||||||||||||||||
| Federal Home Loan Bank stock | 24,583 | 434 | 7.00 | 21,125 | 488 | 9.16 | ||||||||||||||||||||||||||||||||
| Loans | 7,929,249 | 123,367 | 6.17 | 6,873,559 | 107,250 | 6.19 | ||||||||||||||||||||||||||||||||
| Total interest earning assets | 9,474,431 | 134,469 | 5.63 | 8,586,419 | 120,354 | 5.56 | ||||||||||||||||||||||||||||||||
| Less allowance for credit losses on loans | 111,371 | 92,859 | ||||||||||||||||||||||||||||||||||||
| Non-interest earning assets: | ||||||||||||||||||||||||||||||||||||||
| Cash and due from banks | 81,637 | 75,952 | ||||||||||||||||||||||||||||||||||||
| Premises and equipment, net | 131,162 | 115,810 | ||||||||||||||||||||||||||||||||||||
| Bank owned life insurance | 106,736 | 90,882 | ||||||||||||||||||||||||||||||||||||
| Goodwill | 238,354 | 194,074 | ||||||||||||||||||||||||||||||||||||
| Accrued interest receivable and other | 296,168 | 246,525 | ||||||||||||||||||||||||||||||||||||
| Total assets | $ | 10,217,117 | $ | 9,216,803 | ||||||||||||||||||||||||||||||||||
| Interest bearing liabilities: | ||||||||||||||||||||||||||||||||||||||
| Deposits: | ||||||||||||||||||||||||||||||||||||||
| Interest bearing demand | $ | 3,082,529 | $ | 14,237 | 1.83 | % | $ | 2,518,044 | $ | 12,353 | 1.95 | % | ||||||||||||||||||||||||||
| Savings | 477,313 | 360 | 0.30 | 423,488 | 289 | 0.27 | ||||||||||||||||||||||||||||||||
| Money market | 1,298,425 | 7,559 | 2.31 | 1,370,189 | 9,654 | 2.80 | ||||||||||||||||||||||||||||||||
| Time | 1,804,092 | 16,067 | 3.53 | 1,689,554 | 16,998 | 3.99 | ||||||||||||||||||||||||||||||||
| Total interest bearing deposits | 6,662,359 | 38,223 | 2.28 | 6,001,275 | 39,294 | 2.60 | ||||||||||||||||||||||||||||||||
| Securities sold under agreements to repurchase | 98,741 | 462 | 1.86 | 104,640 | 588 | 2.23 | ||||||||||||||||||||||||||||||||
| Federal funds purchased | 7,438 | 68 | 3.63 | 6,689 | 72 | 4.27 | ||||||||||||||||||||||||||||||||
| Federal Home Loan Bank advances | 269,565 | 2,654 | 3.91 | 300,000 | 2,870 | 3.80 | ||||||||||||||||||||||||||||||||
| Subordinated debentures | 26,806 | 373 | 5.52 | 26,806 | 411 | 6.08 | ||||||||||||||||||||||||||||||||
| Total interest bearing liabilities | 7,064,909 | 41,780 | 2.35 | 6,439,410 | 43,235 | 2.66 | ||||||||||||||||||||||||||||||||
| Non-interest bearing liabilities: | ||||||||||||||||||||||||||||||||||||||
| Non-interest bearing demand deposits | 1,673,942 | 1,540,029 | ||||||||||||||||||||||||||||||||||||
| Accrued interest payable and other | 220,240 | 221,886 | ||||||||||||||||||||||||||||||||||||
| Total liabilities | 8,959,091 | 8,201,325 | ||||||||||||||||||||||||||||||||||||
|
Stockholders' equity
|
1,258,026 | 1,015,478 | ||||||||||||||||||||||||||||||||||||
| Total liabilities and stockholders' equity | $ | 10,217,117 | $ | 9,216,803 | ||||||||||||||||||||||||||||||||||
| Net interest income | $ | 92,689 | $ | 77,119 | ||||||||||||||||||||||||||||||||||
| Net interest spread | 3.28 | % | 2.90 | % | ||||||||||||||||||||||||||||||||||
| Net interest margin | 3.88 | % | 3.56 | % | ||||||||||||||||||||||||||||||||||
Average Balance Sheets and Interest Rates (FTE) - Nine-Month Comparison
| Nine months ended September 30, | ||||||||||||||||||||||||||||||||||||||
| 2026 | 2025 | |||||||||||||||||||||||||||||||||||||
| (dollars in thousands) |
Average Balance |
Interest |
Average Rate |
Average Balance |
Interest |
Average Rate |
||||||||||||||||||||||||||||||||
| Interest earning assets: | ||||||||||||||||||||||||||||||||||||||
| Federal funds sold and interest bearing due from banks | $ | 548,363 | $ | 15,300 | 3.73 | % | $ | 294,033 | $ | 9,734 | 4.43 | % | ||||||||||||||||||||||||||
| Mortgage loans held for sale | 6,946 | 260 | 5.00 | 6,310 | 229 | 4.85 | ||||||||||||||||||||||||||||||||
| Investment securities: | ||||||||||||||||||||||||||||||||||||||
| Taxable | 908,689 | 14,469 | 2.13 | 1,270,410 | 23,580 | 2.48 | ||||||||||||||||||||||||||||||||
| Tax-exempt | 63,433 | 1,467 | 3.09 | 72,332 | 1,514 | 2.80 | ||||||||||||||||||||||||||||||||
| Total securities | 972,122 | 15,936 | 2.19 | 1,342,742 | 25,094 | 2.50 | ||||||||||||||||||||||||||||||||
| Federal Home Loan Bank stock | 22,960 | 1,231 | 7.17 | 24,756 | 1,682 | 9.08 | ||||||||||||||||||||||||||||||||
| Loans | 7,580,225 | 347,887 | 6.14 | 6,740,318 | 309,952 | 6.15 | ||||||||||||||||||||||||||||||||
| Total interest earning assets | 9,130,616 | 380,614 | 5.57 | 8,408,159 | 346,691 | 5.51 | ||||||||||||||||||||||||||||||||
| Less allowance for credit losses on loans | 102,130 | 91,106 | ||||||||||||||||||||||||||||||||||||
| Non-interest earning assets: | ||||||||||||||||||||||||||||||||||||||
| Cash and due from banks | 78,741 | 76,178 | ||||||||||||||||||||||||||||||||||||
| Premises and equipment, net | 126,859 | 115,891 | ||||||||||||||||||||||||||||||||||||
| Bank owned life insurance | 100,236 | 90,252 | ||||||||||||||||||||||||||||||||||||
| Goodwill | 218,845 | 194,074 | ||||||||||||||||||||||||||||||||||||
| Accrued interest receivable and other | 279,467 | 240,332 | ||||||||||||||||||||||||||||||||||||
| Total assets | $ | 9,832,634 | $ | 9,033,780 | ||||||||||||||||||||||||||||||||||
| Interest bearing liabilities: | ||||||||||||||||||||||||||||||||||||||
| Deposits: | ||||||||||||||||||||||||||||||||||||||
| Interest bearing demand | $ | 2,934,898 | $ | 38,478 | 1.75 | % | $ | 2,496,769 | $ | 35,809 | 1.92 | % | ||||||||||||||||||||||||||
| Savings | 456,197 | 982 | 0.29 | 422,850 | 873 | 0.28 | ||||||||||||||||||||||||||||||||
| Money market | 1,283,452 | 22,051 | 2.30 | 1,349,068 | 28,236 | 2.80 | ||||||||||||||||||||||||||||||||
| Time | 1,788,019 | 48,945 | 3.66 | 1,538,245 | 46,468 | 4.04 | ||||||||||||||||||||||||||||||||
| Total interest bearing deposits | 6,462,566 | 110,456 | 2.29 | 5,806,932 | 111,386 | 2.56 | ||||||||||||||||||||||||||||||||
| Securities sold under agreements to repurchase | 90,635 | 1,207 | 1.78 | 130,507 | 2,027 | 2.08 | ||||||||||||||||||||||||||||||||
| Federal funds purchased | 7,377 | 199 | 3.61 | 6,605 | 214 | 4.33 | ||||||||||||||||||||||||||||||||
| Federal Home Loan Bank advances | 289,744 | 8,515 | 3.93 | 356,044 | 10,519 | 3.95 | ||||||||||||||||||||||||||||||||
| Subordinated debentures | 26,806 | 1,108 | 5.53 | 26,806 | 1,230 | 6.13 | ||||||||||||||||||||||||||||||||
| Total interest bearing liabilities | 6,877,128 | 121,485 | 2.36 | 6,326,894 | 125,376 | 2.65 | ||||||||||||||||||||||||||||||||
| Non-interest bearing liabilities: | ||||||||||||||||||||||||||||||||||||||
| Non-interest bearing demand deposits | 1,564,339 | 1,485,519 | ||||||||||||||||||||||||||||||||||||
| Accrued interest payable and other | 211,377 | 237,702 | ||||||||||||||||||||||||||||||||||||
| Total liabilities | 8,652,844 | 8,050,115 | ||||||||||||||||||||||||||||||||||||
|
Stockholders' equity
|
1,179,790 | 983,665 | ||||||||||||||||||||||||||||||||||||
| Total liabilities and stockholders' equity | $ | 9,832,634 | $ | 9,033,780 | ||||||||||||||||||||||||||||||||||
| Net interest income | $ | 259,129 | $ | 221,315 | ||||||||||||||||||||||||||||||||||
| Net interest spread | 3.21 | % | 2.86 | % | ||||||||||||||||||||||||||||||||||
| Net interest margin | 3.79 | % | 3.52 | % | ||||||||||||||||||||||||||||||||||
Supplemental Information - Average Balance Sheets and Interest Rates (FTE)
•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 $85,000 and $82,000 for the three month periods ended September 30, 2026 and 2025, and $276,000 and $253,000 for the nine month periods ended September 30, 2026 and 2025.
•Interest income includes loan fees of $1.6 million and $1.3 million for the three month periods ended September 30, 2026 and 2025, and $4.9 million and $4.3 million for the nine month periods ended September 30, 2026 and 2025. 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 $567,000 and $375,000 for the three month periods ended September 30, 2026 and 2025, and $1.8 million and $1.1 million for the nine month periods ended September 30, 2026 and 2025.
•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 September 30, 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.
| -200 | -100 | +100 | +200 | ||||||||||||||||||||
| Basis Points | Basis Points | Basis Points | Basis Points | ||||||||||||||||||||
| % Change from base net interest income at September 30, 2026 | -6.68 | % | -3.18 | % | 3.32 | % | 6.60 | % | |||||||||||||||
Bancorp's loan portfolio is currently composed of approximately 64% fixed and 36% 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 September 30, 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:
|
Three months ended September 30, |
Nine months ended September 30, |
|||||||||||||||||||||||||
| (dollars in thousands) | 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||||
| Beginning balance | $ | 109,094 | $ | 90,722 | $ | 91,867 | $ | 86,943 | ||||||||||||||||||
| ACL for acquired loans (goodwill adjustment) | 2,013 | - | 17,540 | - | ||||||||||||||||||||||
| Provision for credit losses on loans | 700 | 1,550 | 2,325 | 4,700 | ||||||||||||||||||||||
| Total charge-offs | (4,254) | (429) | (4,962) | (1,596) | ||||||||||||||||||||||
| Total recoveries | 302 | 317 | 1,085 | 2,113 | ||||||||||||||||||||||
| Net loan recoveries | (3,952) | (112) | (3,877) | 517 | ||||||||||||||||||||||
| Ending balance | $ | 107,855 | $ | 92,160 | $ | 107,855 | $ | 92,160 | ||||||||||||||||||
| Average total loans | $ | 7,929,249 | $ | 6,873,559 | $ | 7,580,225 | $ | 6,740,318 | ||||||||||||||||||
| Provision for credit losses on loans to average total loans (1) | 0.01 | % | 0.02 | % | 0.03 | % | 0.07 | % | ||||||||||||||||||
| Net loan (charge-offs)/recoveries to average total loans (1) | (0.05 | %) | 0.00 | % | (0.05 | %) | 0.01 | % | ||||||||||||||||||
| ACL for loans to total loans | 1.35 | % | 1.33 | % | 1.35 | % | 1.33 | % | ||||||||||||||||||
| ACL for loans to average total loans | 1.36 | % | 1.34 | % | 1.42 | % | 1.37 | % | ||||||||||||||||||
(1)Ratios are not annualized
The ACL for loans totaled $108 million as of September 30, 2026 compared to $92 million at September 30, 2025, representing an ACL to total loans ratio of 1.35% and 1.33% for the respective periods. The ACL for loans was increased $18 million as a result of the loan portfolio added through the FM acquisition, with the corresponding offset recorded to goodwill (as opposed to provision for credit loss expense).
Provision expense on loans of $700,000 was recorded for the three month period ended September 30, 2026, consistent with moderate organic loan growth, an improved unemployment forecast and strong credit quality metrics. Provision expense on loans totaling $2.3 million was recorded for the nine month period ended September 30, 2026, driven primarily by strong organic loan growth that was only partially offset by improvement in the unemployment forecast and decreased specific reserves. Net charge off/recovery activity totaled $4.0 million and $3.9 million the three and nine month periods ended September 30, 2026, serving to reduce the ACL for loans, as the majority of charge off activity was fully reserved for.
Provision expense on loans of $1.6 million and $4.7 million was recorded for the three and nine month periods ended September 30, 2025. While expense for both periods of the prior year was consistent with strong loan growth, slight deterioration within the unemployment forecast and increased specific reserves, expense for the nine month period was also impacted by annual CECL model updates made during the first quarter of 2025. Net charge offs of $112,000 and net recoveries of $517,000 were recorded for the three and nine month periods ended September 30, 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, increased $375,000 between December 31, 2025 and September 30, 2026. While no provision expense was recorded for off balance sheet credit exposures for the three and nine month periods ended September 30, 2026, the liability was increased as a result of the line of credit portfolio added through the FM acquisition, with the corresponding offset recorded to goodwill (as opposed to provision expense). The lack of expense for the first nine months of 2026 was consistent with changes in expected utilization within the C&D portfolio. The ACL for off balance sheet exposures totaled $8.3 million as of September 30, 2026.
Provision expense of $425,000 and $350,000 for off balance sheet credit exposures was recorded for the three and nine month periods ended September 30, 2025, driven by increased availability associated with new line production, particularly within the C&D segment for the respective periods. The lower expense recorded for the nine month period stemmed from recording a credit to provision expense for off balance sheet credit exposures during the first quarter of 2025, consistent with improved utilization and thus reduced availability for that period. The ACL for off balance sheet credit exposures totaled $7.1 million as of September 30, 2025.
Bancorp's loan portfolio is well-diversified with no significant concentrations of credit. Geographically, most loans are extended to borrowers throughout the state of 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 September 30, 2026 is adequate to absorb probable losses inherent in the loan portfolio as of the financial statement date.
Additionally, an ACL for AFS investment securities was established as of September 30, 2026 to record the impairment of a corporate security owned as a result of the 2021 KB acquisition, which represents the only corporate security owned by Bancorp. Monthly payments had been received for the security since acquisition, but ceased in August due to a long-term tenant not renewing their lease, ultimately creating an event of default. Provision expense of $250,000, or approximately half of the bond's book value, was recorded to establish the ACL. A committee of bondholders has been established to find resolution, which is likely to be a lengthy process. Bancorp will continue to monitor the situation as it develops.
Non-interest Income
| Three months ended September 30, | Nine months ended September 30, | |||||||||||||||||||||||||||||||||||||||||||||||||
| (dollars in thousands) | 2026 | 2025 | $ Variance | % Variance | 2026 | 2025 | $ Variance | % Variance | ||||||||||||||||||||||||||||||||||||||||||
| Wealth management and trust services | $ | 12,863 | $ | 10,704 | $ | 2,159 | 20 | % | $ | 36,761 | $ | 31,834 | $ | 4,927 | 15 | % | ||||||||||||||||||||||||||||||||||
| Deposit service charges | 2,555 | 2,281 | 274 | 12 | 7,079 | 6,429 | 650 | 10 | ||||||||||||||||||||||||||||||||||||||||||
| Debit and credit card income | 5,611 | 5,009 | 602 | 12 | 15,393 | 14,354 | 1,039 | 7 | ||||||||||||||||||||||||||||||||||||||||||
| Treasury management fees | 3,327 | 2,923 | 404 | 14 | 9,490 | 8,601 | 889 | 10 | ||||||||||||||||||||||||||||||||||||||||||
| Mortgage banking income | 876 | 1,252 | (376) | (30) | 2,819 | 3,263 | (444) | (14) | ||||||||||||||||||||||||||||||||||||||||||
| Net investment product sales commissions and fees | 1,216 | 1,112 | 104 | 9 | 3,351 | 3,102 | 249 | 8 | ||||||||||||||||||||||||||||||||||||||||||
| Bank owned life insurance | 729 | 631 | 98 | 16 | 2,052 | 1,882 | 170 | 9 | ||||||||||||||||||||||||||||||||||||||||||
| Gain on sale of premises and equipment | - | - | - | - | 445 | 74 | 371 | 501 | ||||||||||||||||||||||||||||||||||||||||||
| Other | 456 | 564 | (108) | (19) | 1,584 | 2,281 | (697) | (31) | ||||||||||||||||||||||||||||||||||||||||||
| Total non-interest income | $ | 27,633 | $ | 24,476 | $ | 3,157 | 13 | % | $ | 78,974 | $ | 71,820 | $ | 7,154 | 10 | % | ||||||||||||||||||||||||||||||||||
Total non-interest income increased $3.2 million, or 13%, and $7.2 million, or 10%, for the three and nine month periods ended September 30, 2026 compared to the same periods of 2025. Non-interest income comprised 23.0% and 23.4% of total revenues, defined as net interest income and non-interest income, for the three and nine month periods ended September 30, 2026 compared to 24.1% and 24.5% for the same periods of 2025. The decreases from the prior year are attributed to net interest income growth outpacing non-interest income. WM&T services comprised 46.5% and 46.6% of total non-interest income for the three and nine month periods ended September 30, 2026 compared to 43.7% and 44.3% for the same periods of the prior year. The increases over the prior year were driven by WM&T revenue growth outpacing the other non-interest income categories.
Total non-interest income attributed to the FM acquisition for the three and nine month periods ended September 30, 2026 totaled $2.0 million and $3.3 million. The three months ended September 30, 2026 represents the first full quarter of activity associated with the acquisition of FM while the nine months ended September 30, 2026 represents five months of such activity.
WM&T Services:
The magnitude of WM&T revenue distinguishes Bancorp from other community banks of similar asset size. WM&T revenue increased $2.2 million, or 20%, and $4.9 million, or 15%, for the three and nine month periods ended September 30, 2026, as compared with the same periods of 2025, attributed to AUM expansion over the past 12 months, which has been driven by both general market appreciation and new business development in addition to the impact of the FM acquisition, the latter of which contributed approximately $1.2 million and $2.0 million in revenue for the three and nine month periods ended September 30, 2026.
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 $2.1 million, or 20%, and $5.1 million, or 16%, for the three and nine month periods ended September 30, 2026, as compared with the same periods of 2025, consistent with AUM expansion, general market appreciation and the impact of the FM acquisition.
A portion of WM&T revenue, most notably executor and certain employee benefit plan-related fees, are non-recurring in nature and the timing of these revenues corresponds with the related administrative activities. For this reason, such fees are subject to greater period over period fluctuation. Total non-recurring fees increased $46,000, or 16%, and decreased $143,000, or 15%, for the three and nine month periods ended September 30, 2026, as compared with the same periods of 2025, both the increase and the decrease for the respective periods being attributed to fluctuations in estate fee revenue.
AUM, stated at market value, totaled $8.95 billion at September 30, 2026 compared with $7.64 billion at December 31, 2025 and $7.48 billion at September 30, 2025. The increase in AUM between September 30, 2025 and September 30, 2026 was attributed largely to the impact of the FM acquisition, but was also driven by appreciation within the equity and fixed income markets in addition to organic new business development over the past 12 months. AUM totaling approximately $825 million were added as a result of the FM acquisition on May 1, 2026.
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:
| Three months ended September 30, | Nine months ended September 30, | |||||||||||||||||||||||||
| (in thousands) | 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||||
| Investment advisory | $ | 5,581 | $ | 4,561 | $ | 15,829 | $ | 13,132 | ||||||||||||||||||
| Personal trust | 3,525 | 3,142 | 10,553 | 9,938 | ||||||||||||||||||||||
| Personal investment retirement | 2,701 | 2,085 | 7,395 | 6,092 | ||||||||||||||||||||||
| Company retirement | 440 | 419 | 1,259 | 1,228 | ||||||||||||||||||||||
| Foundation and endowment | 389 | 335 | 1,190 | 998 | ||||||||||||||||||||||
| Custody and safekeeping | 175 | 73 | 352 | 207 | ||||||||||||||||||||||
| Brokerage and insurance services | 4 | 33 | 37 | 51 | ||||||||||||||||||||||
| Other | 48 | 56 | 146 | 188 | ||||||||||||||||||||||
| Total WM&T services income | $ | 12,863 | $ | 10,704 | $ | 36,761 | $ | 31,834 | ||||||||||||||||||
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 $8.95 billion at September 30, 2026 as follows:
| September 30, 2026 | December 31, 2025 | |||||||||||||||||||||||||||||||||||||
| (in thousands) | Managed | Non-managed (1) | Total | Managed | Non-managed (1) | Total | ||||||||||||||||||||||||||||||||
| Investment advisory | $ | 3,759,363 | $ | 48,682 | $ | 3,808,045 | $ | 2,959,858 | $ | 35,809 | $ | 2,995,667 | ||||||||||||||||||||||||||
| Personal trust | 1,642,622 | 500,805 | 2,143,427 | 1,531,824 | 498,525 | 2,030,349 | ||||||||||||||||||||||||||||||||
| Personal investment retirement | 1,320,510 | 28,672 | 1,349,182 | 1,037,825 | 17,654 | 1,055,479 | ||||||||||||||||||||||||||||||||
| Company retirement | 49,357 | 728,179 | 777,536 | 52,669 | 670,690 | 723,359 | ||||||||||||||||||||||||||||||||
| Foundation and endowment | 633,991 | 689 | 634,680 | 549,666 | 7,588 | 557,254 | ||||||||||||||||||||||||||||||||
| Subtotal | $ | 7,405,843 | $ | 1,307,027 | $ | 8,712,870 | $ | 6,131,842 | $ | 1,230,266 | $ | 7,362,108 | ||||||||||||||||||||||||||
| Custody and safekeeping | - | 236,365 | 236,365 | - | 273,110 | 273,110 | ||||||||||||||||||||||||||||||||
| Total AUM | $ | 7,405,843 | $ | 1,543,392 | $ | 8,949,235 | $ | 6,131,842 | $ | 1,503,376 | $ | 7,635,218 | ||||||||||||||||||||||||||
(1)Non-managed assets represent those for which the WM&T department does not hold investment discretion.
As of September 30, 2026 and December 31, 2025, approximately 83% 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) | September 30, 2026 | December 31, 2025 | ||||||||||||
| Interest bearing deposits | $ | 344,408 | $ | 440,692 | ||||||||||
| Treasury and government agency obligations | 333,089 | 206,184 | ||||||||||||
| State, county and municipal obligations | 493,316 | 425,178 | ||||||||||||
| Money market mutual funds | 37,894 | 34,371 | ||||||||||||
| Equity mutual funds | 1,664,113 | 1,344,762 | ||||||||||||
| Other mutual funds - fixed, balanced and municipal | 783,487 | 670,680 | ||||||||||||
| Other notes and bonds | 204,321 | 176,103 | ||||||||||||
| Unregistered funds & private equity investments | 150 | - | ||||||||||||
| Common and preferred stocks | 3,233,283 | 2,641,640 | ||||||||||||
| Real estate mortgages | 5,771 | - | ||||||||||||
| Real estate | 39,875 | 16,924 | ||||||||||||
| Other miscellaneous assets (1) | 266,136 | 175,308 | ||||||||||||
| Total managed assets | $ | 7,405,843 | $ | 6,131,842 | ||||||||||
(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 66% in equities and 34% in fixed income securities as of September 30, 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 $274,000, or 12%, and $650,000, or 10%, for the three and nine month periods ended September 30, 2026, as compared with the same periods of 2025, driven by both acquisition-related activity and organic growth. However, Bancorp implemented compliance-related changes associated with regulatory deposit settlement requirements during the third quarter of 2026, which are consistent with changing industry practices. While these changes were expected to negatively impact this revenue stream, they were countered by the decision to increase the overdraft limit on deposit accounts. Bancorp remains cautious regarding the outlook for deposit service charge revenue, as regulation and industry practice continues to evolve.
Debit and credit card income consists of interchange revenue, ancillary fees and incentives received from card processors. Debit and credit card revenue increased $602,000, or 12%, and $1.0 million, or 7%, for the three and nine month periods ended September 30, 2026, as compared with the same periods of 2025, attributed to both acquisition-related activity and organic growth. Debit card income increased $626,000, or 19%, and $1.1 million, or 12%, and total credit card income decreased $24,000, or 1%, and $103,000, or 2%, for the three and nine month periods ended September 30, 2026 compared the same periods 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. Further, Bancorp will be subject to regulatory limitations on interchange transaction fees for debit card transactions after total consolidated assets exceed $10 billion as of any given December 31, which will negatively impact this revenue stream. Such limitations begin on July 1 of the calendar year immediately following the year an institution crosses this threshold. Bancorp expects to officially cross the $10 billion threshold for regulatory purposes on December 31, 2027.
Treasury management fees primarily consist of fees earned for cash management services provided to commercial customers. Treasury management fees increased $404,000, or 14%, and $889,000 or 10%, for the three and nine month periods ended September 30, 2026 as compared with the same periods 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. While the FM acquisition had little impact on overall treasury management fee income for the three and nine month periods ended September 30, 2026, the customer base added through the acquisition is expected to provide ample opportunity for future growth given Bancorp's ability to offer these new customers a broader array of treasury services.
Mortgage banking income primarily includes gains on sales of mortgage loans and net loan servicing income offset by MSR amortization. Bancorp's mortgage banking department predominantly originates residential mortgage loans to be sold in the secondary market, primarily to FNMA and FHLMC. Bancorp offers conventional, VA, FHA and GNMA financing for purchases and refinances, as well as programs for first-time homebuyers. Interest rates on mortgage loans directly influence the volume of business transacted by the mortgage-banking department. Mortgage banking revenue decreased $376,000, or 30%, and $444,000, or 14%, for the three and nine month periods ended September 30, 2026, as compared with the same periods of 2025. While overall volumes have remained steady, yields on mortgage loans sold in the secondary market have declined as a result of competitive pricing pressures created by rising mortgage rates, negatively impacting mortgage banking revenue. The FM acquisition had minimal impact on mortgage banking revenue for the three and nine months ended September 30, 2026.
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 $104,000, or 9%, and $249,000, or 8%, for the three and nine month periods ended September 30, 2026 compared to the same periods of 2025, driven by a continued shift to more profitable wrap fee-based business and general market appreciation. The FM acquisition had minimal impact on this non-interest revenue stream.
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 $98,000, or 16%, and $170,000, or 9%, for the three and nine month periods ended September 30, 2026 compared to the same periods of 2025, primarily as a result of adding BOLI assets totaling approximately $13 million as a result of the FM acquisition.
While no gain/loss on the sale of premises and equipment was recorded for the three months ended September 30, 2026, a gain of $445,000 was recorded for the nine months ended September 30, 2026, which consisted primarily of the sale of a former branch location during the first quarter of 2026, which was only partially offset by a loss recorded during the second quarter related to the disposal of miscellaneous equipment. No such activity was recorded during the three months ended September 30, 2025, however, a gain of $74,000 was recorded for the nine month period ended September 30, 2025 as a result of the sale of a property owned through a prior acquisition that had been held for sale.
Other non-interest income decreased $108,000, or 19%, and $697,000, or 31%, for the three and nine month periods ended September 30, 2026 compared with the same periods of 2025, driven mainly by the prior year periods benefitting from swap fee activity.
Non-interest Expenses
| Three months ended September 30, | Nine months ended September 30, | |||||||||||||||||||||||||||||||||||||||||||||||||
| (dollars in thousands) | 2026 | 2025 | $ Variance | % Variance | 2026 | 2025 | $ Variance | % Variance | ||||||||||||||||||||||||||||||||||||||||||
| Compensation | $ | 31,573 | $ | 28,836 | $ | 2,737 | 9 | % | $ | 91,692 | $ | 82,047 | $ | 9,645 | 12 | % | ||||||||||||||||||||||||||||||||||
| Employee benefits | 6,422 | 4,878 | 1,544 | 32 | 18,774 | 15,993 | 2,781 | 17 | ||||||||||||||||||||||||||||||||||||||||||
| Net occupancy and equipment | 4,991 | 4,086 | 905 | 22 | 14,056 | 12,234 | 1,822 | 15 | ||||||||||||||||||||||||||||||||||||||||||
| Technology and communication | 6,416 | 4,837 | 1,579 | 33 | 18,173 | 14,438 | 3,735 | 26 | ||||||||||||||||||||||||||||||||||||||||||
| Debit and credit card processing | 2,367 | 1,984 | 383 | 19 | 6,415 | 5,711 | 704 | 12 | ||||||||||||||||||||||||||||||||||||||||||
| Marketing and business development | 1,971 | 1,887 | 84 | 4 | 5,486 | 5,353 | 133 | 2 | ||||||||||||||||||||||||||||||||||||||||||
| Postage, printing and supplies | 957 | 910 | 47 | 5 | 2,895 | 2,816 | 79 | 3 | ||||||||||||||||||||||||||||||||||||||||||
| Legal and professional | 1,043 | 891 | 152 | 17 | 3,278 | 2,886 | 392 | 14 | ||||||||||||||||||||||||||||||||||||||||||
| FDIC insurance | 1,073 | 1,198 | (125) | (10) | 3,328 | 3,681 | (353) | (10) | ||||||||||||||||||||||||||||||||||||||||||
| Capital and deposit based taxes | 852 | 1,082 | (230) | (21) | 2,706 | 2,520 | 186 | 7 | ||||||||||||||||||||||||||||||||||||||||||
| Merger expenses | 678 | - | 678 | 100 | 2,961 | - | 2,961 | 100 | ||||||||||||||||||||||||||||||||||||||||||
| Intangible amortization | 1,920 | 915 | 1,005 | 110 | 4,265 | 2,744 | 1,521 | 55 | ||||||||||||||||||||||||||||||||||||||||||
| Other | 3,851 | 2,327 | 1,524 | 65 | 9,133 | 7,135 | 1,998 | 28 | ||||||||||||||||||||||||||||||||||||||||||
| Total non-interest expenses | $ | 64,114 | $ | 53,831 | $ | 10,283 | 19 | % | $ | 183,162 | $ | 157,558 | $ | 25,604 | 16 | % | ||||||||||||||||||||||||||||||||||
Total non-interest expenses increased $10.3 million, or 19%, and $25.6 million, or 16%, for the three and nine month periods ended September 30, 2026 compared to the same periods of 2025. Compensation and employee benefits comprised 59.9% and 61.3% of Bancorp's total non-interest expenses, excluding one-time merger-related expenses, for the three and nine month periods ended September 30, 2026, compared to 62.6% and 62.2% for the same periods of 2025.
Total non-interest expense, excluding one-time merger-related expenses, attributed to the FM acquisition for the three and nine month periods ended September 30, 2026 totaled $5.7 million and $9.4 million. While the three month period represents the first full quarter of activity related to the FM acquisition, the nine month period includes just five months of such activity. One-time merger-related expenses totaled $678,000 and $3.0 million for the three and nine month periods ended September 30, 2026. The vast majority of remaining one-time merger-related expenses are expected to be recorded during the fourth quarter of 2026.
Compensation, which includes salaries, incentives, bonuses and stock based compensation, increased $2.7 million, or 9%, and $9.6 million, or 12%, for the three and nine month periods ended September 30, 2026, as compared with the same periods of 2025. The increase was attributed primarily to growth in full time equivalent employees, including the impact of the FM acquisition and annual merit-based salary increases. Net full time equivalent employees totaled 1,270 at September 30, 2026 compared to 1,140 at September 30, 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 $1.5 million, or 32%, and $2.8 million, or 17%, for the three and nine month periods ended September 30, 2026, as compared with the same periods of 2025, driven mainly by the previously mentioned growth in FTEs, including the impact of the FM acquisition, and increased 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 $905,000, or 22%, and $1.8 million, or 15%, for the three and nine month periods ended September 30, 2026, as compared with the same periods of 2025, consistent with the impact of the FM acquisition and organic branch network expansion in addition to higher rent and depreciation expense. In addition to the six full-service locations added through the FM acquisition, four new branch locations were opened over the past 12 months, including Bancorp's first full-service location in the Bowling Green, Kentucky, which represents the first location opened in the new South Central Kentucky market. At September 30, 2026, Bancorp's branch network consisted of 82 locations throughout the state of 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 $1.6 million, or 33%, and $3.7 million, or 26%, for the three and nine month periods ended September 30, 2026 compared to the same periods of 2025, consistent with several planned investments, including the development of advanced data analytics capabilities, and the impact of the FM acquisition.
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 $383,000, or 19%, and $704,000, or 12%, for the three and nine month periods ended September 30, 2026 compared to the same periods of 2025, driven by higher processing fees, including increased fraud-mitigation and prevention expenses, in addition to the impact of the FM acquisition.
Marketing and business development expenses include all costs associated with promoting Bancorp, including community support, retaining customers and acquiring new business. Marketing and business development expenses increased $84,000, or 4%, and $133,000, or 2%, for the three and nine month periods ended September 30, 2026, as compared to the same periods of 2025, the increases being driven by higher travel expenses and customer entertainment.
Postage, printing and supplies expense increased $47,000, or 5%, and $79,000, or 3%, for the three and nine month periods ended September 30, 2026 compared to the same periods of 2025, attributed primarily to increases in the general cost of postage.
Legal and professional fees increased $152,000, or 17%, and $392,000, or 14%, for the three and nine month periods ended September 30, 2026 compared to the same periods of 2025, driven by an increase in expenses related to general corporate legal matters and the impact of the FM acquisition.
FDIC insurance expense decreased $125,000, or 10%, and $353,000, or 10%, for the three and nine month periods ended September 30, 2026, as compared to the same periods 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, decreased $230,000, or 21%, and increased $186,000, or 7%, for the three and nine month periods ended September 30, 2026 compared to the same periods 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.
Merger expenses represent non-recurring expenses associated with completion of acquisitions and consist primarily of investment banker fees, legal fees, various compensation-related expenses, early termination fees relation to various contracts and system-conversion expenses. Such expenses totaled $678,000 and $3.0 million for the three and nine month periods ended September 30, 2026 and are attributed entirely the FM acquisition.
Intangible amortization expense consists of amortization associated with the CDI of acquired deposit portfolios, as well as intangibles related to customer lists of WM&T business lines added through a past acquisition. The intangibles are amortized on an accelerated basis over a period of approximately ten years. Intangible amortization expense increased $1.0 million, or 110%, and $1.5 million, or 55%, for the three and nine month periods ended September 30, 2026 compared to the same periods of 2025, which is attributed entirely to the CDI and CLI assets added through the FM acquisition.
Other non-interest expenses increased $1.5 million, or 65%, and $2.0 million, or 28%, for the three and nine month periods ended September 30, 2026 as compared to the same periods of 2025, driven primarily by a singular, non-recurring credit card fraud loss that totaled $850,000 in addition to higher card reward expense and the impact of the FM acquisition.
A comparison of income tax expense and ETR follows:
| Three months ended September 30, | Nine months ended September 30, | |||||||||||||||||||||||||||||||||||||||||||||||||
| (dollars in thousands) | 2026 | 2025 | $/bp Variance | % Variance | 2026 | 2025 | $ Variance | % Variance | ||||||||||||||||||||||||||||||||||||||||||
| Income before income tax expense | $ | 55,173 | $ | 45,707 | $ | 9,466 | 21 | % | $ | 152,090 | $ | 130,274 | $ | 21,816 | 17 | % | ||||||||||||||||||||||||||||||||||
| Income tax expense | 11,665 | 9,466 | 2,199 | 23 | 31,930 | 26,738 | 5,192 | 19 | ||||||||||||||||||||||||||||||||||||||||||
| Effective tax rate | 21.14 | % | 20.71 | % | 43 bps | 2 | 20.99 | % | 20.52 | % | 47 bps | 2 | ||||||||||||||||||||||||||||||||||||||
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 3.14% for the nine month period ended September 30, 2026, compared to an increase of 2.93% 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 0.12% for the nine month period ended September 30, 2026 compared to a decrease of 0.32% 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 0.43% and 0.59% for the nine month periods ended September 30, 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 nine month periods ended September 30, 2026 and 2025 served to reduce the ETR 2.79% and 2.54%, respectively.
•Tax-exempt interest income earned on loans and investment securities reduced the ETR by 0.26% and 0.32% for the nine month periods ended September 30, 2026 and 2025, respectively.
•Non-deductible merger expenses recorded during the nine months ended September 30, 2026 served to increase the ETR by 0.10%. No such expense was recorded for the prior year period.
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Financial Condition - September 30, 2026 Compared to December 31, 2025
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Overview
Total assets increased $724 million, or 8%, to $10.26 billion at September 30, 2026 from $9.54 billion at December 31, 2025. Total assets, including purchase accounting adjustments, of $838 million were added on May 1, 2026 as a result of the FM acquisition, including net loans of $624 million. Goodwill of $46 million was recorded in relation to this acquisition. Excluding the impact of the acquisition, total assets decreased $114 million, or 1%, during the first nine months of 2026. The decrease was attributed to a $213 million, or 24%, decrease in cash and cash equivalents and a $122 million, or 13%, decline in investment securities, as liquidity was used to fund $320 million, or 5%, of net loan growth and $166 million, or 2%, of deposit contraction.
As a result of the Durbin Amendment, Bancorp will be subject to regulatory limitations on interchange transaction fees for debit card transactions after total consolidated assets exceed $10 billion as of any given December 31. Such limitations begin on July 1 of the calendar year immediately following the year an institution crosses this threshold. Bancorp expects to officially cross the $10 billion threshold for regulatory purposes on December 31, 2027.
While total assets technically exceed $10 billion as of September 30, 2026, Bancorp intends to implement balance sheet management strategies to be below this threshold at December 31, 2026, which is the official measurement date associated with the $10 billion regulatory threshold. Such strategies include use of the ICS network's one-way sell service, which will enable Bancorp to move large deposit balances off balance sheet temporarily by sending an equivalent amount of cash to ICS's network of participating banks. In this scenario, Bancorp does not receive any deposits, effectively helping 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.
Total liabilities increased $532 million, or 6%, to $9.00 billion at September 30, 2026 from $8.46 billion at December 31, 2025. Total liabilities of $771 million were assumed on May 1, 2026 as a result of the FM acquisition, including total deposits of $765 million. Excluding the impact of the acquisition, total liabilities decreased $239 million, or 3%, during the first nine months of 2026, driven by combined contraction of $195 million, or 2%, for total deposits and SSURA in addition to a $50 million, or 17%, decrease in FHLB advances.
Stockholders' equity increased $192 million, or 18%, to $1.27 billion at September 30, 2026 from $1.08 billion at December 31, 2025. Stock issued in relation to the FM acquisition, which totaled $112 million, and net income of $120.2 million were only partially offset by $29.6 million of cash dividends declared and a $13.5 million decline in AOCI during the first nine months of 2026.
Cash and Cash Equivalents
Cash and cash equivalents decreased $213 million, or 24%, ending at $673 million at September 30, 2026 compared to $886 million at December 31, 2025, driven by a combination of solid organic loan growth and deposit contraction within both the legacy and acquired deposit portfolios. Cash and cash equivalents totaling $92 million were added through the FM acquisition as of the acquisition date.
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 $122 million, or 13%, to $799 million at September 30, 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 nine months of 2026 was used primarily to fund organic loan growth.
AFS debt securities totaling $56 million (stated at market value) were acquired as a result of the FM acquisition. Shortly after acquisition, 86 securities with a total fair value of $55 million from the acquired AFS debt securities portfolio were sold, resulting in a loss on sale of $701,000, which was recognized as part of the initial purchase accounting for the acquisition.
Additionally, an ACL for AFS investment securities was established as of September 30, 2026 to record the impairment of a corporate security owned as a result of the 2021 KB acquisition. Monthly payments had been received for the security since acquisition, but ceased in August due to a long-term tenant not renewing their lease, ultimately creating an event of default. Provision expense of $250,000, or approximately half of the bond's book value, was recorded to establish the ACL. A committee of bondholders has been established to find resolution, which is likely to be a lengthy process. We will continue to monitor the situation as it develops.
FHLB Stock
FHLB stock holdings increased from $21 million at December 31, 2025 to $24 million at September 30, 2026, the increase stemming entirely from stock added through the FM acquisition. FHLB members are required to hold certain levels of FHLB stock in relation to the amount of their borrowings, which declined during the first nine months of 2026. Bancorp's FHLB stock holdings are expected to fluctuate consistent with borrowing activity from period to period.
Loans
Total loans increased $946 million, or 13%, from December 31, 2025 to September 30, 2026. Net loans added through the FM acquisition, including purchase accounting-related adjustments, totaled $624 million, as of the acquisition date. Excluding the acquired loan portfolio, total loans increased $322 million, or 5%, during the first nine months of 2026, led most notably by increases in the CRE and C&I segments.
Total line of credit utilization has experienced gradual improvement over the past several quarters, ending at 48.3% as of September 30, 2026 compared to 48.0% at December 31, 2025 and 46.8% at September 30, 2025. However, utilization within the C&I portfolio was declined as of September 30, 2026, ending at 35.5% compared to 37.0% at December 31, 2025 and 36.8% at September 30, 2025, driven in part by payoff activity within the 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 state of Kentucky, as well as the Indianapolis, Indiana and Cincinnati, Ohio MSAs.
The following table presents the maturity distribution (based on contractual maturity) and rate sensitivity of the total loan portfolio as of September 30, 2026:
| Maturity | ||||||||||||||||||||||||||||||||||||||
|
September 30, 2026 (in thousands)
|
Within one year |
After one but within five years |
After five but within fifteen years |
After fifteen years |
Total | % of Total | ||||||||||||||||||||||||||||||||
| Fixed rate | $ | 422,858 | $ | 2,483,473 | $ | 977,671 | $ | 1,191,910 | $ | 5,075,912 | 64 | % | ||||||||||||||||||||||||||
| Variable rate | 967,619 | 1,223,035 | 635,483 | 85,615 | 2,911,752 | 36 | % | |||||||||||||||||||||||||||||||
| Total loans | $ | 1,390,477 | $ | 3,706,508 | $ | 1,613,154 | $ | 1,277,525 | $ | 7,987,664 | 100 | % | ||||||||||||||||||||||||||
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) | September 30, 2026 | December 31, 2025 | ||||||||||||
| Non-accrual loans | $ | 20,014 | $ | 12,585 | ||||||||||
| Modifications to borrowers experiencing financial difficulty | - | - | ||||||||||||
| Loans past due 90 days or more and still accruing | 1,877 | 449 | ||||||||||||
| Total non-performing loans | 21,891 | 13,034 | ||||||||||||
| Other real estate owned | 406 | 190 | ||||||||||||
| Total non-performing assets | $ | 22,297 | $ | 13,224 | ||||||||||
| Non-performing loans to total loans | 0.27 | % | 0.19 | % | ||||||||||
| Non-performing assets to total assets | 0.22 | % | 0.14 | % | ||||||||||
| ACL for loans to total non-performing loans | 493 | % | 705 | % | ||||||||||
As of September 30, 2026, non-accrual loans totaled $20 million compared to $13 million at December 31, 2025. The increase in total non-accrual loans between December 31, 2025 and September 30, 2026 was attributed to both an increase in non-accruals within Bancorp's legacy portfolio and the addition of the FM portfolio. A small number of larger, unrelated CRE and C&I relationships within the legacy portfolio were moved to non-accrual status during the period. FM's non-accrual loans were similarly concentrated in CRE and C&I.
Loans past due 90 days or more and still accruing totaled $1.9 million as of September 30, 2026 compared to $449,000 as of December 31, 2025. The increase stems primarily from a CRE relationship within the legacy portfolio that was 90 days past due as of period end.
Non-performing assets as of September 30, 2026 consisted of approximately 140 loans, ranging in individual amounts up to $1.2 million, and three residential real estate properties held as OREO.
Delinquent Loans
Delinquent loans (consisting of all loans 30 days or more past due) totaled $51 million and $26 million at September 30, 2026 and December 31, 2025. Delinquent loans to total loans were 0.64% and 0.38% at September 30, 2026 and December 31, 2025, respectively. The increase for the period is attributed to both a few larger relationships within Bancorp's legacy portfolio going past due as of period end and the loan portfolio added as a result of the FM acquisition, the latter of which was responsible for delinquent loans totaling $11 million. Bancorp anticipates that delinquent loans attributed to the acquired portfolio will decline in future periods as processes surrounding credit quality become aligned with the Company's established standards.
Classified Loans
Classified loans, which consist of loans defined as OAEM, substandard, substandard non-performing (including non-accrual loans discussed above) and doubtful, totaled $171 million and $151 million at September 30, 2026 and December 31, 2025, respectively. The increase experienced during the first nine months of 2026 is attributed mainly to the loan portfolio acquired from FM. Similar to the increase experienced for delinquent loans, Bancorp anticipates that classified loans attributed to the acquired portfolio will decline in future periods as processes surrounding quality become aligned with the Company's established standards.
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 $108 million as of September 30, 2026 compared to $92 million as of December 31, 2025. The ACL was increased by $18 million as a result of the loan portfolio added through the FM acquisition, which was recorded as an adjustment to goodwill at acquisition date. Additionally, provision expense for credit losses on loans of $2.3 million was recorded for the nine months ended September 30, 2026, consistent with solid loan growth and only partially offset by strong credit quality metrics, improvement in the FRB's national unemployment forecast, annual CECL model updates and decreased specific reserves. Further, net charge offs of $3.9 million were recorded for the nine months ended September 30, 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:
| September 30, 2026 | December 31, 2025 | |||||||||||||||||||||||||||||||||||||
| (dollars in thousands) |
Allocated Allowance |
% of Total ACL on loans |
ACL for loans to Total Loans |
Allocated Allowance |
% of Total ACL on loans |
ACL for loans to Total Loans |
||||||||||||||||||||||||||||||||
| Commercial real estate - non-owner occupied | $ | 17,790 | 17 | % | 0.82 | % | $ | 13,779 | 15 | % | 0.72 | % | ||||||||||||||||||||||||||
| Commercial real estate - owner occupied | 16,617 | 15 | % | 1.29 | % | 13,100 | 14 | % | 1.17 | % | ||||||||||||||||||||||||||||
| Total commercial real estate | 34,407 | 32 | % | 1.00 | % | 26,879 | 29 | % | 0.89 | % | ||||||||||||||||||||||||||||
| Commercial and industrial - term | 25,126 | 23 | % | 2.19 | % | 21,121 | 23 | % | 2.35 | % | ||||||||||||||||||||||||||||
| Commercial and industrial - lines of credit | 7,090 | 7 | % | 1.13 | % | 7,323 | 8 | % | 1.20 | % | ||||||||||||||||||||||||||||
| Total commercial and industrial | 32,216 | 30 | % | 1.82 | % | 28,444 | 31 | % | 1.88 | % | ||||||||||||||||||||||||||||
| Residential real estate - owner occupied | 16,826 | 16 | % | 1.68 | % | 14,914 | 16 | % | 1.69 | % | ||||||||||||||||||||||||||||
| Residential real estate - non-owner occupied | 4,937 | 5 | % | 1.03 | % | 4,287 | 5 | % | 1.10 | % | ||||||||||||||||||||||||||||
| Total residential real estate | 21,763 | 21 | % | 1.47 | % | 19,201 | 21 | % | 1.51 | % | ||||||||||||||||||||||||||||
| Construction and land development | 14,541 | 13 | % | 1.89 | % | 12,316 | 14 | % | 1.64 | % | ||||||||||||||||||||||||||||
| Home equity lines of credit | 1,973 | 2 | % | 0.55 | % | 1,439 | 2 | % | 0.50 | % | ||||||||||||||||||||||||||||
| Consumer | 2,424 | 2 | % | 2.13 | % | 2,924 | 3 | % | 2.05 | % | ||||||||||||||||||||||||||||
| Leases | 250 | 0 | % | 2.22 | % | 524 | 0 | % | 2.35 | % | ||||||||||||||||||||||||||||
| Credit cards | 281 | 0 | % | 1.04 | % | 140 | 0 | % | 1.05 | % | ||||||||||||||||||||||||||||
| Total | $ | 107,855 | 100 | % | 1.35 | % | $ | 91,867 | 100 | % | 1.30 | % | ||||||||||||||||||||||||||
The table below details net charge-offs to average loans outstanding by category of loan for the three and nine month periods ended September 30, 2026 and 2025, respectively.
| 2026 | 2025 | |||||||||||||||||||||||||||||||||||||
|
Three months ended September 30,
(dollars in thousands)
|
Net (charge offs)/ recoveries |
Average Loans |
Net (charge offs)/ recoveries to average loans |
Net (charge offs)/ recoveries |
Average Loans |
Net (charge offs)/ recoveries to average loans |
||||||||||||||||||||||||||||||||
| Commercial real estate - non-owner occupied | $ | (785) | $ | 2,157,096 | (0.04 | %) | $ | - | $ | 1,964,277 | 0.00 | % | ||||||||||||||||||||||||||
| Commercial real estate - owner occupied | (227) | 1,288,499 | (0.02 | %) | 17 | 1,048,426 | 0.00 | % | ||||||||||||||||||||||||||||||
| Total commercial real estate | (1,012) | 3,445,595 | (0.03 | %) | 17 | 3,012,703 | 0.00 | % | ||||||||||||||||||||||||||||||
| Commercial and industrial - term | (2,041) | 1,105,274 | (0.18 | %) | 107 | 859,260 | 0.01 | % | ||||||||||||||||||||||||||||||
| Commercial and industrial - lines of credit | (150) | 633,644 | (0.02 | %) | - | 627,858 | 0.00 | % | ||||||||||||||||||||||||||||||
| Total commercial and industrial | (2,191) | 1,738,918 | (0.13 | %) | 107 | 1,487,118 | 0.01 | % | ||||||||||||||||||||||||||||||
| Residential real estate - owner occupied | (165) | 995,674 | (0.02 | %) | (81) | 860,371 | (0.01 | %) | ||||||||||||||||||||||||||||||
| Residential real estate - non-owner occupied | (288) | 476,793 | (0.06 | %) | 2 | 391,677 | 0.00 | % | ||||||||||||||||||||||||||||||
| Total residential real estate | (453) | 1,472,467 | (0.03 | %) | (79) | 1,252,048 | (0.01 | %) | ||||||||||||||||||||||||||||||
| Construction and land development | - | 769,722 | 0.00 | % | - | 671,439 | 0.00 | % | ||||||||||||||||||||||||||||||
| Home equity lines of credit | - | 351,274 | 0.00 | % | - | 266,789 | 0.00 | % | ||||||||||||||||||||||||||||||
| Consumer | (148) | 114,053 | (0.13 | %) | (145) | 141,097 | (0.10 | %) | ||||||||||||||||||||||||||||||
| Leases | - | 11,951 | 0.00 | % | - | 16,501 | 0.00 | % | ||||||||||||||||||||||||||||||
| Credit cards | (148) | 25,269 | (0.59 | %) | (12) | 25,864 | (0.05 | %) | ||||||||||||||||||||||||||||||
| Total | $ | (3,952) | $ | 7,929,249 | (0.05 | %) | $ | (112) | $ | 6,873,559 | 0.00 | % | ||||||||||||||||||||||||||
| 2026 | 2025 | |||||||||||||||||||||||||||||||||||||
|
Nine months ended September 30,
(dollars in thousands)
|
Net (charge offs)/ recoveries |
Average Loans |
Net (charge offs)/ recoveries to average loans |
Net (charge offs)/ recoveries |
Average Loans |
Net (charge offs)/ recoveries to average loans |
||||||||||||||||||||||||||||||||
| Commercial real estate - non-owner occupied | $ | (785) | $ | 2,061,744 | (0.04 | %) | $ | 26 | $ | 1,912,089 | 0.00 | % | ||||||||||||||||||||||||||
| Commercial real estate - owner occupied | (227) | 1,226,744 | (0.02 | %) | (21) | 1,027,927 | 0.00 | % | ||||||||||||||||||||||||||||||
| Total commercial real estate | (1,012) | 3,288,488 | (0.03 | %) | 5 | 2,940,016 | 0.00 | % | ||||||||||||||||||||||||||||||
| Commercial and industrial - term | (1,721) | 1,025,439 | (0.17 | %) | 1,207 | 877,183 | 0.14 | % | ||||||||||||||||||||||||||||||
| Commercial and industrial - lines of credit | (150) | 630,169 | (0.02 | %) | - | 594,547 | - | % | ||||||||||||||||||||||||||||||
| Total commercial and industrial | (1,871) | 1,655,608 | (0.11 | %) | 1,207 | 1,471,730 | 0.08 | % | ||||||||||||||||||||||||||||||
| Residential real estate - owner occupied | (307) | 946,563 | (0.03 | %) | (74) | 836,390 | (0.01 | %) | ||||||||||||||||||||||||||||||
| Residential real estate - non-owner occupied | (288) | 435,921 | (0.07 | %) | (1) | 387,559 | 0.00 | % | ||||||||||||||||||||||||||||||
| Total residential real estate | (595) | 1,382,484 | (0.04 | %) | (75) | 1,223,949 | (0.01 | %) | ||||||||||||||||||||||||||||||
| Construction and land development | - | 763,284 | 0.00 | % | - | 662,466 | 0.00 | % | ||||||||||||||||||||||||||||||
| Home equity lines of credit | - | 321,679 | 0.00 | % | (10) | 258,742 | 0.00 | % | ||||||||||||||||||||||||||||||
| Consumer | (168) | 129,178 | (0.13 | %) | (495) | 141,957 | (0.35 | %) | ||||||||||||||||||||||||||||||
| Leases | - | 14,166 | 0.00 | % | - | 15,772 | 0.00 | % | ||||||||||||||||||||||||||||||
| Credit cards | (231) | 25,338 | (0.91 | %) | (115) | 25,686 | (0.45 | %) | ||||||||||||||||||||||||||||||
| Total | $ | (3,877) | $ | 7,580,225 | (0.05 | %) | $ | 517 | $ | 6,740,318 | 0.01 | % | ||||||||||||||||||||||||||
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, increased $375,000 between December 31, 2025 and September 30, 2026. While no provision expense was recorded for off balance sheet credit exposures for the three and nine months ended September 30, 2026, the liability was increased as a result of the line of credit portfolio added through the FM acquisition, with the corresponding offset recorded to goodwill (as opposed to provision expense). The lack of expense for the first nine months of 2026 was consistent with changes in expected utilization within the C&D portfolio. The ACL for off balance sheet exposures totaled $8.3 million as of September 30, 2026.
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 $12.7 million, or 11%, between December 31, 2025 and September 30, 2026, driven by both the impact of the FM acquisition, which added six locations, and organic branch network expansion. Bancorp's branch network currently consists of 82 locations throughout the state of 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 September 30, 2026 and December 31, 2025, respectively. The decrease during the first nine months of 2026 was attributed to the sale of a former branch location during the first quarter of 2026. Premises held for sale consisted of three vacant parcels of land as of September 30, 2026.
BOLI
BOLI assets increased to $107 million at September 30, 2026 compared to $92 million at December 31, 2025, consistent with the impact of the FM acquisition and general appreciation of the cash surrender values within the policy plans experienced during the nine month period ended September 30, 2026. BOLI assets totaling $13 million were added as a result of the FM acquisition.
Goodwill
Goodwill increased to $240 million at September 30, 2026 from $194 million at December 31, 2025, as $46 million of goodwill was recorded in relation to the FM acquisition. Management has up to 12 months following the date of acquisition to finalize the fair values of the acquired assets and assumed liabilities. Any changes to the related fair values during this measurement period could result in a change to the total goodwill recorded as a result of this acquisition.
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, 2026, 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 September 30, 2026 and December 31, 2025, Bancorp's CDI assets totaled $22 million and $7 million, respectively, and are attributed entirely to the Commercial segment. The increase between these periods is attributed to the CDI added as a result of the FM acquisition.
As of September 30, 2026 and December 31, 2025, Bancorp's CLI assets were $9 million and $5 million, and attributed entirely to the WM&T segment. The increase between these periods is the result of the CLI added through the FM acquisition.
Other Assets and Other Liabilities
Other assets increased $28 million, or 9%, to $333 million between December 31, 2025 and September 30, 2026. Other liabilities increased $11 million, or 5%, to $232 million over the same period. The increase in other assets was driven largely by the impact rising rates had on interest rate swap assets and deferred tax assets, the latter of which related to changing fair values within the investment securities portfolio. The increase in other liabilities resulted from a combination of changing interest rate swap liability values (also due to rising interest rates) and an increase in other miscellaneous liabilities, which were only partially offset by a reduction in accrued tax credit investment contributions as required funding payments were made during the period.
Deposits
Total deposits increased $599 million, or 8%, from December 31, 2025 to September 30, 2026. Deposits assumed as a result of the FM acquisition totaled $765 million as of the acquisition date, including $134 million of non-interest bearing deposits.
Excluding the deposit portfolio added as a result of the acquisition, total deposits decreased $166 million, or 2%. Interest bearing deposits decreased $279 million, or 4%, driven in part by normal seasonal declines in public fund balances in addition to time deposit contraction. However, non-interest bearing deposits increased $109 million, or 8%, during the first nine months of 2026.
The cost of interest-bearing deposits experienced a favorable decline over the past 12 months, ending at 2.29% for the nine months ended September 30, 2026 compared to 2.56% for the nine months ended September 30, 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 nine months ended September 30, 2026 compared to the same period of
2025, declining 20 bps to 1.84%. However, despite the decreases noted above, Bancorp remains cautious regarding deposit costs and anticipates higher funding costs going forward due to pricing pressure/competition and potential changes in the overall deposit mix.
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 investment 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 $29 million, or 26%, between December 31, 2025 and September 30, 2026, driven by a combination of normal seasonal balance fluctuations a small number of clients within the product switching into other deposit offerings, primarily the previously mentioned ICS offering. No SSUAR were assumed as a result of the FM acquisition.
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 September 30, 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 $239,000, or 3%, between December 31, 2025 and September 30, 2026. At September 30, 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 September 30, 2026 and December 31, 2025, subordinated notes totaled $27 million, respectively.
FHLB Advances
FHLB advances outstanding totaled $250 million and $300 million at September 30, 2026 and December 31, 2025, both periods consisting entirely of a rolling three-month 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. During the period, this advance was reduced by $50 million in tandem with the maturity of a related cash flow hedge interest rate swap. For more information related to the interest rate swaps noted above, see the footnote titled, "Derivative Financial Instruments." No FHLB advances, or borrowings of any kind, were assumed as a result of the FM acquisition.
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 $595 million and $816 million at September 30, 2026 and December 31, 2025, respectively. Despite the impact of the FM acquisition, a decrease was experienced for the first nine months of 2026, which was attributed to loan growth and 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 $619 million and $722 million at September 30, 2026 and December 31, 2025, respectively. The decrease in AFS debt security portfolio for the first nine 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 $147 million (based on assumed prepayment speeds and contractual maturities as of September 30, 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 September 30, 2026, the total carrying value of investment securities pledged for these purposes comprised 68% of the debt securities portfolio, leaving approximately $258 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 September 30, 2026, such deposits totaled $7.14 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 September 30, 2026 and December 31, 2025, Bancorp held no brokered deposits.
Included in total deposit balances at September 30, 2026 are $695 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 nine months of 2026 was attributed to normal seasonal declines in public fund deposits, including those assumed through the FM acquisition.
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 September 30, 2026 and December 31, 2025, available credit from the FHLB totaled $1.60 billion and $1.47 billion, respectively. Bancorp also had unsecured FFP lines with correspondent banks totaling $80 million at both September 30, 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 September 30, 2026, the Bank could pay an amount equal to $280 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 $268 million, or 12%, as of September 30, 2026 compared to December 31, 2025, driven by the loan portfolio added through the FM acquisition in addition to 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 loan and recorded in other liabilities on the consolidated balance sheets, increased $375,000 between December 31, 2025 and September 30, 2026. While no provision expense was recorded for off balance sheet credit exposures for the three and nine months ended September 30, 2026, the liability was increased as a result of the line of credit portfolio added through the FM acquisition, with the corresponding offset recorded to goodwill (as opposed to provision expense). The lack of expense for the first nine months of 2026 is consistent with decreased utilization (excluding acquisition-related activity) stemming primarily from payoff activity within the portfolio. The ACL for off balance sheet exposures totaled $8.3 million as of September 30, 2026.
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 September 30, 2026, stockholders' equity totaled $1.27 billion, representing an increase of $191.6 million, or 18%, compared to December 31, 2025, as stock issued in relation to the FM acquisition, which totaled $112 million, and net income of $120.2 million was only partially offset by $29.6 million of dividends declared during the first nine months of 2026 and a $13.5 million decline in AOCI during the first nine months of 2026 stemming from the impact of rising interest rates on the AFS investment securities portfolio. 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, increased between December 31, 2025 and September 30, 2026, which stemmed largely from recording net income of $120.2 million. TCE was 9.98% at September 30, 2026 compared to 9.32% at December 31, 2025, while tangible book value per share was $32.08 at September 30, 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 3%, of Bancorp's total common shares outstanding. This share repurchase program replaces the program that expired in May of 2025 and will expire in 2027 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 September 30, 2026 increased compared December 31, 2025, as a result of strong operating results, which helped offset the substantial average asset and risk-weighted asset growth associated with the FM acquisition. 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 September 30, 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 September 30, 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) | September 30, 2026 | December 31, 2025 | ||||||||||||
| Total stockholders' equity - GAAP (a) | $ | 1,267,270 | $ | 1,075,697 | ||||||||||
| Less: Goodwill | (239,862) | (194,074) | ||||||||||||
| Less: Core deposit and other intangibles | (30,770) | (12,160) | ||||||||||||
| Tangible common equity - Non-GAAP (c) | $ | 996,638 | $ | 869,463 | ||||||||||
| Total assets - GAAP (b) | $ | 10,260,130 | $ | 9,536,124 | ||||||||||
| Less: Goodwill | (239,862) | (194,074) | ||||||||||||
| Less: Core deposit and other intangibles | (30,770) | (12,160) | ||||||||||||
| Tangible assets - Non-GAAP (d) | $ | 9,989,498 | $ | 9,329,890 | ||||||||||
| Total stockholders' equity to total assets - GAAP (a/b) | 12.35 | % | 11.28 | % | ||||||||||
| Tangible common equity to tangible assets - Non-GAAP (c/d) | 9.98 | % | 9.32 | % | ||||||||||
| Total shares outstanding (e) | 31,066 | 29,476 | ||||||||||||
| Book value per share - GAAP (a/e) | $ | 40.79 | $ | 36.49 | ||||||||||
| Tangible common equity per share - Non-GAAP (c/e) | 32.08 | 29.50 | ||||||||||||
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.
| Three months ended September 30, | Nine months ended September 30, | |||||||||||||||||||||||||
| (dollars in thousands) | 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||||
| Total non-interest expenses (a) | $ | 64,114 | $ | 53,831 | $ | 183,162 | $ | 157,558 | ||||||||||||||||||
| Less: Non-recurring merger expenses | (678) | - | (2,961) | - | ||||||||||||||||||||||
| Total non-interest expenses - Non-GAAP (c) | $ | 63,436 | $ | 53,831 | $ | 180,201 | $ | 157,558 | ||||||||||||||||||
| Total net interest income, FTE | $ | 92,689 | $ | 77,119 | $ | 259,129 | $ | 221,315 | ||||||||||||||||||
| Total non-interest income | 27,633 | 24,476 | 78,974 | 71,820 | ||||||||||||||||||||||
| Total revenue - Non-GAAP (b) | $ | 120,322 | $ | 101,595 | $ | 338,103 | $ | 293,135 | ||||||||||||||||||
| Less: Gain/loss on sale of premises and equipment | - | - | (445) | (74) | ||||||||||||||||||||||
| Total adjusted revenue - Non-GAAP (d) | $ | 120,322 | $ | 101,595 | $ | 337,658 | $ | 293,061 | ||||||||||||||||||
| Efficiency ratio - Non-GAAP (a/b) | 53.29 | % | 52.99 | % | 54.17 | % | 53.75 | % | ||||||||||||||||||
| Adjusted efficiency ratio - Non-GAAP (c/d) | 52.72 | % | 52.99 | % | 53.37 | % | 53.76 | % | ||||||||||||||||||
Stock Yards Bancorp Inc. published this content on November 05, 2026, and is solely responsible for the information contained herein. Distributed via EDGAR on November 05, 2026 at 19:13 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]