UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant ☒
Filed by a Party other than the Registrant ☐
Check the appropriate box: |
☐ | Preliminary Proxy Statement | |
☐ | Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) | |
☒ | Definitive Proxy Statement | |
☐ | Definitive Additional Materials | |
☐ | Soliciting Material Pursuant to §240.14a-12 | |
Stock Yards Bancorp, Inc.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box)
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
☒ | No fee required. | |
☐ | Fee | |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
☐ |
| |
|
| |
|
| |
|
| |
|
| |
NOTICE OF THE2021
2023 ANNUAL MEETING OF SHAREHOLDERS
March 12, 202117, 2023
To our Shareholders:
The Annual Meeting of Shareholders of Stock Yards Bancorp, Inc., a Kentucky corporation, will be held on Thursday, April 22, 202127, 2023, at 10:00 a.m., Eastern Time, solely by remote communication in a virtual-only format. The meeting will be accessible on the Internet at www.virtualshareholdermeeting.com/SYBT2021SYBT2023. The items of business to be presented at the Annual Meeting include the following proposals:
(1) | To elect directors to serve until the next annual meeting of shareholders and until their respective successors are duly elected and qualified; |
(2) | To ratify the selection of |
(3) | To approve a non-binding resolution to approve the compensation of Stock Yards Bancorp’s named executive officers; |
(4) | To hold an advisory vote on the frequency of future shareholder votes on executive compensation; and |
(5) | To transact such other business as may properly come before the meeting. |
The record date for the determination of the shareholders entitled to vote at the meeting or at any adjournment thereof is the close of business on February 26, 2021.March 3, 2023.
A list of shareholders of record as of the record date and entitled to vote at the Annual Meeting will be made available for inspection by shareholders for any legally valid purpose related to the Annual Meeting (i) at the principal executive offices of Stock Yards Bancorp, beginning five business days prior to the meeting date and (ii) on the virtual shareholder meeting web site on the date of the meeting.
Your vote is important.important. Whether or not you plan to virtually attend the Annual Meeting of Shareholders, we hope you will vote as soon as possible. You may vote your shares via a toll free number, over the Internet,electronically using your computer, telephone or mobile device, or by completing, signing, dating and returning the enclosed proxy card in the mailing envelope provided. Instructions regarding each of the threethese methods of voting are contained in the accompanying Proxy Statement. I encourage you to take advantage of eitherone of the telephone or Internetelectronic voting options. Both offerEach offers a quick and convenient way to cast votes electronically and assureassures that your shares are represented at the meeting.
Thank you for your support of Stock Yards Bancorp. If your schedule permits, I hope you will join us throughvia the live webcast.
By Order of the Board of Directors | ||
/s/ James A. Hillebrand | ||
James A. Hillebrand | ||
Chairman and Chief Executive Officer |
Stock Yards Bancorp, Inc.
PROXY STATEMENT
FOR THE 20212023 ANNUAL MEETING OF SHAREHOLDERSAPRIL 22, 2021
PROXY HIGHLIGHTS
This summary highlights information contained elsewhere in this Proxy Statement about the Annual Meeting and is not complete. We encourage you to read the entire Proxy Statement before voting your shares at the meeting. For complete information about our performance and financial results for 2022, please review our Annual Report on Form 10-K which accompanies this Proxy Statement.
Annual Meeting Information
Date and Time: | Virtual Location: | Record Date: |
Thursday, April 27, 2023 10:00 a.m., Eastern Time | www.virtualshareholdermeeting.com/SYBT2023 | March 3, 2023 |
Voting Matters and Board Recommendations
Proposal | Board Recommendation | Page Reference | |
1: | Election of directors | ✔ FOR all nominees | 14 |
2: | Ratification of our independent auditor for 2023 | ✔ FOR | 25 |
3: | Advisory vote on executive compensation (“say-on-pay” vote) | ✔ FOR | 26 |
4: | Advisory vote on the frequency of future say-on-pay votes | ✔ 1 YEAR | 26 |
How to Vote Your Shares
You may vote your shares using one of the following methods:
www.proxyvote.com | Call toll-free | Scan the QR Code on your proxy card (above QR code is not active) | Complete, sign, date and return the enclosed proxy card | Attend and vote online at: www.virtualshareholdermeeting.com/SYBT2023 |
YOUR VOTE IS IMPORTANT!
PLEASE CAST YOUR VOTE PROMPTLY
Attending the Virtual Annual Meeting
Our 2023 Annual Meeting will be held in a virtual-only format via a live webcast. You will be able to attend the meeting online, vote your shares electronically and submit questions either before or during the meeting by following the information and instructions provided in this Proxy Statement. To attend the Annual Meeting online, simply visit the virtual meeting website at www.virtualshareholdermeeting.com/SYBT2023. In order to be admitted to the meeting, you will need to enter the 16-digit control number located on your proxy card, voting instruction form or email notice included with your proxy materials. For more information about joining the online meeting, go to page 6.
Important Notice Regarding the Availability of Proxy Materials for the Shareholders Meeting to Be Held on April 27, 2023: The Notice and Proxy Statement and Annual Report are available at www.proxyvote.com and on the investor relations page of the Company’s website at https://stockyardsbancorp.q4ir.com. |
GENERAL INFORMATION ABOUT THE ANNUAL MEETING
About This Proxy Statement
This Proxy Statement is being furnished to the shareholders of Stock Yards Bancorp, Inc. in connection with the solicitation by its Board of Directors of proxies to be used at the 2023 Annual Meeting of Shareholders to be held by live webcast on Thursday, April 22, 2021, at 10:00 a.m., Eastern Time. The proxies may also be voted at any adjournments or postponements of the Annual Meeting.Shareholders. This Proxy Statement includes information regarding the matters to be acted upon at the 20212023 Annual Meeting and certain other information required by the Securities and Exchange Commission, or “SEC”, and the rules of the Nasdaq Stock Market.Market, or “Nasdaq”. This Proxy Statement is first being mailed to shareholders on or about March 12, 2021.17, 2023.
Throughout this Proxy Statement, unless the context otherwise requires, the terms “Stock“Stock Yards Bancorp”Bancorp”, “Bancorp”“Bancorp”, “the Company”“the Company”, “we”“we”, “us”“us” or “our”“our” all refer to Stock Yards Bancorp, Inc. and its direct and indirect wholly-owned subsidiaries, including Stock Yards Bank & Trust Company, which we refer to in this Proxy Statement as “the Bank”“the Bank”. Stock Yards Bancorp owns 100% of Stock Yards Bank & Trust Company. Because Stock Yards Bancorp has no significant operations of its own, its business and that of Stock Yards Bank & Trust Company are essentially the same.
|
Important Notice Regarding the Availability of Proxy Materials for the Shareholders Meeting to Be Held on April 22, 2021: The Notice and Proxy Statement and Annual Report are available at www.proxyvote.com and on the investor relations page of the Company’s web site at https://stockyardsbancorp.q4ir.com.
GENERAL INFORMATION ABOUT THE ANNUAL MEETING
Proxy Materials
Why have I received these materials?
We are mailing these proxy materials to you in connection with our 20212023 Annual Meeting of Shareholders, which will be held on Thursday, April 22, 2021,27, 2023, at 10:00 a.m., Eastern Time. As a shareholder, you are invited to participate in the meeting via live webcast and vote on the matters described in this Proxy Statement.
What is included in the proxy materials?
These proxy materials include:
● | The Notice of the |
● | This Proxy Statement for the Annual Meeting; and |
● | Our |
What is a proxy?
We are soliciting your proxy to vote the shares of the Company’s common stock that you own at the Annual Meeting. A proxy is your designation of another person to vote stock you own. That other person is called a proxy. If you designate someone as your proxy in a written document, that document is also called a proxy or a proxy card. When you designate a proxy, you may also direct the proxy how to vote your shares. James A. Hillebrand, the Company’s Chairman and Chief Executive Officer, and Philip S. Poindexter, the Company’s President, have been designated as the proxies to cast the votes of Bancorp’s shareholders at the Annual Meeting. The proxies will vote your shares according to the instructions you provide on the proxy card or by telephone, mobile device or over the Internet.
Voting Information
What am I voting on?
● | Electing |
● | Ratifying the selection of |
● | Approving a non-binding resolution to approve the compensation of the Company’s named executive | |
● | Determining shareholders’ preferred frequency for conducting future say-on-pay votes, which we refer to as the say-on-frequency proposal (Proposal 4). |
Where can I find more information about these voting matters?
● | Information about the nominees for election as directors is contained in |
● | Information about the ratification of the selection of |
● | Information about the | |
● | Information about the say-on-frequency proposal is contained in Proposal 4 on page 26. |
Who is entitled to vote at the Annual Meeting?
Holders of record of Common Stock (“Common Stock”) of Stock Yards Bancorp as of the close of business on February 26, 2021March 3, 2023 will be entitled to vote at the Annual Meeting. On February 26, 2021,March 3, 2023, there were 22,732,97629,287,064 shares of Common Stock outstanding and entitled to one vote on all matters presented for vote at the Annual Meeting.
How do I vote my shares without participating in the Annual Meeting?
If you are a “record” shareholder of Common Stock (that is, if you hold Common Stock in your own name in Stock Yards Bancorp’s stock records maintained by our transfer agent), you may vote your shares without participating in the Annual Meeting by using one of the following threefour options:
|
Use the Internet to transmit your voting instructions. Vote by 11:59 p.m., Eastern Time, on April 26, 2023 for shares held directly and by 11:59 p.m., Eastern Time, on April 24, 2023 for shares held in a Plan. Have your proxy card in hand when you access the web site and follow the respective instructions to create an electronic voting instruction form. |
Use the Internet to transmit your voting instructions. Vote by 11:59 p.m., Eastern Time, on April 21, 2021 for shares held directly and by 11:59 p.m., Eastern Time, on April 19, 2021 for shares held in a Plan. Have your proxy card in hand when you access the web site and follow the instructions to create an electronic voting instruction form.
|
Use any touch-tone telephone to transmit your voting instructions. Vote by 11:59 p.m., Eastern Time, on April 26, 2023 for shares held directly and by 11:59 p.m., Eastern Time, on April 24, 2023 for shares held in a Plan. Have your proxy card in hand when you call and then follow the respective instructions. |
Use any touch-tone telephone to transmit your voting instructions. Vote by 11:59 p.m., Eastern Time, on April 21, 2021 for shares held directly and by 11:59 p.m., Eastern Time, on April 19, 2021 for shares held in a Plan. Have your proxy card in hand when you call and then follow the instructions.
|
Scan the QR Code that appears on your proxy card or voting instruction card to vote using your mobile device (cell phone or tablet). |
Mark, sign and date your proxy card and either return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717.
Can I vote my shares during the meeting?
You may vote online during the meeting by logging into the virtual meeting web site with the 16-digit control number foundlocated on your proxy card, voting instruction form or email notice included with your proxy materials and following the on-screen instructions. You may also continue to vote your shares by mail, telephone, mobile device or internet prior to the virtual meeting by following the voting instructions included in your proxy materials. If you have already voted using one of these methods you do not need to vote again at the meeting unless you wish to change your vote or revoke a previous proxy.
If my shares are held by my broker, will my broker vote my shares for me?
If your shares are held in a stock brokerage account or by a bank or other holder of record (that is, in “street name”), you are considered the beneficial owner of those shares. This Notice of Annual Meeting and Proxy Statement and any accompanying documents have been forwarded to you by your broker, bank or other holder of record. As the beneficial owner, you have the right to direct your broker, bank or other holder of record how to vote your shares by using the voting instruction card provided by them or by following their instructions for voting by telephone, mobile device or over the Internet. Beneficial owners who wish to vote their shares electronically during the Annual Meeting may do so by following the instructions from their broker that accompany their proxy materials.
Who votes the shares held in my Stock Yards KSOP account?
If you are a participant in the Stock Yards Bank & Trust Company 401(k) and Employee Stock Ownership Plan (“KSOP”), you have the option of receiving your voting information either electronically or by regular postal mail. Plan participants who have elected to receive their voting information electronically should follow the instructions contained in the electronic communication. If you have not affirmatively elected to receive voting information for your KSOP shares electronically, you will receive a paper version of the proxy card via postal mail that will include the shares you own through your KSOP account. That proxy card will serve as a voting instruction card for the trustee of the plan. If you own shares through the plan and do not vote electronically or by mail, the plan trustee will be instructed by the plan’s administrative committee to vote the plan shares as the Board of Directors recommend.recommends.
What if I return my proxy card but do not provide voting instructions?
If you vote by proxy card, your shares will be voted as you instruct. If you return your proxy card but do not mark your voting instructions on your signed card, James A. Hillebrand, Chairman and Chief Executive Officer, and Philip S. Poindexter, President, as proxies named on the proxy card, will vote your shares FOR the election of the ten13 director nominees, FOR the ratification of BKD,FORVIS, LLP, and FOR the approval of the compensation ofsay-on-pay proposal and 1 YEAR on the named executive officers.say-on-frequency proposal.
Can I change my vote after I have voted?
Yes. You may change your vote at any time before the polls close at the Annual Meeting. You may do this by:
● | Signing another proxy card with a later date and returning it to us prior to the Annual Meeting; |
● | Voting again by telephone, mobile device or through the Internet prior to 11:59 p.m., Eastern Time, on April |
● | Giving written notice of revocation to our Corporate Secretary at 1040 East Main Street, Louisville, Kentucky 40206, prior to the Annual Meeting; or |
● | Voting again electronically during the Annual Meeting. |
Your participation in the Annual Meeting will not have the effect of revoking a proxy unless you notify our Corporate Secretary in writing before the polls close that you wish to revoke a previously submitted proxy.
What is a broker non-vote?
If you are a beneficial owner whose shares are held of record by a broker, you must instruct the broker how to vote your shares. If you do not provide voting instructions, your shares will not be voted on any proposal on which the broker does not have the discretionary authority to vote. This is called a “broker non-vote.” In these cases the broker can register your shares as being present at the Annual Meeting for purposes of determining the presence of a quorum but will not be able to vote on those matters for which specific authorization is required under the rules of the New York Stock Exchange (“NYSE”) that govern brokers.
If you are a beneficial owner whose shares are held of record by a broker, your broker has discretionary voting authority to vote your shares on the ratification of BKD,FORVIS, LLP (Item(Proposal 2) even if the broker does not receive voting instructions from you. However, your broker does not have discretionary authority to vote on the election of directors (Item(Proposal 1), the say-on-pay proposal (Proposal 3) or the approval of executive compensation (Item 3)say-on-frequency proposal (Proposal 4) without instructions from you, in which case a broker non-vote will occur and your shares will not be voted on these matters.
What constitutes a quorum for purposes of the Annual Meeting?
Holders of a majority of the outstanding shares of Common Stock entitled to vote at the Annual Meeting must be present at the Annual Meeting or represented by proxy for the transaction of business. This is called a quorum. Proxies marked as abstaining (including proxies containing broker non-votes) on any matter to be acted upon by shareholders will be treated as present at the meeting for purposes of determining a quorum but will not be counted as votes cast on such matters. If a quorum is not present, we may propose to adjourn the meeting to solicit additional proxies and reconvene the meeting at a later date.
What vote is required to approve each item?Proposal?
You may vote “FOR” each nominee for director or “AGAINST” each nominee, or “ABSTAIN” from voting on one or more nominees. Unless you mark “AGAINST” or “ABSTAIN” with respect to a particular nominee or nominees or for all nominees, your proxy will be voted “FOR” each of the director nominees named in this Proxy Statement. A nominee will be elected as a director if the number of “FOR” votes exceeds the number of “AGAINST” votes.
The selection offollowing chart describes the independent registered public accounting firm will be ratified if the votes cast for it exceed the votes cast against it.
The proposal to approve the compensation of our named executive officers disclosed in this Proxy Statement will pass if votes cast for it exceed votes cast against it. Because this vote is advisory, it will not be binding upon Bancorp or the Board of Directors.
Any other itemproposals to be voted uponconsidered at the Annual Meeting, the vote required to elect directors and to approve each of the other proposals and the manner in which votes will pass if votes cast for it exceed votes cast against it.be counted.
Proposals | Voting Options | Votes Required | Effect of Abstentions | Effect of Broker Non-Votes |
Proposal 1: Election of Directors | For, against or abstain for each nominee | Majority of votes cast | No effect | No effect |
Proposal 2: Ratification of our independent accountants for 2023 | For, against or abstain | Majority of votes cast | No effect | No effect |
Proposal 3: Approval of our executive compensation (say-on-pay) | For, against or abstain | Majority of votes cast | No effect | No effect |
Proposal 4: A proposal on the frequency of future say-on-pay votes | 1, 2 or 3 years or abstain | Majority of votes cast | No effect | No effect |
● | Proposal 1: Election of directors. Our Bylaws provide that a nominee for director in an uncontested election will be elected to our Board if the number of votes cast for the nominee’s election exceed the number of votes cast against his or her election. If a nominee does not receive the required votes for election at our Annual Meeting, our Board, with the assistance of our Nominating and Corporate Governance Committee, will consider whether to accept the director’s offer of resignation, which is required to be tendered under our Corporate Governance Guidelines. Our Board will publicly disclose its decision regarding the resignation and the basis for its decision within 90 days after election results are certified. | |
● | Other proposals. Approval of Proposals 2 and 3 requires that the votes cast in favor of each such proposal exceed the votes cast against the proposal. Because the say-on-pay vote (Proposal 3) is advisory, it will not be binding on the Company or our Board of Directors. For Proposal 4, there are four choices for shareholders: each year; every two years; every three years; and abstain. The choice that receives the majority of votes cast will be considered shareholders’ preferred frequency for future say-on-pay votes. If none of the choices receives a majority of the votes cast on the proposal, we will consider the choice receiving the highest number of votes as the preferred frequency. |
What happens if the Annual Meeting is adjourned or postponed?
Your proxy will still be effective and will be voted at the rescheduled meeting in the same manner as it would have been voted at the originally scheduled meeting. You will still be able to change or revoke your proxy until it is voted.
Who counts the votes?
Broadridge Financial Solutions will count votes cast by proxy at the Annual Meeting. They will also certify the results of the voting and will also determine whether a quorum is present at the meeting. Any votes cast electronically during the Annual Meeting will be included in the final voting tally.
How are abstentions and broker non-votes treated?
You may abstain from voting on one or more nominees for director. You may also abstain from voting on any or all other proposals. Abstentions will be treated as shares that are present and entitled to vote for purposes of determining the presence of a quorum, but will not be counted in the number of votes cast for or against any nominee or with respect to any other matter. If a broker does not receive voting instructions from the beneficial owner of shares on a particular matter and indicates on the proxy that it does not have discretionary authority to vote on that matter, we will treat these shares as present at the meeting for purposes of determining a quorum but the shares will not count as votes cast on the matter. Abstentions and broker non-votes will not affect the outcome of any matters to be voted on at the Annual Meeting.
How does the Board recommend that I vote my shares?
The Board recommends a vote FOR each of the nominees for director set forth in this Proxy Statement, FOR the ratification of the selection of the independent registered accounting firm, and FOR the approval of the compensation ofsay-on-pay proposal and 1 YEAR on the named executive officers.say-on-frequency proposal.
With respect to any other matter that properly comes before the Annual Meeting, the proxy holders will vote as recommended by the Board of Directors or, if no recommendation is given, in their own discretion in the best interests of Stock Yards Bancorp. At the date this Proxy Statement went to press, the Board of Directors had no knowledge of any business other than that described herein that would be presented for consideration at the Annual Meeting.
Is my vote confidential?
Proxy instructions, ballots and voting tabulations that identify individual shareholders are kept confidential from our management and Board of Directors to protect your voting privacy. We will not disclose the proxy voting instructions or ballots of individual shareholders unless disclosure is required by law and in certain other limited circumstances. If you write comments on your proxy card, the card may be forwarded to our management and Board of Directors to review your comments.
Who will bear the expense of soliciting proxies?
Stock Yards Bancorp will bear the cost of soliciting proxies in the form enclosed. In addition to the solicitation by mail, proxies may be solicited personally or by telephone, facsimile or electronic transmission by our employees. We reimburse brokers holding Common Stock in their names or in the names of their nominees for their expenses in sending proxy materials to the beneficial owners of such Common Stock. The Company has engaged the services of Laurel Hill Advisory Group, LLC.,LLC, a professional proxy solicitation firm, to aid in the solicitation of proxies from certain brokers, bank nominees and other institutional owners. The Company’s costscost for such services will not exceed $7,500be $8,500 plus reasonable out of pocket expenses.
How can I find the voting results of the Annual Meeting?
Preliminary results will be announced at the Annual Meeting. Final results will be published in a Current Report on Form 8-K that we will file with the SEC within four business days after the Annual Meeting.
Virtual Meeting Information
Why are you holding a virtual meeting instead of a physical meeting?
The Annual Meeting will be conducted in an online, virtual-only format. This format enables us to leverage technology to communicate more efficiently with our shareholders. We can provide a consistent experience for all our shareholders regardless of geographic location and allow all shareholders with internet access to attend and participate in the meeting without the cost of travel. We have designed the virtual meeting format to provide the same participation opportunities as were provided at our past in-person meetings, including the ability to vote your shares and ask questions during the meeting.
How do I participate in the meeting?
To participate in the virtual meeting, visit www.virtualshareholdermeeting.com/SYBT2021SYBT2023 and enter the 16-digit control number includedlocated on your proxy card, voting instruction form or email notice that accompanied your proxy materials. You may log into the meeting platform beginning at 9:45 a.m., Eastern Time, on April 22, 2021.27, 2023. The live audio webcast will begin promptly at 10:00 a.m., Eastern Time. We encourage shareholders to access the virtual meeting web site prior to the start of the meeting and to allow sufficient time to complete the online registration process.
What are the technical requirements for accessing the online meeting site?
The virtual meeting platform is fully supported across browsers (Internet Explorer,(Microsoft Edge, Firefox, Chrome and Safari) and devices (desktops, laptops, tablets and cell phones) running the most updated version of applicable software and plugins. Participants should ensure that they have a strong Internet connection wherever they intend to participate in the meeting. Participants should also give themselves ample time to log in and ensure that they can hear streaming audio prior to the start of the meeting.
Will I have an opportunity to submit a question?
Yes, shareholders will have the opportunity to submit questions if they choose. If you wish to submit a question, you may do so in two ways. If you want to ask a question before the meeting, you may log into www.proxyvote.com and enter your 16-digit control number. Next, click on "Question“Question for Management,"” type in your question and click "Submit."“Submit.” Alternatively, if you want to submit your question during the meeting, log into the virtual meeting platform at www.virtualshareholdermeeting.com/SYBT2021SYBT2023, click the Q&A button to open the question panel, type your question into the fieldbox titled “Submit“Ask a Question” on the meeting screen and click "Submit.“Submit.” Shareholders may choose from a list of optional question topics or enter their own live question in the box provided. Questions and answers will be grouped by topic and substantially similar questions will be grouped and answered together.
Questions pertinent to meeting matters will be answered during the meeting, subject to time constraints. Shareholders should refer to the Rules of Conduct and Procedures for the meeting that will be posted on the virtual meeting web site for guidelines regarding the submission of questions, including certain topics and subject matter that we will consider inappropriate for purposes of the meeting. Any questions pertinent to meeting matters that cannot be answered during the meeting due to time constraints will be posted online and answered at www.syb.com. The questions and answers will be available as soon as practical after the meeting and will remain available until one week after posting.
What if I have lost or misplaced my 16-digit control number?
If you no longer have your control number or were not a shareholder on February 26, 2021,March 3, 2023, you may still enter the meeting as a guest in listen-only mode. To access the meeting as a guest, visit www.virtualshareholdermeeting.com/SYBT2021SYBT2023 and enter the requested information on the welcome screen. However, if you attend the meeting as a guest, you will not have the ability to vote or submit questions.
What if I experience technical difficulties accessing the meeting?
If you encounter any technical difficulties with the virtual meeting platform, please use the telephone numbers listed on the meeting web site prior to the start of the meeting and technicians will be available to assist you.
What will happen if we experience technical problems during the meeting webcast?
In the event of technical difficulties or interruptions with the Annual Meeting, we expect that an announcement will be made on the meeting website, www.virtualshareholdermeeting.com/SYBT2021.SYBT2023. If necessary, the announcement will provide updated information regarding the date, time and location of the Annual Meeting. Any updated information regarding the Annual Meeting will also be posted to the investor relations page on our website, www.syb.com.
Shareholder Proposals and Director Nominations
Is there any information thatCan I should know about future annual meetings?submit a proposal (other than a director nomination) for consideration at the 2024 Annual Meeting?
Any shareholder who intends to present a proposal at the 20222024 Annual Meeting of Shareholders must deliver the proposal to the Corporate Secretary at 1040 East Main Street, Louisville, Kentucky 40206the address provided below no later than November 12, 202117, 2023 if the proposal is submitted for inclusion in our proxy materials for that meeting pursuant to Rule 14a-8 under the Securities Exchange Act of 1934. In addition, our Bylaws impose certain advance notice requirements onFor a shareholder nominatingproposal that is submitted for presentation directly at the 2024 Annual Meeting but not intended to be included in our proxy materials under Rule 14a-8, the shareholder must give timely notice to our Corporate Secretary and otherwise comply with the applicable requirements of our Bylaws. Our Bylaws require that notice of a director or submitting ashareholder proposal to an Annual Meeting. Such notice must be submitted to thereceived by our Corporate Secretary of Stock Yards Bancorp no later than January 21, 2022. The notice must26, 2024 and contain the information prescribed by the Bylaws, copies of which are available from the Corporate Secretary. These requirements apply even if
How may I nominate individuals to serve as directors at the 2024 Annual Meeting?
Our Bylaws permit shareholders to nominate directors for consideration at an annual meeting. A shareholder desiring to present a director nomination directly at an annual meeting must provide the information required by our Bylaws and give timely notice of the nomination to our Corporate Secretary in accordance with our Bylaws. To nominate a director for consideration at the 2024 Annual Meeting of Shareholders, the notice must be received by our Corporate Secretary at the address provided below no later than January 26, 2024, and contain the information required by our Bylaws.
Further, the deadline for providing notice to the Company under Rule 14a-19, the SEC’s universal proxy rule, of a shareholder’s intent to solicit proxies on the Company’s proxy card in support of director nominees submitted in accordance with the advance notice provisions of our Bylaws for the 2024 Annual Meeting of Shareholders is February 27, 2024. This deadline under Rule 14a-19 does not desiresupersede or replace any of the timing requirements for advance notice under our Bylaws. The supplemental notice and information required under Rule 14a-19 is in addition to have his or her nomination or proposal includedthe advance notice requirements of our Bylaws and does not extend the deadline specified in our Proxy Statement.the Bylaws.
CORPORATE GOVERNANCE AND RELATED MATTERSAll shareholder proposals, director nominations and requests for copies of our Bylaws should be addressed as follows:
Stock Yards Bancorp, Inc.
Executive Offices
1040 E. Main Street
Louisville, Kentucky 40206
Attn: Corporate Secretary
Corporate Governance Highlights
Our Board of Directors and management are committed to strong corporate governance practices, which we believe support our dedication to managing the Company’s business in a responsible and ethical manner and promote long-term shareholder value. Highlights of our governance structure and practices include the following:
Board Independence
● | Strong Lead Independent Director |
● | Substantial majority of independent directors |
● | All Board committees are comprised entirely of independent directors |
● | Executive sessions of non-management directors at Board and committee meetings |
Board Accountability
● | Annual elections for all directors |
● | Majority voting in uncontested director elections combined with a director resignation policy |
● | Mandatory director retirement policy |
● | Board focus on strategic planning and direction, including annual reviews of the Company’s strategic objectives and plans |
● | No poison pill |
Board Effectiveness
● | Annual Board and committee assessments, including one-on-one discussions between the Lead Independent Director and each other non-management director |
● | Strong corporate governance guidelines |
● | Comprehensive onboarding program for new directors |
● | Ongoing training and educational opportunities for directors |
Shareholder Alignment
● | Robust stock ownership requirements for directors and executive management |
● | Policies that prohibit our directors and executive officers from hedging or pledging Stock Yards stock |
Role of the Board and Governance Principlesof Directors
The Stock Yards Bancorp’s Board of Directors represents shareholders’ interests in perpetuating a successful business including optimizing shareholder returns. The Directors are responsible for determining that the Company is managed to ensure this result. This is an active responsibility, and the Board monitors the effectiveness of policies and decisions including the execution of the Company’s business strategies. Strong corporate governance guidelines form the foundation for Board practices. As a part of this foundation, the Board believes that high ethical standards in all Company matters are essential to earning the confidence of investors, customers, employees and vendors. Accordingly, Stock Yards Bancorp has established a framework that exercises appropriate measures of oversight at all levels of the Company and clearly communicates that the Board expects all actions be consistent with its fundamental principles of business ethics and other corporate governance guidelines. The Company’s governance guidelines and other related matters are published on the Company’s website: www.syb.com under the Investor Relations section.
Board Leadership Structure
The Board of Directors modified the Company’s leadership structure during 2018 in connection with the retirement of David P. Heintzman as Chief Executive Officer. Mr. Heintzman had previously held the positions of Chairman of the Board and Chief Executive Officer. He retired as Chief Executive Officer effective September 30, 2018, and James A. Hillebrand, previously President of the Company, was appointed to succeed Mr. Heintzman as Chief Executive Officer. Mr. Heintzman remained employed in the role of Executive Chairman until his retirement from the Company at the end of 2018. Thereafter, Mr. Heintzman continued to lead the Board as non-executive Chairman.
During 2020, the Nominating and Corporate Governance Committee, in consultation with Mr. Heintzman, reviewed the leadership structure of the Board and decided that the interests of the Company’s shareholders would be best served by again combining the roles of Chairman and Chief Executive Officer. Based upon the recommendation of the Nominating and Corporate Governance Committee, and noting the successful executive management transition process following Mr. Heintzman’s retirement and strong leadership skills demonstrated by Mr. Hillebrand following his promotion to Chief Executive Officer, the Board of Directors voted to appoint Mr. Hillebrand to the additional position of Chairman of the Board effective January 1, 2021.
Corporate Governance Guidelines
Our Board of Directors has adopted Corporate Governance Guidelines that provide the framework for how the Board conducts its business and fulfills its duties and responsibilities. The Corporate Governance Guidelines address board responsibilities, director independence, the role of the Lead Independent Director, director qualifications, stock ownership requirements and other Board structures and practices intended to enhance the Board’s effectiveness. Under the leadership and oversight of the Nominating and Corporate Governance Committee, the Corporate Governance Guidelines are reviewed annually in light of recent governance trends and developments, best practices and changes in applicable laws and regulations. The Corporate Governance Guidelines are available on the investor relations page of the Company’s website, www.syb.com.
The Board of Directors believes that the most effective leadership structure for the Company at the present time is to combine the roles of Chairman of the Board and Chief Executive Officer. Our current Chief Executive Officer, James A. Hillebrand, was appointed to the additional position of Chairman of the Board effective January 1, 2021. Mr. Hillebrand has a long history of service in various management capacities with the Bank, is very familiar with its business, its customers and the banking industry generally, and the community bank model in particular. The Board believes that he is highly qualified to lead discussions on important strategic and operational issues affecting the Bank and Bancorp. Combining the Chief Executive OfficeOfficer and Chairman positions creates a firm link between management and the Board and promotes development and implementation of corporate strategy. The Board also believes that the industry knowledge and experience provided by Mr. Hillebrand as our Chief Executive Officer, together with our strong lead independent director, Stephen M. Priebe, and our experienced committee chairs and other directors, will enable the Company to continue to meet the expectations of our shareholders and provide strong independent oversight from our directors.
The Board does not have a fixed policy on whether the roles of Chairman of the Board and Chief Executive Officer should be separate or combined. The Company’s corporate governance documents address the leadership structure of the Board and the respective roles of the Chairman of the Board and the Chief Executive Officer. The Board will annually elect one of its members to serve as Chairman of the Board. The Chairman will preside at all meetings of the shareholders and of the Board of Directors, and generally consult with the Board on matters pertaining to the Company’s business and affairs. Both positions may, but need not, be held by the same person. The decision as to whether the offices of Chairman of the Board and Chief Executive Officer should be combined or separated will be made from time to time by the Board of Directors at its discretion. The Board’s decision will be made in its business judgment and based upon its consideration of all relevant factors and circumstances at the time, including the specific needs of the Company’s business, the strengths of the individual or individuals holding those positions and the current composition of the Board. We would notify shareholders promptly of a decision by the Board to separate the roles of Chairman of the Board and Chief Executive Officer.
If the individual elected as Chairman of the Board is also the Chief Executive Officer, or if the Chairman of the Board is not an independent director, the Board will elect a lead independent director to help ensure strong independent leadership on the Board.
In addition to an independent lead director, threefive committees of the Board provide independent oversight of management – the Audit Committee, the Compensation Committee, and the Nominating and Corporate Governance Committee, the Risk Committee and the Trust Committee. Each is composed entirely of independent directors.
If a lead independent director is called for under the Company’s governance documents, the Chair of the Nominating and Corporate Governance Committee acts in that role. Stephen M. Priebe currently serves as lead director because Mr. Hillebrand, as the current Chief Executive Officer of the Company, does not qualify as an independent director under the Board’s independence standards. The role and responsibility of the lead director presides at executive sessionsconsists of the following:
● | preside at executive sessions of the Board, which consist of independent and non-management directors and are held at least two times annually; |
● | call special meetings of the independent directors and committees of the Board; |
● | serve as a liaison between the Chief Executive Officer and board members and be available to discuss with any director concerns he or she may have regarding the Board, the Company or the management team; |
● | provide advice and consultation to the Chief Executive Officer and inform him or her of decisions reached and suggestions made during executive sessions of the Board of Directors; |
● | review and approve matters such as agendas and schedules for Board meetings and executive sessions, and information distributed to board members; and |
● | consult and communicate with shareholders where appropriate. |
Stock Yards Bancorp maintains an Audit Committee, a Compensation Committee, a Nominating and Corporate Governance Committee and a Risk Committee of the Board of Directors. The lead directorBank maintains a Trust Committee of the Board of Directors. Each of these committees operates under a written charter approved by the Board of Directors and reviewed annually by the committee. The chair of each committee reports its activities, discussions, recommendations and approvals to the full Board at each regularly scheduled Board meeting. Committee leadership and membership is reviewed annually by the Nominating and Corporate Governance Committee and, upon its recommendations, approved by the Board. The charters are available on the investor relations page of our website, www.syb.com. Current members of each of these committees are identified below.
Director | Audit Committee | Compensation Committee | Nominating And Corporate Governance Committee | Risk Committee | Trust Committee |
Shannon B. Arvin | ✔ | Chair | |||
Paul J. Bickel III | ✔ | ✔ | |||
J. McCauley Brown | ✔ | ✔ | |||
Allison J. Donovan | ✔ | ✔ | |||
David P. Heintzman (1) | ✔ | Chair | |||
Carl G. Herde (1) | Chair | ✔ | |||
James A. Hillebrand (3) | |||||
Richard A. Lechleiter (1) | ✔ | Chair | |||
Philip S. Poindexter (3) | |||||
Stephen M. Priebe (2) | ✔ | Chair | |||
Edwin S. Saunier | ✔ | ✔ | |||
John L. Schutte | ✔ | ✔ | |||
Kathy C. Thompson (3) | |||||
Laura L.Wells | ✔ | ✔ |
(1) | Audit Committee Financial Expert | |
(2) | Lead Independent Director | |
(3) | Messrs. Hillebrand and Poindexter and Ms. Thompson are management directors and do not serve on any Board committees. |
Audit Committee
The Board of Directors of Stock Yards Bancorp maintains an Audit Committee comprised of directors who are not officers of Stock Yards Bancorp. Each member of the Audit Committee meets the Securities and Exchange Commission (“SEC”) and NASDAQ independence requirements for membership on an audit committee and each is financially literate within the meaning of the NASDAQ listing rules.
The Audit Committee oversees the Company’s financial reporting process on behalf of the Board of Directors. Management has primary responsibility for the financial statements and the reporting process including the systems of internal controls. In fulfilling its oversight responsibilities, the Committee, among other matters,
● | considers the appointment of our external auditors, | |
● | reviews with the auditors the plan and scope of the audit and audit fees, | |
● | monitors the adequacy of reporting and internal controls, | |
● | meets regularly with internal and external auditors, | |
● | reviews the independence of the external auditors, | |
● | reviews our financial results as reported in SEC filings, | |
● | approves all audit and permitted non-audit services performed by our external auditors, | |
● | reviews and evaluates identified related party transactions, and | |
● | discusses with management the Company’s major financial risk exposures and the steps management has taken to monitor and control those exposures. |
The Audit Committee meets with our management at least quarterly to consider the adequacy of our internal controls and the objectivity of our financial reporting. This Committee also meets with the external auditors and with our internal auditors regarding these matters. Both the independent auditors and the internal auditors regularly meet privately with this Committee and have unrestricted access to this Committee.
The Audit Committee held six meetings during 2022.
The Board of Directors has determined that Messrs. Heintzman, Herde and Lechleiter are audit committee financial experts for Stock Yards Bancorp and are independent as described in the paragraph above. We refer you to the section captioned “REPORT OF THE AUDIT COMMITTEE” on page 65 of this Proxy Statement for more information about the role and responsibility of the Audit Committee in the Company’s financial reporting process.
Nominating and Corporate Governance Committee
The Board of Directors of Stock Yards Bancorp maintains a Nominating and Corporate Governance Committee. Each member of the Nominating and Corporate Governance Committee meets the NASDAQ independence requirements for membership on a nominating and governance committee. Responsibilities of the Committee are set forth in a written charter satisfying the NASDAQ’s corporate governance standards, requirements of federal securities law and incorporating other best practices.
The Committee’s primary duties and responsibilities consist of:
● | identifying and evaluating candidates for election to the Board of Directors, including consideration of candidates suggested by shareholders; | |
● | developing a Board succession strategy; | |
● | assisting the Board in determining the structure, leadership and composition of Board committees; | |
● | monitoring the Board’s effectiveness; | |
● | developing and implementing the Company’s corporate governance guidelines; | |
● | establishing stock ownership guidelines for non-management directors and annually assessing directors’ ownership relative to those guidelines; | |
● | developing and overseeing an annual self-evaluation process for the Board and its committees; and | |
● | reviewing the Company’s policies, practices and disclosures with respect to environmental, social and governance, or ESG, matters |
This Committee held four meetings during 2022.
Compensation Committee
The Board of Directors of Stock Yards Bancorp maintains a Compensation Committee. Each member of the Compensation Committee meets the NASDAQ independence requirements for membership on the Compensation Committee. The responsibilities of this Committee include oversight of executive and Board compensation and related programs. We refer you to the section captioned “REPORT ON EXECUTIVE COMPENSATION” beginning on page 31 of this Proxy Statement for more information about the role and responsibilities of the Compensation Committee in our executive compensation program and its activities during 2022.
The Compensation Committee held seven meetings during 2022.
Risk Committee
The Board of Directors of Stock Yards Bancorp maintains a Risk Committee. This Committee is responsible for overseeing and monitoring management’s implementation and enforcement of the Bank’s framework for risk management throughout the organization. The Committee’s primary duties and responsibilities consist of:
● | monitoring and advising the Board of matters specific to the Bank’s risk exposures, including credit, cyber/information security and compliance/legal risks; | |
● | reviewing reports of examination by regulatory agencies and reviewing and observations or communications by regulatory agencies, and the results of internal and third party testing, analyses and reviews, related to the Bank’s risks, risk management or any other matters within the scope of the Committee’s oversight responsibilities; | |
● | reviewing items as mandated by regulatory agencies, which may include annual reviews of information security, physical security and the BSA/AML program; and | |
● | assisting the Board in overseeing and supervising all aspects of the Bank’s compliance with the Community Reinvestment Act (“CRA”) and fair lending. |
The Committee reviews and approves mattersdiscusses with management its assessment of asset quality and trends in asset quality, credit quality administration and underwriting standards and the effectiveness of portfolio risk management systems. The Committee is also responsible for reviewing and approving significant lending and credit policies and compliance with those policies. Additionally, the Risk Committee has oversight responsibility for a wide range of enterprise-related risks within the Bank, including regulatory compliance, information security, cybersecurity, insurance and physical security.
The Risk Committee held six regular meetings in 2022.
Trust Committee
The Board of Directors of Stock Yards Bank maintains a Trust Committee. The Trust Committee oversees the operations of the wealth management and trust department of the Bank to help ensure it operates in accordance with sound fiduciary principles and is in compliance with pertinent laws and regulations. The Committee’s primary duties and responsibilities consist of:
● | approving written policies to govern the conduct of the Bank’s fiduciary and trust activities; | |
● | monitoring the proper implementation of policies, procedures and guidelines established for the activities and operations of the wealth management and trust department; | |
● | reviewing business development reports and overseeing the development and growth of new wealth management and trust business; | |
● | reviewing regular reports from management concerning investment performance and significant changes in recommended assets for applicable investment accounts; and | |
● | reviewing audit and examination reports. |
This Committee held five meetings in 2022.
Non-management Executive Sessions
The non-management members of the Board of Directors meet in executive session at least twice each year following the regularly scheduled Board meeting, and more frequently if necessary or appropriate. The Lead Independent Director presides over these executive sessions. The executive sessions provide an opportunity for the directors to discuss topics such as agendasbusiness results and schedules forperformance, executive leadership and succession, critical strategic matters and other matters outside the presence of management. Board meetings andcommittees also have the opportunity to meet in executive sessions, and information distributedsession without management if they choose to board members. The lead director will be available to consult and communicate with shareholders where appropriate.do so.
The Board conducts an annual self-assessment to enhance its effectiveness. Through regular evaluation of its policies, practices and procedures, the Board identifies areas for further consideration and improvement. The evaluation process is led by the Nominating and Corporate Governance Committee. Each year, that Committee discusses and decides upon the process to be followed for the upcoming year. Each director may be requested to complete a questionnaire and provide feedback on a range of issues, including his or her assessment of the Board’s overall effectiveness and performance; its committee structure; priorities for future Board discussion and attention; the composition of the Board and the background and skills of its members; the quality, timing and relevance of information received from management; the nature and scope of agenda items; and his or her individual contributions to the Board. The lead director then meets with each director individually either to discuss his or her questionnaire responses or, if directors were not requested to complete a questionnaire, to discuss thoughts and suggestions the director may have regarding the Board’s overall effectiveness or specific Board practices or policies. The lead director prepares a summary of findings drawn from the questionnaire responses and director interviews for presentation to the full Board of Directors. Each of the Committees also conducts their own self-assessments led by the respective committee chairs.
We require all of our officers and employees and, when applicable, our directors to accept and abide by our Code of Business Conduct and Ethics, or the “Code of Conduct”. The Code of Conduct reinforces our Company’s commitment to the highest standards of ethical business practices and compliance with all applicable legal requirements, and sets forth expectations for the use and protection of proprietary business and customer information and relationships with our employees, customers, vendors and the public, among other matters. Our Chief Executive Officer, President, Chief Financial Officer, Controller and other financial officers are also subject to a Code of Ethics which supplements our general Code of Conduct. We will promptly disclose any amendment or waiver with respect to the financial Code of Ethics in accordance with the applicable rules of the SEC and Nasdaq.
All of our directors, officers and employees are required to annually affirm in writing their continued understanding of and compliance with our Code of Conduct. Employees receive regular quarterly reminders of our “Do the Right Thing” policy and their responsibility to report questionable business practices that could be violations of law or breaches of our Code of Conduct. Employees are encouraged to report their concerns on a confidential basis either directly to a designated company employee or to a representative of an independent third party firm.
Board Oversight of Risk Management
The Board of Directors has a significant role in the oversight of risk management. The Board receives information regarding risks facing the Company, their relative magnitude and management’s plan for mitigating these risks. Primary risks facing the Company are credit, operational, cybersecurity and informational security, interest rate, liquidity, compliance/legal, strategic and reputational risks. After assessment by management, reports are made to committees of the Board. Credit risk is addressed by the Risk Committee of Bancorp. Operational and compliance/legal risks are addressed by the Audit Committee and the Risk Committee of Bancorp. Cybersecurity and informational security risks are addressed by the Risk Committee of Bancorp. Interest rate and liquidity risks are addressed by the Asset/Liability Committee comprised of Bank management and reports are made to the Board at each of its regular meetings. Strategic and reputational risk is addressed by the above committees in addition to the Compensation Committee of Bancorp along with other executive compensation matters. Oversight of the trust department is addressed by the Trust Committee of the Bank. Corporate governance matters are addressed by the Nominating and Corporate Governance Committee of Bancorp. The full Board receives reports from each of these committees at the Board meeting immediately following the Committee meeting. The Bank’s Director of Internal Audit has a direct reporting line to the Audit Committee of the Board. The Chief Risk Officer, Information Security Officer and Compliance Officer make regular reports to the Audit and Risk Committees and the full Board when appropriate.
During 2022, the Board of Directors of Stock Yards Bancorp held eight regularly scheduled meetings and one special meeting. All directors of Stock Yards Bancorp are also directors of the Bank. During 2022, the Bank’s Board of Directors also held eight regularly scheduled meetings and one special meeting.
All directors attended at least 75% of the number of meetings of the Board and committees of the Board on which they served that were held during the period he or she served as a director. All directors are encouraged to attend annual meetings of shareholders, and all attended the 2022 Annual Meeting.
Shareholder Communications with the Board of Directors
Shareholders may communicate directly to the Board of Directors in writing by sending a letter to the Board at: Stock Yards Bancorp Board of Directors, P.O. Box 32890, Louisville, KY 40232-2890. Communications directed to the Board of Directors will be received by the Chairman and processed by the Nominating and Corporate Governance Committee when the communications concern matters related to the duties and responsibilities of the Board of Directors.
BOARD OF DIRECTORS’ MEETINGS AND COMMITTEES
During 2020, the Board of Directors of Stock Yards Bancorp held nine regularly scheduled meetings. All directors of Stock Yards Bancorp are also directors of the Bank. During 2020, the Bank’s Board of Directors also held nine regularly scheduled meetings.
All directors attended at least 75% of the number of meetings of the Board and committees of the Board on which they served that were held during the period he or she served as a director. All directors are encouraged to attend annual meetings of shareholders, and all attended the 2020 Annual Meeting.CORPORATE RESPONSIBILITY
Stock Yards Bancorp maintains an Audit Committee,Bank is a Compensation Committee,community bank built on strong core values of trust, character, integrity, sound judgment, personal accountability and respect for others. We are committed to serving our customers’ needs and helping them to achieve their financial goals. Likewise, we are committed to being a good neighbor and investing in the communities in which we live and work, and to supporting our fellow team members by cultivating a healthy work environment in which they can grow and succeed together and individually. This means providing the products and services necessary to help our individual customers and their families reach their financial goals, assisting our business customers to grow and expand their businesses and extending access to banking and financial resources to all segments of our communities, including the underbanked. We recognize that environmental, social and governance (“ESG”) principles are important to delivering on those commitments and maintaining our core values.
In 2022, we published our inaugural Corporate Responsibility Report. The report identifies our ongoing practices and recent accomplishments in the areas of environmental risk and impact management, social responsibility, including diversity, equity and inclusion, and governance. It highlights many of the initiatives occurring both within the Bank and in our communities to promote the interests of our various stakeholders – our customers, team members, communities and shareholders. We encourage you to review the entire report, which is available on our website at www.syb.com. Neither our Corporate Responsibility Report nor any other content appearing on our website is deemed to be a part of, or incorporated by reference into, this Proxy Statement.
Highlights of our ESG efforts are summarized below:
Governance and Accountability
● | All officers and employees are required to adhere to our Code of Business Conduct and Ethics and annually affirm their continued understanding and compliance with its principles and guidelines. | |
● | Employees receive regular quarterly reminders of our “Do the Right Thing” policy and their responsibility to report questionable business practices. | |
● | We provide a third party hotline for employees to report concerns about questionable business or financial practices anonymously and without fear of retaliation or dismissal. |
Responsibility toOur Customers
● | We supported our customers’ financial needs through the pandemic by completing approximately 5,500 loans under the Paycheck Protection Program (PPP) totaling $918 million. | |
● | We extended customer access to financial products and services with online banking, mobile banking, text banking and telebanking in English and Spanish | |
● | Our website is ADA accessible and includes financial calculators to improve financial literacy | |
● | We provide numerous learning opportunities for customers through in-person educational sessions on topics ranging from cybersecurity and fraud awareness to assisting first-time home buyers and teaching teens financial literacy. | |
● | We offer a number of mortgage and financial assistance programs to remove barriers to homeownership, particularly for first-time home buyers, and reduce blight in distressed neighborhoods. | |
● | Our employees are expected to communicate with customers in a clear, truthful and complete manner to assure clarity and transparency in all our business relationships. |
Responsibility to Our Employees
● | We offer competitive pay that includes annual performance and merit-based bonuses and generous paid time-off policies, and a comprehensive benefits package that includes a 401(k) and employee stock ownership plan with a substantial company matching contribution |
● | Our commitment to employees’ financial wellness and personal wellbeing includes educational opportunities and guidance for wealth management and estate planning, training and professional development programs and fully-funded wellness programs that reward employees for healthy behaviors. |
● | We recognize employees for their extraordinary efforts and innovative ideas with quarterly achievement awards, and their time and investment in reaching the Bank’s goals with service anniversary rewards. |
● | We provide numerous opportunities for career advancement and professional development through online learning libraries, our management training program and general banking schools. |
● | Our commitment to diversity, equity and inclusion is reflected in the overall representation of minorities and women in our workforce, including increasing representation on senior leadership teams – nearly 30% of our senior vice presidents are female and 7% are minorities. |
Responsibility to Our Community
● | We created a new leadership positon, Director of Community Engagement and Outreach, in 2021 to work proactively to establish and maintain strong relationships with community-based charitable and non-profit organizations in support of our community reinvestment and fair lending programs. | |
● | Our employees make significant contributions of their time and talent to our communities through volunteer activities – over 4,000 hours were spent on volunteer boards in 2021 | |
● | Our employees are generous financial supporters of civic, cultural and emergency relief activities with more than $130,000 contributed to nonprofit organizations across our markets in 2021. |
Awards and Recognition
As a testament to the strong culture, inclusive environment and numerous benefits we are committed to providing our employees, we were recognized in 2022 by American Banker as one of the “Best Banks to Work For”, which evaluates employee satisfaction, as well as the policies and employee benefits of each institution. We were honored to be one of only 90 institutions in the country to make the list for 2022.
Board Oversight of ESG Matters
As we are early in our ESG journey, we have only begun to establish Board-level oversight for ESG matters. The Nominating and Corporate Governance Committee is responsible for monitoring and overseeing our ESG policies, practices and strategies. The Nominating and Corporate Governance Committee expects to engage with management on a Risk Committeeregular basis on our ESG initiatives and to receive periodic updates on developments related to ESG and associated governance issues.
PROPOSAL 1: ELECTION OF DIRECTORS
Our Bylaws specify that the Board of Directors shall consist of not less than nine nor more than 20 directors. Within this range, the number of directors to be elected at each annual meeting of shareholders may be fixed from time to time by resolution of the Board of Directors. The Bank maintains a Trust CommitteeDirectors adopted prior to the giving of notice of the Board of Directors.
Audit Committee
The Board of Directors of Stock Yards Bancorp maintains an Audit Committee comprised of directors who are not officers of Stock Yards Bancorp. For 2020,meeting or by later resolution adopted by the Audit Committee was comprised of Messrs. Herde (Chairman), Lechleiter and Schutte. Each of these individuals meetsshareholders at the Securities and Exchange Commission (“SEC”) and NASDAQ independence requirements for membership on an audit committee and each is financially literate within the meaning of the NASDAQ listing rules.annual meeting. The Board of Directors has adopted a written charter forfixed the Audit Committee, and this charter is available on Stock Yards Bancorp’s website: www.syb.com.
The Audit Committee oversees Stock Yards Bancorp’s financial reporting process on behalfnumber of directors to be elected at the Board of Directors. Management has primary responsibility for the financial statements and the reporting process including the systems of internal controls. In fulfilling its oversight responsibilities, the Committee, among other matters, considers the appointment of the external auditors for Stock Yards Bancorp, reviews with the auditors the plan and scope of the audit and audit fees, monitors the adequacy of reporting and internal controls, meets regularly with internal and external auditors, reviews the independence of the external auditors, reviews Stock Yards Bancorp’s financial results as reported in SEC filings, and approves all audit and permitted non-audit services performed by its external auditors. The Committee reviews and evaluates identified related party transactions and discusses with management the Company’s major financial risk exposures and the steps management has taken to monitor and control those exposures. The Audit Committee meets with our management2023 Annual Meeting at least quarterly to consider the adequacy of our internal controls and the objectivity of our financial reporting. This Committee also meets with the external auditors and with our internal auditors regarding these matters. Both the independent auditors and the internal auditors regularly meet privately with this Committee and have unrestricted access to this Committee. The Audit Committee held five meetings during 2020.13.
The Board of Directors has determined that Messrs. Herde and Lechleiter are audit committee financial experts for Stock Yards Bancorp and are independent as described in the paragraph above. See “REPORT OF THE AUDIT COMMITTEE” for more information.
Nominating and Corporate Governance Committee
The Board of Directors of Stock Yards Bancorp maintains a Nominating and Corporate Governance Committee. Members of this Committee are Messrs. Priebe (Chairman), Brown and Herde, all of whom are non-employee directors meeting the NASDAQ independence requirements for membership on a nominating and governance committee. Responsibilities of the Committee are set forth in a written charter satisfying the NASDAQ’s corporate governance standards, requirements of federal securities law and incorporating other best practices. The Board of Directors has adopted a written charter for the Nominating and Corporate Governance Committee, and this charter is available on Stock Yards Bancorp’s website: www.syb.com.
Among the Committee’s duties are identifying and evaluating candidates for election to the Board of Directors, including consideration of candidates suggested by shareholders. To submit a candidate for consideration by the Committee, a shareholder must provide written communication to the Committee. The Committee would apply the same board membership criteria to shareholder-nominated candidates as it would to Committee-nominated candidates. The Committee also assists the Board in determining the composition of Board committees, assessing the Board’s effectiveness and developing and implementing the Company’s corporate governance guidelines. This Committee held three meetings during 2020.
Compensation Committee
The Board of Directors of Stock Yards Bancorp maintains a Compensation Committee. Members of this Committee are Messrs. Lechleiter (Chairman), Priebe, Schutte and Tasman, all of whom meet the NASDAQ independence requirements for membership on the Compensation Committee. The Board of Directors has adopted a written charter for the Compensation Committee, and this charter is available on Stock Yards Bancorp’s website: www.syb.com. The responsibilities of this Committee include oversight of executive and Board compensation and related programs. The Compensation Committee held eight meetings during 2020. See “REPORT ON EXECUTIVE COMPENSATION” for more information.
Risk Committee
The Board of Directors of Stock Yards Bancorp maintains a Risk Committee. This Committee is responsible for monitoring the Bank’s commercial and consumer loan portfolio and the related credit risk. The Committee reviews and discusses with management its assessment of asset quality and trends in asset quality, credit quality administration and underwriting standards and the effectiveness of portfolio risk management systems. The Committee is also responsible for reviewing and approving significant lending and credit policies and compliance with those policies. Additionally, the Risk Committee has oversight responsibility for a wide range of enterprise-related risks within the Bank, including regulatory compliance, information security, cybersecurity, insurance and physical security. Members of this Committee are Messrs. Tasman (Chairman), Bickel, Heintzman and Ms. Heitzman. The Risk Committee held seven regular meetings in 2020.
Trust Committee
The Board of Directors of Stock Yards Bank maintains a Trust Committee. The members of the Trust Committee are Ms. Heitzman (Chair) and Messrs. Bickel, Brown and Heintzman. The Trust Committee oversees the operations of the wealth management and trust department of the Bank to help ensure it operates in accordance with sound fiduciary principles and is in compliance with pertinent laws and regulations. This Committee held six meetings in 2020.
ITEM 1. ELECTION OF TEN DIRECTORS
The Board of Directors presently consists of eleven members. One current director, Norman Tasman, will reach his mandatory retirement age before the date of the 2021 Annual Meeting and will not stand for re-election at the Annual Meeting. Directors serve a one-year term and hold office until the Annual Meeting following the year of their election and until his or her successor is elected and qualified, subject to his or her death, resignation, retirement, removal or disqualification.
The BoardAll of Directors has fixed the numberCompany’s directors also currently serve as directors of directors to bethe Bank. If elected, all of the nominees for election at the 2021 Annual Meeting at ten. The tenare expected to continue serving as Bank directors nominated byfollowing the meeting.
The Nominating and Corporate Governance Committee of the Board of Directors has presented a slate of 13 nominees for election this year toas directors at the 2023 Annual Meeting. If elected, we expect that all of the nominees will serve as directors and hold office until the 2022 Annual Meeting2024 annual meeting of shareholders and until their respective successors arehave been elected and qualified are identified below. Subjectqualified. However, if for any reason a nominee should become unable or unwilling to completion of its proposed merger transaction with Kentucky Bancshares, Inc., we intend to expand the size ofserve, proxies may be voted for another person nominated as a substitute by the Board concurrent withof Directors, or the closing ofBoard may reduce the transaction to twelve directors and add two existing members of the Kentucky Bancshares boardnumber of directors to our Board.be elected. The Board has no reason to believe that any nominee will be unable or unwilling to serve as a director if elected.
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
|
| |
|
| |
|
|
The Board of Directors presently consists of 14 members. One current director, J. McCauley Brown, will reach his mandatory retirement age before the date of the 2023 Annual Meeting and will not stand for re-election at the Annual Meeting. All nominees currently serve on our Board of Directors and, other than Allison J. Donovan and Laura L. Wells, were last elected to the Board of Directors by shareholders at the 2022 Annual Meeting. Ms. Donovan was appointed to our Board of Directors in November 2022. Ms. Wells is a former director of Commonwealth Bancshares, Inc. and was appointed to our Board of Directors in May 2022 following completion of our acquisition of Commonwealth Bancshares in March 2022.
Except for Mses. Arvin and Wells and Mr. Saunier, there are no arrangements or understandings between or among any of the nominees, directors or executive officers and any other person pursuant to which any of our nominees, directors or executive officers have been selected for their respective positions. We refer you to the section captioned “Commonwealth Bancshares Investor Agreement” on page 21 of this Proxy Statement for a discussion of our agreement with the principal shareholders of Commonwealth Bancshares to consider and, if acceptable to Stock Yards, nominate a qualified individual designated by the principal shareholders for election to our Board of Directors.
There are no family relationships between any of our directors or executive officers and any other directors or executive officers.
Unless otherwise directed, shares represented by a properly submitted proxy will be voted for the election of each nominee. Proxies cannot be voted at the Annual Meeting for a greater number of persons than the 13 nominees named in this Proxy Statement.
To be elected in an uncontested election, a director nominee must receive a majority of the total votes cast for his or her election. Because we did not receive advance notice by the deadline established in our Bylaws of any shareholder nominees for director, this election of directors is an uncontested election.
The following table contains information about the 13 nominees for election at the Annual Meeting. Each nominee has consented to being named in this Proxy Statement and agreed to serve as a director if elected.
Name | Age (1) | Independent | Director Since | Principal Occupation (2) | Other Public Company |
Shannon B. Arvin | 48 | ✔ | 2021 | President and CEO, Keeneland Association | None |
Paul J. Bickel III | 67 | ✔ | 2017 | President, U.S. Specialties | None |
Allison J. Donovan | 42 | ✔ | 2022 | Member, Stoll Keenon Ogden PLLC | None |
David P. Heintzman | 63 | ✔ | 1992 | Former Chairman of the Boards and Retired Chief Executive Officer, Stock Yards Bancorp, Inc. and Stock Yards Bank & Trust Company | None |
Carl G. Herde | 62 | ✔ | 2005 | Vice President/Financial Policy, Kentucky Hospital Association | None |
James A. Hillebrand | 54 | 2008 | Chairman of the Boards and Chief Executive Officer, Stock Yards Bancorp, Inc. and Stock Yards Bank & Trust Company | None | |
Richard A. Lechleiter | 64 | ✔ | 2007 | President, Catholic Education Foundation of Louisville | None |
Philip S. Poindexter | 56 | 2022 | President, Stock Yards Bancorp, Inc. and Stock Yards Bank & Trust Company | None | |
Stephen M. Priebe | 59 | ✔ | 2012 | President, Hall Contracting of Kentucky | None |
Edwin S. Saunier | 65 | ✔ | 2021 | President, Saunier North American, Inc. | None |
John L. Schutte | 59 | ✔ | 2018 | Chief Executive Officer, GeriMed, Inc. | None |
Kathy C. Thompson | 61 | 1994 | Senior Executive Vice President, Stock Yards Bank & Trust Company, Director of the Bank’s Wealth Management and Trust Department | None | |
Laura L. Wells | 48 | ✔ | 2022 | Freelance Journalist | None |
(1) | Ages listed are as of December 31, |
(2) | Each nominee has been engaged in his or her |
|
|
|
|
Our Board
As a result of this review, and based upon the advice and recommendations of the Nominating and Corporate Governance Committee, the Board of Directors has affirmatively determined that Messrs. Bickel, Brown, Herde, Lechleiter, Priebe and Schutte and Ms. Heitzman satisfy the independence requirements of the NASDAQ Stock Market. Mr. Heintzman served as an executive officer of the Bank until December 31, 2018 and does not satisfy these requirements. As current employees of the Bank, Mr. Hillebrand and Ms. Thompson also do not satisfy these requirements. The Board of Directors also previously determined that Mr. Tasman satisfied the NASDAQ independence requirements during his most recent year of service as a director prior to retirement.
In performing its independence review, the Nominating and Corporate Governance Committee noted that the Bank and Mr. Heintzman have in the past made charitable donations to the Catholic Education Foundation of Louisville, of which Mr. Lechleiter is the President. However, the Committee determined that these relationships were not material to the director or his affiliated organization.Composition
Our Articlesnominees for director represent a balance of Incorporationskills, experience and Bylaws require majority voting forperspectives that provide effective leadership and oversight of the electionCompany’s business and are aligned with our business and strategies, particularly our community bank orientation. The following charts present information on the composition of directors in uncontested elections. This meansour Board of Directors. Diversity data is based on information self-identified by each nominee to the Company.
The following chart provides certain demographic information about the 13 director nominees. Diversity characteristics are based on information self-identified by each nominee to the Company.
Board Diversity Matrix (As of March 10, 2023) | ||||
Total Number of Directors | 13 | |||
Female | Male | Non- Binary | Did Not | |
Part I: Gender Identity | ||||
Directors | 4 | 7 | 2 | |
Part II: Demographic Background | ||||
African American or Black | 1 | |||
Alaskan Native or American Indian | ||||
Asian | ||||
Hispanic or Latinx | ||||
Native Hawaiian or Pacific Islander | ||||
White | 4 | 7 | ||
Two or More Races or Ethnicities | 1 | |||
LGBTQ+ | ||||
Did Not Disclose Demographic Background | 2 |
The matrix shown below identifies certain skills, qualifications and experience that the Board believes are relevant to our business and achievement of our long-term strategy. An individual director nomineesmay possess other skills, qualifications and experience not indicated in the matrix that may also be relevant and valuable to their service on our Board.
Qualifications and Experience | Arvin | Bickel | Donovan | Heintzman | Herde | Hillebrand | Lechleiter | Poindexter | Priebe | Saunier | Schutte | Thompson | Wells | Total |
Executive Leadership | x | x | x | x | x | x | x | x | x | 9 | ||||
Accounting/Financial Reporting | x | x | x | x | x | x | 6 | |||||||
Commercial Real Estate | x | x | 2 | |||||||||||
Legal and Regulatory | x | x | x | x | x | x | x | 7 | ||||||
Sales and Marketing | x | x | x | x | x | x | x | x | 8 | |||||
Community Engagement | x | x | x | x | x | x | x | x | x | 9 | ||||
Banking and Financial Services | x | x | x | x | x | x | x | 7 | ||||||
Mergers and Acquisitions | x | x | x | x | x | x | x | x | 8 | |||||
Strategic Planning | x | x | x | x | x | x | x | x | x | x | x | 11 | ||
Risk Management | x | x | x | x | x | x | x | x | 8 | |||||
Corporate Governance | x | x | x | x | x | 5 | ||||||||
Small Business | x | x | x | x | x | 5 | ||||||||
Customer Experience | x | x | x | x | x | x | x | x | x | x | x | 11 |
Executive Leadership
Experience in an uncontested election for directors must receive a numberexecutive leadership position that provides the skill and perspective to understand and direct business operations, manage human capital, analyze risk, manage organizational change and develop and implement strategic plans.
Accounting/Financial Reporting
Knowledge of votes cast “for” his or her electionexperience in accounting, financial reporting or auditing processes that exceeds the number of votes cast “against.” The Company’s corporate governance guidelines further provide that any incumbent director who does not receive a majority of “for” votes in an uncontested election must, within five days following the certification of the election results, tender to the Chairman ofassists the Board hisin overseeing our financial condition, financial management systems and the effectiveness of our internal controls, and ensuring accuracy and transparency in financial reporting and disclosure.
Commercial Real Estate
Experience as investors, owners and developers in the development operation and financing of commercial real estate projects in our market areas that assists the Board in overseeing and evaluating risk in our commercial real estate loan portfolio.
Legal and Regulatory
Knowledge of and experience in legal and regulatory matters, particularly regulated business, that assists the Board in understanding and analyzing legal regulatory and compliance requirements and related risks and advising management with regard to relationships with our regulators.
Sales and Marketing
Experience in managing sales and marketing activities, particularly for new products and markets and the adoption and use of digital marketing strategies that assists the Board in developing strategies to attract and retain customers and grow market share in each of our markets.
Community Engagement
Leadership experience with civic, charitable or her resignation fromcommunity service organizations or in governmental or public policy roles that positively impact the Board. The resignation will specify that it is effective upon the Board’s acceptancereputation, image and public profile of the resignation. The Board will, through a process managed by the Nominating and Corporate Governance Committee and excluding the nomineeour company in question, accept or reject the resignation within 90 days after certification of the shareholder vote. The Board will promptly communicate any action taken on the resignation.our local communities.
Banking and Financial Services
Experience in the banking or financial services industry that assists the Board in understanding the key drivers of success in our core lines of business, including the development of innovative financial products and services to meet the changing banking needs of our customers.
Mergers and Acquisitions
Leadership experience with the planning, analysis and execution of mergers and acquisitions transactions and the integration of people, operations and systems that assists the Board in evaluating business development opportunities to complement our core strategy of organic growth.
Strategic Planning
Experience in the development and implementation of operating plans and business strategies.
Risk Management
Knowledge of or experience with oversight of corporate risk and risk management functions that assists the Board in identifying and evaluating the key areas of risk within our company and establishing an appropriate framework for managing and controlling risk.
Corporate Governance
Knowledge of public company governance practices and policies that assists the Board in considering and adopting sound governance practices, adherence to high standards or ethical business conduct and understanding the impact of those policies and practices on our business.
Small Business
Experience in ownership and/or managerial positions with small and medium size businesses that assists the Board in understanding the banking and credit needs of this segment of our customer base and how the Bank interacts with its commercial and business customers.
Customer Experience
Experience in consumer-focused businesses that assists the Board in developing strategies to strengthen brand awareness and customer loyalty, build customer relationships, attract new customers and enhance the overall customer experience.
Additional Information Regarding the Background and Qualifications of Director Nominees
The Nominating and Corporate Governance Committee considers the particular experience, qualifications, attributes and expertise of each nominee for election to the Board. Having directors with different points of view, professional experience, education and skills provides broader perspectives and more diverse considerations valuable to the directors as they fulfill their leadership roles. Potential Board candidates are evaluated based upon various criteria, including:
● | Direct industry knowledge, broad-based business experience, or professional skills that indicate the candidate will make a significant and immediate contribution to the Board’s discussion and decision-making in the array of complex issues facing Bancorp; |
● | Behavior and reputation that indicate he or she is committed to the highest ethical standards and the values of Bancorp; |
● | Special skills, expertise, and background that add to and complement the range of skills, expertise, and background of the existing directors; |
● | The ability to contribute to broad Board responsibilities, including succession planning, management development, and strategic planning; and |
● | Confidence that the candidate will effectively, consistently, and appropriately take into account and balance the legitimate interests and concerns of all Bancorp’s shareholders in reaching decisions. |
Directors must have time available to devote to Board activities and to enhance their knowledge of Stock Yards Bancorp and the banking industry.
The Nominating and Corporate Governance Committee engages in regular discussions
All non-management directors are required to own Common Stock equal in value to at least $200,000 within three years of joining the Board and to maintain that minimum ownership level for the remainder of their service as a director. The Nominating and Corporate Governance Committee may exercise its discretion in enforcing the guidelines when the accumulation of Common Stock is affected by the price of Bancorp stock or changes in director compensation. Management directors also have ownership targets as set forth elsewhere in this Proxy Statement. All directors’ ownership positions exceed the requirement, and some of the more tenured directors are among the Company’s largest shareholders.
The Nominating and Corporate Governance Committee of the Board of Directors has presented a slate of ten nominees for election as directors at the 2021 Annual Meeting. If elected, we expect that all of the aforementioned nominees will serve as directors and hold office until the 2022 annual meeting of shareholders and until their respective successors have been elected and qualified. However, if for any reason a nominee should become unable or unwilling to serve, proxies may be voted for another person nominated as a substitute by the Board of Directors, or the Board may reduce the number of directors to be elected.
All ten nominees are standing for re-election and were last elected to the Board of Directors by shareholders at the 2020 Annual Meeting. Below is a summary of the Committee’s consideration and evaluation of each director nominee.
Ms. Arvin currently serves as the eighth President and CEO of the Keeneland Association. Prior to this, Ms. Arvin was a member of the Lexington, Kentucky law firm of Stoll Keenon Ogden, and served on the firm’s Board of Directors and Executive Committee. Ms. Arvin also served as corporate counsel to Keeneland since 2008, and as secretary and member of Keeneland’s Board of Directors since 2015. Also, Ms. Arvin currently holds the following positions: Trustee of The Lexington School, and Thoroughbred Owners and Breeders Association, Member of The Jockey Club, Board and Executive Committee Member of the Gluck Equine Foundation, Thoroughbred Racing Associations/Thoroughbred Racing Protective Bureau and the National Thoroughbred Racing Association. In connection with our acquisition of Kentucky Bancshares, Inc. in May 2021, we agreed to expand the size of our Boards of Directors by two directors and fill the resulting vacancies with two Kentucky Bancshares directors. We identified Ms. Arvin as one of the two former Kentucky Bancshares directors to be added to our Boards following completion of the acquisition. Ms. Arvin serves on the Nominating and Corporate Governance Committee of Bancorp and chairs the Bank’s Trust Committee.
Mr. Bickel is founder and President of U.S. Specialties, a commercial building supply company. He has served as the managing member of several real estate development organizations in the Louisville, Kentucky area over the past 30 years. Outside of commercial endeavors, Mr. Bickel has been very active in the Louisville community, serving in a leadership capacity on numerous area non-profit boards. Mr. Bickel serves on the RiskAudit Committee of Bancorp and the Bank’s Trust Committee.
Mr. BrownMs. Donovan retired asis a ViceMember in the Lexington, Kentucky office of Stoll Keenon Ogden PLLC, a regional law firm practicing out of five cities in Kentucky and Indiana. Ms. Donovan has been with the firm since 2006 and concentrates primarily on corporate, securities, mergers and acquisitions and banking matters. She is a director and the immediate past President of Brown-Forman Corporation, a Fortune 1,000 company,the Kentucky Bar Foundation, and has previously served on other community nonprofit boards, including the American Heart Association and the John W. Rowe Foundation, Inc. Ms. Donovan has previously participated in 2015. HisLeadership Central Kentucky and the Leadership Council on Legal Diversity Fellows program. Her extensive experience in business, managementbanking and accounting, and his deep ties to the Louisville community, bring valuable local and global perspectivescorporate law, as well as her previous experience as a director of another Kentucky-based banking institution, provide additional expertise to our Board. Additionally, his widespread commitment to community organizations in LouisvilleBoard and beyond gives him a strong sense ofwill complement the needs, prospects and potentialcontributions of our region. Mr. Brownother directors as we continue to develop and execute on our long-term strategies. Ms. Donovan serves on the Risk Committee and the Nominating and Corporate Governance Committee of Bancorp and the Bank’s Trust Committee.Bancorp.
Mr. Heintzman retired as Chief Executive Officer of Bancorp and the Bank as of September 30, 2018. From October 1, 2018 through December 31, 2018, he held the position of Executive Chairman. HeChairman and he continued to serve as non-executive Chairman of the Boards of Bancorp and the Bank until January 1, 2021. Mr. Heintzman holds an accounting degree, and prior to joining the Bank, worked as a certified public accountant for an international accounting firm. He joined the Bank in 1985 and, prior to his appointment as Chief Executive Officer, held a series of executive positions, including Chief Financial Officer, Executive Vice President and President. In January 2005, he assumed the position of Chairman and Chief Executive Officer. Mr. Heintzman was instrumental in the Bank’s growth strategies and profitable execution. His commitment to ethical standards set the example for the Bank and its employees, and his tenure and experience in all areas of the business provide a unique perspective of the business and strategic direction of the Company. Mr. Heintzman serves onchairs the Risk Committee of Bancorp and the Bank’s Trust Committee.
Ms. Heitzman, Certified Public Accountant, Chartered Financial Analyst, with expertise in the institutional credit markets and experience with investment strategies, provides our Board with a deep knowledge and understanding of capital markets, finance and accounting. Ms. Heitzman retired in 2016 as a portfolio manager for New York City based KKR Prisma Capital. She joined that company in 2004 to help construct and manage customized portfolios. Before joining KKR Prisma, Ms. Heitzman served in various capacities at AEGON USA, previously Providian Capital. As a portfolio manager in capital market strategies, she facilitated significant growth and broad diversification of a $1 billion fund portfolio. Ms. Heitzman serves on the RiskAudit Committee of Bancorp and chairsBancorp. He has been designated by the Bank’s Trust Committee.Board of Directors as an audit committee financial expert.
Mr. Herde holds an accounting degree, is a Certified Public Accountant and joined Baptist Healthcare System, Inc., one of the largest not-for-profit health care systems in Kentucky, in 1984 as controller. He served as the Chief Financial Officer from 1993 until his retirement from Baptist in September 2016. He now serves as the Vice President/Financial Policy for the Kentucky Hospital Association. He has extensive experience in financial reporting and corporate finance. Mr. Herde chairs the Audit Committee of Bancorp and has been designated by the Board of Directors as an audit committee financial expert. He also serves on the Nominating and Corporate Governance Committee of Bancorp.
Mr. Hillebrand was appointed Chief Executive Officer of Bancorp and the Bank effective October 1, 2018, and assumed the additional roles of Chairman of the Boards of each company effective January 1, 2021. He joined Stock Yards Bank in 1996 as director and developer of the private banking group. Prior to joining the Bank, he was with a regional bank and a community bank where he specialized in private banking. He has directed the expansion of the Bank into the Indianapolis, and Cincinnati markets and was named President in 2008.
Mr. Lechleiter is the President of the Catholic Education Foundation of Louisville. From February 2002 until his retirement in January 2014, he served as the Executive Vice President and Chief Financial Officer of Kindred Healthcare, Inc., a Fortune 500 healthcare services company based in Louisville. Mr. Lechleiter also served in senior financial positions at other large publicly held healthcare services companies such as Humana Inc. and HCA, Inc. during his professional financial career spanning nearly 35 years. His extensive experience in business leadership, financial reporting, corporate finance, investor relations, mergers and acquisitions and corporate governance is valuable to the Board. Mr. Lechleiter serves on the Audit Committee of Bancorp and has been designated by the Board of Directors as an audit committee financial expert. He also chairs the Compensation Committee of Bancorp.
Mr. Poindexter was appointed President of Bancorp and the Bank in October 2018. He previously served as Chief Lending Officer of the Bank from 2008 until October 2018, and as Executive Vice President and Director of Commercial Banking of the Bank. Mr. Poindexter joined the Bank in 2004. Under his leadership as Chief Lending Officer, the Bank achieved record levels of organic loan growth. Mr. Poindexter has also been instrumental in promoting an active sales and service culture across all departments of the Bank with a focus on increased referral activity that has led to record levels of non-interest income for the Bank.
Mr. Priebe is President of Hall Contracting of Kentucky, which provides construction services in the areas of heavy construction, asphalt, civil, pipeline, and highway and bridge construction. A registered professional civil engineer, he began his career at Hall in 1986. Mr. Priebe has had extensive involvement with many civic organizations throughout his career. He has worked with the Kentucky Transportation Cabinet Disadvantaged Business Enterprise Training Program and is actively mentoring a local electric contractor. Mr. Priebe’s business acumen and familiarity with the local and regional economic climate bring valuable perspective to the Board. Mr. Priebe serves as our Lead Independent Director, chairs the Nominating and Corporate Governance Committee of Bancorp and serves as a member of the Compensation Committee of Bancorp.
Mr. Saunier currently serves as President of Saunier North American, Inc., a moving and storage company. Mr. Saunier is a member of the Policy Council of Commerce Lexington in Lexington, Kentucky, Past Chairman of the Winchester Clark County Chamber of Commerce in Winchester, Kentucky, founder of Leadership Winchester and Past President of Thoroughbred Club of America. In connection with our acquisition of Kentucky Bancshares, Inc. in 2021, we agreed to expand the size of our Boards of Directors by two directors and fill the resulting vacancies with two Kentucky Bancshares directors. We identified Mr. Saunier as one of the two former Kentucky Bancshares directors to be added to our Boards following completion of the acquisition. Mr. Saunier serves on the Risk Committee and Compensation Committee of Bancorp.
Mr. Schutte is Chief Executive Officer of GeriMed, Inc., a nationwide group purchasing organization specializing in long-term care pharmacy services for independent pharmacies that serve long-term care providers, such as nursing homes, assisted living facilities, and hospice, as well as prison populations. In February 2017, he founded MainPointe Pharmaceuticals, a national company that markets and distributes pharmaceuticals as well as over-the-counter products and supplements. He also previously served as Chairman of the Board of VistaPharm, for which he was the largest shareholder, until it was sold in December 2015. Mr. Schutte is also involved in numerous commercial real estate development projects in the Louisville area and elsewhere. His entrepreneurial skills and insights and strong reputation in the Louisville business community are beneficial to the Board. He serves on the Audit Committee and Compensation Committee of Bancorp.Bancorp and the Bank’s Trust Committee.
Ms. Thompson joinedis the Bank in 1992 as ManagerDirector of the Wealth ManagementBank’s wealth management and Trust Department.trust department. The department currently managesmanaged approximately $3.9$6.6 billion in assets at December 31, 2022, and is one of the most profitable bank-owned trust companies in the country. Prior to joining the Company in 1992, Ms. Thompson practiced law for a large law firm in the estate planning lawand tax group and worked in a regional bank’sbank trust departmentcompany where she specialized infocused on investment management, and estate, trust and personal financial planning.
Ms. Wells has served as a freelance journalist covering the Near and Middle East for various U.S. and international media outlets since September 2009. She previously worked in institutional research and sales for Merrill Lynch & Co. Additionally, Ms. Wells was the co-founder and CEO of the Turkish office of an international online startup company from December 2010 to February 2012. She previously served as a director of Commonwealth Bancshares, Inc. and Commonwealth Bank and Trust Company from 2016 to 2022. She joined our Board of Directors in May 2022, following our acquisition of Commonwealth Bancshares earlier that year. Her nomination is being made pursuant to the terms of an Investor Agreement between us and the principal shareholders of Commonwealth Bancshares. Ms. Wells serves on the Risk Committee of Bancorp and the Bank’s Trust Committee.
Commonwealth Bancshares Investor Agreement
On March 7, 2022, we completed the acquisition of Commonwealth Bancshares, Inc. In connection with the acquisition, we entered into an Investor Agreement with the principal shareholders of Commonwealth Bancshares, Darrell R. Wells, Margaret C. Wells and the Darrell R. Wells Trust, which, among other matters, gives the principal shareholders the right to designate a qualified individual to serve on our Board of Directors, with the agreement of Stock Yards. We refer to this individual as the “mutually acceptable director”. The individual designated by the principal shareholders as the mutually acceptable director will be subject to the annual review and nomination process applicable to all members of our Board of Directors. Laura L. Wells is the director nominee designated as the mutually acceptable director pursuant to the terms of the Investor Agreement.
Our Nominating and Corporate Governance Committee is responsible for identifying and recommending director candidates to our Board for nomination. The Board, in coordination with the Nominating and Corporate Governance Committee, also considers Board leadership succession planning and committee membership.
When considering a candidate for membership on the Board, the Nominating and Corporate Governance Committee assesses a candidate’s independence, qualifications, skills and experience, as compared to the areas of qualifications, skills and experience that the Board has identified as important to be reflected on the Board. The Nominating and Corporate Governance Committee also evaluates the collective contribution of qualifications, skills and experience relevant to the Company for effective oversight. In the case of incumbent directors, the Committee also considers the director’s attendance and participation at meetings of the Board of Directors and committees on which he or she serves.
Although the Nominating and Corporate Governance Committee does not have a specific policy governing diversity, it considers, in identifying nominees for director, a nominee’s professional experience, education, qualifications and skills with a view towards having a diversity of viewpoints in the broadest sense being represented on the Board. These considerations include, without limitation, the individual’s interest in Stock Yards, independence, integrity, reputation, business experience, education, accounting and financial expertise, age, race, ethnicity, gender, civic and community relationships and knowledge and experience in matters impacting financial institutions.
The Nominating and Corporate Governance Committee engages in regular discussions of board and director succession matters, including plans for identifying potential candidates to fill positions vacated by retiring directors. Several of our existing directors will reach our mandatory retirement age over the course of the next few years. As the Committee seeks to identify qualified individuals to fill those vacancies and considers the overall composition of the Board, the Committee is committed to broadening the diversity of our Board and expects to actively consider race and ethnicity as additional factors in the evaluation of its potential director candidates. During 2022, we expanded the diversity of the Board through the addition of one director from the underrepresented community, Allison J. Donovan.
With respect to incumbent directors considered for re-election, the Nominating and Corporate Governance Committee also assesses each director’s performance, contribution, level of engagement, and meeting attendance record. In addition, the Nominating and Corporate Governance Committee determines whether nominees are in a position to devote an adequate amount of time to the effective performance of director duties.
The Nominating and Corporate Governance Committee will consider candidates for nomination as a director submitted by shareholders. The Committee evaluates individuals recommended by shareholders for nomination as directors according to the same criteria discussed above and in accordance with the Company’s bylaws and the procedures describe under “Shareholder Proposals and Director Nominations” on page 6 of this Proxy Statement.
Our Board of Directors, through a process managed by the Nominating and Corporate Governance Committee, conducts an annual review of director independence. During this review, the Nominating and Corporate Governance Committee considers transactions and relationships between each director or any member of his or her immediate family and the Company. The purpose of this review is to determine whether any such relationships or transactions are inconsistent with a determination that the director is independent.
As a result of this review, and based upon the advice and recommendations of the Nominating and Corporate Governance Committee, the Board of Directors has affirmatively determined that Messrs. Bickel, Heintzman, Herde, Lechleiter, Priebe, Saunier and Schutte and Mses. Arvin, Donovan and Wells satisfy the independence requirements of the NASDAQ Stock Market. As current employees of the Bank, Messrs. Hillebrand and Poindexter and Ms. Thompson do not satisfy these requirements. The Board of Directors also previously determined that Mr. Brown satisfied the NASDAQ independence requirements during his most recent year of service as a director prior to retirement.
In performing its independence review, the Nominating and Corporate Governance Committee noted that the Bank has made charitable donations to the Catholic Education Foundation of Louisville, of which Mr. Lechleiter is the President, regularly engages Stoll Keenon Ogden PLLC, of which Ms. Donovan is a member, for legal services and leases warehouse space for storage from Mr. Saunier. However, the Committee determined that none of these relationships were material to the director or his or her affiliated organization.
Our Articles of Incorporation and Bylaws require majority voting for the election of directors in uncontested elections. This means that the director nominees in an uncontested election for directors must receive a number of votes cast “for” his or her election that exceeds the number of votes cast “against.” The Company’s corporate governance guidelines further provide that any incumbent director who does not receive a majority of “for” votes in an uncontested election must, within five days following the certification of the election results, tender to the Chairman of the Board his or her resignation from the Board. The resignation will specify that it is effective upon the Board’s acceptance of the resignation. The Board will, through a process managed by the Nominating and Corporate Governance Committee and excluding the nominee in question, accept or reject the resignation within 90 days after certification of the shareholder vote. The Board will promptly communicate any action taken on the resignation.
All non-management directors are required to own Common Stock equal in value to at least five times the amount of their annual cash retainer fee within five years of joining the Board and to maintain that minimum ownership level for the remainder of their service as a director. The Nominating and Corporate Governance Committee may exercise its discretion in enforcing the guidelines when the accumulation of Common Stock is affected by the price of Bancorp stock or changes in director compensation. Management directors also have ownership targets described elsewhere in this Proxy Statement.
Our Board does not have a term limits policy. Our Corporate Governance Guidelines establish a mandatory retirement age of 70 for all directors. Our retirement age policy is intended to recognize the valuable perspectives, knowledge and experience provided by our longer-tenured directors while also facilitating the Board’s recruitment of new directors with appropriate backgrounds and skills and provide for an orderly transition of leadership on the Board and its committees. In accordance with this policy, one incumbent director, J. McCauley Brown, is not standing for re-election at the 2023 Annual Meeting. The Board has not in the past, nor does it expect in the future to, grant waivers or exemptions from the retirement age policy.
The Compensation Committee is responsible for reviewing and recommending to the Board the compensation paid to our non-employee directors. The Compensation Committee, with advice and assistance from McLagan, its independent consultant, reviews the compensation of our non-employee directors at least every two years. Their review of director compensation includes surveys of peer data from other institutions and the related form and substance of how directors are compensated, including comparative analyses of the Company’s director compensation program relative to its peer group. The compensation program for our non-employee directors consists of a combination of cash and equity. Directors of the Company who are employees of the Bank receive no additional compensation for their service as directors of the Company or the Bank.
The following table outlines the director compensation structure in effect during 2022:
Member Cash Retainer | Member Equity Retainer | Member Per Meeting Fee | Chair Additional Cash Retainer | Lead Director Additional Cash Retainer | ||||||||||||||||
Board of Directors | $ | 18,000 | $ | 35,000 | $ | 1,625 | - | $ | 7,500 | |||||||||||
Audit Committee | - | - | 1,200 | $ | 11,000 | - | ||||||||||||||
Compensation Committee | - | - | 800 | 7,500 | - | |||||||||||||||
Nominating and Corporate Governance Committee | - | - | 800 | 6,000 | - | |||||||||||||||
Risk Committee | - | - | 900 | 9,000 | - | |||||||||||||||
Trust Committee | - | - | 800 | 5,000 | - |
Directors may defer all or a portion of their fees pursuant to the Director Nonqualified Deferred Compensation Plan (the “Director NQ Plan”), and the amounts so deferred then increase or decrease in value based on how the director elects that the account be allocated as among various investment options provided by the Bank. The investment options are currently the same options available under the Executive NQ Plan, except that directors may also direct that their fees be invested in Company stock, which is then actually purchased and held in trust at the Bank. At December 31, 2022, approximately 94 percent of the aggregate amounts owed directors under the Director NQ Plan were invested in the Company’s stock.
In November 2022, the Compensation Committee reviewed a report prepared by McLagan with respect to the Company’s average director compensation for 2022 compared to the average director compensation program for 2021 for the compensation peer group selected by McLagan and approved by the Compensation Committee. The McLagan report noted, amount other findings, that since the last director compensation review performed in 2020, the Company’s recent acquisitions and organic growth have resulted in a significant increase in peer group median revenue, and market median compensation for directors has followed that trend. Given the Company’s significant growth over the past two years and the relatively minor historical increases in director compensation, our average director compensation has moved substantially below the market median. After taking into account the information contained in the McLagan report, the Compensation Committee determined it was appropriate to recommend to the Board changes to the compensation amounts for non-employee directors for the two-year compensation period beginning January 1, 2023, to restore the positioning of our director compensation program relative to our peer group. Acting upon the recommendation of the Compensation Committee, the Board approved the following changes to director compensation amounts effective January 1, 2023:
Member Cash Retainer | Member Equity Retainer | Member Per Meeting Fee | Chair Additional Cash Retainer | Lead Director Additional Cash Retainer | ||||||||||||||||
Board of Directors | $ | 42,000 | $ | 50,000 | $ | 1,625 | - | $ | 20,000 | |||||||||||
Audit Committee | - | - | 1,200 | $ | 15,000 | - | ||||||||||||||
Compensation Committee | - | - | 800 | 12,000 | - | |||||||||||||||
Nominating and Corporate Governance Committee | - | - | 800 | 3,000 | - | |||||||||||||||
Risk Committee | - | - | 900 | 9,000 | - | |||||||||||||||
Trust Committee | - | - | 800 | 4,000 | - |
2022 Director Compensation
The following table sets forth information regarding the compensation of our non-employee directors for 2022. Messrs. Hillebrand and Poindexter and Ms. Thompson serve as directors for the Company but receive no compensation for their director service.
Change in Pension | ||||||||||||||||||||||||||||
Value and | ||||||||||||||||||||||||||||
Non-Equity | Nonqualified | |||||||||||||||||||||||||||
Fees Earned | Stock | Option | Incentive Plan | Deferred Compensation | All Other | |||||||||||||||||||||||
or Paid in Cash | Awards | Awards | Compensation | Earnings | Compensation | Total | ||||||||||||||||||||||
Name | ($) | ($)(1) | ($)(2) | ($) | ($)(3) | ($)(4) | ($)(5) | |||||||||||||||||||||
Ms. Arvin | 38,700 | 35,000 | - | - | - | 617 | 74,317 | |||||||||||||||||||||
Mr. Bickel | 40,400 | 35,000 | - | - | - | 617 | 76,017 | |||||||||||||||||||||
Mr. Brown | 38,200 | 35,000 | - | - | - | 617 | 73,817 | |||||||||||||||||||||
Ms. Donovan | 6,325 | - | 12,720 | - | - | - | 19,045 | |||||||||||||||||||||
Mr. Heintzman | 49,400 | 35,000 | - | - | - | 617 | 85,017 | |||||||||||||||||||||
Mr. Herde | 52,400 | 35,000 | - | - | - | 617 | 88,017 | |||||||||||||||||||||
Mr. Lechleiter | 51,300 | 35,000 | - | - | - | 617 | 86,917 | |||||||||||||||||||||
Mr. Priebe | 53,300 | 35,000 | - | - | - | 617 | 88,917 | |||||||||||||||||||||
Mr. Saunier | 42,000 | 35,000 | - | - | - | 617 | 77,617 | |||||||||||||||||||||
Mr. Schutte | 43,800 | 35,000 | - | - | - | 617 | 79,417 | |||||||||||||||||||||
Ms. Wells | 26,125 | - | 20,260 | - | - | - | 46,385 |
(1) | In January 2022 each non-employee director then serving on the Board of Directors received a restricted stock unit award under the 2015 Omnibus Equity Compensation Plan. The number of shares granted was equal to $35,000 divided by the fair market value per share on the grant date. Based on the closing price of the Common Stock on the grant date, each director received 541 shares. The restricted stock unit awards, together with all dividend equivalents thereon, fully vest one year from the date of grant. |
(2) | Represents 1,000 SARs for each director valued using a Black Scholes value of $12.72 (Ms. Donovan) and $20.26 (Ms. Wells), respectively, per right. |
(3) | Each director has the option of deferring some or all of their fees. Investment options include Company stock and various mutual funds. Earnings on the non-employee directors' nonqualified deferred compensation balances are not included above. The investment alternatives of the nonqualified plan do not and have not offered above market rates of interest or preferential returns. |
(4) | Represents dividends on 2022 restricted stock unit awards. Dividends are held until awards vest. As such, dividends on the shares earned in 2022 were paid in January 2023. |
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE ELECTION OF EACH OF THESE NOMINEES
ITEM 2.PROPOSAL 2: RATIFICATION OF THE SELECTION OF THE INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
The Audit Committee has selected FORVIS, LLP (formerly BKD, LLPLLP) as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 20212023 and has directed that management submit the selection of the independent registered public accounting firm to shareholders for ratification at the Annual Meeting. The firm of BKD,FORVIS, LLP has served as the Company’s auditors since June 7, 2018. Representatives of BKD,FORVIS, LLP are expected to be present atduring the meeting, will have an opportunity to make a statement if they so desire and will be available to respond to appropriate questions.
Shareholder ratification of the selection of BKD,FORVIS, LLP as the Company’s independent registered public accounting firm is not required by the Company’s Bylaws or otherwise. However, we are submitting the selection of BKD,FORVIS, LLP to the shareholders for ratification as a matter of sound corporate practice. If the shareholders fail to ratify the selection, the Audit Committee will reconsider whether or not to retain BKD,FORVIS, LLP. Even if the selection is ratified, the Audit Committee in its discretion may direct the appointment of a different independent audit firm at any time during the year if it is determined that such a change would be in the best interests of the Company and its shareholders.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE RATIFICATION OF THE SELECTION OF BKD,FORVIS, LLP
ITEM 3.PROPOSAL 3: ADVISORY VOTE ON EXECUTIVE COMPENSATION
We are asking our shareholders to provide an advisory vote on the compensation of the named executive officers disclosed in the REPORT“REPORT ON EXECUTIVE COMPENSATIONCOMPENSATION” section of this Proxy Statement. We refer to this item throughout this Proxy Statement as the “say-on-pay” proposal. We have included this proposal among the items to be considered at the Annual Meeting pursuant to the requirements of Section 14A of the Securities Exchange Act of 1934. While this vote is non-binding on our Company and the Board of Directors, it will provide the Compensation Committee with information regarding investor sentiment regarding our executive compensation philosophy, policies and practices which the Committee will be able to consider when determining future executive compensation arrangements. Our current policy is to hold an advisory vote on executive compensation each year. We expectIn Proposal 4, we are asking our shareholders to hold the nextvote on an advisory vote at our 2022 Annual Meeting of Shareholders.basis for their preferred frequency for conducting future say-on-pay votes. Following is a summary of some of the key points of our 20202022 executive compensation program. SeeYou should refer to the REPORTsection captioned “REPORT ON EXECUTIVE COMPENSATION sectionCOMPENSATION” beginning on page 31 of this Proxy Statement for more information.information about our 2022 executive compensation.
The pay-for-performance compensation philosophy of the Compensation Committee supports Stock Yards Bancorp’s primary objective of creating value for its shareholders. The Committee strives to ensure that compensation of Stock Yards Bancorp’s executive officers is market-competitive to attract and retain talented individuals to lead Stock Yards Bancorp and the Bank to growth and higher profitability while maintaining stability and capital strength. Our executive compensation program has been designed to align managements’ interests with those of our shareholders. In addition, the program seeks to mitigate risks related to compensation. In designing the 20202022 compensation program, the Compensation Committee used key performance measurements to motivate our executive officers to achieve short-term and long-term business goals after reviewing peer and market data and the Company’s business expectations for 2020.2022.
We believe that the information provided regarding executive compensation in this Proxy Statement demonstrates that our executive compensation program was designed appropriately and is working to maximize shareholder return while mitigating risk and aligning managements’ interests with our shareholders. Accordingly, the Board of Directors recommends that shareholders approve the following advisory resolution:
RESOLVED, that the shareholders of Stock Yards Bancorp, Inc. approve, on an advisory basis, the compensation paid to the Company’s named executive officers as disclosed in the Stock Yards Bancorp, Inc. 20212023 Proxy Statement pursuant to the executive compensation disclosure rules of the SEC, including the Compensation Discussion and Analysis, the Summary Compensation Table and the other executive compensation tables and related narratives.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE APPROVAL OF THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS AS DESCRIBED IN THIS PROXY STATEMENTSAY-ON-PAY PROPOSAL
PROPOSAL 4: ADVISORY VOTE ON THE FREQUENCY OF FUTURE SAY-ON-PAY VOTES
SECURITY
As described in Proposal 3 above, our shareholders have the opportunity to cast an advisory vote to approve the compensation of our named executive officers. This Proposal 4 affords shareholders the additional opportunity to cast an advisory vote on how often we should include a say-on-pay proposal in our proxy materials for future annual shareholder meetings or any special shareholder meeting for which we must include executive compensation information in the proxy statement for that meeting. We refer to this item throughout this Proxy Statement as the “say-on-frequency” vote. We have included this proposal among the items to be considered at the Annual Meeting pursuant to the requirements of Section 14A of the Exchange Act. Under this Proposal 4, shareholders may vote to conduct the say-on-pay vote every year, every two years or every three years. Shareholders that do not have a preference regarding the frequency of future say-on-pay votes may abstain from voting on this proposal.
Our shareholders voted on a similar proposal in 2017. At that year’s annual meeting, a majority of our shareholders voted to hold the say-on-pay vote every year, which was the recommendation of our Board of Directors. We continue to believe that say-on-pay votes should be conducted every year so that our shareholders may annually express their views on our executive compensation program.
This vote, like the say-on-pay vote described in Proposal 3 above, is advisory and not binding on the Company or the Board of Directors. Shareholders are not voting to approve or disapprove the Board’s recommendation. However, the Board values the opinions expressed by shareholders in their votes on this proposal and will consider the outcome of the vote when making future decisions regarding the frequency of conducting a say-on-pay vote.
It is expected that the next say-on-frequency vote will occur at the 2029 annual meeting of shareholders.
Shareholders may cast their advisory vote to conduct future say-on-pay votes every “1 Year,” “2 Years” or “3 Years,” or they may abstain from this vote.
The option of every year, every two years or every three years that receives the highest number of votes cast by shareholders will reflect the shareholders’ preferred frequency for holding future say-on-pay votes. However, because this vote is advisory and not binding on the Board of Directors or the Company, the Board may decide that it is in the best interests of our shareholders and the Company to hold a say-on-pay vote more or less frequently than the option selected by our shareholders.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU SELECT “ONE YEAR” AS THE PREFERRED FREQUENCY FOR HOLDING FUTURE SAY-ON-PAY VOTES
STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENTINFORMATION
Set forth in the following table is the beneficial ownership of our Common Stock as of December 31, 20202022 for each person or entity known by us to beneficially own more than five percent of the outstanding shares of our Common Stock;Stock and for all our directors and executive officers as a group; and directors, executive officers and employees as a group. “Executive officer” means the chairman, president, any vice president in charge of a principal business unit, division or function, or other officer who performs a policy making function or any other person who performs similar policy making functions and is so designated by the Board of Directors. For a description of the voting and investment power with respect to the shares beneficially owned by the current directors, nominees for election as directors and named executive officers of Stock Yards Bancorp and the Bank, see the following tables.
|
| ||
|
| ||
|
| ||
|
|
| |
| |||
| |||
|
|
| |
| |||
| |||
|
|
| |
| |||
| |||
|
|
| |
| |||
|
|
| |
|
Amount and Nature | Percent of | |||||||
of Beneficial | Stock Yards Bancorp | |||||||
Name of Beneficial Owner | Ownership | Common Stock (1) | ||||||
BlackRock, Inc. | 1,977,501 | (2) | 6.8 | % | ||||
55 East 52nd Street | ||||||||
New York, NY 10055 | ||||||||
The Vanguard Group, Inc. | 1,817,768 | (3) | 6.2 | % | ||||
100 Vanguard Boulevard | ||||||||
Malvern, PA 19355 | ||||||||
Darrell R. Wells | 1,691,765 | (4) | 5.8 | % | ||||
Margaret Cowley Wells | ||||||||
Darrell R. Wells Trust | ||||||||
4350 Brownsboro Road, Suite 310 | ||||||||
Louisville, KY 40207 | ||||||||
Neuberger Berman Group, LLC | 1,645,416 | (5) | 5.6 | % | ||||
1290 Avenue of the Americas | ||||||||
New York, NY 10104 | ||||||||
Kayne Anderson Rudnick Investment Management LLC | 1,534,878 | (6) | 5.3 | % | ||||
2000 Avenue of the Stars, Suite 1110 | ||||||||
Los Angeles, CA 90067 | ||||||||
Directors and executive officers of Bancorp and the Bank as a group (18 persons) | 1,101,505 | (7) | 3.7 | % |
(1) | Shares of Stock Yards Bancorp Common Stock subject to outstanding stock appreciation rights (“SARs”) that are currently exercisable or may become exercisable within the following 60 days under Stock Yards Bancorp’s Stock Incentive Plans are deemed outstanding for purposes of computing the percentage of Stock Yards Bancorp Common Stock beneficially owned by the person and group holding such SARs but are not deemed outstanding for purposes of computing the percentage of Stock Yards Bancorp Common Stock beneficially owned by any other person or group. |
(2) | Based upon Schedule 13G/A filed with the SEC |
(3) | Based upon Schedule 13G/A filed with the SEC on February 9, 2023. |
(4) | Based upon Schedule 13D filed jointly on behalf of each of the reporting persons with the SEC on March 1, 2023. Beneficial ownership information for the reporting persons is presented in the Schedule 13D as of the date of filing and is based upon the number of shares of our Common Stock outstanding as of January 31, 2023. Darrell R. and Margaret C. Wells are the parents of our current director and nominee, Laura L. Wells. We refer you to the section captioned “Commonwealth Bancshares Investor Agreement” on page 21 of this Proxy Statement for additional information regarding their rights to designate a qualified individual to serve on our Board of Directors, with our agreement. |
(5) | Based upon Schedule 13G filed with the SEC |
|
|
| Includes |
’ |
|
The following table shows the beneficial ownership of Stock Yards Bancorp, Inc.’s Common Stock as of December 31, 20202022 by each current director, each nominee for election as director and each individual included as a named executive officer.officer in the Summary Compensation Table appearing on page 51 of this Proxy Statement.
Name | Number of Shares Beneficially Owned(1) (2) (3) (4) | Percent of Stock Yards Bancorp Common Stock | |||
Paul J. Bickel III | 26,828 | (6) | (5) | ||
J. McCauley Brown | 14,173 | (7) | (5) | ||
William M. Dishman III | 64,517 | (8) | (5) | ||
David P. Heintzman | 286,107 | (9) | 1.25% | ||
Donna L. Heitzman | 10,726 | (10) | (5) | ||
Carl G. Herde | 51,452 | (5) | |||
James A. Hillebrand | 222,165 | (11) | (5) | ||
Richard A. Lechleiter | 27,966 | (12) | (5) | ||
Philip S. Poindexter | 95,373 | (13) | (5) | ||
Stephen M. Priebe | 24,704 | (5) | |||
John L. Schutte | 83,681 | (14) | (5) | ||
T. Clay Stinnett | 89,635 | (15) | (5) | ||
Norman Tasman | 314,907 | (16) | 1.37% | ||
Kathy C. Thompson | 76,887 | (5) |
Name | Number of Shares Beneficially Owned(1) (2) (3) (4) | Percent of Stock Yards Bancorp Common Stock | |
Shannon B. Arvin | 1,384 | * | |
Paul J. Bickel III | 30,453 | (5) | * |
J. McCauley Brown | 16,425 | (6) | * |
Allison J. Donovan | - | * | |
David P. Heintzman | 206,355 | * | |
Carl G. Herde | 48,683 | * | |
James A. Hillebrand | 213,998 | (7) | * |
Richard A. Lechleiter | 29,778 | (8) | * |
Philip S. Poindexter | 109,917 | (9) | * |
Stephen M. Priebe | 28,623 | * | |
Michael V. Rehm | 26,511 | * | |
Edwin S. Saunier | 6,668 | * | |
John L. Schutte | 87,205 | (10) | * |
T. Clay Stinnett | 104,425 | (11) | * |
Kathy C. Thompson | 53,052 | * | |
Laura L. Wells | 16,244 | (12) | * |
* Less than 1% of outstanding shares of Common Stock
(1) | Includes, where noted, shares in which members of the director’s, nominee’s or executive officer’s immediate family have a beneficial interest. The column does not, however, include the interest of certain of the listed directors, nominees or executive officers in shares held by other non-dependent family members in their own right. In each case, the principal disclaims beneficial ownership of any such shares, and declares that the listing in this Proxy Statement should not be construed as an admission that the principal is the beneficial owner of any such securities. |
(2) | Includes shares subject to outstanding SARs that are currently exercisable or may become exercisable within the following 60 days and unvested restricted shares issued under Stock Yards Bancorp’s Stock Incentive Plan(s) as follows: |
Name | Number of | Number of | ||||||
Arvin | 200 | 541 | ||||||
Bickel | 1,000 | 541 | ||||||
Brown | 1,500 | 541 | ||||||
Donovan | �� | - | - | |||||
Heintzman | 50,955 | 541 | ||||||
Herde | - | 541 | ||||||
Hillebrand | 102,132 | - | ||||||
Lechleiter | - | 541 | ||||||
Poindexter | 54,926 | - | ||||||
Priebe | - | 541 | ||||||
Rehm | 13,672 | - | ||||||
Saunier | 200 | 541 | ||||||
Schutte | 800 | 541 | ||||||
Stinnett | 42,746 | - | ||||||
Thompson | 5,959 | - | ||||||
Wells | - | - |
(3) | Includes shares |
Name | Number of | Number of | ||||||
Bickel | 600 | 730 | ||||||
Brown | 1,500 | 730 | ||||||
Dishman | 32,363 | - | ||||||
Heintzman | 111,277 | 730 | ||||||
Heitzman | 800 | 730 | ||||||
Herde | - | 730 | ||||||
Hillebrand | 114,732 | - | ||||||
Lechleiter | - | 730 | ||||||
Poindexter | 49,456 | - | ||||||
Priebe | 1,500 | 730 | ||||||
Schutte | 400 | 730 | ||||||
Stinnett | 38,913 | - | ||||||
Tasman | - | 730 | ||||||
Thompson | 12,626 | - |
|
|
Number | ||||
Name | of Shares | |||
Arvin | - | |||
Bickel | ||||
Brown | ||||
| ||||
Heintzman | - | |||
Herde | ||||
Hillebrand | ||||
Lechleiter | ||||
Poindexter | - | |||
Priebe | ||||
Saunier | 538 | |||
Schutte | ||||
| ||||
Wells | - |
(4) |
|
|
Number | ||||
Name | of Shares | |||
| ||||
Hillebrand | ||||
Poindexter | ||||
Rehm | 2,226 | |||
Stinnett | ||||
Thompson |
(5) |
|
| Includes 10,500 shares held jointly by Mr. Bickel and his |
(6) | Includes 3,987 shares held by Mr. Brown’s spouse. |
(7) | Includes |
(8) | Includes |
|
|
|
|
|
|
|
|
| Includes 291 shares held as custodian for Mr. Poindexter’s children. |
| Includes 23,073 shares held jointly by Mr. Schutte and his spouse and 2,250 shares |
| Includes |
| Includes |
DELINQUENT SECTION 16(a) REPORTS
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires our executive officers, our directors and persons who own more than 10% of a registered class of Stock Yards Bancorp’s Common Stock to file initial reports of ownership and changes in ownership with the SEC and the NASDAQ. Such executive officers, directors and shareholders are required by SEC regulations to furnish us with copies of all Section 16(a) forms they file. Based solely on a review of the copies of such forms furnished to us and written representations from the applicable executive officers and our directors, all persons subject to the reporting requirements of Section 16(a) filed the required reports on a timely basis for the year ended December31, 2020, with the exception of Michael Rehm, Executive Vice President and Chief Lending Officer of the Bank, who completed two open market sales transactions on July 24, 2020 and August 19, 2020, for a total of 1,755 shares and reported both transactions on November 3, 2020.
EXECUTIVE COMPENSATION AND OTHER INFORMATION
REPORT ON EXECUTIVE COMPENSATION
Compensation Discussion and Analysis
This compensation discussion and analysis (“CD&A”) describes the philosophy, objectives, process, components, and additional aspects of our 20202022 executive compensation program. This CD&A is intended to be read in conjunction with the tables and related narrative disclosure that immediately follow this section, which provide further historical compensation information for the following named executive officers (“NEOs”):
Name | Position |
James A. Hillebrand | Chairman and Chief Executive Officer (“Chairman/CEO”) |
Philip S. Poindexter | President |
T. Clay Stinnett | Executive Vice President and Chief Financial Officer (“CFO”) |
Kathy C. Thompson | Senior Executive Vice President and |
| Executive Vice President and Chief |
CD&A Reference Guide
Executive Summary | Section I |
Compensation Philosophy and Objectives | SectionII |
Compensation | Section |
Components of Our Compensation | Section |
| Section |
|
|
I. |
● | Despite incurring significant one-time acquisition costs, 2022 represented the strongest year in our history. Highlights for the year ended December 31, 2022 follow: | |
● | Completion of the Commonwealth Bancshares acquisition, which expanded our presence in Louisville and neighboring Shelby County and Northern Kentucky significantly | |
● | Record organic loan production | |
● | Substantial legacy loan growth across all markets | |
● | The Federal Reserve raised interest rates by 425 basis points, which coupled with our loan growth expanded net interest income and net interest margin | |
● | Increase in the allowance for credit loss on loans associated with loan growth and deterioration within the Federal Reserve’s future unemployment rate forecast | |
● | Record levels of non-interest income | |
● | Operating expenses remaining well-controlled | |
● | Pristine credit quality | |
● | Publication of our inaugural Environmental, Social and Governance (“ESG”) Corporate Responsibility Report |
20202022 Select Business Results
In 2020 we continued ourWe have a long-term track record of performing at the top of our peer group on key profitability measures such as return on average assets (“ROAA”) and return on average equity (“ROAE”). As shown below, which are common metrics within the banking industry and which allow us to directly compare our performance against similarly-sized and situated banking institutions. In 2022 and 2021, our profitability results were negatively impacted by $18.5 million and $20.7 million of tax effected one-time acquisition costs, respectively, which led to a decline in our performance metrics relative to our compensation peer group. However, calculation methodologies for 2020, our ROAEboth short-term and long-term performance metrics exclude one-time acquisition costs.
Our ROAA for 2022 totaled 1.25%, representing a decline from 1.33% reported in 2021. Compared to the compensation peer group, we ranked wellslightly above the 50th percentile. However, when adjusted to exclude one-time acquisition costs, ROAA equated to 1.50%* and 1.69%* in 2022 and 2021, respectively, and was at or above the 90th percentile for both periods.
Our ROAE of 12.58% for 2022 was slightly below the 50th percentile of the compensation peer group as it has for many years. Our ROAA for 2020and represented a decline from 13.02% in 2021. When adjusted to exclude one-time acquisition costs, ROAE was slightly belowsignificantly in excess of the 75th percentile of the compensation peer group.for 2022.
|
| ROAA |
| ROAE | ||
25th percentile |
| 0.75 | % |
| 6.65 | % |
50th percentile |
| 1.15 | % |
| 10.97 | % |
75th percentile |
| 1.42 | % |
| 12.82 | % |
90th percentile |
| 1.46 | % |
| 13.47 | % |
Stock Yards Bancorp |
| 1.40 | % |
| 14.01 | % |
ROAA | ROAE | |||||||
25th percentile | 1.01 | % | 10.37 | % | ||||
50th percentile | 1.22 | % | 12.70 | % | ||||
75th percentile | 1.38 | % | 13.75 | % | ||||
90th percentile | 1.50 | % | 16.14 | % | ||||
Stock Yards Bancorp – Actual | 1.25 | % | 12.58 | % | ||||
Stock Yards Bancorp – Adjusted* | 1.50 | % | 15.09 | % |
Financial Results
Net income increased 25% to $93.0 million, or $3.21 per diluted share, in 2022 compared to $74.6 million, or $2.97 per diluted share, in the prior year. Despite incurring $18.5 million in tax effected one-time acquisition costs, 2022 represented the strongest year in our history. Excluding one-time acquisition costs, net income would have increased 17% to $111.5 million*, or $3.86* per diluted share year over year. Our reported annual diluted EPS has trended as follows over the past five years. |
|
|
|
|
|
|
|
* Adjusted for one-time acquisition costs. This result represents a non-GAAP financial measure. See Appendix A for a reconciliation of GAAP and non-GAAP financial measures.
Operating Results
● |
|
● | Asset and credit quality remained strong, |
|
|
● | Total revenue, comprising fully |
20202022 Shareholder Return
● | 1-year total shareholder return (“TSR”): |
● | Substantial and sustained dividend payout ratio; rate raised |
● |
|
Performance Orientation of 20202022 Compensation
Chairman/CEO Compensation Majority Performance-Based (Equity and Total). The Compensation Committee (the “Committee”) of our Board of Directors is responsible for the design and administration of our executive compensation program. The Committee’s philosophy is to place at risk a significant portion of executive officers’ total compensation, making it contingent on Company performance while remaining consistent with our risk management policies. As such, the Committee has structured the majority of the compensation of the Chairman/CEO as variable, at-risk and subject to the achievement of performance goals in order to be earned. Approximately 52% of the Chairman/CEO’s grant date target total direct compensation, consisting of base salary, short-term incentive opportunity and long-term incentive opportunity, was variable, at-risk and performance-based. Seventy-five percent of the long-term incentive equity grants were performance-based and were in the form of performance share units (“PSUs”). These PSUs are subject to three-year performance metrics tied to our key operating goals and will vest at the end of a three-year performance period, subject to a mandatory one-year post-vesting holding period. The other 25% were in the form of time-based stock appreciation rights (“SARs”) that vest over five years.
Long-Term Incentives: 75% PSUs, 25% SARs; Three-Year Performance Period; High ThresholdTarget Performance Level. For the long-term incentive equity grants to executive officers, the Committee utilized PSUs to motivate operational achievement and link pay to performance, and SARs to motivate stock price appreciation over the long term, because they deliver value only if the stock price increases. For the grants in the form of PSUs, the Committee establishedmaintained three-year goals at the outset of the performance period for relative ROAA (85th percentile is target performance, representing a rigorous and challenging level of achievement that was increased from the 80th percentile in 2019)achievement) and cumulative EPS, the target for which reflects a solid growth rate.
Assessed CriteriaKey 2022 Executive Compensation Decisions and Updated Peer Group. The Committee evaluates annually the group of peer companies used as a reference point for evaluating executive compensation. Outcomes
In connection with determining 20202022 executive compensation, the Committee reviewed its criteria, in part because of pending acquisitions by the Company’s having fallen to the 38th percentile by revenue of the existing peer group.Company. As part of this review, the Committee determined to maintain its key criteria but change some of the size ranges, which led to the removal of fourseven companies and the addition of twoten companies. As a result, the Company moved closer to the median for annual revenue and assets.
COVID-19-Related Actions
Operating results for the year were lower compared to the record results posted in 2019, primarily due to pandemic-related increases in loan loss provisioning. Despite solid traditional credit metrics, we recorded a significant provision for credit losses (“provision”) during the past year. The 2020 provision expense was $16.9 million, compared to $1.0 million in 2019, based on our adoption of the new CECL provisioning methodology as required under the relevant accounting standards, the expected impact of the COVID-19 pandemic on forecasted unemployment and changing macro-economic conditions, and qualitative factor adjustments. In light of the unique circumstances in 2020, the Committee reviewed the effect of the COVID-19 pandemic on Company performance and thus on incentive programs, and determined it was in the best interests of shareholders and participants to make responsible, one-time adjustments to both performance goals and to payout opportunities, which were lowered, in recognition of the impact of the pandemic on our business. These one-time adjustments were applied only to the 2020 Short-Term Incentive Plan, and neither the criteria nor the payout opportunities under either the 2020 Long-Term Incentive Plan or any outstanding PSUs were adjusted.
These actions occurred amid broader considerations of the impact of COVID-19 on the Company. Specifically, we took actions to protect our employees and prioritize their well-being, including the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Annual Cash Incentives. In light of the impact of the COVID-19 pandemic on financial performance, on September 15, 2020, the Committee made the decision to shift the EPS metrics from a GAAP EPS amount to a pre-provision EPS amount for the full year. Provision is the aspect of performance that is most volatile and most materially affected by COVID-19 and related economic impacts in 2020. We believe that pre-provision EPS more accurately reflected our fundamental performance in 2020 and is a better indicator of the long-term impacts of 2020 performance. In light of this change, and in recognition of shareholder expectations and views on mid-cycle changes, the Committee also reduced each payout opportunity level by 50% in recognition of the adjusted metric in an unprecedented year. Line of business goals for line of business executives such as Ms. Thompson were unchanged, but the associated payout component was lowered by 25%.
Long-Term Incentive Equity. During the discussion of changes to annual cash incentives, the Committee determined to leave the goals and structure of all aspects of PSUs and SARs unchanged given the long-term horizon of such awards.
Key 2020 Executive Compensation Decisions and Outcomes
In 2020, we had strong fundamental performance, outperformed our peers, and took prudent compensation action to balance shareholder experience, GAAP performance, core performance, future expectations and executive interests.
Base Salaries. BaseThe Committee reviewed our NEOs’ base salaries, determined that those salaries lagged the peer median in part because of its decision not to increase NEOs’ base salaries for 2021, and approved base salary increases ranged from zero to 3.7% dependingas discussed further on changes in market data, the time since the executive received a salary adjustment and other factors. page 42.
Annual Cash Incentives. The Compensation Committee undertook a rigorous process to set the performance targets for 2020. As the effects of the pandemic unfolded, it became clear to the Committee that our Threshold level of corporate EPS under our annual incentive plan would likely not be attained due primarily to increased loan loss provision, and that annual incentive payments for at least four of our executives would be eliminated entirely. The Committee did not believe that our core operating performance warranted elimination of annual incentive payouts and therefore made adjustments as described on page 35.
2022. Annual cash incentive opportunities for fourthree of our NEOs, Messrs. Hillebrand, Poindexter Stinnett and Dishman,Stinnett, are tied exclusively to corporate profitability, as measured by EPS. Ms. Thompson’s and Mr. Rehm’s short-term incentive plan incorporatesplans incorporate goals related to hertheir line of business responsibilities as well as Company-wide profitability.
Messrs. Hillebrand, Poindexter, Stinnett and DishmanStinnett
The primary performance metric utilized for Messrs. Hillebrand, Poindexter, and Stinnett and Dishman was diluted EPS. The initial target performance goal for 20202022 was set below25% higher than the prior year amount in recognition of unique circumstances associated with changes to accounting rules and the one-time benefit observed in 2019, but the goal nevertheless required strong performance to achieve above-target payouts even after the COVID-related adjustments.2021 EPS target.
The EPS metric hadmaintained a performance threshold of 96%94% of target and a performance maximum of 104%107% of target. The Committee uses EPS because it believes EPS drives long-term shareholder return, as it represents the culmination of executive officers’ efforts regarding profitability, revenue growth, expense control, risk profile and other elements.
The revised target annual incentive plan opportunities of each of Messrs. Hillebrand, Poindexter, Stinnett and DishmanStinnett were denominated as a percentage of base salary based on external and internal factors applicable to the positions held by these individuals, among other things, and ranged from 15%35% to 25%50% of base salary. Payouts were capped at 200% of the lowered target payout.
Company-wide performance accounted for 100% of the annual incentive plan opportunity for Messrs. Hillebrand, Poindexter, Stinnett and Dishman;Stinnett; there was no allocation to individual performance goals. All of our eligible executive officersNEOs participate in the annual incentive plan on the same terms, other than the target percentage of base salary, andsalary. Ms. Thompson hasand Mr. Rehm have additional components relating to her areatheir respective areas of responsibility.
As described above, GAAP EPS decreased 10%increased 8% to $2.59$3.21 per diluted share, driven largely by a dramatic increase in provision for potential future loan losses due to the combination of CECL adoptionCommonwealth acquisition, substantial organic growth and the pandemic. On a pre-provision basis, ourrecord non-interest income. This EPS was $3.17 compared to a Target of $2.89, whichresult led to short-term incentive payouts to Messrs. Hillebrand, Poindexter, Stinnett and DishmanStinnett at 200% of Target.target.
Ms. Thompson
Ms. Thompson’s short-term incentive includes three components: income before overhead allocations and taxes, consolidated EPS of the Company, and net new business. Ms. Thompson’s incentive is weighted 75% for her line of business and 25% for overall Company performance, and the Committee considers her line of business goals to be appropriately challenging to attain. Financial results drove theMs. Thompson’s short-term incentive payout for 2022 was 125% of target.
Mr. Rehm
Mr. Rehm’s short-term incentive includes two components: production (& other) goals and consolidated EPS of the Company. Mr. Rehm’s incentive is weighted 75% for his line of business and 25% for overall Company performance, and the Committee considers his line of business goals to Ms. Thompson at 200%be appropriately challenging to attain. Mr. Rehm’s short-term incentive payout for 2022 was 191% of target.
Long-Term Incentive Equity. TheAs in 2021, the Company’s 20202022 long-term incentives consisted of 75% PSUs (by grant date value) that vest based on performance over a three-year measurement period, and 25% SARs that vest over five years. No pandemic-related changes were implemented to our long-term incentive awards granted in 2022 or prior years.
The performance metrics for the PSUs, which are weighted 50% each, are three-year relative ROAA, with the target set at the 85th percentile and the threshold set at the 80th percentile of the peer group, a very challenging relative level of performance; and three-year cumulative EPS, a true long-term performance period using a metric viewed as central to increasing long-term shareholder value. These objectives were increased from the 2019 plan, which used a target goal of the 80th percentile and a threshold goal of the 75th percentile, as a reflection of our high performance expectations relative to our peers and the broader banking market.
No pandemic-related changes were implemented to our long-term incentive awards granted in 2020 or prior years.
PSUs granted in 20182020 vested as of December 31, 20202022, and will be certified and distributed by March 31, 2021.2023. Based on our aggregate EPS for the three-year performance period 2018-20202020-2022 and preliminary data indicating that our average adjusted ROAA for the three-year performance period of 1.68% significantly1.53%* exceeded the 90th percentile of the comparator group, we expect that recipients will be awarded grants on the EPS portion at targetthe maximum performance level and the ROAA portion at the maximum performance levels.
Increased Stock Ownership Guidelines. In November 2020 the Committee’s regular review of our stock ownership guidelines led us to increase the multiple for our Chairman/CEO from 5x to 6x to remain in a leadership position.level.
2021 Compensation Decisions. In early 2021, we determined to forego salary increases* Adjusted for anyone-time acquisition costs. This result represents a non-GAAP financial measure. See Appendix A for a reconciliation of our NEOs for 2021 in light of the ongoing pandemicGAAP and economic uncertainty. In addition, we anticipate that our 2021 annual incentive program will revert to its historical design rather than utilizing the modified design adopted in 2020 in response to the pandemic. We also anticipate maintaining our customary performance-oriented long-term incentive design for our equity awards in 2021.non-GAAP financial measures.
Connecting Pay and Performance
In 2020, Stock Yards Bancorp continued to generate performance superior to a substantial majority of our peer companies as measured by key metrics. Our record of consistently higher long-term financial performance has in turn driven our long-term shareholder returns and key financial metrics to impressive levels relative to our peers. Consistent with our pay-for-performance philosophy, a substantial portion of annual target total direct compensation is variable, at-risk pay. We consider compensation to be “at risk” and performance-based if it is subject to operating performance or if its value depends on stock price appreciation.
The following charts demonstrate the positioning of our ROAA and ROAE compared to the peer group described on page 2939 over each of the last five years. As shown below, our ROAE and ROAA have consistently ranked in the top 10%25% of our peer group in every one of the last five years, and our ROAA ranked in the top 10% of the peer group every year exceptuntil 2020. Our ROAA in 2020 was2021 and 2022 profitability results were negatively impacted by one-time expenses related to the Company’s election to adopt CECLacquisitions of Kentucky Bancshares ($20.7 million net of tax) and the outsized balance sheet growth attributed to lower-yielding loans under the Paycheck Protection Program (“PPP”)Commonwealth Bancshares ($18.5 million net of tax). In addition,Even with that slight decline in profitability, our average ROAA over that five-year period was inat the 9990th percentile of our peer group, and our average ROAE over that period was higher than that of anyat the 96th percentile of our peers.peer group.
The following chart compares our five-year total shareholder return (TSR) to the median TSR of our compensation peer group and an additional industry peer group.
Source: S&P Global Market Intelligence. Market pricing data as of December 31, 2020.2022.
(1) | TSR equals the return of a security over a period, including price appreciation and the reinvestment of dividends. Dividends are assumed to be reinvested at the closing price of the security on the ex-date of the dividend. |
|
(2) | See page |
(3) | Nationwide peers representing |
The Committee believes stock price closely mirrors earnings growth over the long-term, and management should be incentedincentivized with respect to performance measures related to the operations of the Company. Over the short term, stock price is not controllable by management and should not be a tool to judge management’s performance. We believe our EPS growth aligns management’s interests with shareholders and drives total returnthus having EPS as a common focus in the Company’s annual and long-term incentive programs is in the best interest of shareholders. While the annual and long-term incentive programs use different EPS goals, together the programs drive shareholder value creation over the long term.time.
Additionally, the Committee believes that it uses appropriately challenging targets in setting goals for both short-term and long-term incentives, and that the Company’s financial results must significantly exceed peer median performance in order to achieve target-level awards. For example,Payouts for the EPS component under our short-term incentive programs require a minimum threshold of diluted EPS in order for bonuses to be earned. Under the Company’s performance share goals, executives do not achieve target award vesting for the ROAA component of our PSU program unless our ROAA exceeds the 85th percentile of our comparator group (which is comprised of all publicly-tradedpublicly traded banks with $1.5$6.0 to $7.0$16.0 billion in assets), and no awards are earned if our ROAA does not exceed the 80th percentile of our comparator group.
Say-on-Pay Results
At the 20202022 Annual Meeting of Shareholders, 97.4%98% of the votes were cast in favor of the advisory vote to approve executive compensation, commonly known as “say-on-pay.” This vote is consistent with the 2019 result.recent vote results. The Committee believes its compensation practices are properly aligned with the interests of shareholders, and that the high level of shareholder support of our 20202022 say-on-pay proposal indicates that most shareholders share the Committee’s view.
Compensation Program Governance
The Committee continually reviews its policies and procedures to ensure they are consistent with strong corporate governance guidelines. This also includes education around governance best practices and their bearing on the Company and its executive compensation program.
What We Do: |
| What We Don’t Do: |
Align pay and performance | No guaranteed bonuses – incentive compensation may be reduced to zero if financial metrics are not met | |
Engage an independent third-party compensation consultant for advice in making compensation decisions |
| No |
|
| No |
|
| No |
|
| No |
Maintain |
| No |
Maintain |
| No |
|
|
II. |
Our compensation philosophy guides the design and decisions of our compensation program to achieve the following objectives:
● | To attract, retain, and motivate top executive talent; |
● | To link overall compensation to company performance; |
● | To align executive interests with shareholder interests; |
● | To place a significant portion of total compensation at risk, making it contingent on Company performance while remaining consistent with our risk management policies; and |
● | To support the Company’s objective of creating shareholder value without taking unnecessary risks. |
The Committee believes that the Company’s pay policies and practices do not create risks reasonably likely to have a material adverse effect on the Company.
III. |
Role of the Compensation Committee
The Committee assists our Board in establishing our compensation philosophy and determining the compensation of our executive officers. The Committee is also responsible for determining the structure and components of our programs, as well as reviewing and approving the compensation of the NEOs, or recommending it for approval by the Board of Directors. The Committee is responsible for annually assessing the performance of the executive officers, including the NEOs, and for determining their annual salary, incentive (short- and long-term) compensation goals and payout/grant levels. Each of the four members of our Committee is independent as is defined under NASDAQ listing standards.
The Committee held eightseven meetings during 2020,2022, and its actions included finalizing all aspects of 20202022 executive compensation. The Committee:Committee in 2022, among other items:
● | Reviewed its compensation philosophy |
|
|
● |
|
● | Reviewed the Committee charter |
● | Reviewed the Company’s |
● | Established the performance-based metrics and targets for the annual incentive plans |
● | Established the design, award mix and performance goals for the long-term incentive plan |
● | Evaluated achievement relative to performance targets, and determined and certified corresponding incentive payouts |
● | Reviewed and | |
● | Reviewed the stock ownership guidelines for our executive officers |
● | Discussed executive succession planning |
● | Reviewed the Company-wide retirement plan programs, and |
● | Received education on compensation trends, compliance issues and best practices from the Committee’s compensation consultants, McLagan. |
Ultimately, the Committee’s decisions are based on a variety of factors, including short- and long-term Company performance, the officer’s level of responsibility, an assessment of individual performance, and competitive market data.
Role of Executives in Compensation Committee Deliberations
The Committee works closely with the CEO, and the CEO attends Committee meetings to discuss the Company’s compensation and performance matters, particularly as it relates to the other executive officers. For each executive officer other than himself, the CEO presents annual evaluations of such officers and makes recommendations to the Committee regarding their compensation. This assessment considers such factors as our achievement of goals related to corporate, division, function, and individual performance. Our CEO does not play any role with respect to any matter affecting his own compensation and is not present when the Committee discusses and formulates its compensation recommendation for the CEO. The Committee reviews recommendations made by its CEO and information from the executive compensation consultant review. The Committee sets the compensation for our CEO and each of our NEOs at its meetings in the first quarter of each year and subsequently reports its compensation decisions to the full Board of Directors.
The general counsel of the Company works with the Committee Chair to provide administrative support and, along with other executives, provide pertinent financial, tax, accounting, or operational information. Other executives, such as those from human resources or finance, may attend meetings from time-to-time to provide their insights and suggestions on pertinent topics. Only Committee members may vote on decisions regarding executive compensation. The Committee regularly conducts a portion of its business in executive session.
Role of the Compensation Consultant
The Committee views it as important to obtain objective, independent expertise and advice in carrying out its responsibilities, and has the power to retain an independent compensation consultant to assist it in the performance of its duties and responsibilities. The Committee has retained an independent executive compensation consultant to assist in evaluating the compensation practices at the Company and to provide advice and ongoing recommendations regarding executive compensation consistent with our business goals and pay philosophy.
In 2020,2022, the Committee continued to engage McLagan, which is part of the RewardsHuman Capital Solutions practice at Aon plc, to provide executive compensation consulting services regarding our compensation programs and pay levels. The scope of McLagan’s executive compensation consulting assignment included the ongoing evaluation of the appropriateness of our peer group of banks as well as a comparison of management’s base salaries, annual cash incentive awards and equity-based compensation to those paid by the banks in the peer bank group. The Committee used data developed by McLagan among the various factors that informed its determination of executive officer pay. While the Committee takes into consideration the review and recommendations of McLagan when making decisions about our executive compensation program, ultimately, the Committee makes its own independent decisions about compensation matters.
McLagan reports directly to and performed services solely on behalf of the Committee and has no other relationship with the Company or its management. The Committee has assessed the independence of McLagan consistent with SEC rules and NASDAQ listing standards and has concluded that McLagan’s work did not involve any conflicts of interest.
Peer Selection Process
Each year, the Committee re-evaluates and updates the peer group, with the consultant’s guidance, to ensure ongoing relevance. The Committee uses this information for making compensation decisions, such as changes to base salaries, annual cash incentive awards, and long-term equity awards.
For 20202022 compensation, the Committee worked with the consultant in 20192021 to select peer banks using the following criteria as of March 31, 2019.2021. The chosen criteria were essentially consistent with the prior year:year and took into consideration the Company’s size given the possibility of future acquisitions and growth in certain criteria:
● |
|
● | Total revenue from |
● | Total assets less than |
● | Insider ownership less than 35% with no single holder owning more than 15%; |
● | Publicly traded for at least one calendar year; | |
● | Non-interest income greater than 15% of total revenue; |
● | Market capitalization greater than |
● | Located in markets with populations greater than 100,000; | |
● | Non-performing assets / total assets less than 3.0%; and |
● | Return on average assets greater than 0.5%. |
Based on these criteria fouras well as acquisitions, the Committee removed seven companies were removed from the peer group used for 20202022 compensation decisions: HeritageBoston Private Financial, Bryn Mawr Bank Corp., Cambridge Bancorp, Farmers National Banc Corp., First Financial Corp., Great SouthernHills Bancorp, Inc., Access Nationaland Mercantile Bank Corp. and, Peoples Utah Bancorp. TwoEleven new companies met the criteria and were added to the peer group: National Bank Holdings Corp. and HomeTrust Bancshares Inc.group.
The table below lists the peer banks approved by the Compensation Committee for 2020:
2022 compensation decisions, with the newly added peer companies shown in italics:
|
| |
|
| |
City Holding |
| |
Enterprise Financial Services | QCR Holdings Inc | |
First Busey Corp. | Sandy Spring Bancorp Inc. | |
First Financial Bankshares | Seacoast Banking | |
| South Plains Financial Inc. | |
Great Southern Bancorp Inc. | Southside Bancshares Inc. | |
|
| |
Horizon Bancorp Inc. | Tompkins Financial Corp. | |
Independent Bank Corp. | Univest | |
| Veritex Holdings | |
MidWestOne Financial Group Inc. | Washington Trust Bancorp Inc. | |
|
Our total revenue, asset size, net income and market capitalization and that of the peer group as ofestablished for 2022 compensation decisions, using the March 31,st, 2019 2021 data considered by the Committee when establishing the peer group, effective date are set forth in the following table.table:
Peer Bank Name, Ticker, State | Total Revenue | Total Assets | Net Income | Market Capitalization | ||||||||||||
Dollars in millions | ||||||||||||||||
Bryn Mawr Bank Corporation (BMTC) PA | $ | 225 | $ | 4,632 | $ | 59,183 | $ | 729 | ||||||||
Carolina Financial Corporation (CARO) SC | 175 | 3,482 | 60,159 | 771 | ||||||||||||
City Holding Company (CHCO) WV | 208 | 4,917 | 74,005 | 1,256 | ||||||||||||
Enterprise Financial Services Corp. (EFSC) MO | 236 | 6,932 | 84,452 | 1,096 | ||||||||||||
Farmers National Banc Corp. (FMNB) OH | 106 | 2,356 | 32,084 | 383 | ||||||||||||
HomeTrust Bancshares Inc. (HTBI) NC | 127 | 3,458 | 26,340 | 460 | ||||||||||||
Independent Bank Corp. (IBCP) MI | 163 | 3,384 | 40,059 | 507 | ||||||||||||
National Bank Holdings Corp. (NBHC) CO | 271 | 5,803 | 71,909 | 1,033 | ||||||||||||
Nicolet Bankshares, Inc. (NCBS) WI | 147 | 3,041 | 41,726 | 564 | ||||||||||||
Old Second Bancorp Inc. (OSBC) IL | 125 | 2,624 | 40,668 | 376 | ||||||||||||
Peapack-Gladstone Financial Corporation (PGC) NJ | 163 | 4,662 | 44,788 | 510 | ||||||||||||
QCR Holdings, Inc. (QCRH) IL | 192 | 5,067 | 45,507 | 534 | ||||||||||||
Seacoast Banking Corp. of Florida (SBCF) FL | 273 | 6,783 | 71,953 | 1,355 | ||||||||||||
Southside Bancshares, Inc. (SBSI) TX | 210 | 6,217 | 76,704 | 1,120 | ||||||||||||
United Community Financial Corp. (UCFC) OH | 112 | 2,852 | 35,728 | 457 | ||||||||||||
Univest Corporation of Pennsylvania (UVSP) PA | 224 | 5,036 | 53,772 | 716 | ||||||||||||
Washington Trust Bancorp, Inc. (WASH) RI | 197 | 5,035 | 69,716 | 833 | ||||||||||||
Median | $ | 192 | $ | 4,662 | $ | 53,772 | $ | 716 | ||||||||
Stock Yards Bancorp, Inc. | $ | 162 | $ | 3,281 | $ | 57,755 | $ | 772 |
Five banks in the original peer group no longer meet the selection criteria of the peer group due to merger and acquisition activity and are thus omitted from the peer performance comparisons shown in this proxy statement. Those five former peers are Carolina Financial Corp., Enterprise Financial Services, Seacoast Banking Corp. of FL, Southside Bancschares, Inc. and United Community Financial Corp.
Peer Bank Name (Ticker) State | Total Revenue | Total Assets | Market Capitalization | |||||||||
Dollars in Millions | ||||||||||||
Amerant Bancorp Inc. (AMTB) FL | 254 | 7,751 | 704 | |||||||||
Capital City Bank Group Inc. (CCBG) FL | 226 | 3,930 | 438 | |||||||||
City Holding Company (CHCO) WV | 218 | 5,894 | 1,286 | |||||||||
Enterprise Financial Services Corp. (EFSC) MO | 338 | 10,191 | 1,545 | |||||||||
First Busey Corp. (BUSE) IL | 401 | 10,760 | 1,394 | |||||||||
First Financial Bankshares (FFIN) TX | 504 | 12,103 | 6,649 | |||||||||
First Merchants Corp. (FRME) IN | 493 | 14,629 | 2,509 | |||||||||
Great Southern Bancorp Inc. (GSBC) MO | 214 | 5,604 | 776 | |||||||||
HomeStreet Inc. (HMST) WA | 373 | 7,265 | 941 | |||||||||
Horizon Bancorp Inc. (HNBC) IN | 234 | 6,056 | 817 | |||||||||
Independent Bank Corp. (IBCP) MI | 220 | 4,426 | 515 | |||||||||
International Bancshares Corp. (IBOC) TX | 528 | 14,922 | 2,941 | |||||||||
MidWestOne Financial Group Inc. (MOFG) IA | 194 | 5,737 | 495 | |||||||||
National Bank Holdings Corp. (NBHC) CO | 338 | 6,950 | 1,225 | |||||||||
Nicolet Bankshares, Inc. (NCBS) WI | 202 | 4,544 | 835 | |||||||||
Park National Corp. (PRK) OH | 468 | 9,914 | 2,112 | |||||||||
Peapack-Gladstone Financial Corporation (PGC) NJ | 193 | 5,970 | 588 | |||||||||
QCR Holdings, Inc. (QCRH) IL | 293 | 5,645 | 748 | |||||||||
Sandy Spring Bancorp (SASR) MD | 517 | 12,873 | 2,049 | |||||||||
Seacoast Banking Corp. of Florida (SBCF) FL | 331 | 8,812 | 2,004 | |||||||||
South Plains Financial Inc. (SPFI) TX | 231 | 3,733 | 410 | |||||||||
Southside Bancshares, Inc. (SBSI) TX | 237 | 6,999 | 1,258 | |||||||||
The First Bancshares (FBMS) MS | 203 | 5,443 | 769 | |||||||||
Tompkins Financial Corp. (TMP) NY | 302 | 8,095 | 1,233 | |||||||||
Univest Corp. of Pennsylvania (UVSP) PA | 261 | 6,417 | 840 | |||||||||
Veritex Holdings Inc. (VBTX) TX | 318 | 9,238 | 1,617 | |||||||||
Washington Trust Bancorp, Inc. (WASH) RI | 233 | 5,719 | 894 | |||||||||
Median | 261 | 6,950 | 941 | |||||||||
Stock Yards Bancorp, Inc. | 247 | 5,995 | 1,163 |
Referencing the Competitive Market in Determining 20202022 Compensation
The Committee considers a number ofseveral factors in determining appropriate pay levels and plan designs for our NEOs. These factors include competitive compensation data from peer companies and the banking market in general. The Committee does not view competitive market prescriptively or tie the compensation levels of our executives to specific market percentiles. Instead, the Committee applies judgment and discretion in establishing targeted pay levels, considering not only competitive market data, but also factors such as company, business unit and individual performance, scope of responsibility, internal pay equity, skill sets, leadership potential and succession planning.
Mix of Pay
We believe that our executive compensation program strikes an appropriate balance between fixed and variable pay as well as between short and long-term pay. The following charts for our CEO and our other NEOs illustrate the target compensation established in early 2020,2022, consisting of base salary, annual incentive awards, and long-term equity-based compensation granted in 2020.
2022.
Name | Salary | Target Bonus % | Target Bonus | PSUs | SARs | Total | ||||||||||||||||||
Hillebrand | $ | 560,000 | 50 | % | $ | 280,000 | $ | 252,000 | $ | 84,000 | $ | 1,176,000 | ||||||||||||
Poindexter | 396,000 | 40 | % | 158,400 | 142,560 | 47,520 | 744,480 | |||||||||||||||||
Thompson | 364,000 | 35 | % | 127,400 | 114,660 | 38,220 | 644,280 | |||||||||||||||||
Stinnett | 317,000 | 35 | % | 110,950 | 99,855 | 33,285 | 561,090 | |||||||||||||||||
Dishman | 289,000 | 30 | % | 86,700 | 78,030 | 26,010 | 479,740 |
Name | Salary | Target Bonus % | Target Bonus | PSUs | SARs | Total | ||||||||||||||||||
Hillebrand | $ | 710,000 | 50 | % | $ | 355,000 | $ | 319,500 | $ | 106,500 | $ | 1,491,000 | ||||||||||||
Poindexter | 465,000 | 40 | % | 186,000 | 167,400 | 55,800 | 874,200 | |||||||||||||||||
Stinnett | 400,000 | 35 | % | 140,000 | 126,000 | 42,000 | 708,000 | |||||||||||||||||
Thompson | 385,000 | 35 | % | 134,750 | 121,275 | 40,425 | 681,450 | |||||||||||||||||
Rehm | 335,000 | 35 | % | 117,250 | 105,525 | 35,175 | 592,950 |
As demonstrated above, variable pay at target for the CEO represents 52% of direct compensation. However, when the BankCompany performs at maximum, payouts for variable pay significantly increase commensurate with that outperformance.
As discussed elsewhere, the award opportunities under our cash incentive plan were reduced during 2020 in response to the pandemic, which had the effect of de-emphasizing cash incentives within the overall 2020 executive compensation program.
Each compensation element is discussed in more detail below and outlined in more detail in the 20202022 Summary Compensation Table and 20202022 Grants of Plan-Based Awards Table appearing on pages 4151 and 4352 of this proxy statement.
(2) |
|
(3) |
|
Year | Summary Compensation Table Total for James A. Hillebrand | Exclusion of Change in Pension Value for James A. Hillebrand | Exclusion of Stock Awards and Option Awards for James A. Hillebrand | Inclusion of Pension Service Cost for James A. Hillebrand | Inclusion of Equity Values for James A. Hillebrand | Compensation Actually Paid to James A. Hillebrand | ||||||||||||
2022 | 1,962,364 | — | (425,974) | — | 775,702 | 2,312,092 | ||||||||||||
2021 | 1,548,814 | — | (335,971) | — | 2,151,509 | 3,364,352 | ||||||||||||
2020 | 1,268,318 | — | (335,992) | — | 189,729 | 1,122,055 |
Year | Average Summary Compensation Table Total for Non-PEO NEOs | Average Exclusion of Change in Pension Value for Non-PEO NEOs | Average Exclusion of Stock Awards and Option Awards for Non-PEO NEOs | Average Inclusion of Pension Service Cost for Non-PEO NEOs | Average Inclusion of Equity Values for Non-PEO NEOs | Average Compensation Actually Paid to Non-PEO NEOs | ||||||||||||
2022 | 898,772 | — | (173,373) | — | 307,892 | 1,033,291 | ||||||||||||
2021 | 786,865 | — | (144,998) | — | 934,080 | 1,575,947 | ||||||||||||
2020 | 701,121 | 25,092 | (145,022) | — | 53,137 | 634,328 |
Ms. Thompson was the only NEO who had a pension benefit in 2020; however, the company did not incur any service cost that year related to her pension benefit.
The amounts in the Inclusion of Equity Values in the tables above are derived from the amounts set forth in the following tables:
Year | Year-End Fair Value of Equity Awards Granted During Year That Remained Unvested as of Last Day of Year for James A. Hillebrand | Change in Fair Value from Last Day of Prior Year to Last Day of Year of Unvested Equity Awards for James A. Hillebrand | Vesting-Date Fair Value of Equity Awards Granted During Year that Vested During Year for James A. Hillebrand | Change in Fair Value from Last Day of Prior Year to Vesting Date of Unvested Equity Awards that Vested During Year for James A. Hillebrand | Fair Value at Last Day of Prior Year of Equity Awards Forfeited During Year for James A. Hillebrand | Value of Dividends or Other Earnings Paid on Equity Awards Not Otherwise Included for James A. Hillebrand | Total - Inclusion of | |||||||||||||||||||||
2022 | 771,361 | 173,137 | — | (168,796 | ) | — | — | 775,702 | ||||||||||||||||||||
2021 | 616,247 | 1,321,359 | — | 213,903 | — | — | 2,151,509 | |||||||||||||||||||||
2020 | 448,012 | (134,559 | ) | — | (123,724 | ) | — | — | 189,729 |
Year | Average Year-End Fair Value of Equity Awards Granted During Year That Remained Unvested as of Last Day of Year for Non-PEO NEOs | Average Change in Fair Value from Last Day of Prior Year to Last Day of Year of Unvested Equity Awards for Non-PEO NEOs | Average Vesting-Date Fair Value of Equity Awards Granted During Year that Vested During Year for Non-PEO NEOs | Average Change in Fair Value from Last Day of Prior Year to Vesting Date of Unvested Equity Awards that Vested During Year for Non-PEO NEOs | Average Fair Value at Last Day of Prior Year of Equity Awards Forfeited During Year for Non-PEO NEOs | Average Value of Dividends or Other Earnings Paid on Equity Awards Not Otherwise Included for Non-PEO NEOs | Total - Average Inclusion of | |||||||||||||||||||||
2022 | 313,948 | 77,332 | — | (83,388 | ) | — | — | 307,892 | ||||||||||||||||||||
2021 | 265,959 | 569,898 | — | 98,223 | — | — | 934,080 | |||||||||||||||||||||
2020 | 193,372 | (68,969 | ) | — | (71,266 | ) | — | — | 53,137 |
(4) |
|
(5) | We determined adjusted diluted earnings per share to be the most important financial performance measure used to link Company performance to Compensation Actually Paid to our PEO and non-PEO NEOs in 2022. This figure is adjusted for one-time acquisition costs. See Appendix A for a reconciliation of adjusted diluted earnings per share to our GAAP financial measures. This performance measure may not have been the most important financial performance measure for years 2021 and 2020 and we may determine a different financial performance measure to be the most important financial performance measure in future years. |
Relationship Between Compensation Actually Paid and Company Total Shareholder Return (“TSR”)
The following chart sets forth the relationship between Compensation Committee, with advice and assistance from McLagan, its independent consultant, reviews Board compensation at least every two years. Their reviewActually Paid to our PEO, the average of director compensation includes surveys of benchmark institutionsCompensation Actually Paid to our non-PEO NEOs, and the related form and substance of how directors are compensated, including comparative analyses ofCompany’s cumulative TSR over the Company’s director compensation program relative to its peer group. For 2020, non-employee directors received an annual retainer of $18,000. Stock Yards Bancorp’s directors are also directors of the Bank, and received $1,625 for each Bank board meeting attended and $1,625 for each meeting of Stock Yards Bancorp’s Board of Directors he or she attended, if the meeting was not held immediately before or after a meeting of the Board of Directors of the Bank.three most recently completed fiscal years.
For 2020, non-employee directors
Relationship Between Compensation Actually Paid and Net Income
The following chart sets forth the relationship between Compensation Actually Paid to our PEO, the average of Stock Yards BancorpCompensation Actually Paid to our non-PEO NEOs, and our net income during the Bank who are members of the various standing committees of the Board of Directors received $1,200 per meeting of Bancorp’s Audit Committee, $800 per meeting of Bancorp’s Compensation Committee, $800 per meeting of Bancorp’s Nominating and Corporate Governance Committee, $900 per meeting of Bancorp’s Risk Committee and $800 per meeting of the Bank’s Trust Committee.three most recently completed fiscal years.
Relationship Between Compensation Actually Paid and Adjusted Diluted Earnings Per Share
The following chart sets forth the relationship between compensation Actually Paid to our PEO, the average of Compensation Actually Paid to our non-PEO NEOs, and our Adjusted Diluted Earnings Per Share during the three most recently completed fiscal years.
* | Adjusted for one-time acquisition costs. This result represents a non-GAAP financial measure. See Appendix A for a reconciliation of GAAP and non-GAAP financial measures. |
Relationship Between Company TSR and Peer Group TSR
The following chart compares our cumulative TSR over the three most recently completed fiscal years to that of the KBW NASDAQ Bank Index over the same period.
Tabular List of Most Important Financial Performance Measures
The following table presents the financial performance measures that the Company considers to have been the most important in linking Compensation Actually Paid to our PEO and each of the non-PEO NEOs for 2022 to Company performance. The measures in this table are not ranked. We refer you to the section captioned “Compensation Discussion and Analysis” beginning on page 31 of this Proxy Statement for a discussion of each of these measures and how they are used in our executive compensation program.
James A. Hillebrand | Philip S. Poindexter | T. Clay Stinnett | Kathy C. Thompson | Michael V. Rehm |
Adjusted Diluted Earnings Per Share | Adjusted Diluted Earnings Per Share | Adjusted Diluted Earnings Per Share | Adjusted Diluted Earnings Per Share | Adjusted Diluted Earnings Per Share |
Return on Average Assets | Return on Average Assets | Return on Average Assets | Return on Average Assets | Return on Average Assets |
Net New Business* Income Before Overhead Allocation and Taxes* | Loan Growth |
* | Two of Ms. Thompson’s financial measures, net new business and income before overhead allocation and taxes, relate strictly to her line of business, wealth management and trust. |
In addition, the Chairman of the Audit Committee received an annual retainer of $11,000, the Chairman of the Compensation Committee received an annual retainer of $7,500, the Chairman of the Nominating and Corporate Governance Committee received an annual retainer of $5,000, the Chairman of the Risk Committee received an annual retainer of $9,000, the Chairman of the Trust Committee received an annual retainer of $5,000 and the Lead Independent Director received an annual retainer of $7,500. Annual retainers are prorated if a director serves in a position for a portion of the year.
Directors may defer all or a portion of their fees pursuant to the Director Nonqualified Deferred Compensation Plan (the "Director NQ Plan"), and the amounts so deferred then increase or decrease in value based on how the director elects that the account be allocated as among various investment options provided by the Bank. The investment options are currently the same options available under the Executive NQ Plan, except that directors may also direct that their fees be invested in Company stock, which is then actually purchased and held in trust at the Bank. At December 31, 2020, approximately 95 percent of the aggregate amounts owed directors under the Director NQ Plan were invested in the Company’s stock.
The Audit Committee’s role includes assisting the Board of Directors in monitoring the integrity of the Company’s financial statements and related reporting process, compliance by the Company with legal and regulatory requirements, the independent auditor’s qualifications, independence and performance, performance of the Company’s internal audit function and the business practices and ethical standards of the Company. The Audit Committee operates under a written charter approved by the Board of Directors. Messrs. Herde, LechleiterBickel, Heintzman and SchutteLechleiter serve on the Committee and Messrs. Heintzman, Herde and Lechleiter serve as audit committee financial experts.
The Audit Committee reviews Stock Yards Bancorp’s financial reporting process on behalf of the Board of Directors. Management is responsible for the Company’s internal controls and financial reporting process. The Company’s independent auditor is responsible for performing an independent audit of the Company’s consolidated financial statements and its internal controls over financial reporting in accordance with standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”) and to express its opinions on the Company’s financial statements in accordance with accounting principles generally accepted in the United States of America (US GAAP) and the Company’s internal control over financial reporting. The Audit Committee’s responsibility is to monitor and oversee these processes. In addition, the Audit Committee is directly responsible for the appointment, compensation, retention and oversight of the independent auditor, including review of their qualifications, independence and performance.
The Committee discussed with management, the internal auditors and the independent auditors the quality and adequacy of Stock Yards Bancorp’s internal controls and the internal audit function’s organization, responsibilities, budget and staffing. The Committee reviewed the audit plans of both the independent and internal auditors, including audit scope and identification and evaluation of financial and related audit risks. The Committee also discussed the results of the internal audit examinations.
Management represented to the Audit Committee that Stock Yards Bancorp’s consolidated financial statements were prepared in accordance with US GAAP and the Audit Committee reviewed and discussed the quarterly and year end consolidated financial statements contained in filings with the Securities and Exchange Commission (“SEC”) with management and the independent auditors. The Audit Committee discussed with the independent auditors matters required to be discussed by the Statementapplicable requirements of Auditing Standards No. 1301, Communication with Audit Committees, as adopted by the Public Company Accounting Oversight Board.PCAOB and the SEC.
In addition, the Audit Committee discussed with the independent auditors the auditors’ independence from Stock Yards Bancorp and its management, including the matters in the written disclosures required by the applicable requirements of the Public Company Accounting Oversight Board.PCAOB. The Audit Committee also considered whether the independent auditors’ provision of non-audit services to Stock Yards Bancorp is compatible with the auditors’ independence.
In reliance on the reviews and discussions referred to above, the Audit Committee recommended to the Board of Directors that the audited consolidated financial statements be included in Stock Yards Bancorp’s Annual Report on Form 10-K for the year ended December 31, 2020,2022, for filing with the SEC.
The Audit Committee of the Board of Directors of Stock Yards Bancorp, Inc.
Carl G. Herde, Chairman | |
Paul J. Bickel III | |
David P. Heintzman | |
Richard A. Lechleiter
|
The following table presents fees for professional services rendered by the Company’s independent registered public accounting firm, BKD,FORVIS, LLP, for the 20202022 and 20192021 financial statement audits and audit-related services provided during 20202022 and 2019.2021.
2020 | 2019 | |||||||
Audit fees, excluding audit-related | $ | 417,000 | $ | 388,000 | ||||
Audit-related fees | - | 20,800 | (1) | |||||
All other fees | - | - | ||||||
Total fees | $ | 417,000 | $ | 408,800 |
|
|
2022 | 2021 | |||||||
Audit fees, excluding audit-related | $ | 565,000 | $ | 470,000 | ||||
Audit-related fees | - | - | ||||||
All other fees | - | - | ||||||
Total fees | $ | 565,000 | $ | 470,000 |
Audit fees include fees for the consolidated audit and review of Form 10-K as well as fees for reviews of quarterly financial information filed with the SEC on Form 10-Q, FDICIA and U.S Housing and Urban Development assisted programs reporting.
The Audit Committee is responsible for pre-approving all auditing services and permitted non-audit services to be performed by its independent auditors. For both 20202022 and 2019,2021, the Audit Committee pre-approved the performance of unspecified audit-related services for which fees may total up to $20,000 annually. No fees were incurred under this pre-approval authority in either 20202022 or 2019.2021.
TRANSACTIONS WITH MANAGEMENT AND OTHERS
Banking Transactions with Directors, Officers and Others
The Bank has had, and expects to have in the future, banking transactions in the ordinary course of business with certain directors and officers of Stock Yards Bancorp and the Bank and their associates, as well as with corporations or organizations with which they are connected as directors, officers, shareholders or partners. These banking transactions are made on substantially the same terms including interest rates and collateral as those prevailing at the time for comparable transactions with persons not related to the Bank or Stock Yards Bancorp. In the opinion of management of Stock Yards Bancorp and the Bank, such transactions do not involve more than the normal risk of collectibilitycollectability or present other unfavorable features. Loans made to directors and executive officers are in compliance with federal banking regulations and are thereby exempt from insider loan prohibitions included in the Sarbanes-Oxley Act of 2002.
At December 31, 2020,2022, loans to directors and officers of Stock Yards Bancorp and the Bank and their associates totaled $43.1$79 million equaling 9.8%10.4% of Bancorp’s consolidated stockholders’ equity.
Review and Approval of Related Person Transactions
Bancorp has written procedures for reviewing transactions between Bancorp and its directors and executive officers, their immediate family members and entities with which they have a position or relationship. These procedures are intended to determine whether any such related person transactions impair the independence of a director or present a conflict of interest on the part of a director or executive officer. Quarterly we require each of our directors and executive officers to complete a questionnaire listing any related person transactions. These are compiled by the internal audit department, and results are reported to the Audit Committee of the Board of Directors. Annually we require each director and executive officer to complete a directors’ and officers’ questionnaire that elicits information about related person transactions. Any related person transactions identified are discussed with the Audit Committee, and subsequently the Nominating and Corporate Governance Committee of the Board of Directors, and evaluated to determine whether any likelihood exists that the transaction could impair the director’s independence or present a conflict of interest for that director. Any such conclusion would be considered by the Board of Directors. Should it be determined a director is no longer independent, he/she would be removed from the Audit, Compensation or Nominating and Corporate Governance Committee(s) as applicable. If the transaction were to present a conflict of interest, the Board would determine the appropriate response. Upon receiving notice of any transaction on the part of an executive officer that may present a conflict of interest, the Director of Internal Audit will discuss the transaction with the Chief Executive Officer or if the transaction involves the Chief Executive Officer, the Chair of the Audit Committee, to determine whether the transaction presents a conflict of interest. In a case involving a conflict of interest, the Chief Executive Officer, or Chair of the Audit Committee, along with the director of Human Resources will determine the appropriate response.
Under the oversight of the Audit Committee, management established a procedure under which any related person transaction or series of transactions in excess of $25,000, other than banking transactions in the ordinary course of business and in compliance with federal banking regulations, will be reported to and approved by the Audit Committee.
Transactions with Related Persons
In the ordinary course of business, the Bank may from time to time engage in non-banking transactions with other firms or entities whose officers, directors, partners or members are also directors or executive officers of Bancorp or members of their immediate families. In all cases, these transactions are conducted on an arms-length basis. ThereExcept as described below, there were no transactions in 20202022 with related persons involving amounts in excess of $120,000, which is the dollar threshold for disclosure under the SEC’s related person transaction rules.
In March 2022, we acquired Commonwealth Bancshares, Inc. and its wholly-owned banking subsidiary, Commonwealth Bank & Trust Company. Prior to the acquisition, Commonwealth Bank & Trust Company leased approximately 15,976 square feet of office space from Summit I Partners, Ltd., a real estate entity of which Darrell R. Wells is the majority owner. Mr. Wells is the father of our current director and nominee, Laura L. Wells. Mr. Wells, together with his spouse and his personal trust, beneficially own in excess of 5% of our outstanding Common Stock. We assumed the obligations of Commonwealth Bank under the lease with Summit I Partners following the acquisition. The aggregate amount of all lease payments due under the lease on and after January 1, 2022 until the lease expiration date of April 30, 2025, is $1,307,000.
As part of its annual assessment of director independence, the Nominating and Corporate Governance Committee considers the amount and nature of any business transactions or relationships between the Bank and any companies or organizations, including charitable organizations, with which a director may be affiliated. The Nominating and Corporate Governance Committee has determined that there are no such transactions or relationships that impair any director’s independence or present a conflict of interest on the part of any director.
CompensationCompensation Committee Interlocks and Insider Participation
During 20202022, Messrs. Lechleiter, Priebe, SchutteSaunier and Tasman,Schutte, all of whom are independent, non-employee directors, served on the Compensation Committee of the Board of Directors. None have served as an officer of Stock Yards Bancorp nor had any relationship with Stock Yards Bancorp requiring disclosure under the Securities and Exchange Commission’sSEC’s rules regarding related persons transactions. The Compensation Committee members have no interlocking relationships requiring disclosure under the rules of the Securities and Exchange Commission.SEC.
A copy of Stock Yards Bancorp, Inc.’s 20202022 Annual Report on Form 10-K as filed with the Securities and Exchange Commission, without exhibits, will be provided without charge following receipt of a written or oral request directed to: T. Clay Stinnett, Executive Vice President, Treasurer and Chief Financial Officer, Stock Yards Bancorp, Inc., P.O. Box 32890, Louisville, Kentucky 40232-2890, (502) 625-0890; or clay.stinnett@syb.com.clay.stinnett@syb.com. A copy of the Form 10-K may also be obtained at the companyCompany’s website, www.syb.com, or the SEC’s website, www.sec.gov.
The officers and directors of Stock Yards Bancorp do not know of any matters to be presented for shareholder approval at the Annual Meeting other than those described in this Proxy Statement. If any other matters should properly come before the Annual Meeting, the Board of Directors intends that the persons named in the enclosed form of proxy, or their substitutes, will vote such proxy as recommended by the Board or, if no recommendation is given in their own discretion in the best interests of Stock Yards Bancorp.
By Order of the Board of Directors | ||
/s/ James A. Hillebrand | ||
James A. Hillebrand Chairman and Chief Executive Officer Stock Yards Bancorp, Inc. | ||
Louisville, Kentucky March |
Reconciliation of GAAP and non-GAAP Financial Measures
Earnings per diluted share equals net income divided by weighted average diluted shares outstanding. Return on average assets equals net income divided by total average assets, annualized to reflect a full year return on average assets. Similarly, return on average equity equals net income divided by total average equity, annualized to reflect a full year return on average equity.
As a result of the substantial impact that one-time acquisition costs related to the Kentucky Bancshares acquisition had on results for the year ended December 31, 2022, Bancorp considers adjusted diluted earnings per share, return on average assets and return on average equity ratios important as they reflect performance after removing certain merger expenses and purchase accounting adjustments.
Years Ended December 31, | ||||||||||||||||
(dollars and shares in thousands) | 2022 | 2021 | $ Variance | % Variance | ||||||||||||
Net income, as reported (a) | $ | 92,972 | $ | 74,645 | $ | 18,327 | 24.6 | % | ||||||||
Add: One-time acquisition costs | 19,500 | 19,025 | 475 | 2.5 | % | |||||||||||
Add: Provision for credit losses on non-PCD loans | 4,429 | 7,397 | (2,968 | ) | -40.1 | % | ||||||||||
Less: Tax effect of adjustments to net income | (5,400 | ) | (5,747 | ) | 347 | -6.0 | % | |||||||||
Net income – Non-GAAP (b) | $ | 111,501 | $ | 95,320 | $ | 16,181 | 17.0 | % | ||||||||
Weighted average diluted shares outstanding (c) | 28,922 | 25,156 | 3,766 | 15.0 | % | |||||||||||
Total average assets (d) | $ | 7,438,880 | $ | 5,626,886 | 1,811,994 | 32.2 | % | |||||||||
Total average equity (c) | 738,798 | 573,261 | 165,537 | 28.9 | % | |||||||||||
Earnings per share – diluted – GAAP (a/c) | $ | 3.21 | $ | 2.97 | $ | 0.25 | 8.3 | % | ||||||||
Earnings per share – Diluted – Non-GAAP (b/c) | $ | 3.86 | $ | 3.79 | $ | 0.07 | 1.7 | % | ||||||||
Return on average assets – GAAP (a/d) | 1.25 | % | 1.33 | % | -8 bps | -5.8 | % | |||||||||
Return on average assets – Non-GAAP (b/d) | 1.50 | % | 1.69 | % | -19 bps | -11.5 | % | |||||||||
Return on average equity – GAAP (a/c) | 12.58 | % | 13.02 | % | -44 bps | -3.4 | % | |||||||||
Return on average equity – Non-GAAP (b/c) | 15.09 | % | 16.63 | % | -154 bps | -9.2 | % |