$55.22
$102.61
bear $55.22
base $79.80
bull $102.61
margin of safety $40.00
market price* $76.69
Stock Yards Bancorp owns Stock Yards Bank & Trust, a Louisville, Kentucky commercial bank founded in 1904 that now operates across Louisville, Lexington, central and northern Kentucky, Indianapolis and Cincinnati, with about $9.5 billion of assets at the end of 2025 and a wealth management and trust business that produces close to a quarter of revenue. That fee business, which earns money from assets under management rather than from lending, is a real strength in a downturn. In the second quarter of 2026 the bank completed its all-stock purchase of Field & Main Bancorp of Henderson, Kentucky (about $861 million of assets, $652 million of loans, $68 million of tangible equity and an $800 million trust book), which lifted goodwill from $194 million to $238 million and loans to about $7.8 billion. How we measure earnings. For a bank we start from operating cash flow, strip out timing swings in accrued interest and in mortgages held briefly for sale, subtract stock compensation and the capital spending needed to keep branches and systems running, and also subtract the provision for loan losses, because the reserve the bank sets aside for bad loans is a real, recurring cost of being a lender even though it does not leave as cash in the year it is booked. On that basis owner earnings per share were $1.89 in 2016, $2.20, $2.29, $2.58, $2.47 in 2020, $3.42, $3.23, $4.07, $3.80 and $4.45 in 2025. We anchor on the four years since the Commonwealth Bancshares acquisition (2022-2025), because the bank is a materially larger and differently funded business than before 2022; the median is about $3.94 a share. That sits below reported earnings per share of $4.75 in 2025 because our measure charges the full loan loss provision and capital spending and does not count a strong 2025 as the new normal. Part of 2024-2025 earnings also came from tax-credit partnership investments made to meet community lending obligations; their net benefit was about $5 million in 2025, small enough that we have not adjusted for it. Owner earnings grew 17% in 2025; we assume only 5% for the first year, because 2025 benefited from an unusually low loan loss provision ($6.7 million against $13.8 million in 2023) and that should not be extrapolated. First-half 2026 diluted earnings of $2.55 a share, up from $2.28, are consistent with the anchor holding. What growth we credit. For more than a decade the bank has grown its loan book and per-share earnings by retaining part of its profits and lending them out; before the acquisition run, from 2016 to 2019, owner earnings per share grew about 11% a year with a flat share count. We credit that repeatable process at a slower 5% a year, tapering to 3% by year ten, and we charge for it: every year the case holds back enough earnings to grow the equity base at the same rate as earnings, and only the remainder counts as cash to owners. We give no credit to future acquisitions, to new markets, or to wider lending margins. After year ten we assume the earnings power simply persists without growth, because the evidence for that is the bank's 120-year deposit franchise and its trust business, not a forecast. Because deposits and borrowings are the raw material of a bank, we value its earnings after interest and do not subtract them as debt; the risk of that funding is charged in the bear case instead. Base case, about $80 a share: earnings start from the $3.94 anchor, grow 5% a year for five years and 3-4% after, with roughly 40-60% of earnings retained to fund the growth.
Bull case, about $103: the 2025 level of $4.45 proves to be the new normal, growth runs at 7% for five years and 5-6% after, a pace still below the bank's own 2016-2019 record.
Bear case, about $55: the 2008-2010 credit cycle repeats. Lending margins are squeezed so the starting level falls to about $3.60, growth slows to 2% with three flat years, and in years three to six the bank absorbs extra loan losses of roughly $395 million before tax, about 5% of today's loan book, in line with what commercial-real-estate-heavy community banks lost through that cycle. That produces two small loss years, and the bank stops growing and spends some capital, but even then it does not need to raise new shares, because cumulative losses consume only a few percent of its roughly $32 a share of tangible equity. The bear value exceeds tangible book because the trust and wealth management business, which earned through 2008-2010 and through 2020, and the low-cost local deposit base keep generating earnings after the losses are absorbed; a bank earning 12-14% on tangible capital through the cycle is worth more than its capital. The earlier analysis was prepared on a different basis, so its figures are not comparable with these. What has changed in the business since then is the completion of the Field & Main purchase and another quarter of solid earnings. Margin-of-safety price. We are fairly confident in the earnings level: the bank has been profitable every year in the record we reviewed, including 2020, and return on equity has stayed between about 12.6% and 14% for five years. The worst plausible outcome is a deep commercial real estate bust concentrated in Louisville, Lexington, Indianapolis and Cincinnati, perhaps combined with a sharp fall in rates that compresses lending margins; the bank's structure would survive that, because it funds itself mainly with granular local deposits, keeps capital well above regulatory minimums, has no controlling owner and earns a large stream of fee income from trust assets. The things we are most likely to be wrong about are credit losses (if they ran double the bear case the shares would be worth roughly $45), growth (with none at all the shares would be worth about $66), and acquisitions (each one so far has been paid for in stock, and a poorly priced one would dilute owners). The price assumes a three-to-five-year holding period, and the bank pays a dividend of $1.28 a share a year in the meantime. From $40 a share, if the business does no better than the base case, its value plus dividends would roughly double that price within about four years, about a 20% annual return; on the bear case the value sits well above $40. Above $40 the return would rely on the bull case, which our estimate does not count on, so $40 is the margin-of-safety price.