Stock Yards Bancorp, Inc. Stock Compensation Disclosure

(18) Stock-Based Compensation

 

At Bancorp's 2015 Annual Meeting of Shareholders, shareholders approved the 2015 Omnibus Equity Compensation Plan and authorized the shares available from the expiring 2005 plan for future awards under the 2015 plan. In 2018, shareholders approved an additional 500,000 shares for issuance under the plan. Shareholders approved an additional 1 million shares for issuance under the plan at Bancorp’s 2024 Annual Meeting of Shareholders on April 25, 2024. As of December 31, 2025, there were 1 million shares available for future awards. The 2015 Stock Incentive Plan has no defined expiration date.

 

SAR Grants – SARs granted have a vesting schedule of 20% per year and expire ten years after the grant date unless forfeited due to termination of employment.

 

Fair values of SARs are estimated at the date of grant using the Black-Scholes option pricing model, a leading formula for calculating such value. The model requires the input of assumptions, changes to which can materially affect the fair value estimate. The following assumptions were used in SAR valuations at the grant date in each year:

 

		2025				2024				2023
Dividend yield			2.26	%			2.29	%			2.24	%
Expected volatility			29.29	%			28.43	%			27.20	%
Risk free interest rate			4.42	%			4.16	%			3.84	%
Expected life (in years)			7.8				7.1				7.1

 

Dividend yield and expected volatility are based on historical information for Bancorp corresponding to the expected life of SARs granted. Expected volatility is the volatility of underlying shares for the expected term calculated on a monthly basis. The risk free interest rate is the implied yield currently available on U.S. Treasury issues with a remaining term equal to the expected life of the awards. The expected life of SARs is based on historic experience of past like-term SARs. Bancorp evaluates historical exercise and post-vesting termination behavior when determining the expected life.

 

RSA Grants – RSAs granted to officers vest equally over a period of five years on each grant’s anniversary date. There is no performance-based requirement necessary for vesting. The fair value of RSAs is equal to the market value of the shares on the date of grant.

 

PSU Grants – PSUs vest based upon service and a three-year performance period, which begins January 1 of the first year of the performance period. Because grantees are not entitled to dividend payments during the performance period, the fair value of these PSUs is estimated based upon the market value of the underlying shares on the date of grant, adjusted for non-payment of dividends. PSUs require a one year post-vesting holding period and the fair value of such grants incorporates a liquidity discount related to the holding period of 5.5%, 5.8% and 5.2% for 2025, 2024 and 2023, respectively.

 

RSU Grants – RSUs are only granted to non-employee directors, are time-based and vest 12 months after grant date. Because grantees are entitled to deferred dividend payments at the end of the vesting period, the fair value of the RSUs equals market value of underlying shares on the date of grant.

 

In the first quarters of 2025 and 2024, Bancorp awarded 7,670 and 9,550 RSUs to non-employee directors of Bancorp with a grant date fair value of $539,000 and $500,000, respectively.

 

Bancorp utilized cash of $344,000 and $203,000 during 2025 and 2024, respectively, for the purchase of shares upon the vesting of RSUs.

 

Bancorp has recognized stock-based compensation expense for SARs, RSAs, and PSUs within compensation expense, and RSUs for directors within other non-interest expense, as follows:

 

		Year Ended December 31, 2025
(in thousands)		Stock Appreciation Rights				Restricted Stock Awards				Restricted Stock Units				Performance Stock Units				Total
Expense		$	443			$	1,914			$	512			$	1,539			$	4,408
Deferred tax benefit			(93	)			(402	)			(107	)			(323	)			(925	)
Total net expense		$	350			$	1,512			$	405			$	1,216			$	3,483

 

		Year Ended December 31, 2024
(in thousands)		Stock Appreciation Rights				Restricted Stock Awards				Restricted Stock Units				Performance Stock Units				Total
Expense		$	284			$	1,699			$	501			$	1,289			$	3,773
Deferred tax benefit			(60	)			(357	)			(105	)			(271	)			(793	)
Total net expense		$	224			$	1,342			$	396			$	1,018			$	2,980

 

		Year Ended December 31, 2023
(in thousands)		Stock Appreciation Rights				Restricted Stock Awards				Restricted Stock Units				Performance Stock Units				Total
Expense		$	492			$	1,599			$	519			$	1,854			$	4,464
Deferred tax benefit			(104	)			(336	)			(109	)			(390	)			(939	)
Total net expense		$	388			$	1,263			$	410			$	1,464			$	3,525

 

Detail of unrecognized stock-based compensation expense to be recognized in the future follows:

 

(in thousands) Year Ended		Stock Appreciation Rights				Restricted Stock Awards				Restricted Stock Units				Performance Stock Units				Total
2026		$	410			$	1,703			$	1			$	1,209			$	3,323
2027			340				1,412				—				1,209				2,961
2028			250				1,024				—				—				1,274
2029			135				657				—				—				792
2030			16				109				—				—				125
Total estimated expense		$	1,151			$	4,905			$	1			$	2,418			$	8,475

 

The following table summarizes SARs activity and related information:

 

																								Weighted
												Weighted								Weighted				average
												average				Aggregate				average				remaining
						Exercise						exercise				intrinsic				fair				contractual
(in thousands, except per share and years)		SARs				price						price				value(1)				value				life (in years)
Outstanding, January 1, 2023			435				$19.37	-	$74.92			$	35.60			$	12,784			$	6.02				5.1
Granted			29				60.76	-	60.76				60.76				—				16.81
Exercised			(24	)			19.37	-	19.37				19.37				681				3.58
Forfeited			—				—						—				—				—
Outstanding, December 31, 2023			440				$19.44	-	$74.92			$	38.11			$	6,297			$	6.86				4.7
Outstanding, January 1, 2024			440				$19.44	-	$74.92			$	38.11			$	6,297			$	6.86				4.7
Granted			42				47.95	-	54.92				49.20				—				13.75
Exercised			(142	)			22.96	-	40.00				28.74				5,617				4.51
Forfeited			—				—						—				—				—
Outstanding, December 31, 2024			340				$25.76	-	$74.92			$	43.41			$	9,774			$	8.69				5.3
Outstanding, January 1, 2025			340				$25.76	-	$74.92			$	43.41			$	9,774			$	8.69				5.3
Granted			26				67.85	-	75.21				74.93				—				23.63
Exercised			(28	)			25.76	-	40.00				29.67				1,332				4.32
Forfeited			—				—						—				—				—
Outstanding, December 31, 2025			338				$35.90	-	$75.21			$	46.98			$	6,354			$	10.21				5.0
Vested and exercisable			245				$35.90	-	$74.92			$	42.30			$	5,565			$	7.78				3.9
Unvested			93				47.17	-	75.21				59.32				789				16.61				3.2
Outstanding, December 31, 2025			338				$35.90	-	$75.21			$	46.98			$	6,354			$	10.21				5.0
Vested in the current year			33				$36.65	-	$74.92			$	49.39			$	519			$	11.30

 

(1) - Aggregate intrinsic value for SARs is defined as the amount by which the current market price of the underlying stock exceeds the exercise or grant price.

 

SARs outstanding and exercisable by expiration year and weighted average exercise price follows:

 

(in thousands, except per share data)
Expiration Year		SARs outstanding				SARs vested and exercisable				Weighted average exercise price
2026			-				-			$	-
2027			16				16				40.00
2028			68				68				38.10
2029			47				47				37.06
2030			46				46				37.30
2031			31				25				50.50
2032			34				22				55.45
2033			29				13				60.76
2034			41				8				49.20
2035			26				-				79.93
			338				245			$	46.98

 

The following table summarizes activity for RSAs:

 

						Weighted
						average cost
(in thousands, except per share data)		RSAs				at grant date
Unvested at January 1, 2023			96			$	47.26
Shares awarded			38				63.04
Restrictions lapsed and shares vested			(33	)			43.77
Shares canceled			(3	)			53.38
Unvested at December 31, 2023			98			$	54.23
Unvested at January 1, 2024			98			$	54.23
Shares awarded			46				52.06
Restrictions lapsed and shares vested			(33	)			49.49
Shares canceled			(9	)			53.10
Unvested at December 31, 2024			102			$	54.92
Unvested at January 1, 2025			102			$	54.92
Shares awarded			42				75.34
Restrictions lapsed and shares vested			(32	)			51.92
Shares canceled			(6	)			61.89
Unvested at December 31, 2025			106			$	62.49

 

Shares currently expected to be awarded for PSUs granted to executive officers of Bancorp, the three-year performance period, which began January 1 of the award year, are as follows:

 

Grant Year		Vesting Period in Years				Fair Value				Shares Expected to be Awarded
2023			3			$	54.33				18,762
2024			3				41.84				49,957
2025			3				67.61				53,254

 

All Bancorp equity compensation plans have been approved by shareholders. The following table provides detail of the number of shares to be issued upon exercise of outstanding stock-based awards and remaining shares available for future issuance under Bancorp’s equity compensation plan as of December 31, 2025:

 

Number of

Shares

shares to be

Weighted

available for

issued upon

average

future

Plan category (in thousands)

exercising/vesting

exercise price

issuance (a)

Equity compensation plans approved by security holders:

Stock Appreciation Rights

(b)

(b)

953

Restricted Stock Awards

106

N/A

(a)

Restricted Stock Units

7

N/A

(a)

Performance Stock Units

(c)

N/A

(a)

Total shares

113

953

 

(a)	Under the 2015 Omnibus Equity Compensation Plan, shares of stock are authorized for issuance as incentive and non-qualified stock options, SARs, RSAs, and RSUs.

 

(b)	At December 31, 2025, approximately 338 SARs were outstanding at a weighted average grant price of $46.98. The number of shares to be issued upon exercise will be determined based on the difference between the grant price and the market price at the date of exercise.

 

(c)	The number of shares to be issued is dependent upon Bancorp achieving certain predefined performance targets and ranges from zero shares to approximately 220 shares. As of December 31, 2025, shares expected to be awarded totaled approximately 122.