Stock Yards Bank & Trust is making a major expansion into the Central Kentucky market after spending its first 117 years as a major member of the Louisville banking market. SYB completed an acquisition of Paris-based Kentucky Bank in June, and this month the latter’s 19 branches become Stock Yards operations.
SYB came into 2021 with 44 offices in the Louisville, Cincinnati and Indianapolis markets and has grown its earnings per share in 28 of the past 32 years.
The deal with Kentucky Bank is a good marriage, according to state banking experts, that puts SYB into a very desirable new market with no duplication of locations.
“This one fit Stock Yards perfectly,” said Ballard W. Cassady Jr., president and CEO of the Kentucky Bankers Association. “It puts them in that Central Kentucky market—it’s an excellent market—with a good bank in locations where they needed locations.”
Banks always want to grow and prefer to grow organically, but acquisition can be the better option when market demographics make significant growth unlikely.
“It was a great opportunity for Stock Yards Bank and a good opportunity for the stockholders of Kentucky Bank,” Cassady said.
James “Ja” Hillebrand, chairman and CEO of Stock Yards Bank, said the banks share a unique alignment of core values, business philosophies and service models—a community bank approach that is based on building long-term relationships and investing in the community.
The two banks have similar deep roots in Kentucky. Stock Yards Bank traces its history to 1904, when it opened to the livestock and agribusiness industries as The Bourbon Stock Yards in Louisville. Kentucky Bank originated in Paris in 1851, serving the agricultural economy of the region.
Both banks have well-established wealth management operations.
“Kentucky Bank fits in seamlessly with how Stock Yards does business,” Hillebrand said. Acquiring Kentucky Bank “allows us to expand into a new market, gives our existing customers more banking options in the region and allows us to enhance our services across the Central and Eastern Kentucky market.”
The merger allows broader product offerings, increased lending capability, and expands the branch service delivery system for existing customers of both banks as well as for new clients, Hillebrand said.
“Additionally, the larger organization provides solid growth opportunities for us and a platform for future expansion,” he said.
Combined, the two banks have $5.8 billion in assets.
This is Stock Yards’ third acquisition since 2013. It acquired The Bank of Oldham County in 2013 and King Southern Bank in Nelson County in 2019. The acquisition of Kentucky Bank furthers Stock Yards’ goal to remain independent and community- service oriented, Hillebrand said.
“We are always focused on an organic growth strategy, meaning we’re going to grow our bank one customer at a time, one branch at a time, but opportunities came up within another institution to help us grow more,” he said.
Business and consumer customers always need a bank that is large enough to weather unexpected events and stand by customers in challenging times, said Louis Pritchard, president and CEO of Kentucky Bank.
“We feel this merger will provide the operating scale, lending capacity, expanded product offering and technology of a larger institution married with the community banking model that both banks have always valued. It is a powerful formula for providing enhanced banking services to the Central Kentucky market,” he said.
Prichard will join Stock Yards Bank with the title of Central Kentucky market president and will serve on the bank’s management committees, including operations, lending, strategic planning, interest rates and human resources.
Pandemic highlighted personalized service
Financial institutions were a lifeline for businesses during the height of the COVID-19 pandemic, from assisting with Paycheck Protection Program (PPP) loans to helping individuals manage their day-to-day finances, Hillebrand said.
“I think the COVID-19 pandemic quite frankly highlighted the value of community banking and how important it is to have a relationship with your local banker,” he said.
Stock Yards Bank was an active PPP participant. It facilitated and made approximately $1 billion in PPP loans, Hillebrand said.
Banks loaned their money to cover a range of businesses’ costs associated with maintaining employees on their private payrolls; the federal government repays a set amount of loans for businesses that complied with PPP rules. Some $800 billion in PPP loans has been guaranteed nationwide, according to the Small Business Administration.
After serving existing customers first, Stock Yards Bank opened its PPP loan guidance expertise to new customers and attracted over 600 new business customers in the two rounds of lending Congress authorized and funded. Bank staff worked around the clock for the first three weeks of the program to process loans, Hillebrand said.
That pandemic response demonstrates the value of community banking, he said, providing access to solutions and technology delivered in a personable and accessible way.
“Community banking means when people come into our branches, we need to make sure we have enough people and the right, experienced people in those branches to handle any of their needs,” he said. “We can’t send them off to an 800 number. We can’t have them standing in long lines. We need to make sure we have enough personnel in those branches.”
Plenty of M&A interest
The banking industry normally sees both new entrants and consolidation. Cassady monitors activity across the state and nation and said merger and acquisition talk is a trend “going on everywhere … primarily because of the cost of banking, the changes in technology, how difficult it is to … keep up with the Jones.”
There are always economies of scale to be gained in meeting ever-increasing compliance obligations.
“If you take a look at the everyday community bank—which we have a lot of in Kentucky—every time you add a new regulation, a new accounting principle (to provide data for), other things they are talking about in Washington (or) at the IRS, environmental issues, (the) costs increase,” Cassady said. “The bigger you are, the easier you can manage.”
He described the merger with Kentucky Bank as “an excellent move by Stock Yards Bank. Kentucky Bank was an extremely well-run bank.”
Kentucky is a great market for banking, Cassady said. While other states are much larger in dollar terms, the conservative principles that define the commonwealth’s banking practices produce steady, reliable growth without major ups and downs. He contrasted the Bluegrass State with Texas, whose large energy and tech sectors produce a growth chart with sharp increases and sharp decreases.
“Kentucky is diversified: Plain vanilla can taste good sometimes,” he said.