10-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

Form 10-K

Annual Report Pursuant to Section 13
or 15(d) of the Securities Exchange Act of 1934

For the Fiscal Year Ended	Commission File Number
December 31, 2005	0-17262

S.Y. BANCORP, INC.

1040 East Main Street
Louisville, Kentucky 40206
(502) 582-2571

Incorporated in Kentucky I.R.S. No. 61-1137529

Securities registered pursuant to Section 12(b) of the Act:

Title of each class:	Name of each exchange on which registered:
9.00% Cumulative trust preferred securities and the guarantee with respect thereto	American Stock Exchange

Securities registered pursuant to Section 12(g) of the Act:

Common stock, no par value

Preferred Share Purchase Rights

Indicate by check mark if the registrant is a well-known seasoned issuer (as defined in Rule 405 of the Securities Act). Yes  o      No  ý

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes  o      No  ý

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes  ý     No  o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act:

Large accelerated filer     o Accelerated filer     ý Non-accelerated filer     o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes  o      Noý

The aggregate market value of registrant’s voting stock (Common Stock, no par value) held by non-affiliates of the registrant as of June 30, 2005 (the last business day of the registrant’s most recently completed second fiscal quarter) was $283,184,000.

The number of shares of the registrant’s Common Stock, no par value, outstanding as of March 6, 2006, was 13,803,057.

Documents Incorporated By Reference

Portions of Registrant’s definitive proxy statement related to Registrant’s Annual Meeting of Shareholders to be held on April 26, 2006 (the “Proxy Statement”), are incorporated by reference into Part III of this Form 10-K.

S.Y. BANCORP, INC.
Form 10-K
Index

Part I:
Item 1.	Business
Item 1A.	Risk Factors
Item 1B.	Unresolved Staff Comments
Item 2.	Properties
Item 3.	Legal Proceedings
Item 4.	Submission of Matters to a Vote of Security Holders
Part II:
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Item 6.	Selected Financial Data
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk
Item 8.	Financial Statements and Supplementary Data
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Item 9A.	Controls and Procedures
Item 9B.	Other Information
Part III:
Item 10.	Directors and Executive Officers of the Registrant
Item 11.	Executive Compensation
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Item 13.	Certain Relationships and Related Transactions
Item 14.	Principal Accountant Fees and Services
Part IV:
Item 15.	Exhibits and Financial Statement Schedules
Signatures
Index to Exhibits

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Part I

Item 1.Business

S. Y. Bancorp, Inc. (Bancorp) was incorporated in 1988 and is a Kentucky corporation headquartered in Louisville, Kentucky. Bancorp is a bank holding company registered with, and subject to supervision, regulation and examination by the Board of Governors of the Federal Reserve System. Bancorp has two subsidiaries, Stock Yards Bank & Trust Company (the Bank) and S.Y. Bancorp Capital Trust I (the Trust). The Bank is wholly owned and is a state chartered bank. Bancorp conducts no active business operations; the business of Bancorp is substantially the same as that of the Bank.  The operations of the Bank are fully reflected in the consolidated financial statements of Bancorp.  Accordingly, references to “Bancorp” in this document may encompass both the holding company and the Bank.  The Trust is a Delaware statutory business trust that is a 100%-owned finance subsidiary of Bancorp.

Stock Yards Bank & Trust Company

Stock Yards Bank & Trust Company is the only banking subsidiary of Bancorp and was originally chartered in 1904.  The Bank is headquartered in Louisville, Kentucky and provides commercial banking services in Louisville, southern Indiana and Indianapolis through 24 full service banking offices (See “ITEM 2. PROPERTIES”).  The Bank is chartered under the laws of the Commonwealth of Kentucky.  In addition to traditional commercial and personal banking activities, the Bank has an investment management and trust department offering a wide range of trust and investment services.  This department operates under the name of Stock Yards Trust Company.  The Bank also originates and sells single-family residential mortgages through its operating division of retail banking, Stock Yards Mortgage Company. Additionally, the Bank offers securities brokerage services and life insurance products through arrangements with various third party providers.  See Note 21 to Bancorp’s consolidated financial statements for the year ended December 31, 2005 for information relating to the Bank’s business segments.

At December 31, 2005, the Bank had 442 full-time equivalent employees. As is typically the case with banks, employees are not subject to a collective bargaining agreement. Management of Bancorp considers the relationship with employees to be good.

Supervision and Regulation

Bank holding companies and commercial banks are extensively regulated under both federal and state law. Any change in applicable law or regulation may have a material effect on the business and prospects of Bancorp and the Bank.

Bancorp, as a registered bank holding company, is subject to the supervision of and regulation by the Federal Reserve Board under the Bank Holding Company Act of 1956. In addition, Bancorp is subject to the provisions of Kentucky’s banking laws regulating bank acquisitions and certain activities of controlling bank shareholders.

The Bank is subject to the supervision of and regular examination by the Federal Deposit Insurance Corporation and the Kentucky Department of Financial Institutions. The Federal Deposit Insurance Corporation insures the deposits of the Bank to the current maximum of $100,000 per depositor.

The Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 (the 1994 Act) removed state law barriers to interstate bank acquisitions and permits the consolidation of interstate banking operations. Under the 1994 Act, adequately capitalized and managed bank holding companies may acquire banks in any state, subject to Community Reinvestment Act compliance, compliance with federal and state antitrust laws and deposit concentration limits and subject to any state laws restricting the transaction. Kentucky banks are also permitted to acquire a branch in another state if permitted by law of the other state.  Kentucky currently allows out-of-state banks to enter Kentucky to provide banking services on the same terms that a Kentucky bank could enter that bank’s state.

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The Gramm-Leach-Bliley Act (the 1999 Act) repealed the Depression-era barrier between commercial and investment banking established by the Glass-Steagall Act, as well as the prohibition on the mixing of banking and insurance established by the Bank Holding Company Act of 1956. The 1999 Act allows for affiliations among banks, securities firms and insurance companies by means of a financial holding company (FHC). In most cases, the creation of an FHC is a simple election and notice to the Federal Reserve Board. The 1999 Act requires that, at the time of establishment of an FHC, all depository institutions within that corporate group must be “well managed” and “well capitalized” and must have received a rating of “satisfactory” or better under its most recent Community Reinvestment Act examination. Further, non-banking financial firms (for example an insurance company or securities firm) may establish an FHC and acquire a depository institution. While the distinction between banks and non-banking financial firms has been blurring over recent years, the 1999 Act makes it less cumbersome for banks to offer services “financial in nature” but beyond traditional commercial banking activities. Likewise, non-banking financial firms may find it easier to offer services that had, heretofore, been provided primarily by depository institutions.  Management of Bancorp has chosen not to become an FHC at this time, but may chose to do so in the future.

The USA Patriot Act of 2001 was enacted in response to the terrorist attacks in New York, Pennsylvania and Washington, D. C. on September 11, 2001 and is intended to strengthen U.S. law enforcement’s and the intelligence community’s ability to work cohesively to combat terrorism. The Patriot Act contains sweeping anti-money laundering and financial transparency laws and requires various regulations, including: (a) due diligence requirements for financial institutions that administer, maintain, or manage private bank accounts for non-U.S. persons; (b) standards for verifying customer identification at account opening; (c) rules to promote cooperation among financial institutions, regulators and law enforcement entities in identifying parties that may be involved in terrorism or money laundering; (d) currency transaction reports (“CTRs”) for transactions exceeding $10,000; and (e) filing of suspicious activities reports (“SARs”) if the Bank believes a customer may be in violation of U.S. laws and regulations.

Available Information

Bancorp files reports with the SEC. Those reports include the Annual Report on Form 10-K, quarterly reports on Form 10-Q, current event reports on Form 8-K and proxy statements, as well as any amendments to those reports. The public may read and copy any materials the Registrant files with the SEC at the SEC’s Public Reference Room at 100 F Street, NE, Washington, DC 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC maintains an internet site that contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC at http://www.sec.gov. Bancorp’s Annual Report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to section 13(a) or 15(d) of the Exchange Act are accessible at no cost on Bancorp’s web site at http://www.syb.com after they are electronically filed with or furnished to the SEC.

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Item 1A.Risk Factors

Investments in Bancorp’s common stock involve risk, and Bancorp’s profitability and success may be affected by a number of factors including those discussed below.

Fluctuations in interest rates could reduce Bancorp’s profitability.

Bancorp’s primary source of income is from the difference between interest earned on loans and investments and the interest paid on deposits and borrowings. Management expects to periodically experience “gaps” in the interest rate sensitivities of Bancorp’s assets and liabilities, meaning that either Bancorp’s interest-bearing liabilities will be more sensitive to changes in market interest rates than Bancorp’s interest-earning assets, or vice versa. In either event, if market interest rates should move contrary to Bancorp’s position, this “gap” will work against Bancorp and Bancorp’s earnings may be negatively affected.

Fluctuations of market interest rates are affected by the following factors:

•inflation;

•recession;

•a rise in unemployment;

•tightening money supply; and

•international disorder and instability in domestic and foreign financial markets.

Bancorp’s asset-liability management strategy, which is designed to mitigate Bancorp’s risk from changes in market interest rates, may not be able to prevent changes in interest rates from having a material adverse effect on Bancorp’s results of operations and financial condition.

Competition with other financial institutions could adversely affect Bancorp’s profitability.

Bancorp faces vigorous competition from banks and other financial institutions. A number of these banks and other financial institutions have substantially greater resources and lending limits, larger branch systems and a wider array of banking services. Additionally, Bancorp encounters competition from both de novo and smaller community banks entering the Louisville market. Bancorp also competes with other providers of financial services, such as money market mutual funds, brokerage firms, consumer finance companies and insurance companies. This competition may reduce or limit Bancorp’s margins on banking services, reduce Bancorp’s market share and adversely affect Bancorp’s results of operations and financial condition.

The unexpected loss of key members of Bancorp’s management team may adversely affect Bancorp’s operations.

Bancorp’s success to date has been influenced strongly by Bancorp’s ability to attract and to retain senior management experienced in banking and financial services. Bancorp’s ability to retain executive officers and the current management teams of each of Bancorp’s lines of business will continue to be important to successful implementation of Bancorp’s strategies. There are no employment or non-compete agreements with any of these key employees. The unexpected loss of services of any key management personnel, or the inability to recruit and retain qualified personnel in the future, could have an adverse effect on Bancorp’s business and financial results.

Bancorp’s profitability depends on local and national economic conditions.

Bancorp’s success depends on general economic conditions both locally and nationally. Most of Bancorp’s customers are in the Louisville area with a growing number of customers in the Indianapolis area. Some of Bancorp’s customers are directly impacted by the local economy while others have more national or global business dealings. Local economic conditions have an impact on the demand of Bancorp’s customers for loans, the ability of some borrowers to repay these loans, and the value of the collateral securing these loans.

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Factors influencing general national economic conditions include inflation, recession, and unemployment. As these factors impact the overall business climate, they can have a significant effect on loan demand. Loan growth is critical to Bancorp’s profitability. Significant decline in general economic conditions will negatively affect the financial results of Bancorp’s banking operations.

If Bancorp’s allowance for loan losses is not sufficient to cover actual loan losses, Bancorp’s earnings could decrease.

Bancorp’s loan customers may not repay their loans according to the terms of these loans, and the collateral securing the payment of these loans may be insufficient to assure repayment. Accordingly, Bancorp may experience significant credit losses which could have a material adverse effect on operating results. Management makes various assumptions and judgments about the collectibility of Bancorp’s loan portfolio, including the creditworthiness of Bancorp’s borrowers and the value of real estate and other assets serving as collateral for repayment of many of Bancorp’s loans. In determining the size of the allowance for loan losses, management considers, among other factors, Bancorp’s loan loss experience and an evaluation of economic conditions. If Bancorp’s assumptions prove to be incorrect, Bancorp’s current allowance may not be sufficient to cover future loan losses and adjustments may be necessary to allow for different economic conditions or adverse developments in Bancorp’s loan portfolio. Material additions to Bancorp’s allowance would materially decrease Bancorp’s net income.

In addition, federal and state regulators periodically review Bancorp’s allowance for loan losses and may require an increase in Bancorp’s provision for loan losses or further loan charge-offs. Any increase in Bancorp’s provision for loan losses or loan charge-offs as required by these regulatory agencies could have a negative effect on net income.

An inability to maintain Bancorp’s historical growth rate may adversely impact Bancorp’s results of operations and financial condition.

To achieve growth, Bancorp has initiated internal growth programs and opened additional branches. Bancorp may not be able to sustain its historical rate of growth or obtain funding necessary to support such growth. Further, Bancorp’s inability to attract and retain experienced bankers may adversely affect Bancorp’s internal growth. A significant decrease in Bancorp’s historical rate of growth may adversely impact Bancorp’s results of operations and financial condition.

Bancorp operates in a highly regulated environment and may be adversely affected by changes in federal and local laws and regulations.

Bancorp is subject to extensive regulation, supervision and examination by federal and state banking authorities. Any change in applicable regulations or federal or state legislation could have a substantial impact on Bancorp’s bank and its operations. Additional legislation and regulations may be enacted or adopted in the future that could significantly affect Bancorp’s powers, authority and operations, which could have a material adverse effect on Bancorp’s financial condition and results of operations. Further, regulators have significant discretion and power to prevent or remedy unsafe or unsound practices or violations of laws by banks and bank holding companies in the performance of their supervisory and enforcement duties. The exercise of regulatory power may have negative impact on Bancorp’s results of operations and financial condition.

Item 1B.Unresolved Staff Comments

Bancorp has no unresolved staff comments.

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Item 2.Properties

The principal offices of Bancorp and the Bank are located at 1040 East Main Street, Louisville, Kentucky. The Bank’s operations center is a part of the main office complex. In addition to the main office complex, the Bank owned seven branch properties at December 31, 2005 (two of which are located on leased land) and Bancorp owned three.  The Bank also leased thirteen branch facilities.  Of the twenty-four banking locations, eighteen are located in Louisville, five are located in nearby southern Indiana and one is located in Indianapolis, Indiana.  See Notes 5 and 17 to Bancorp’s consolidated financial statements for the year ended December 31, 2005, for additional information relating to amounts invested in premises, equipment and lease commitments.

Item 3.Legal Proceedings

See Note 17 to Bancorp’s consolidated financial statements for the year ended December 31, 2005, for information relating to legal proceedings.

Item 4.Submission of Matters to a Vote of Security Holders

None

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Executive Officers of the Registrant

The following table lists the names and ages (as of December 31, 2005) of all current executive officers of Bancorp. Each executive officer is appointed by Bancorp’s Board of Directors to serve at the discretion of the Board. There is no arrangement or understanding between any executive officer of Bancorp and any other person(s) pursuant to which he/she was or is to be selected as an officer.

Name and Age of Executive Officer	Position and Offices with Bancorp
David P. Heintzman Age 46	Chairman, President, Chief Executive Officer and Director
Kathy C. Thompson Age 44	Senior Executive Vice President and Director
Phillip S. Smith Age 48	Executive Vice President
Gregory A. Hoeck Age 55	Executive Vice President
Nancy B. Davis Age 50	Executive Vice President, Secretary, Treasurer and Chief Financial Officer
Philip S. Poindexter Age 39	Executive Vice President
James A. Hillebrand Age 37	Executive Vice President

Mr. Heintzman was appointed Chairman and Chief Executive Officer effective January 1, 2005. Prior thereto, he served as President of Bancorp and the Bank. Mr. Heintzman joined the Bank in 1985 and has served as Treasurer, Chief Financial Officer of Bancorp and Executive Officer of the Bank.

Ms. Thompson was appointed Senior Executive Vice President in January 2005.   Prior thereto, she served as Executive Vice President of Bancorp and the Bank. She joined the Bank in 1992 as Senior Vice President and is Manager of the Investment Management and Trust Department and is also responsible for the sales, service and marketing areas of the Bank.

Mr. Smith was appointed Executive Vice President of the Bank in 1996. Prior thereto, he was Senior Vice President of the Bank. He is the Chief Credit Officer of the Bank, responsible for Bank-wide lending policy and operations.

Mr. Hoeck joined the Bank as Executive Vice President in 1998. He is primarily responsible for the retail area of the Bank. Prior to joining the Bank, Mr. Hoeck was an Executive Vice President for PNC Bank and the Retail Market Manager for the Kentucky and Indiana markets.

Ms. Davis was appointed Executive Vice President of Bancorp and the Bank in 1999. Prior thereto, she was Senior Vice President of Bancorp and the Bank. She was appointed Chief Financial Officer of Bancorp in 1993.

Mr. Poindexter joined the Bank as Executive Vice President in 2004. He is the Director of Commercial Lending for the Bank.  Prior to joining the Bank, Mr. Poindexter served as City Executive for BB&T, managing all commercial banking functions for the Louisville region.

Mr. Hillebrand was appointed Executive Vice President in January 2005. Prior thereto, he was Senior Vice President of the Bank. He has been primarily responsible for Private Banking since joining the Bank in 1996 and is also responsible for the Bank’s expansion efforts into the Indianapolis market.

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Part II

Item 5.Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Bancorp’s common stock is traded on the NASDAQ National Market under the ticker symbol SYBT. Prior to July 2005, the stock traded on the American Stock Exchange under the symbol SYI. The table below sets forth the quarterly high and low market closing prices of Bancorp’s common stock and dividends declared per share. The payment of dividends by the Bank to Bancorp is subject to the restriction described in Note 16 to the consolidated financial statements. Management believes that Bancorp will continue to generate adequate earnings to continue to pay dividends on a quarterly basis.  On December 31, 2005, Bancorp had 1,237 shareholders of record, and approximately 3,100 non objecting beneficial owners holding shares in nominee or “street name”.

	2005						2004
Quarter	High		Low		Cash Dividends Declared		High		Low		Cash Dividends Declared
First	$	25.30	$	21.82	$	0.11	$	23.78	$	20.51	$	0.08
Second	23.49		20.97		0.11		23.55		19.45		0.10
Third	24.80		22.06		0.12		23.90		21.16		0.10
Fourth	25.50		22.55		0.13		24.70		21.88		0.11

The following table shows information relating to the repurchase of shares of common stock by Bancorp during the three months ended December 31, 2005.

	Total Number of Shares Purchased	Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plan	Maximum Number of Shares that May Yet Be Purchased Under the Plan
October 1-October 31	27,100	$	22.79	27,100	379,936
November 1-November 30	16,100	23.63		16,100	363,836
December 1-December 31	—	—		—	363,836
Total	43,200	$	23.10	43,200	363,836

The Board of Directors of S.Y. Bancorp, Inc. approved a 400,000 share buyback plan in 1999.  The plan had no expiration date.  In February 2005, the Directors expanded this plan to allow for the repurchase of 550,000 shares between February 2005 and February 2006. In February 2006, the Board of Directors extended the term of this plan to February 2007.

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Item 6.Selected Financial Data

Selected Consolidated Financial Data

	Years ended December 31
(Dollars in thousands except per share data)	2005			2004			2003			2002			2001
Net interest income	$	49,235		$	44,221		$	42,748		$	40,580		$	34,945
Provision for loan losses	225			2,090			2,550			4,500			4,220
Net income	21,644			18,912			17,709			15,650			13,542
Per share data
Net income, basic	$	1.56		$	1.37		$	1.31		$	1.17		$	1.02
Net income, diluted	1.53			1.33			1.27			1.12			0.98
Cash dividends declared	0.47			0.39			0.305			0.26			0.225
Book value	9.11			8.36			7.40			6.41			5.37
Market value	25.02			24.10			20.56			18.55			16.65
Average balances
Stockholders’ equity	$	121,614		$	109,414		$	93,799		$	79,417		$	66,433
Assets	1,270,178			1,148,652			1,083,949			998,421			884,793
Federal Home Loan Bank advances	25,809			25,573			—			—			—
Long-term debt	20,769			20,799			20,829			20,867			14,336
Selected ratios
Return on average assets	1.70		%	1.65		%	1.63		%	1.57		%	1.53		%
Return on average stockholders’ equity	17.80			17.28			18.88			19.71			20.38
Average stockholders’ equity to average assets	9.57			9.53			8.65			7.95			7.51
Net interest rate spread	3.79			3.82			3.86			3.90			3.60
Net interest rate margin, fully tax-equivalent	4.25			4.20			4.25			4.38			4.27
Non-performing loans to total loans	0.44			0.57			0.55			0.68			0.66
Non-performing assets to total assets	0.59			0.75			0.76			0.58			0.55
Net charge offs to average loans	0.07			0.15			0.29			0.47			0.36
Allowance for loan losses to average loans	1.19			1.37			1.38			1.48			1.52

Per share information has been adjusted to reflect stock split effective September 2003.

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Item 7.    Management’s Discussion and Analysis of Financial Condition and Results of Operations

The purpose of this discussion is to provide information as to the analysis of the consolidated financial condition and results of operations of S.Y. Bancorp, Inc. (Bancorp) and its wholly owned subsidiary, Stock Yards Bank & Trust Company (the Bank).  Bancorp, incorporated in 1988, has no active business operations. Thus, Bancorp’s business is substantially the same as that of the Bank. The Bank has operated continuously since it opened in 1904. The Bank conducted business at one location for 85 years and then began branching. At December 31, 2005, the Bank had twenty-three full service banking locations in Louisville and southern Indiana and one full service banking location in Indianapolis, Indiana. The combined effect of added convenience with the Bank’s focus on flexible, attentive customer service has been key to the Bank’s growth and profitability. The wide range of services added by the investment management and trust department, including the brokerage department, and by the mortgage department helps support the corporate philosophy of capitalizing on full service customer relationships.

Forward-Looking Statements

This report contains forward-looking statements under the Private Securities Litigation Reform Act that involve risks and uncertainties. These forward-looking statements may be identified by the use of words such as “expect”, “anticipate”, “plan”, “foresee” or other words with similar meaning. Although Bancorp believes the assumptions underlying the forward-looking statements contained herein are reasonable, any of these assumptions could be inaccurate. Factors that could cause actual results to differ from results discussed in forward-looking statements include, but are not limited to: economic conditions both generally and more specifically in the markets in which Bancorp and its subsidiaries operate; competition for the Bank’s customers from other providers of financial services; government legislation and regulation which change from time to time and over which Bancorp has no control; changes in interest rates; material unforeseen changes in liquidity, results of operations or financial condition of the Bank’s customers; or other risks detailed in Bancorp’s filings with the Securities and Exchange Commission and Item 1A of this Form 10-K all of which are difficult to predict and many of which are beyond the control of Bancorp.

Critical Accounting Policies

Bancorp has prepared all of the consolidated financial information in this report in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP).  In preparing the consolidated financial statements in accordance with U.S. GAAP, Bancorp makes estimates and assumptions that affect the reported amount of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reporting period.  There can be no assurances that actual results will not differ from those estimates.

Management has identified the accounting policy related to the allowance and provision for loan losses as critical to the understanding of Bancorp’s results of operations and discussed this conclusion with the Audit Committee of the Board of Directors.  Since the application of this policy requires significant management assumptions and estimates, it could result in materially different amounts to be reported if conditions or underlying circumstances were to change.  Assumptions include many factors such as changes in borrowers’ financial condition which can change quickly or historical loss ratios related to certain loan portfolios which may or may not be indicative of future losses.  To the extent that management’s assumptions prove incorrect, the results from operations could be materially affected by a higher provision for loan losses.  The accounting policy related to the allowance and provision for loan losses is applicable to the commercial banking segment of Bancorp.  The impact and any associated risks related to this policy on Bancorp’s business operations are discussed in the “Allowance for Loan Losses” section below.

Additionally, management has identified the accounting policy related to accounting for income taxes as critical to the understanding of Bancorp’s results of operations and discussed this conclusion with the Audit Committee of the Board of Directors.  The objectives of accounting for income taxes are to recognize the amount of taxes payable or refundable for the current year and deferred tax liabilities and assets for the future tax consequences of events that have been recognized in an entity’s financial statements or tax returns.  Judgment is required in assessing the future tax consequences of events that have been recognized in Bancorp’s financial statements or tax returns. Fluctuations in the actual outcome of these future tax

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consequences, including the effects of IRS examinations and examinations by other state agencies, could materially impact Bancorp’s financial position and its results from operations.  Additional information regarding income taxes is discussed in the “Income Taxes” section below and note 7 to the consolidated financial statements.

Overview of 2005

The following discussion should be read in conjunction with Bancorp’s consolidated financial statements and accompanying notes and other schedules presented elsewhere in this report.

The 2005 business environment was influenced by a continuation of improving local economic trends and a rising interest rate environment.  With solid growth from all areas of the Bank, Bancorp completed its eighteenth consecutive year of higher earnings.

As is the case with most banks, the primary source of Bancorp’s revenue is net interest income and fees from various financial services provided to customers.  Net interest income is the difference between interest income earned on loans, investment securities and other interest earning assets less interest expense on deposit accounts and other interest bearing liabilities.  Loan volume and the interest rates earned on those loans are critical to overall profitability. Similarly deposit volume is crucial to funding loans, and rates paid on deposits directly impact profitability. Business volumes are influenced by overall economic factors including market interest rates, business spending, consumer confidence and competitive conditions within the marketplace.

Loan volume increased during 2005 and was crucial to growth in interest income. Deposits grew in support of loan growth. Net interest margin improved as Bancorp was able to hold down deposit costs even as market interest rates rose.

Distinguishing Bancorp from other similarly sized community banks is its diverse revenue stream. Non-interest income as a percentage of total revenues continued over 34% in 2005 and proved key to earnings growth.  Stock Yards Trust Company maintained new business growth in 2005, and revenues increased accordingly. Also, increases in revenues from bankcard transactions, brokerage activity and gains on sales of mortgage loans offset a decline in service charges on deposit accounts.

Results in 2005 were also positively affected by a significantly lower provision for loan losses.  Non-performing loans and net charge-offs reached their lowest level since 2000.  Bancorp’s process of evaluating the inherent risk in the portfolio considered this data and other information in the evaluation of the risk in the loan portfolio to determine the required balance in the allowance for loan losses account and the corresponding provision for loan losses.

Challenges for 2006 could include net interest margin contraction, loan growth and credit quality.

•Having benefited from loan rates repricing more quickly than deposit rates, market conditions could reverse, and lagging deposit costs could increase more than loan rates to impact net interest margin negatively.

•To achieve our goals for 2006, net loan growth must exceed that of 2005.

•The extremely low levels of charge offs and excellent asset quality may not be sustainable, and the provision for loan losses will respond to the credit quality of the loan portfolio.

Not a part of core earnings, but noteworthy for 2006, are unamortized debt issuance costs related to trust preferred securities. That debt is callable by Bancorp at management’s discretion beginning mid 2006, and if called, unamortized pre-tax debt issuance costs of approximately $879,000 would be expensed. Also as noted herein, Bancorp will begin recognizing expense for stock options in accordance with SFAS No. 123(R), Share-Based Payment, which is effective January 1, 2006. As detailed under the caption “Non-Interest Income and Non-Interest Expenses” and in Note 15 to the consolidated financial statements, Bancorp accelerated the vesting of stock options in 2005 to reduce expense related to these options in 2006 through

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2009. Bancorp expects approximately $300,000 of non-cash compensation expense for 2006 related primarily to 2006 option grants.

The following sections will provide more details on subjects presented in this overview.

Results of Operations

Net income was $21,644,000 or $1.53 per share on a diluted basis for 2005 compared to $18,912,000 or $1.33 per share for 2004 and $17,709,000 or $1.27 per share for 2003.  The increase in 2005 net income was attributable to growth in net interest income and non-interest income and a significant reduction in the provision for loan losses, all of which were partially offset by increased non-interest expenses and taxes. Earnings include an 11.2% increase in fully taxable equivalent net interest income and a 9.9% increase in non-interest income.  Non-interest income improved mainly due to a 14.7% increase in income from investment management and trust.   Non-interest expenses increased 14.1% primarily from salaries and benefits and other non-interest expenses.  The provision for loan losses was down 89.2% for the year as credit quality continued to improve.

The following paragraphs provide a more detailed analysis of the significant factors affecting operating results.

Net Interest Income

Net interest income, the most significant component of Bancorp’s earnings, is total interest income less total interest expense.  Net interest spread is the difference between the taxable equivalent rate earned on average interest earning assets and the rate expensed on average interest bearing liabilities.  Net interest margin represents net interest income on a taxable equivalent basis as a percentage of average earning assets.  Net interest margin is affected by both the interest rate spread and the level of non-interest bearing sources of funds, primarily consisting of demand deposits and stockholders’ equity.  The level of net interest income is determined by the mix and volume of interest earning assets, interest bearing deposits and interest bearing liabilities and by changes in interest rates. The discussion that follows is based on tax-equivalent interest data.

Comparative information regarding net interest income follows:

(Dollars in thousands)	2005			2004			2003			2005/2004 Change		2004/2003 Change
Net interest income, tax-equivalent basis	$	50,131		$	45,091		$	43,480		11.2	%	3.7	%
Net interest spread	3.79		%	3.82		%	3.86		%	(3	)bp	(4	)bp
Net interest margin	4.25		%	4.20		%	4.25		%	5	bp	(5	)bp
Average earning assets	$	1,178,922		$	1,074,845		$	1,022,438		9.7	%	5.1	%
Five year treasury bond at year end	4.36		%	3.61		%	3.22		%	75	bp	39	bp
Average five year treasury bond	4.04		%	3.42		%	2.93		%	62	bp	49	bp
Prime rate at year end	7.25		%	5.25		%	4.00		%	200	bp	125	bp
Average prime rate	6.19		%	4.34		%	4.12		%	185	bp	22	bp

bp = basis point = 1/100th of a percent

Although the average prime rate increased 185 basis points in 2005 compared to the previous year, net interest margin increased 5 basis points and net interest spread decreased 3 basis points.

Prime rate is included above to provide a general indication of the interest rate environment in which the Bank operated.  A large portion of the Bank’s variable rate loans are indexed to the Bank’s prime rate and reprice as the prime rate changes, unless they reach a contractual floor or ceiling.  Many fixed rate loans are indexed to the five year Treasury bond.  The flattening of the Treasury yield curve negatively impacted interest spreads despite the Bank’s asset sensitive position in 2005.

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The competitive environment held average loan yields to an increase of 45 basis points. Average interest costs on interest bearings deposits increased 55 basis points as Bancorp grew average interest bearing deposits $86,600,000, or 11.7%.

Management believes that interest rate increases in 2006 could have a positive impact on both spread and margin, while a decrease in interest rates could have a negative impact on net interest spread and margin.  During the rising rate environment of 2005, Bancorp was able to hold interest costs on deposits but believes that due to competitive pressures it will see a gradual increase in these deposit rates in 2006.

Asset/Liability Management and Interest Rate Risk

Managing interest rate risk is fundamental for the financial services industry. The primary objective of interest rate risk management is to neutralize effects of interest rate changes on net income. By considering both on and off-balance sheet financial instruments, management evaluates interest rate sensitivity while attempting to optimize net interest income within the constraints of prudent capital adequacy, liquidity needs, market opportunities and customer requirements.

Interest Rate Simulation Sensitivity Analysis

Bancorp uses an earnings simulation model to estimate and evaluate the impact of changing interest rates on earnings. The simulation model is designed to reflect the dynamics of interest earning assets, interest bearing liabilities and off-balance sheet financial instruments in a one year forecast. By estimating the effects of interest rate increases and decreases, the model can reveal approximate interest rate risk exposure. The simulation model is used by management to gauge approximate results given a specific change in interest rates at a given point in time.  The model is therefore a tool to indicate earnings trends in given interest rate scenarios and does not indicate actual expected results.  The December 31, 2005 simulation analysis indicates that an increase in interest rates of 100 to 200 basis points would have a positive effect on net interest income, and a decrease of 100 to 200 basis points in interest rates would have a negative effect on net interest income.  These estimates are summarized below.

	Net Interest Income % Change
Increase 200 bp	5.17
Increase 100 bp	2.57
Decrease 100 bp	(2.55	)
Decrease 200 bp	(5.10	)

To assist in achieving a desired level of interest rate sensitivity, management has in the past entered into derivative financial instruments that are designed to mitigate the effect of changes in interest rates. Derivative financial instruments can be a cost and capital efficient method of modifying interest rate risk sensitivity. Based upon management’s assessment of interest rate sensitivity, Bancorp had no derivative financial instruments during fiscal years 2005 or 2004.

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The following table presents the increases in net interest income due to changes in rate and volume computed on a tax-equivalent basis and indicates how net interest income in 2005 and 2004 was impacted by volume increases and the higher average interest rate environment. The tax-equivalent adjustments are based on a 35% federal tax rate. The change in interest due to both rate and volume has been allocated to the change due to rate and the change due to volume in proportion to the relationship of the absolute dollar amounts of the change in each.

Taxable Equivalent Rate/Volume Analysis

	2005/2004								2004/2003
			Increase (Decrease)									Increase (Decrease)
			Due to									Due to
(In thousands)	Net Change		Rate			Volume			Net Change			Rate			Volume
Interest income
Loans	$	10,801	$	4,359		$	6,442		$	1,069		$	(2,651	)	$	3,720
Federal funds sold	343		324			19			(182		)	21			(203		)
Mortgage loans held for sale	121		23			98			(535		)	(48		)	(487		)
Securities
Taxable	288		570			(282		)	195			(413		)	608
Tax-exempt	276		(95		)	371			11			(132		)	143
Total interest income	11,829		5,181			6,648			558			(3,223		)	3,781
Interest expense
Deposits
Interest bearing demand deposits	574		812			(238		)	22			(105		)	127
Savings deposits	96		95			1			51			41			10
Money market deposits	2,888		2,225			663			388			360			28
Time deposits	2,498		610			1,888			(2,318		)	(1,297		)	(1,021		)
Securities sold under agreements to repurchase and federal funds purchased	540		503			37			260			105			155
Other short-term borrowings	20		21			(1		)	1			—			1
Federal Home Loan Bank advances	173		168			5			545			—			545
Long-term debt	—		3			(3		)	(2		)	1			(3		)
Total interest expense	6,789		4,437			2,352			(1,053		)	(895		)	(158		)
Net interest income	$	5,040	$	744		$	4,296		$	1,611		$	(2,328	)	$	3,939

Bancorp’s net interest income increased $5,040,000 for the year ending December 31, 2005 compared to the same period of 2004 while 2004 compared to 2003 saw a $1,611,000 increase. Net interest income for the year 2005 compared to 2004 was positively impacted by a significant increase in volume and, to a lesser degree, an increase in rate. Although interest rates increased in 2005, which increased interest income, the effect on interest income was somewhat offset by an increase in expense from an increase in deposit rates. If the yield curve remains flat or inverts and if deposit rates continue to increase due to market competition, this could cause a decrease in net interest spread. Strong loan growth accounted for $6,442,000 of the increase in interest income due to volume which was somewhat offset by money market and time deposit growth which increased interest expense by $2,551,000 for the year of 2005 compared to 2004.

For the year 2004 compared to 2003, loan growth generated an increase of $3,720,000 in interest income. The decrease in average deposits lowered interest expense and increased net interest income.

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Provision for Loan Losses

In determining the provision for loan losses charged to expense, management considers many factors. Among these are the quality and underlying collateral of the loan portfolio, previous loss experience, the size and composition of the loan portfolio, changes in lending personnel and an assessment of the impact of current economic conditions on borrowers’ ability to pay. The provision for loan losses is summarized below:

(Dollars in thousands)	2005			2004			2003
Provision for loan losses	$	225		$	2,090		$	2,550
Allowance to loans at year end	1.14		%	1.27		%	1.33		%
Allowance to average loans for year	1.19		%	1.37		%	1.38		%

The provision for loan losses decreased during 2005 in response to Bancorp’s assessment of inherent risk in the loan portfolio.  Non-performing loans and net charge-offs reached their lowest year-end totals since 2000, pointing to outstanding loan quality during 2005.  As loans have grown and the provision for loan losses has decreased, the relationship of the allowance to loans at year end and to average loans has decreased. See “Financial Condition-Non-performing Loans and Assets” for further discussion of non-performing loans.  See “Financial Condition-Summary of Loan Loss Experience” for further discussion of loans charged off during the year.

The Bank’s loan portfolio is diversified with no significant concentrations of credit. Geographically, most loans are extended to borrowers in the Louisville, Kentucky metropolitan area. The adequacy of the allowance is monitored on an ongoing basis and it is the opinion of management that the balance of the allowance for loan losses at December 31, 2005 is adequate to absorb losses inherent in the loan portfolio as of the financial statement date. See “Financial Condition-Allowance for Loan Losses” for more information on the allowance for loan losses.

Non-Interest Income and Non-Interest Expenses

The following table provides a comparison of the components of non-interest income for 2005, 2004 and 2003. The table shows the dollar and percentage change from 2004 to 2005 and from 2003 to 2004. Below the table is a discussion of significant changes and trends.

								2005/2004						2004/2003
(Dollars in thousands)	2005		2004		2003			Change				%		Change			%
Non-interest income
Investment management and trust services	$	10,813	$	9,427	$		8,301	$		1,386		14.7	%	$	1,126		13.6	%
Service charges on deposit accounts	8,426		8,890		8,487			(464			)	-5.2	%	403			4.7	%
Bankcard transaction revenue	1,704		1,262		1,013			442				35.0	%	249			24.6	%
Gains on sales of mortgage loans held for sale	1,391		1,064		2,552			327				30.7	%	(1,488		)	-58.3	%
Gains on sales of securities available for sale	—		—		10			—				—		(10		)	100.0	%
Brokerage commissions and fees	2,055		1,675		1,272			380				22.7	%	403			31.7	%
Other	2,733		2,358		2,863			375				15.9	%	(505		)	-17.6	%
	$	27,122	$	24,676	$	24,498		$	2,446			9.9	%	$	178		0.7	%

Total non-interest income increased 9.9% for the year ending December 31, 2005 compared to the same period for 2004. The largest component of non-interest income is investment management and trust services. This area of the Bank continues to grow through attraction of new business and customer retention. At December 31, 2005 assets under management totaled $1.4 billion compared to $1.3 billion at December 31, 2004 and $1.2 billion as of December 31, 2003.  Because assets under management are expressed in terms of fair value, increases in market value of existing accounts during the last two years and the attraction of new

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business have both served to increase assets under management.  Growth in the department’s assets consisted primarily of personal trust accounts during both 2005 and 2004.

Service charges on deposit accounts decreased $464,000, or 5.2%, for the year ending December 31, 2005 compared to the same period a year ago. Several factors contributed to the decline including lower overdraft activity levels compared to the prior year and the impact of free business checking. Additionally, the impact of higher interest rates on commercial analysis accounts served to increase earnings credits which are used to offset service charges.

Bankcard transaction revenue primarily represents income that the Bank derives from customers’ use of debit cards.  As the popularity of these cards has grown during 2005 and 2004, there have been increases in the number of transactions by existing cardholders as customers recognize the convenience that the cards offer.  The growth rate of this account was slowed during 2003 by a class action lawsuit brought by several retail merchants against VISA®USA and MasterCard® challenging rules imposed by VISA and MasterCard governing the acceptance of debit and credit cards by merchants.  The lawsuit resulted in a reduction of interchange rates effective August 1, 2003 and established that rates on and after January 2004 would be established from time to time reflecting competitive considerations.  Although the fees per transaction have been reduced, the Bank expects fees to continue to grow as volume growth should offset any rate reduction.

The Bank operates a mortgage banking company within its retail banking division of the Bank. This division originates residential mortgage loans and sells the loans in the secondary market. The division offers conventional, VA and FHA financing, as well as a program for low-income first time home buyers. Loans are made for both the purchase of and refinancing of homes. Virtually all loans originated by the mortgage banking company are sold in the secondary market with servicing rights released.  Interest rates on the loans sold are locked with the buyer and investor, thus Bancorp bears no interest rate risk related to these loans. Interest rates on conventional mortgage loans directly impact the volume of business transacted by the mortgage banking division. Record low mortgage rates in the first three quarters of 2003 led to record volume, while higher rates in late 2003 and in 2004 and 2005 led to an industry-wide slowdown in loan volume during 2004 and 2005. However, as a result of the addition of loan originators, mortgage volume in 2005 improved.

Brokerage commissions and fees increased during 2005 and 2004 as the sales efforts of our brokers helped to spur investor activity and resulted in higher brokerage commission levels.  Bancorp continues to be pleased to offer a full compliment of financial services to its customer base and feels that brokerage services are a key component of that strategy.

Other non-interest income increased during 2005 primarily as a result of increased income related to the purchase of two bank-owned life insurance (“BOLI”) policies during the second half of 2004. The BOLI policies were purchased to help offset increasing employee benefit costs. A total premium of $20 million, invested in the third quarter of 2004, generated income of $882,000 and $342,000 during 2005 and 2004, respectively.  Contributing factors to the decrease in non-interest income for 2004 compared to 2003 included the decrease related to mortgage refinancing fees and related income such as title insurance.  There were also a few one time items during 2003, the most significant being income of $256,000 related to the demutualization of an insurance company which held policies related to a defined benefit retirement plan for certain key officers.  See Note 14 to Bancorp’s consolidated financial statements for further discussion of the defined benefit retirement plan.

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The following table provides a comparison of the components of non-interest expenses for 2005, 2004 and 2003. The table shows the dollar and percentage change from 2004 to 2005 and from 2003 to 2004. Below the table is a discussion of significant changes and trends.

							2005/2004				2004/2003
(Dollars in thousands)	2005		2004		2003		Change		%		Change			%
Non-interest expense
Salaries and employee benefits	$	24,358	$	21,652	$	21,624	$	2,706	12.5	%	$	28		0.1	%
Net occupancy expense	3,444		3,027		2,623		417		13.8	%	404			15.4	%
Data processing expense	3,668		3,419		3,372		249		7.3	%	47			1.4	%
Furniture and equipment expense	1,191		1,178		1,062		13		1.1	%	116			10.9	%
State bank taxes	1,742		1,196		1,188		546		45.7	%	8			0.7	%
Other	10,209		8,621		8,756		1,588		18.4	%	(135		)	-1.5	%
	$	44,612	$	39,093	$	38,625	$	5,519	14.1	%	$	468		1.2	%

Salaries and benefits are the largest component of non-interest expenses.  Increases in personnel expense rose in part from increases in regular salaries during 2005 and 2004. Base salaries increased 6% in 2005 as a result of annual review increases and an increase in the number of full-time equivalent employees.  In 2004 Bancorp paid minimal bonuses as Bancorp did not reach the annual minimum target of 10% for earnings growth. However, with earnings improvement, this bonus resumed in 2005. Also contributing to the 2005 increase was Bancorp’s self-funded health insurance plan. The plan had experienced better than expected claims experience in 2004, but returned to more normal levels in 2005. The Bank continues to add employees to support growth. At December 31, 2005, the Bank had 442 full-time equivalent employees compared to 416 at the same date in 2004 and 385 for 2003.  There are no significant obligations for post-retirement or post-employment benefits.

Additionally, in late December of 2005, Bancorp accelerated the vesting of all employees’ stock options, which resulted in additional non-cash expense of approximately $32,000. By vesting these stock options early, Bancorp will avoid recognizing approximately $1,000,000 in expense over what would have been future vesting periods of one to four years. These options had been granted to 77 executive and senior officers and all were cumulatively in-the-money by approximately $579,000. In accordance with SFAS No. 123R, the fair value of stock options granted beginning January 1, 2006 will result in recognition of non-cash compensation expense. See Note 15 to Bancorp’s consolidated financial statements for further discussion of stock options.

Net occupancy expense has increased as the Bank has added banking centers.  During 2004, the Bank opened two locations.  It opened four locations in 2003.  In addition, in June 2004, the Bank’s Indianapolis, Indiana location was converted from a loan production office into a full service branch and was moved to a new location.  In 2003, the Investment Management and Trust department relocated to new office space.  At December 31, 2005 the Bank had twenty-four banking center locations including the main office.

Data processing expense rose as the Bank continues to update computer equipment and software as technology advances. Costs of capital asset additions flow through the statement of income over the lives of the assets in the form of depreciation expense.  Furniture and fixtures expense has also increased with the addition of banking centers.  State bank taxes are based primarily on average capital and deposit levels, and these taxes have increased as capital and deposit totals have grown. Also in the third quarter of 2005, Bancorp re-evaluated state tax accruals and adjusted expenses accordingly.

Other non-interest expenses increased for the year ending December 31, 2005 compared to the same period of 2004 by $1,588,000. In late 2005 Bancorp made an additional $500,000 contribution to the Bank’s charitable

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foundation for continuing support of non-profit and community-oriented organizations in the Bancorp’s markets. The Bank formed this foundation in 1999 to promote a variety of charitable works. Legal and professional expenses increased mainly due to expenses related to listing on the NASDAQ and computer network consulting services. Also 2005 included an increase primarily due to expensing of obsolete or replaced equipment, facilities, equipment and software. In 2004, the decline in other expenses primarily related to a decline in mortgage banking activity offsetting increases in various expenses related to the Bank’s growth including advertising and marketing.

Income Taxes

A three year comparison of income tax expense and effective tax rate follows:

(Dollars in thousands)	2005			2004			2003
Income tax expense	$	9,876		$	8,802		$	8,362
Effective tax rate	31.3		%	31.8		%	32.1		%

Bancorp’s overall tax rate has fallen due to increased investment in transactions that generate low income housing tax credits. As Bancorp continues to review its tax strategy and invest in these transactions, its 2006 effective tax rate should remain near the current level.

Financial Condition

Earning Assets and Interest Bearing Liabilities

Summary information with regard to Bancorp’s financial condition follows:

							2005/2004				2004/2003
(Dollars in thousands)	2005		2004		2003		Change		%		Change		%
Average earning assets	$	1,178,922	$	1,074,845	$	1,022,438	$	104,077	9.7	%	$	52,407	5.1	%
Average interest bearing liabilities	954,726		865,086		832,310		89,640		10.4	%	32,776		3.9	%
Average total assets	1,270,178		1,148,652		1,083,949		121,526		10.6	%	64,703		6.0	%
Total year end assets	1,330,438		1,212,015		1,118,521		118,423		9.8	%	93,494		8.4	%

The Bank has experienced steady growth in earning assets over the last several years. Growth of average earning assets occurred primarily in the area of loans. From 2004 to 2005, average loans increased 11.1%.  More specifically, period end commercial and industrial loans increased 4.5%, construction loans increased 54.3% and consumer loans increased 18.4%. Real estate loans, Bancorp’s largest loan category, decreased 2.4%.  During 2004, average loans increased 7.1% and average taxable securities grew 17.0%.

The increase in average interest bearing liabilities from 2004 to 2005 occurred primarily in money market deposits, savings and time deposits.  Total interest bearing accounts increased 11.7% and non-interest bearing accounts grew 9.7%. Bancorp held the average cost of the interest bearing deposits to 2.30%, a 55 basis point increase from 1.75% for 2004. In addition, Bancorp continued to utilize fixed rate advances from the Federal Home Loan Bank during 2005 as a more favorably priced alternative to time deposits.  Bancorp had an average of $25,809,000 in outstanding advances in 2005 compared to $25,573,000 and $0 in 2004 and 2003, respectively.

The growth in various types of interest bearing checking accounts in 2004 can be attributed to the Bank’s continued expansion in its primary market. On the other hand, average time deposits shrunk by 9.0% during 2004 as Bancorp utilized less expensive sources of funds. Based on slower than expected loan growth during the year and the availability of cheaper funding sources, Bancorp intentionally let some of the time deposits portfolio run off during 2004.

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Average Balances and Interest Rates – Taxable Equivalent Basis

	Year 2005						Year 2004						Year 2003
(Dollars in thousands)	Average Balances		Interest		Average Rate		Average Balances		Interest		Average Rate		Average Balances		Interest		Average Rate
Earning assets
Federal funds sold	$	16,057	$	515	3.21	%	$	14,604	$	172	1.18	%	$	31,911	$	354	1.11	%
Mortgage loans held for sale	5,902		334		5.66	%	4,137		213		5.15	%	13,535		748		5.53	%
Securities
Taxable	102,509		4,126		4.03	%	110,283		3,873		3.51	%	93,882		3,686		3.93	%
Tax-exempt	35,895		1,958		5.45	%	29,162		1,682		5.77	%	26,777		1,671		6.24	%
FHLB stock	3,298		165		5.00	%	3,157		130		4.12	%	3,034		122		4.02	%
Loans, net of unearned income	1,015,261		66,141		6.51	%	913,502		55,340		6.06	%	853,299		54,271		6.36	%
Total earning assets	1,178,922		73,239		6.21	%	1,074,845		61,410		5.71	%	1,022,438		60,852		5.95	%
Less allowance for loan losses	12,662						12,592						11,971
	1,166,260						1,062,253						1,010,467
Non-earning assets
Cash and due from banks	34,485						32,257						30,201
Premises and equipment	25,913						25,503						23,784
Accrued interest receivable and other assets	43,520						28,639						19,497
Total assets	$	1,270,178					$	1,148,652					$	1,083,949

	Year 2005						Year 2004						Year 2003
(Dollars in thousands)	Average Balances		Interest		Average Rate		Average Balances		Interest		Average Rate		Average Balances		Interest		Average Rate
Interest bearing liabilities
Deposits
Interest bearing demand deposits	$	242,769	$	2,830	1.17	%	$	269,120	$	2,256	0.84	%	$	254,273	$	2,234	0.88	%
Savings deposits	47,081		217		0.46	%	46,797		121		0.26	%	41,657		70		0.17	%
Money market deposits	166,458		3,902		2.34	%	112,643		1,014		0.90	%	108,029		626		0.58	%
Time deposits	371,700		12,093		3.25	%	312,848		9,595		3.07	%	343,872		11,913		3.46	%
Securities sold under agreements to repurchase and federal funds purchased	79,170		1,457		1.84	%	76,173		917		1.20	%	62,599		657		1.05	%
Other short-term borrowings	970		29		2.99	%	1,133		9		0.79	%	1,051		8		0.76	%
FHLB advances	25,809		718		2.78	%	25,573		545		2.13	%	—		—		—
Long-term debt	20,769		1,862		8.97	%	20,799		1,862		8.95	%	20,829		1,864		8.95	%
Total interest bearing liabilities	954,726		23,108		2.42	%	865,086		16,319		1.89	%	832,310		17,372		2.09	%
Non-interest bearing liabilities
Non-interest bearing demand deposits	169,971						155,005						140,239
Accrued interest payable and other liabilities	23,867						19,147						17,601
Total liabilities	1,148,564						1,039,238						990,150
Stockholders’ equity	121,614						109,414						93,799
Total liabilities and stockholders’ equity	$	1,270,178					$	1,148,652					$	1,083,949
Net interest income			$	50,131					$	45,091					$	43,480
Net interest spread					3.79	%					3.82	%					3.86	%
Net interest margin					4.25	%					4.20	%					4.25	%

Notes:

•Yields on municipal securities have been computed on a fully tax-equivalent basis using the federal income tax rate of 35%.

•The approximate tax-equivalent adjustments to interest income were $896,000, $870,000 and $732,000 for the years ended December 31, 2005, 2004 and 2003, respectively.

•Average balances for loans include the principal balance of non-accrual loans.

•Loan interest income includes loan fees and is computed on a fully tax-equivalent basis using the federal income tax rate of 35%.

•Loan fees, net of deferrals, included in interest income amounted to $1,054,000, $1,591,000 and $1,484,000 in 2005, 2004 and 2003, respectively.

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Securities

The primary purpose of the securities portfolio is to provide another source of interest income, as well as liquidity management. In managing the composition of the balance sheet, Bancorp seeks a balance between earnings sources and credit and liquidity considerations.

Securities intended to be held until maturity are carried at amortized cost. Securities available for sale include securities that may be sold in response to changes in interest rates, resultant prepayment risk and other factors related to interest rate and prepayment risk changes. Securities available for sale are carried at fair value with unrealized gains or losses, net of tax effect, included in stockholders’ equity.

The carrying value of securities is summarized as follows:

	December 31
(In thousands)	2005		2004		2003
Securities available for sale
U.S. Treasury and federal agency obligations	$	105,188	$	70,536	$	91,238
Mortgage-backed securities	19,619		21,571		26,335
Obligations of states and political subdivisions	30,224		32,074		33,071
Other	1,919		1,983		1,950
	$	156,950	$	126,164	$	152,594
Securities held to maturity
Mortgage-backed securities	$	133	$	294	$	618
Obligations of states and political subdivisions	3,991		4,989		5,297
	$	4,124	$	5,283	$	5,915

The maturity distribution and weighted average interest rates of debt securities at December 31, 2005, are as follows:

	Within one year				After one but within five years				After five but within ten years				After ten years
(Dollars in thousands)	Amount		Rate		Amount		Rate		Amount		Rate		Amount		Rate
Securities available for sale
U.S. Treasury and federal agencies	$	29,437	4.16	%	$	61,783	3.65	%	$	13,968	4.85	%	$	—	—
Mortgage-backed securities	—		—		3,812		4.08	%	11,560		4.30	%	4,247		4.90	%
Obligations of states and political subdivisions	1,439		5.69	%	13,175		4.41	%	12,796		6.75	%	2,814		7.69	%
Other	618		9.00	%	—		—		—		—		1,301		7.76	%
	$	31,494	4.33	%	$	78,770	3.80	%	$	38,324	5.29	%	$	8,362	6.25	%
Securities held to maturity
Mortgage-backed securities	$	14	7.10	%	$	—	—		$	58	6.50	%	$	61	5.94	%
Obligations of states and political subdivisions	930		6.58	%	3,061		6.68	%	—		—		—		—
	$	944	6.59	%	$	3,061	6.68	%	$	58	6.50	%	$	61	5.94	%

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Loan Portfolio

Bancorp’s primary source of income is interest on loans. The composition of loans as of the end of the last five years follows:

	December 31
(In thousands)	2005		2004		2003		2002		2001
Commercial and industrial	$	225,369	$	215,755	$	189,477	$	175,002	$	154,965
Construction and development	126,961		82,261		53,506		34,910		55,944
Real estate mortgage	524,755		537,491		500,610		484,330		422,290
Consumer	176,786		149,334		142,560		124,331		144,242
	$	1,053,871	$	984,841	$	886,153	$	818,573	$	777,441

Real estate mortgage loans are comprised primarily of owner occupied commercial properties, investment commercial properties and residential properties.

The following tables detail the amounts of commercial and industrial loans, and construction and development loans at December 31, 2005, which based on remaining scheduled repayments of principal, are due in the periods indicated. Also shown are the commercial and industrial loans due after one year classified according to sensitivity to changes in interest rates.

	Maturing
(In thousands)	Within one year	After one but within five years	After five years	Total
Commercial and industrial	$87,659	$106,402	$31,308	$225,369
Construction and development	61,028	56,684	9,249	126,961

	Interest Sensitivity
(In thousands)	Fixed rate		Variable rate
Due after one but within five years	$	56,119	$	50,283
Due after five years	21,255		10,053
	$	77,374	$	60,336

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Non-performing Loans and Assets

Information summarizing non-performing assets, including non-accrual loans follows:

	December 31
(Dollars in thousands)	2005			2004			2003			2002			2001
Non-accrual loans	$	3,709		$	4,944		$	4,417		$	4,840		$	3,775
Loans past due 90 days or more and still accruing	891			696			433			754			1,346
Non-performing loans	$	4,600		$	5,640		$	4,850		$	5,594		$	5,121
Foreclosed real estate	3,226			3,284			3,633			310			63
Other foreclosed property	40			113			—			88			—
Non-performing assets	$	7,866		$	9,037		$	8,483		$	5,992		$	5,184
Non-performing loans as a percentage of total loans	0.44		%	0.57		%	0.55		%	0.68		%	0.66		%
Non-performing assets as a percentage of total assets	0.59		%	0.75		%	0.76		%	0.58		%	0.55		%
Allowance for loan losses as a percentage of non-performing loans	262		%	222		%	243		%	209		%	214		%

Non-performing loans as a percentage of total loans decreased 13 basis points compared to the prior year.  The overall level of non-performing loans as a percentage of total loans at December 31, 2005 is lower than the level seen over the last four years.

The threshold at which loans are generally transferred to non-accrual of interest status is 90 days past due unless they are well secured and in the process of collection. Interest income recorded on non-accrual loans for was $127,000, $144,000, and $127,000 for 2005, 2004, and 2003, respectively.  Interest income that would have been recorded if non-accrual loans were on a current basis in accordance with their original terms was $382,000, $257,000, and $285,000 for 2005, 2004, and 2003, respectively.

In addition to the non-performing loans discussed above, there were loans for which payments were current or less than 90 days past due where borrowers are experiencing significant financial difficulties. These loans totaled approximately $6,211,000, $5,234,000, and $722,000 at December 31, 2005, 2004, and 2003, respectively. These loans are monitored by management and considered in determining the level of the allowance for loan losses.  Management believes these loans currently do not present significant exposure to loss.

Non-performing assets as a percentage of total assets decreased 16 basis point from 2004 to 2005.   The decrease in non-performing assets as a percentage of total assets was the result of the decrease in non-performing loans. Foreclosed real estate primarily consists of property that secured one former loan made up of a residential subdivision development that has required several years for full disposition due to the nature of the property.  Some costs were capitalized as lots were made ready for sale, and partial dispositions of this real estate occurred during 2005 and 2004 as lots were sold. This asset is periodically evaluated for impairment. No impairment charges have been recorded.

Allowance for Loan Losses

An allowance for loan losses has been established to provide for loans that may not be fully repaid. The allowance for loan losses is increased by provisions charged to expense and decreased by charge-offs, net of recoveries. Loans are charged off by management when deemed uncollectible; however, collection efforts continue and future recoveries may occur.

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Bancorp’s lending policies and procedures center on controlling credit risk and include procedures to identify and measure this risk. These procedures begin with lenders assigning a risk rating to each of their credits, and this rating is confirmed in the loan approval process. Internal loan review, through a year-round process of examining individually significant obligor relationships as well as a sample of each lender’s portfolio, tests the reliability of these risk assessments. Additionally, a review of this process is an integral part of regulatory bank examinations.

Adversely rated credits are included on a loan watch list. This list also includes loans requiring closer monitoring due to borrower’s circumstances.  However, these loans have generally not reached a level of adversity which would cause them to be criticized credits by regulators.  Loans are added to the watch list when circumstances are detected which might affect the borrower’s ability to comply with terms of the loan.  This could include any of the following:

•Delinquency of a scheduled loan payment,

•Deterioration in the borrower’s financial condition identified in a review of periodic financial statements,

•Decrease in the value of collateral securing the loan, or

•Change in the economic environment in which the borrower operates.

Loans on the watch list require detailed status reports, including recommended corrective actions, prepared by the responsible loan officer every three months. These reports are reviewed by management.  The watch list is also discussed in quarterly meetings with the Board Loan Committee.

Downgrades of loan risk ratings may be initiated by the responsible loan officer, internal loan review, or the credit analyst department at any time. Upgrades of risk ratings may only be made with the concurrence of management and internal loan review generally at the time of quarterly watch list review meetings.

In determining the allowance and related provision for loan losses, three principal elements are considered:

•Specific allocations based upon probable losses identified during the ongoing review of the loan portfolio.

•Allocations for loans not reviewed are based principally on historical charge-off information by loan type.

•Additional allowance allocations based on subjective factors.

The first element reflects management’s estimate of probable losses based upon a systematic review of specific loans. Loans are reviewed and, if necessary, assigned a loss allocation. These estimates are based primarily upon discounted collateral exposure, but other objective factors such as payment history and financial condition of the borrower or guarantor may be used as well.

The second element estimates losses for the portion of the portfolio not specifically reviewed.  These loans are totaled by loan category, and are assigned a loss allocation factor based upon the Bank’s historical net charge offs by loan type.

The third element is based on factors not necessarily associated with a specific credit or loan category and represents management’s attempt to ensure that the overall allowance for loan losses appropriately reflects a margin for the imprecision necessarily inherent in the estimates of expected credit losses.  Management considers a number of subjective factors, including local and general economic business factors and trends, portfolio concentrations, and changes in the size, mix and general terms of the loan portfolio.

Based on this quantitative and qualitative analysis, provisions are made to the allowance for loan losses.  Such provisions are reflected as a charge against current earnings in Bancorp’s consolidated statements of income.

The allocation of the allowance for loan losses by loan category is a result of the analysis above. The same procedures used to determine requirements for the allowance for loan losses establish the distribution of the allowance by loan category.  The distribution of the allowance will change from period to period due to

24

changes in the identified risk in each loan in the portfolio, changes in the aggregate loan balances by loan category, and changes in management’s view of the subjective factors noted above.

The method of calculating the allowance requirements has not changed significantly over time.  The reallocations among different categories of loans between periods are the result of the redistribution of the individual loans that comprise the aggregate portfolio as described above.  However, the perception of risk with respect to particular loans within the portfolio will change over time as a result of the characteristics and performance of those loans, overall economic and market trends, and the actual and expected trends in non-performing loans.

The adequacy of the allowance for loan losses is monitored by the internal loan review staff and reported quarterly to the Audit Committee of the Board of Directors. In addition, various regulatory agencies, as an integral part of their examination process, periodically review the adequacy of Bancorp’s allowance for loan losses. Such agencies may require Bancorp to make additional provisions to the allowance based upon their judgments about information available to them at the time of their examinations. Management believes that the allowance for loan losses is adequate to absorb probable inherent losses on existing loans that may become uncollectible. See “Provision for Loan Losses” for further discussion of the allowance for loan losses.

Summary of Loan Loss Experience

The following table summarizes average loans outstanding, changes in the allowance for loan losses arising from loans charged off and recoveries on loans previously charged off by loan category and additions to the allowance charged to expense.

	Year ended December 31
(Dollars in thousands)	2005			2004			2003			2002			2001
Average loans	$	1,015,261		$	913,502		$	853,299		$	792,770		$	721,576
Balance of allowance for loan losses at beginning of year	$	12,521		$	11,798		$	11,705		$	10,965		$	9,331
Loans charged off
Commercial and industrial	300			703			467			1,736			1,203
Construction and development	—			—			986			—			—
Real estate mortgage	241			583			690			602			327
Consumer	822			793			1,071			1,628			1,259
Total loans charged off	1,363			2,079			3,214			3,966			2,789
Recoveries of loans previously charged off
Commercial and industrial	207			236			115			37			32
Construction and development	—			—			—			—			—
Real estate mortgage	78			11			254			9			—
Consumer	367			465			388			160			171
Total recoveries	652			712			757			206			203
Net loans charged off	711			1,367			2,457			3,760			2,586
Additions to allowance charged to expense	225			2,090			2,550			4,500			4,220
Balance at end of year	$	12,035		$	12,521		$	11,798		$	11,705		$	10,965
Ratio of net charge-offs during year to average loans	0.07		%	0.15		%	0.29		%	0.47		%	0.36		%

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The overall decrease in charge-offs during 2005 can be attributed primarily to the commercial and industrial portfolio and real estate mortgages.  See “Provision for Loan Losses” for discussion of the provision for loan losses.

The following table sets forth the allocation of the allowance for loan losses for the loan categories shown. Although specific allocations exist, the entire allowance is available to absorb losses in any particular loan category.

	December 31
(In thousands)	2005		2004		2003		2002		2001
Commercial and industrial	$	3,762	$	4,366	$	4,085	$	4,550	$	2,936
Construction and development	744		687		1,887		572		1,066
Real estate mortgage	2,712		2,500		1,598		2,350		3,024
Consumer	2,074		2,011		1,571		1,607		1,779
Unallocated	2,743		2,957		2,657		2,626		2,160
	$	12,035	$	12,521	$	11,798	$	11,705	$	10,965

The changes in the allocation of the allowance from year to year in various categories are influenced greatly by the level of net charge-offs in the respective categories and other factors including, but not limited to, risk allocations tied to specific loans or groups of loans and changes in overall qualitative allocations.

The unallocated allowance is based upon management’s evaluation of various conditions, the effects of which are not directly measured in the determination of the allocated allowance.  The evaluation of the inherent loss with respect to these conditions is subject to a higher degree of uncertainty because they are not identified with specific credits.  The conditions evaluated in connection with the unallocated allowance may include factors such as economic conditions and forecasts, the adequacy of loan policies and internal controls, the experience of the lending staff, bank regulatory examination results, and changes in the composition of the portfolio.

The ratio of loans in each category to total outstanding loans is as follows:

	December 31
	2005		2004		2003		2002		2001
Commercial and industrial	21.4	%	21.9	%	21.4	%	21.4	%	19.6	%
Construction and development	12.0	%	8.3	%	6.0	%	4.3	%	7.2	%
Real estate mortgage	49.8	%	54.6	%	56.5	%	59.1	%	65.1	%
Consumer	16.8	%	15.2	%	16.1	%	15.2	%	8.1	%
	100.0	%	100.0	%	100.0	%	100.0	%	100.0	%

Selected ratios relating to the allowance for loan losses follow:

	Years ended December 31
	2005		2004		2003
Provision for loans losses to average loans	0.02	%	0.23	%	0.30	%
Net charge-offs to average loans	0.07	%	0.15	%	0.29	%
Allowance for loan losses to average loans	1.19	%	1.37	%	1.38	%
Allowance for loan losses to year end loans	1.14	%	1.27	%	1.33	%

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Deposits

Bancorp’s core deposits consist of non-interest and interest bearing demand deposits, savings deposits, certificates of deposit under $100,000, certain certificates of deposit over $100,000 and IRAs. These deposits, along with other borrowed funds, are used by Bancorp to support its asset base. By adjusting rates offered to depositors, Bancorp is able to influence the amounts of deposits needed to meet its funding requirements. The average amount of deposits in the Bank and average rates paid on such deposits for the years indicated are summarized as follows:

	Years ended December 31
	2005				2004				2003
(Dollars in thousands)	Average Balance		Average Rate		Average Balance		Average Rate		Average Balance		Average Rate
Non-interest bearing demand deposits	$	169,971	—		$	155,005	—		$	140,239	—
Interest bearing demand deposits	242,769		1.17	%	269,120		0.84	%	254,273		0.88	%
Savings deposits	47,081		0.46	%	46,797		0.26	%	41,657		0.17	%
Money market deposits	166,458		2.34	%	112,643		0.90	%	108,029		0.58	%
Time deposits	371,700		3.25	%	312,848		3.07	%	343,872		3.46	%
	$	997,979			$	896,413			$	888,070

Maturities of time deposits of $100,000 or more outstanding at December 31, 2005, are summarized as follows:

(In thousands)	Amount
3 months or less	$	25,768
Over 3 through 6 months	12,533
Over 6 through 12 months	25,553
Over 12 months	60,220
	$	124,074

Short-Term Borrowings

Securities sold under agreements to repurchase represent short-term borrowings from commercial customers as part of a cash management service. These agreements generally have maturities of one to four days from the transaction date.

Information regarding securities sold under agreements to repurchase follows:

	Years ended December 31
	2005				2004				2003
(Dollars in thousands)	Amount		Rate		Amount		Rate		Amount		Rate
Securities sold under agreements to repurchase
Year end	$	79,886	2.17	%	$	72,084	1.42	%	$	66,102	0.95	%
Average during year	78,360		1.83	%	70,593		1.18	%	61,571		1.05	%
Maximum month end balance during year	87,987				85,395				71,748

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Subordinated Debentures

Subordinated debentures are long term debt and consist primarily of a trust preferred security issued in June 2001. The trust preferred security has a coupon of 9% and is callable in June 2006. If Bancorp’s management would decide to call the security, Bancorp would incur pre-tax expense of approximately $879,000 due to the write-off of debt issuance costs. See Note 11 for further information regarding subordinated debentures.

Liquidity

The role of liquidity management is to ensure funds are available to meet depositors’ withdrawal and borrowers’ credit demands while at the same time maximizing profitability. This is accomplished by balancing changes in demand for funds with changes in the supply of those funds. Liquidity to meet the demand is provided by maturing assets, short-term liquid assets that can be converted to cash and the ability to attract funds from external sources, principally depositors. Management prefers to focus on transaction accounts and full service relationships with customers.

Bancorp’s Asset/Liability Committee is primarily made up of senior management and has direct oversight responsibility for Bancorp’s liquidity position and profile. A combination of daily, weekly and monthly reports provided to management detail the following:  internal liquidity metrics, composition and level of the liquid asset portfolio, timing differences in short-term cash flow obligations, and exposure to contingent draws on Bancorp’s liquidity.

The Bank has a number of sources of funds to meet liquidity needs on a daily basis. The deposit base, including consumer and commercial deposits are a principal source of funds. The majority of these deposits come from long-term customers and is a stable source of funds. The Bank has no brokered deposits, and has an insignificant amount of deposits on which the rate paid exceeded the market rate by more than 50 basis points when the account was established. In addition, federal funds purchased are an available source of liquidity.

Other sources of funds available to meet daily needs include the sales of securities under agreements to repurchase and funds made available under a treasury tax and loan note agreement with the federal government. Also, the Bank is a member of the Federal Home Loan Bank of Cincinnati (FHLB). As a member of the FHLB, the Bank has access to credit products of the FHLB. At December 31, 2005, the amount of available credit from the FHLB totaled $76 million. Bancorp’s ability to borrow from the FHLB has been reduced by the Bank’s use of fixed rate advances. See Note 10 for further information regarding advances from the Federal Home Loan Bank. Additionally, the Bank has federal funds purchased lines with correspondent banks totaling $58 million. Bancorp can also borrow from the Federal Reserve Bank of St. Louis based upon its asset size. Bancorp has in the past had a line of credit with a correspondent bank and management believes it has the ability to restore a line of credit with an outside bank at any time.

Bancorp’s liquidity depends primarily on the dividends paid to it as the sole shareholder of the Bank. As discussed in Note 16 to Bancorp’s consolidated financial statements, the Bank may pay up to $21,878,000 in dividends to Bancorp without regulatory approval subject to the ongoing capital requirements of the Bank. Prior to the declaration of dividends, management considers the effect such payments will have on total stockholders’ equity and capital ratios.

Over the normal course of business, Bancorp enters into certain forms of off-balance sheet transactions, including unfunded loan commitments and letters of credit. These transactions are managed through Bancorp’s various risk management processes. Management considers both on-balance sheet and off-balance sheet transactions in its evaluation of Bancorp’s liquidity.

Sources and Uses of Cash

Bancorp derives most of its cash flow from the activities of the Bank. Cash flow is provided primarily through the financing activities of the Bank which include raising deposits and the borrowing of funds from institutional sources such as fed funds purchased. These funds are then primarily used to facilitate the

28

investment activities of the Bank which include making loans and increasing the investment portfolio. Another important source of cash is from the net income of the Bank from operating activities. A portion of the net income from the Bank is also used to pay dividends to shareholders. For more specific information, see the consolidated statement of cash flows in Bancorp’s consolidated financial statements.

Commitments

In the normal course of business, Bancorp is party to activities that contain credit, market and operational risk that are not reflected in whole or in part in Bancorp’s consolidated financial statements. Such activities include:  traditional off-balance sheet credit-related financial instruments, commitments under operating leases and long-term debt.

The Bank provides customers with off-balance sheet credit support through loan commitments and standby letters of credit. Summarized credit-related financial instruments, including both commitments to extend credit and letters of credit at December 31, 2005 are as follows:

	Amount of Commitment Expiration per Period
(In thousands)	Total		Less than 1 year		1-3 Years		3-5 Years		Over 5 Years
Unused loan commitments	$	308,679	$	118,466	$	54,781	$	63,808	$	71,624
Standby letters of credit	13,453		11,470		1,982		1		—

Since some of the unused commitments are expected to expire or may not be fully used, the total amount of commitments in the preceding table does not necessarily represent future cash requirements.

In addition to owned banking facilities, the Bank has entered into long-term leasing arrangements to support the ongoing activities of Bancorp. The Bank also has required future payments for a defined benefit retirement plan, long-term debt and the maturity of time deposits. See Note 8, Note 10, Note 11 and Note 14 to Bancorp’s consolidated financial statements for further information on the defined benefit retirement plan, Federal Home Loan Bank advances, subordinated debentures and time deposits.

The required payments under such commitments at December 31, 2005 are as follows:

	Payments due by period
(In thousands)	Total		Less than 1 year		1-3 Years		3-5 Years		Over 5 Years
Operating leases	$	10,039	$	1,335	$	2,327	$	1,371	$	5,006
Defined benefit retirement plan	5,081		174		348		323		4,236
Federal Home Loan Bank advances	40,000		10,000		30,000		—		—
Subordinated debentures	20,769		—		—		—		20,769
Time deposits	386,875		195,122		148,202		25,228		18,323

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Capital

Information pertaining to Bancorp’s capital balances and ratios follows:

	Years ended December 31
(Dollars in thousands, except share data)	2005			2004			2003
Stockholders’ equity	$	125,797		$	116,647		$	100,414
Dividends per share	$	0.470		$	0.390		$	0.305
Tier 1 risk-based capital	13.44		%	13.64		%	13.46		%
Total risk-based capital	14.56		%	14.91		%	14.74		%
Leverage ratio	11.15		%	11.34		%	10.61		%

The increase in stockholders’ equity from 2004 to 2005 was primarily due to net income less the effect of dividends paid to shareholders. Equity was also affected to a lesser extent by shares issued for options and employee benefit plans, shares repurchased and the impact of changes in market value on the unrealized gain in the investment portfolio.

Bank holding companies and their subsidiary banks are required by regulators to meet risk-based capital standards. These standards, or ratios, measure the relationship of capital to a combination of balance sheet and off-balance sheet risks. The value of both balance sheet and off-balance sheet items are adjusted to reflect credit risks. Note 19 to the consolidated financial statements provides more details of regulatory capital requirements, as well as capital ratios of Bancorp and the Bank. Bancorp and the Bank exceed regulatory capital ratios required to be well capitalized. Management considers the effects of growth on capital ratios as it contemplates plans for expansion.

Bancorp first implemented a stock repurchase plan in 1999. The repurchased shares may be used for, among other things, issuance of shares for the stock options or employee stock ownership or purchase plans. In February 2005, the Directors expanded this plan to allow for the repurchase of 550,000 shares between February 2005 and February 2006. In February 2006, the Board of Directors extended the term of this plan to February 2007. Shares repurchased in 2005, including both the 1999 plan and 2005 expanded plan, totaled 234,264 at an average price of $23.46.

A component of equity is accumulated other comprehensive income (loss) which, for Bancorp consists of net unrealized gains or losses on securities available for sale and a minimum pension liability, both net of taxes. Accumulated other comprehensive income (loss) was ($1,197,000) and $420,000 at December 31, 2005 and 2004, respectively. The $1,617,000 decrease in accumulated other comprehensive income is primarily a reflection of the effect of the increasing interest rate environment during fiscal year 2005 on the valuation of the Bank’s portfolio of securities available for sale.

The following table presents various key financial ratios:

	Years ended December 31
	2005		2004		2003
Return on average assets	1.70	%	1.65	%	1.63	%
Return on average stockholders’ equity	17.80	%	17.28	%	18.88	%
Dividend pay out ratio, based on basic EPS	30.13	%	28.47	%	23.28	%
Average stockholders’ equity to average assets	9.57	%	9.53	%	8.65	%

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Recently Issued Accounting Pronouncements

In November 2003, the Emerging Issues Task Force (EITF) issued EITF Issue No. 03-1, The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments. EITF 03-1 provides guidance for determining when an investment is considered impaired, whether impairment is other-than-temporary and the measurement of an impairment loss. Certain disclosure requirements of EITF 03-1 were adopted in 2003 and Bancorp began presenting the new disclosure requirements in its consolidated financial statements for the year ended December 31, 2003. The recognition and measurement provisions were initially effective for other-than-temporary impairment evaluations in reporting periods beginning after June 15, 2004. However, in September 2004, the effective date of these provisions was delayed until the finalization of a FASB Staff Position (“FSP”) to provide additional implementation guidance. On November 3, 2005 the FASB issued FSP FAS 115-1 and FAS 124-1, The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments. This FSP specifically nullifies certain requirements of EITF 03-1 but carries forward the disclosure requirements. Bancorp’s disclosures in Note 3 to the consolidated financial statements incorporate the requirements of EITF No. 03-1 and the aforementioned FSPs.

In December 2004, FASB issued a revision to SFAS No. 123, Accounting for Stock-Based Compensation, SFAS No. 123(revised), Share-Based Payment. SFAS No. 123R establishes standards for the accounting for transactions in which an entity (i) exchanges its equity instruments for goods or services, or (ii) incurs liabilities in exchange for goods or services that are based on the fair value of the entity’s equity instruments or that may be settled by the issuance of the equity instruments. SFAS No. 123R eliminates the ability to account for stock-based compensation under the intrinsic value method using Accounting Practice Bulletin Opinion (“APB”) No. 25, “Accounting for Stock Issued to Employees” and requires that such transactions be recognized as compensation cost in the income statement based on their fair values on the date of the grant. In March 2005, the SEC issued Staff Accounting Bulletin (“SAB”) No. 107, which provided the SEC’s views on the implementation of SFAS No. 123R and their views regarding the valuation of share-based payment arrangements for public companies. SAB 107 also lays out the SEC’s positions regarding the interaction between SFAS No. 123R and certain SEC rules and regulations. SAB 107 further discusses the valuation of share-based payment arrangement for public companies. SFAS No. 123R and SAB No. 107 are effective for the Bancorp on January 1, 2006 and must be fully implemented for any reporting periods following that date. As of January 1, 2006, Bancorp has adopted SFAS No. 123R and the “modified prospective” method in which compensation cost is recognized beginning with the effective date (a) based on the requirements of SFAS No. 123R for all share-based payments granted after the effective date and (b) based on the requirements of SFAS No. 123 for all awards granted to employees prior to the effective date of SFAS No. 123R that remain unvested on the effective date. On December 31, 2005, Bancorp accelerated vesting on employee stock-based compensation outstanding at that date. See the information provided in the stock-based compensation section of this note to the consolidated financial statements for further discussion of the implementation of this standard. Bancorp expects the impact of adopting this statement on Bancorp’s consolidated financial statements for 2006 to be an additional compensation expense of approximately $300,000.

In May 2005, FASB issued SFAS No. 154, Accounting Changes and Error Corrections (SFAS No. 154). SFAS No. 154 provides guidance on the accounting for and reporting of accounting changes and error corrections. It establishes, unless impracticable, retrospective application as the required method for reporting a change in accounting principle in the absence of explicit transition requirements specific to the newly adopted accounting principle. SFAS No. 154 is effective for accounting changes and corrections of errors made in fiscal years beginning after December 15, 2005. The adoption of SFAS No. 154 is not expected to have a material impact on Bancorp’s consolidated financial statements.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Information required by this item is included in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of this Form 10-K.

31

Item 8. Financial Statements and Supplementary Data

The following consolidated financial statements of Bancorp and report of independent auditors are included below:

Report of Independent Registered Public Accounting Firm

Management’s Report on Consolidated Financial Statements

32

Consolidated Balance Sheets

	December 31,
(Dollars in thousands)	2005			2004
Assets
Cash and due from banks	$	34,082		$	31,030
Federal funds sold	9,957			517
Mortgage loans held for sale	7,444			5,528
Securities available for sale (amortized cost $158,371 in 2005 and $125,013 in 2004)	156,950			126,164
Securities held to maturity (approximate fair value $4,180 in 2005 and $5,465 in 2004)	4,124			5,283
Federal Home Loan Bank stock	3,391			3,226
Loans	1,053,871			984,841
Less allowance for loan losses	12,035			12,521
Net loans	1,041,836			972,320
Premises and equipment	25,187			26,266
Accrued interest receivable and other assets	47,467			41,681
Total assets	$	1,330,438		$	1,212,015
Liabilities
Deposits
Non-interest bearing	$	180,628		$	159,342
Interest bearing	850,729			790,741
Total deposits	1,031,357			950,083
Securities sold under agreements to repurchase and federal funds purchased	79,886			73,284
Other short-term borrowings	2,139			1,176
Accrued interest payable and other liabilities	30,490			20,026
Federal Home Loan Bank advances	40,000			30,000
Subordinated debentures	20,769			20,799
Total liabilities	1,204,641			1,095,368
Stockholders’ equity
Preferred stock, no par value; 1,000,000 shares authorized; no shares issued or outstanding	—			—
Common stock, no par value; 20,000,000 shares authorized; issued and outstanding 13,815,837 shares in 2005 and 13,948,981 shares in 2004	6,931			7,373
Additional paid-in capital	14,773			18,684
Retained earnings	105,290			90,170
Accumulated other comprehensive (loss) income	(1,197		)	420
Total stockholders’ equity	125,797			116,647
Total liabilities and stockholders’ equity	$	1,330,438		$	1,212,015

See accompanying notes to consolidated financial statements.

33

Consolidated Statements of Income

	Years Ended December 31,
(In thousands, except per share data)	2005		2004		2003
Interest income
Loans	$	65,835	$	54,726	$	54,025
Federal funds sold	515		172		354
Mortgage loans held for sale	334		213		748
Securities
Taxable	4,291		4,003		3,808
Tax-exempt	1,368		1,426		1,185
Total interest income	72,343		60,540		60,120
Interest expense
Deposits	19,042		12,986		14,843
Securities sold under agreements to repurchase and federal funds purchased	1,457		917		657
Other short-term borrowings	29		9		8
Federal Home Loan Bank advances	718		545		—
Subordinated debentures	1,862		1,862		1,864
Total interest expense	23,108		16,319		17,372
Net interest income	49,235		44,221		42,748
Provision for loan losses	225		2,090		2,550
Net interest income after provision for loan losses	49,010		42,131		40,198
Non-interest income
Investment management and trust services	10,813		9,427		8,301
Service charges on deposit accounts	8,426		8,890		8,487
Bankcard transaction revenue	1,704		1,262		1,013
Gains on sales of mortgage loans held for sale	1,391		1,064		2,552
Gains on sales of securities available for sale	—		—		10
Brokerage commissions and fees	2,055		1,675		1,272
Other	2,733		2,358		2,863
Total non-interest income	27,122		24,676		24,498
Non-interest expense
Salaries and employee benefits	24,358		21,652		21,624
Net occupancy expense	3,444		3,027		2,623
Data processing expense	3,668		3,419		3,372
Furniture and equipment expense	1,191		1,178		1,062
State bank taxes	1,742		1,196		1,188
Other	10,209		8,621		8,756
Total non-interest expense	44,612		39,093		38,625
Income before income taxes	31,520		27,714		26,071
Income tax expense	9,876		8,802		8,362
Net income	$	21,644	$	18,912	$	17,709
Net income per share, basic	$	1.56	$	1.37	$	1.31
Net income per share, diluted	$	1.53	$	1.33	$	1.27

See accompanying notes to consolidated financial statements.

34

Consolidated Statements of Changes in Stockholders’ Equity

	Three Years Ended December 31, 2005
	Common Stock					Additional Paid-In Capital			Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Total
(In thousands, except per share data)	Number of Shares		Amount
Balance December 31, 2002	13,433		$	5,858		$	14,889		$	63,081		$	2,239		$	86,067
Net income	—		—			—			17,709			—			17,709
Change in other comprehensive loss, net of tax	—		—			—			—			(765		)	(765		)
Shares issued for stock options exercised and employee benefit plans	145		274			1,301			—			—			1,575
Cash dividends, $0.305 per share	—		—			—			(4,131		)	—			(4,131		)
Shares repurchased	(2	)	(4		)	(37		)	—			—			(41		)
Balance December 31, 2003	13,576		$	6,128		$	16,153		$	76,659		$	1,474		$	100,414
Net income	—		—			—			18,912			—			18,912
Change in other comprehensive loss, net of tax	—		—			—			—			(1,054		)	(1,054		)
Shares issued for stock options exercised and employee benefit plans	384		1,295			2,709			—			—			4,004
Cash dividends, $0.39 per share	—		—			—			(5,401		)	—			(5,401		)
Shares repurchased	(11	)	(50		)	(178		)	—			—			(228		)
Balance December 31, 2004	13,949		$	7,373		$	18,684		$	90,170		$	420		$	116,647
Net income	—		—			—			21,644			—			21,644
Change in other comprehensive loss, net of tax	—		—			—			—			(1,617		)	(1,617		)
Non-cash compensation expense from early vesting of stock options, net of tax	—		—			32			—			—			32
Shares issued for stock options exercised and employee benefit plans	101		337			774			—			—			1,111
Cash dividends, $0.47 per share	—		—			—			(6,524		)	—			(6,524		)
Shares repurchased	(234	)	(779		)	(4,717		)	—			—			(5,496		)
Balance December 31, 2005	13,816		$	6,931		$	14,773		$	105,290		$	(1,197	)	$	125,797

See accompanying notes to consolidated financial statements.

35

Consolidated Statements of Comprehensive Income

	Years Ended December 31
(In thousands)	2005			2004			2003
Net income	$	21,644		$	18,912		$	17,709
Other comprehensive (loss) income, net of tax:
Unrealized (losses) gains on securities available for sale:
Unrealized holding losses arising during the period (net of tax of $899, $556, and $327, respectively)	(1,669		)	(1,035		)	(661		)
Reclassification adjustment for gains included in net income (net of tax of $4)	—			—			(7		)
Minimum pension liability adjustment (net of tax of $28, $10, and $52, respectively)	52			(19		)	(97		)
Other comprehensive loss	(1,617		)	(1,054		)	(765		)
Comprehensive income	$	20,027		$	17,858		$	16,944

See accompanying notes to consolidated financial statements.

36

Consolidated Statements of Cash Flows

	Years Ended December 31
(In thousands)	2005			2004			2003
Operating activities	$	21,644		$	18,912		$	17,709
Net income
Adjustments to reconcile net income to net cash (used in) provided by operating activities
Provision for loan losses	225			2,090			2,550
Depreciation, amortization and accretion, net	3,257			3,168			2,921
Provision for deferred income taxes (benefit)	(56		)	(130		)	402
Gains on sales of securities available for sale	—			—			(10		)
Gains on sales of mortgage loans held for sale	(1,391		)	(1,064		)	(2,552		)
Loss on the disposal of premises and equipment	115			5			9
Loss on the sale of other real estate	43			204			233
Bank owned life insurance	881			342			—
Origination of mortgage loans held for sale	(115,962		)	(95,937		)	(238,155		)
Proceeds from sales of mortgage loans held for sale	115,437			94,630			265,084
Non cash compensation expense from early vesting of stock options, net of tax	32			—			—
Income tax benefit of stock options exercised	260			794			370
Increase in accrued interest receivable and other assets	(5,010		)	(2,460		)	(9,626		)
Increase (decrease) in accrued interest payable and other liabilities	9,373			(2,712		)	4,560
Net cash provided by operating activities	28,848			17,842			43,495
Investing activities
Purchases of securities available for sale	(84,062		)	(91,872		)	(146,867		)
Proceeds from sales of securities available for sale	—			—			1,014
Proceeds from maturities of securities available for sale	50,497			116,480			107,340
Proceeds from maturities of securities held to maturity	1,164			631			3,467
Net increase in loans	(70,963		)	(99,579		)	(65,462		)
Purchases of premises and equipment	(2,257		)	(4,550		)	(5,465		)
Purchase of bank-owned life insurance	—			(20,000		)	—
Proceeds from sales of other real estate	1,363			1,177			1,108
Net cash used in investing activities	(104,258		)	(97,713		)	(104,865		)
Financing activities
Net increase in deposits	81,274			68,217			20,779
Net increase (decrease) in securities sold under agreements to repurchase and federal funds purchased	6,602			(18,818		)	39,443
Net increase (decrease) in other short-term borrowings	963			(56		)	(1,425		)
Repayments of subordinated debentures	(30		)	(30		)	(30		)
Repayments of Federal Home Loan Bank advances	(10,000		)	—			—
Proceeds from Federal Home Loan Bank advances	20,000			30,000			—
Proceeds from stock options	851			3,210			1,205
Common stock repurchases	(5,496		)	(228		)	(41		)
Cash dividends paid	(6,262		)	(4,953		)	(3,985		)
Net cash provided by financing activities	87,902			77,342			55,946
Net increase (decrease) in cash and cash equivalents	12,492			(2,529		)	(5,424		)
Cash and cash equivalents at beginning of year	31,547			34,076			39,500
Cash and cash equivalents at end of year	$	44,039		$	31,547		$	34,076
Supplemental cash flow information:
Income tax payments	$	10,305		$	7,525		$	7,700
Cash paid for interest	22,891			16,215			17,522
Supplemental non-cash activity:
Transfers from loans to other real estate owned	$	1,222		$	476		$	4,575

See accompanying notes to consolidated financial statements.

37

Notes to Consolidated Financial Statements

(1) Summary of Significant Accounting Policies

Principles of Consolidation and Nature of Operations

The consolidated financial statements include the accounts of S.Y. Bancorp, Inc. (Bancorp) and its wholly owned subsidiary, Stock Yards Bank & Trust Company (the Bank). Significant intercompany transactions and accounts have been eliminated in consolidation. Certain prior year amounts have been reclassified to conform to the 2005 presentation.

The Bank is engaged in commercial banking services and trust and investment management services. The Bank’s primary market area is Louisville, Kentucky and surrounding communities including southern Indiana. A secondary market is Indianapolis, Indiana where the Bank has one full service private banking office.

Basis of Financial Statement Presentation and Use of Estimates

The consolidated financial statements of Bancorp and its subsidiaries have been prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and conform to predominant practices within the banking industry. In preparing the consolidated financial statements, management is required to make estimates and assumptions that affect the reported amounts of certain assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of related revenues and expenses during the reporting period. Actual results could differ from those estimates. Material estimates that are particularly susceptible to significant change relate to the determination of the allowance for loan losses and income tax assets, estimated liabilities and expense.

Cash and Cash Equivalents

Cash and cash equivalents include cash and due from banks and federal funds sold.

Securities

Securities intended to be held until maturity are carried at amortized cost. Securities available for sale include securities that may be sold in response to changes in interest rates, resultant prepayment risk and other factors related to interest rate and prepayment risk changes. Securities available for sale are carried at fair value with unrealized gains or losses, net of tax effect, included in stockholders’ equity. Amortization of premiums and accretion of discounts are recorded using the interest method over the life of the security. Gains or losses on sales of securities are computed on a specific identification cost basis for securities. For securities for which impairment is other than temporary, losses are reflected in operations and a new cost basis is established.

Mortgage Loans Held for Sale

Mortgage loans held for sale are carried at the lower of cost or market value on an individual loan basis. Gains on sales of mortgage loans are recorded at the time of disbursement by an investor at the difference between the sales proceeds and the loan’s carrying value net of any origination costs. All mortgage servicing rights are released upon sale of the related loan.

Loans

Loans are stated at the unpaid principal balance less net deferred loan fees or costs. Loan fees, net of any costs, are deferred over the life of the related loan. Interest income on loans is recorded on the accrual basis except for those loans in a non-accrual income status. Loans are placed in a non-accrual income status when the prospects for recovering both principal and accrued interest are considered doubtful or when a default of principal or interest has existed for 90 days or more unless such a loan is well secured and in the process of collection. Interest received on non-accrual loans is generally applied to principal. Non-accrual loans may be returned to accrual status once principal recovery is reasonably assured.

38

Loans are classified as impaired when it is probable the Bank will be unable to collect interest and principal according to the terms of the loan agreement. These loans are measured based on the present value of future cash flows discounted at the loans’ effective interest rate or at the estimated fair value of the loans’ collateral, if applicable. Generally, impaired loans do not accrue interest.

Allowance for Loan Losses

The allowance for loan losses is maintained at a level that adequately provides for probable losses inherent in the loan portfolio. Management determines the adequacy of the allowance based on reviews of individual credits and the underlying collateral, recent loss experience, current economic conditions, the risk characteristics of the various loan categories and such other factors that, in management’s judgment, deserve current recognition in estimating loan losses. The allowance for loan losses is increased by the provision for loan losses and reduced by net loan charge-offs.

Various regulatory agencies, as an integral part of their examination process, periodically review the adequacy of Bancorp’s allowance for loan losses. Such agencies may require Bancorp to make additional provisions to the allowance based upon their judgments about information available to them at the time of their examinations.

Premises and Equipment

Premises and equipment are carried at cost, less accumulated depreciation and amortization. Depreciation of premises and equipment is computed using straight-line methods over the estimated useful lives of the assets ranging from 3 to 39 years. Leasehold improvements are amortized on the straight-line method over the terms of the related leases, including renewals, or over the useful lives of the improvements, whichever is shorter. Maintenance and repairs are expensed as incurred while major additions and improvements are capitalized.

Other Assets

Bancorp ceased the amortization of goodwill effective January 1, 2002 in accordance with generally accepted accounting principles. The amount of goodwill impairment, if any, is measured and evaluated annually for potential impairment. No impairment charges have been recorded.

Other real estate is carried at the lower of cost or estimated fair value minus estimated selling costs. Any write downs to fair value at the date of acquisition are charged to the allowance for loan losses. In certain situations, improvements to prepare assets for sale are capitalized if those costs increase the estimated fair value of the asset. Expenses incurred in maintaining assets, write downs to reflect subsequent declines in value, and realized gains or losses are reflected in operations and are included in non-interest income and expense. At December 31, 2005 and 2004, other real estate owned was $3,226,000 and $3,284,000, respectively.

Bank-owned life insurance is carried at net realizable value less any applicable surrender charges.

Securities Sold Under Agreements to Repurchase

Bancorp enters into sales of securities under agreement to repurchase as a specified future date. Such repurchase agreements are considered financing agreements and, accordingly, the obligation to repurchase assets sold is reflected as a liability in the consolidated balance sheets of Bancorp. Repurchase agreements are collateralized by debt securities which are under the control of Bancorp.

Repurchased Shares of Common Stock

The repurchase of Bancorp’s common stock is recorded at cost, and repurchased shares return to the status of authorized, but unissued. Amounts recorded in common stock are based on the stated value of the shares, as there is no par value. Residual amounts are recorded in additional paid in capital.

39

Income Taxes

Bancorp accounts for income taxes using the asset and liability method. The objective of the asset and liability method is to establish deferred tax assets and liabilities for temporary differences between the financial reporting and the tax bases of Bancorp’s assets and liabilities at enacted tax rates expected to be in effect when such amounts are realized or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the statement of income in the period that includes the enactment date. Bancorp invests in certain low-income housing projects that yield investment tax credits and tax deductible losses. These tax benefits are recognized in income tax expense using an effective yield method over the life of the investment.

Net Income Per Share

Basic net income per common share is determined by dividing net income by the weighted average number of shares of common stock outstanding. Diluted net income per share is determined by dividing net income by the weighted average number of shares of common stock outstanding plus the weighted average number of shares that would be issued upon exercise of dilutive options, assuming proceeds are used to repurchase shares pursuant to the treasury stock method.

Comprehensive Income

Comprehensive income is defined as the change in equity (net assets) of a business enterprise during a period from transactions and other events and circumstances from non-owner sources. For Bancorp, this includes net income, changes in unrealized gains and losses on available for sale investment securities, net of taxes, and minimum pension liability adjustments, net of taxes.

Segment Information

The Bank provides a broad range of financial services to individuals, corporations and others through its twenty-four full service banking locations. These services include lending, receiving deposits, providing cash management services, safe deposit box rental, mortgage lending and investment management and trust activities. The Bank’s chief decision makers monitor the results of the various banking products and services and accordingly, the Bank’s operations are considered by management to be aggregated in two reportable operating segments: commercial banking and investment management and trust.

40

Stock-Based Compensation

As permitted by Statement of Financial Accounting Standards (SFAS) No. 148, Bancorp continued to apply the provisions of Accounting Principles Board Opinion No. 25, “Accounting for Stock-Based Compensation,” by expensing only the intrinsic value of any share-based awards and elected to disclose pro forma net income and earnings per share amounts as if the fair-value based method had been applied in measuring compensation costs. Bancorp has measured compensation cost for stock-based compensation plans as the difference between the exercise price of the options granted and the fair market value of Bancorp’s stock at the grant date. Bancorp has disclosed below pro forma net income and earnings per share as if compensation was measured at the date of grant based on the fair value of the award and recognized over the service period.

Bancorp’s as reported and pro forma information for the years ended December 31 follow:

(In thousands, except per share data)	2005		2004		2003
Net income, as reported	$	21,644	$	18,912	$	17,709
Plus non-cash compensation expense	32		—		—
Less stock-based compensation expense determined under fair value method	1,439		680		614
Pro forma net income	$	20,237	$	18,232	$	17,095
Basic EPS:
As reported	$	1.56	$	1.37	$	1.31
Pro forma	1.46		1.32		1.27
Diluted EPS:
As reported	1.53		1.33		1.27
Pro forma	1.43		1.29		1.22

The Board of Directors of Bancorp accelerated the vesting of all employee stock options outstanding on December 31, 2005. This action resulted in two financial reporting implications. First, the remaining fair value of all outstanding stock options was recognized in 2005 as part of the pro-forma footnote disclosures above. Second, Bancorp recognized $32,000 of compensation expense in the fourth quarter of 2005 based on an estimate of costs of those awards that would have expired unexercisable pursuant to original terms using a forfeiture rate based on historical experience.

The fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model with the following assumptions used:

	2005		2004		2003
Assumptions Used in Option Valuation
Dividend yield	1.56	%	1.70	%	1.48	%
Expected volatility	16.60	%	16.72	%	17.78	%
Risk free interest rate	4.13	%	4.12	%	4.00	%
Expected life of options (in years)	7.0		7.0		7.0

As of January 1, 2006, Bancorp has adopted SFAS No. 123R and the “modified prospective” method in which compensation cost is recognized beginning with the effective date for all share-based payments granted after the effective date and for all awards granted prior to the effective date of SFAS No. 123R that remain unvested on the effective date. Because vesting was accelerated for all employee options outstanding at December 31, 2005, only options held by non-employee directors remain unvested as of the effective date.

41

Recently Issued Accounting Pronouncements

In November 2003, the Emerging Issues Task Force (EITF) issued EITF Issue No. 03-1, The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments. EITF 03-1 provides guidance for determining when an investment is considered impaired, whether impairment is other-than-temporary and the measurement of an impairment loss. Certain disclosure requirements of EITF 03-1 were adopted in 2003 and Bancorp began presenting the new disclosure requirements in its consolidated financial statements for the year ended December 31, 2003. The recognition and measurement provisions were initially effective for other-than-temporary impairment evaluations in reporting periods beginning after June 15, 2004. However, in September 2004, the effective date of these provisions was delayed until the finalization of a FASB Staff Position (“FSP”) to provide additional implementation guidance. On November 3, 2005 the FASB issued FSP FAS 115-1 and FAS 124-1, The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments. This FSP specifically nullifies certain requirements of EITF 03-1 but carries forward the disclosure requirements. Bancorp’s disclosures in Note 3 to the consolidated financial statements incorporate the requirements of EITF No. 03-1 and the aforementioned FSPs.

In December 2004, FASB issued a revision to SFAS No. 123, Accounting for Stock-Based Compensation, SFAS No. 123(revised), Share-Based Payment. SFAS No. 123R establishes standards for the accounting for transactions in which an entity (i) exchanges its equity instruments for goods or services, or (ii) incurs liabilities in exchange for goods or services that are based on the fair value of the entity’s equity instruments or that may be settled by the issuance of the equity instruments. SFAS No. 123R eliminates the ability to account for stock-based compensation under the intrinsic value method using APB No. 25 and requires that such transactions be recognized as compensation cost in the income statement based on their fair values on the date of the grant. In March 2005, the SEC issued Staff Accounting Bulletin (“SAB”) No. 107, which provided the SEC’s views on the implementation of SFAS No. 123R and their views regarding the valuation of share-based payment arrangements for public companies. SAB 107 also lays out the SEC’s positions regarding the interaction between SFAS No. 123R and certain SEC rules and regulations. SAB 107 further discusses the valuation of share-based payment arrangement for public companies. SFAS No. 123R and SAB No. 107 are effective for Bancorp on January 1, 2006 and must be fully implemented for any reporting periods following that date. As of January 1, 2006, Bancorp has adopted SFAS No. 123R and the “modified prospective” method in which compensation cost is recognized beginning with the effective date (a) based on the requirements of SFAS No. 123R for all share-based payments granted after the effective date and (b) based on the requirements of SFAS No. 123 for all awards granted to employees prior to the effective date of SFAS No. 123R that remain unvested on the effective date. On December 31, 2005, Bancorp accelerated vesting on employee stock-based compensation outstanding at that date. See the information provided in the stock-based compensation section of this note to the consolidated financial statements for further discussion of the implementation of this standard.

In May 2005, FASB issued SFAS No. 154, Accounting Changes and Error Corrections (SFAS No. 154). SFAS No. 154 provides guidance on the accounting for and reporting of accounting changes and error corrections. It establishes, unless impracticable, retrospective application as the required method for reporting a change in accounting principle in the absence of explicit transition requirements specific to the newly adopted accounting principle. SFAS No. 154 is effective for accounting changes and corrections of errors made in fiscal years beginning after December 15, 2005. The adoption of SFAS No. 154 is not expected to have a material impact on Bancorp’s consolidated financial statements.

(2) Restrictions on Cash and Due from Banks

The Bank is required to maintain an average reserve balance in cash or with the Federal Reserve Bank relating to customer deposits. The amount of those required reserve balances was approximately $13,357,000 and $12,059,000 at December 31, 2005 and 2004, respectively.

42

(3) Securities

The amortized cost, unrealized gains and losses, and approximate fair value of securities available for sale follow:

	Amortized Cost		Unrealized				Approximate Fair Value
(In thousands)			Gains		Losses
December 31, 2005
U.S. Treasury and federal agencies	$	106,655	$	86	$	1,553	$	105,188
Mortgage-backed securities	20,001		94		476		19,619
Obligations of states and political subdivisions	29,846		729		351		30,224
Other	1,869		50		—		1,919
	$	158,371	$	959	$	2,380	$	156,950
December 31, 2004
U.S. Treasury and federal agencies	$	70,613	$	572	$	649	$	70,536
Mortgage-backed securities	21,568		164		161		21,571
Obligations of states and political subdivisions	30,963		1,214		103		32,074
Other	1,869		114		—		1,983
	$	125,013	$	2,064	$	913	$	126,164

Other consists of trust preferred securities of other bank holding companies.

The amortized cost, unrealized gains and losses, and approximate fair value of securities held to maturity follow:

	Amortized Cost		Unrealized				Approximate Fair Value
(In thousands)			Gains		Losses
December 31, 2005
Mortgage-backed securities	$	133	$	3	$	1	$	135
Obligations of states and political subdivisions	3,991		54		—		4,045
	$	4,124	$	57	$	1	$	4,180
December 31, 2004
Mortgage-backed securities	$	294	$	9	$	—	$	303
Obligations of states and political subdivisions	4,989		173		—		5,162
	$	5,283	$	182	$	—	$	5,465

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A summary of debt securities as of December 31, 2005 based on maturity is presented below. Actual maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations.

	Securities Available for Sale				Securities Held to Maturity
(In thousands)	Amortized Cost		Approximate Fair Value		Amortized Cost		Approximate Fair Value
Due within one year	$	31,531	$	31,494	$	944	$	948
Due after one year through five years	80,477		78,770		3,061		3,112
Due after five year through ten years	38,224		38,324		58		60
Due after ten years	8,139		8,362		61		60
	$	158,371	$	156,950	$	4,124	$	4,180

Securities with a carrying value of approximately $108,932,000 at December 31, 2005 and $99,509,000 at December 31, 2004 were pledged to secure the accounts of commercial depositors in cash management accounts, public deposits and certain borrowings.

At year end 2005 and 2004, there were no holdings of securities of any one issuer, other than the U.S. Government and its agencies, in an amount greater than 10% of stockholders’ equity.

Securities with unrealized losses at December 31, 2005 and 2004, not recognized in income are as follows:

	Less than 12 months				12 months or more				Total
(In thousands)	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
December 31, 2005
U.S. Treasury and federal agencies	$	40,402	$	334	$	37,285	$	1,219	$	77,687	$	1,553
Mortgage-backed securities	3,483		66		11,999		410		15,482		476
Obligations of states and political subdivisions	3,490		77		8,033		274		11,523		351
Total temporarily impaired securities	$	47,375	$	477	$	57,317	$	1,903	$	104,692	$	2,380
December 31, 2004
U.S. Treasury and federal agencies	$	26,638	$	404	$	11,771	$	245	$	38,409	$	649
Mortgage-backed securities	8,137		35		7,291		126		15,428		161
Obligations of states and political subdivisions	2,712		15		5,494		88		8,206		103
Total temporarily impaired securities	$	37,487	$	454	$	24,556	$	459	$	62,043	$	913

Unrealized losses on Bancorp’s bond portfolio have not been recognized in income because the bonds are of high credit quality, management has the intent and the ability hold for the foreseeable future, and the decline in fair values is largely due to an increase in interest rates from the purchase date. The fair value is expected to recover as the securities reach their maturity date and/or interest rates decline. These investments consist of 47 separate investment positions as of December 31, 2005 and 2004 that are not considered other-than-temporarily impaired.

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(4) Loans

The composition of loans follows:

	December 31,
(In thousands)	2005		2004
Commercial and industrial	$	225,369	$	215,755
Construction and development	126,961		82,261
Real estate mortgage	524,755		537,491
Consumer	176,786		149,334
	$	1,053,871	$	984,841

The Bank’s credit exposure is diversified with secured and unsecured loans to individuals, small businesses and corporations. No specific industry concentration exceeds ten percent of loans. While the Bank has a diversified loan portfolio, a customer’s ability to honor contracts is somewhat dependent upon the economic stability and geographic region and/or industry in which that customer does business. Loans outstanding and related unfunded commitments are primarily concentrated within the Bank’s market areas, which encompasses Louisville, Kentucky and surrounding communities including southern Indiana along with Indianapolis, Indiana.

Information about impaired loans follows:

	December 31,
(In thousands)	2005		2004
Principal balance of impaired loans	$	3,709	$	4,944
Impaired loans with a valuation allowance	1,875		2,725
Amount of valuation allowance	916		812
Impaired loans with no valuation allowance	1,834		2,219
Average balance of impaired loans for year	4,486		4,241

Interest income on non-accrual loans (cash basis) was $127,000, $144,000 and $127,000 in 2005, 2004, and 2003, respectively. Interest income that would have been recorded if non-accrual loans were on a current basis in accordance with their original terms was $382,000, $257,000 and $285,000 in 2005, 2004 and 2003, respectively.

Non-performing loans include the balance of impaired loans plus any loans over ninety days past due and still accruing interest. Loans past due more than ninety days or more and still accruing interest amounted to $891,000 in 2005 and $696,000 in 2004.

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Loans to directors and their associates, including loans to companies for which directors are principal owners, and executive officers are presented in the following table. Included in new loans and repayments are advances and repayments on lines of credit.

	Year Ended December 31,
Loans to directors and executive officers	2005		2004
(in thousands)
Balance as of January 1	$	5,370	$	6,909
New loans	41,254		34,570
Repayments	40,378		36,109
Balance as of December 31	$	6,246	$	5,370
Deposit balances of directors and executive officers as of December 31	$	2,216	$	1,959

An analysis of the changes in the allowance for loan losses for the years ended December 31, 2005, 2004, and 2003 follows:

	Year Ended December 31,
(In thousands)	2005		2004		2003
Balance at January 1	$	12,521	$	11,798	$	11,705
Provision for loan losses	225		2,090		2,550
Loans charged off	1,363		2,079		3,214
Recoveries	652		712		757
Net loan charge-offs	711		1,367		2,457
Balance at December 31	$	12,035	$	12,521	$	11,798

(5) Premises and Equipment

A summary of premises and equipment follows:

	December 31,
(In thousands)	2005		2004
Land	$	4,586	$	3,576
Buildings and improvements	20,483		20,338
Furniture and equipment	16,860		16,772
Construction in progress	205		155
	42,134		40,841
Accumulated depreciation and amortization	16,947		14,575
	$	25,187	$	26,266

Depreciation expense related to premises and equipment was $3,221,000 in 2005, $3,064,000 in 2004 and $2,692,000 in 2003.

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(6) Accrued Interest Receivable and Other Assets

A summary of the major components of accrued interest receivable and other assets follows:

	December 31,
(In thousands)	2005		2004
Cash surrender value of life insurance	$	24,464	$	23,060
Other real estate owned and other foreclosed property	3,266		3,397
Accrued interest receivable	5,951		4,533
Net deferred tax asset	4,460		3,533
Trust preferred securities issuance costs	897		932
Goodwill	682		682
Other	7,747		5,544
	$	47,467	$	41,681

(7) Income Taxes

Income taxes consist of the following:

	Year Ended December 31,
(In thousands)	2005			2004			2003
Expense (benefit) applicable to operations:
Current	$	9,932		$	8,932		$	7,960
Deferred	(56		)	(130		)	402
Total applicable to operations	9,876			8,802			8,362
Charged (credited) to stockholders’ equity:
Unrealized loss on securities available for sale	(899		)	(556		)	(327		)
Stock options exercised	(260		)	(794		)	(370		)
Minimum pension liability adjustment	28			(10		)	(52		)
	$	8,745		$	7,442		$	7,613

An analysis of the difference between the statutory and effective tax rates follows:

	Year Ended December 31,
	2005		2004		2003
U.S. federal income tax rate	35.0	%	35.0	%	35.0	%
Tax exempt interest income	(2.2	)%	(2.6	)%	(2.0	)%
Other, net	(1.5	)%	(0.6	)%	(0.9	)%
	31.3	%	31.8	%	32.1	%

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The effects of temporary differences that gave rise to significant portions of the deferred tax assets and deferred tax liabilities were as follows:

	December 31,
(In thousands)	2005		2004
Deferred tax assets
Allowance for loan losses	$	4,212	$	4,382
Deferred compensation	1,411		1,020
Other	185		465
Total deferred tax assets	5,808		5,867
Deferred tax liabilities
Securities	102		900
Property and equipment	976		1,357
Other	270		77
Total deferred tax liabilities	1,348		2,334
Net deferred tax asset	$	4,460	$	3,533

No valuation allowance for deferred tax assets was recorded as of December 31, 2005 and 2004 because Bancorp has sufficient prior taxable income to allow for utilization of the deductible temporary differences within the carryback period. Management believes that it is more likely than not that all of the deferred tax assets will be realized.

(8) Deposits

The composition of interest bearing deposits follows:

	December 31,
(In thousands)	2005		2004
Interest bearing demand	$	235,871	$	267,461
Savings	48,707		44,540
Money market	179,276		141,200
Time deposits greater than $100	124,074		103,026
Other time deposits	262,801		234,514
	$	850,729	$	790,741

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Interest expense related to certificates of deposit and other time deposits in denominations of $100,000 or more was $3,915,000, $3,087,000, and $3,483,000, respectively, for the years ended December 31, 2005, 2004 and 2003.

At December 31, 2005, the scheduled maturities of time deposits were as follows:

(In thousands)
2006	$	195,122
2007	123,115
2008	25,087
2009	25,228
2010	17,561
Thereafter	762
	$	386,875

(9) Securities Sold Under Agreements to Repurchase

Securities sold under agreements to repurchase are a funding source of the Bank and are primarily used by commercial customers for cash management services. Securities sold under agreements to repurchase generally mature within one to four days from the transaction date. Information concerning securities sold under agreements to repurchase is summarized as follows:

	December 31,
(Dollars in thousands)	2005			2004
Average balance during the year	$	78,360		$	70,593
Average interest rate during the year	1.83		%	1.18		%
Maximum month-end balance during the year	$	87,987		$	85,395

(10) Advances from the Federal Home Loan Bank

The Bank has an agreement with the Federal Home Loan Bank of Cincinnati (FHLB) that enables the Bank to borrow up to $76 million under terms to be established at the time of the advance. Advances from the FHLB are collateralized by certain first mortgage loans under a blanket mortgage collateral agreement and FHLB stock. The Bank had three fixed rate non-callable advances under this agreement totaling $40 million and $30 million as of December 31, 2005 and 2004, respectively. The Bank views the borrowings as a low cost alternative to higher cost certificates of deposit to fund loan growth.

The following is a summary of the contractual maturities and average rates:

	December 31, 2005				December 31, 2004
(In thousands)	Advance		Rate		Advance		Rate
2005					$	10,000	1.52	%
2006	$	10,000	2.16	%	10,000		2.16	%
2007	10,000		2.73	%	10,000		2.73	%
2008	20,000		4.83	%	—		—
	$	40,000	3.64	%	$	30,000	2.14	%

The Bank also has a standby letter of credit from the FHLB for $20 million outstanding at December 31, 2005. Under Kentucky law, customer cash balances in Investment Management and Trust accounts, may be retained as deposits in the Bank. As a part of this transaction, Kentucky law requires these deposits above the

49

$100,000 per account protection provided by the FDIC, to be backed by some form of collateral. The standby letter of credit from the FHLB collateralizes these accounts.

(11) Subordinated Debentures

On June 1, 2001, S.Y. Bancorp Capital Trust I (the Trust), a Delaware statutory business trust and 100%-owned finance subsidiary of Bancorp, issued $20.0 million of 9.00% Cumulative Trust Preferred Securities (the Securities) which mature on June 30, 2031. However, prior redemption is permitted under certain circumstances, such as changes in tax or regulatory capital rules. Proceeds from issuance of the securities, net of underwriting fees and offering expenses were $18.9 million. The principal asset of the Trust is a $20.0 million subordinated debenture of Bancorp. The subordinated debenture also bears interest at the rate of 9.00% and matures June 30, 2031, subject to prior redemption under certain circumstances. Bancorp owns all the common securities of the Trust.

The securities, the assets of the Trust, and the common securities issued by the Trust are redeemable in whole or in part on or after June 30, 2006, or at any time in whole, but not in part, from the date of issuance upon the occurrence of certain events. The Securities are included in Tier 1 capital for regulatory capital adequacy determination purposes, subject to certain limitations.

The obligations of Bancorp with respect to the issuance of the Securities constitute a full, irrevocable and unconditional guarantee on a subordinated basis by Bancorp of the Trust’s obligation with respect to the Securities.

Subject to certain circumstances, Bancorp may defer subordinated debenture interest payments, which could result in a deferral of distribution payments on the related Securities and, with certain exceptions, prevent Bancorp from declaring or paying cash distributions on Bancorp’s common stock or debt securities that rank pari passu or junior to the subordinated debenture.

The Bank had subordinated debentures outstanding amounting to $150,000 at December 31, 2005 and $180,000 at December 31, 2004. Interest due on these debentures is at a variable rate equal to one percent less than the Bank’s prime rate adjusted annually on January 1. For 2005, the rate on these debentures was 4.25%, while in 2004 the rate was 3.00%. The debentures are subordinated to the claims of creditors and depositors of the Bank and are subject to redemption by the Bank at the principal amount outstanding, upon the earlier of the death of the registered owners, or an event of default by the registered owners with respect to loans from the Bank. While the debentures mature in 2049, the owners may redeem the debentures at any time.

(12) Preferred Stock

At Bancorp’s Annual Meeting of Shareholders held in April 2003, the shareholders approved an amendment to the Articles of Incorporation to create a class of preferred stock and authorize 1,000,000 shares of this preferred stock with no par value. The relative rights, preferences and other terms of this stock or any series within the class will be determined by the board of directors prior to any issuance. Some of this preferred stock will be used in connection with a shareholders’ rights plan upon the occurrence of certain triggering events. None of this stock had been issued as of December 31, 2005.

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(13) Net Income per Share and Common Stock Dividends

The following table reflects the numerators (net income) and denominators (average shares outstanding) for the basic and diluted net income per share computations:

(In thousands, except per share data)	2005		2004		2003
Net income, basic and diluted	$	21,644	$	18,912	$	17,709
Average shares outstanding for basic EPS calculation	13,888		13,797		13,481
Effect of dilutive securities	227		372		494
Average shares outstanding including dilutive securities	14,115		14,169		13,975
Net income per share, basic	$	1.56	$	1.37	$	1.31
Net income per share, diluted	$	1.53	$	1.33	$	1.27

(14) Employee Benefit Plans

The Bank has a combined employee stock ownership (“ESOP”) and 401(k) profit sharing plan and a non-qualified deferred compensation plan. Both plans are defined contribution plans. The ESOP/401(k) plan is available to all employees meeting certain eligibility requirements. The non-qualified plan is for certain key officers. Expenses of the plans for 2005, 2004, and 2003 were $1,104,000, $1,067,000, and $980,000, respectively. Contributions are made in accordance with the terms of the plan. As of December 31, 2005 and 2004, the ESOP/401(k) plan held 359,118 and 343,570, respectively, shares of Bancorp stock.

In addition the Bank has non-qualified “excess” plans into which directors and certain senior officers may defer director fees or salary. The Bank makes no contributions to these plans.

The Bank also sponsors an unfunded, non-qualified, defined benefit retirement plan for certain key officers. Benefits vest based on years of service. Bancorp uses a December 31 measurement date for this plan. At December 31, 2005 and 2004, the accumulated benefit obligation for the plan included in other liabilities in the consolidated financial statements was $2,113,000 and $2,133,000, respectively. A discount rate of 5.75% was used in 2005 and 2004 in determining the actuarial present value of the projected benefit obligation.

Information about the components of the net periodic benefit cost of the defined benefit plan follows:

	December 31,
(Dollars in thousands)	2005		2004
Components of net periodic benefit cost:
Service cost	$	—	$	—
Interest cost	117		118
Expected return on plan assets	—		—
Amortization of prior service cost	—		—
Amortization of net losses	28		33
Net periodic benefit cost	$	145	$	151

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The following table sets forth the plan’s benefit obligations, the fair value of plan assets and funded status at December 31, 2005 and 2004:

(Dollars in thousands)	2005			2004
Pension Benefits
Benefit obligation at December 31	$	2,113		$	2,133
Fair value of plan assets at December 31	—			—
Funded status	(2,113		)	(2,133		)
Benefit costs recognized and accrued in the consolidated financial statements	$	1,690		$	1,629

The following table sets forth additional information concerning Bancorp’s unfunded, non-qualified, defined benefit retirement plan as of December 31, 2005 and 2004:

(Dollars in thousands)	2005		2004
Pension Benefits
Benefit cost	$	145	$	151
Employer contribution	—		—
Employee contribution	—		—
Benefits paid	90		90

The benefits expected to be paid in each year from 2006 to 2010 are $174,000, $174,000, $174,000, $174,000 and $149,000, respectively. The aggregate benefits expected to be paid beyond 2010 are $4,236,000. The expected benefits to be paid are based on the same assumptions used to measure the Bank’s benefit obligation at December 31, 2005.

There are no significant obligations for other post-retirement and post-employment benefits.

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(15) Stock Options

In 1995, shareholders approved a stock incentive plan. Under this plan there were a total of 1,560,000 shares of common stock reserved for issuance of stock options to Bank employees and non-employee directors. This plan expired in 2005. At the 2005 annual meeting, shareholders approved the 2005 Stock Incentive Plan under which 700,000 shares of common stock were reserved for issuance of stock based awards.

As of December 31, 2005, there were 698,500 shares available for future awards. Options granted which do not vest immediately are subject to a vesting schedule of 20% per year. All outstanding options were granted at an exercise price equal to the market value of common stock at the time of grant and expire ten years after the grant date. Activity with respect to outstanding options follows:

(In thousands, except per share data)	Share options		Weighted average exercised price per share
Outstanding at December 31, 2002	1,098		$	10.36
Granted	142		21.15
Exercised	(110	)	5.26
Forfeited	(4	)	14.16
Outstanding at December 31, 2003	1,126		12.27
Granted	177		23.82
Exercised	(335	)	6.56
Forfeited	(50	)	17.52
Outstanding at December 31, 2004	918		16.22
Granted	3		22.61
Exercised	(91	)	6.56
Forfeited	(28	)	21.45
Outstanding at December 31, 2005	802		$	17.16

The weighted average fair values of options granted in 2005, 2004 and 2003 were $5.13, $5.27 and $5.00, respectively.

The Board of Directors of Bancorp accelerated the vesting of all employee stock options outstanding on December 31, 2005. This action resulted in two financial reporting implications. First, the remaining fair value of all outstanding employee stock options was recognized in 2005 as part of the pro-forma footnote disclosures above. Second, Bancorp recognized $32,000 of compensation expense in the fourth quarter of 2005 based on an estimate of costs of those awards that would have expired unexercisable pursuant to original terms using a forfeiture rate based on historical experience. By vesting these stock options early, Bancorp will avoid recognizing approximately $1,000,000 in expense over what would have been future vesting periods of one to four years. These options had been granted to 77 executive and senior officers and all were in-the-money cumulatively by approximately $579,000 at the time of vesting. 8,000 options will continue to vest on their original terms. These options have been granted to non-employee directors and require approval by stockholders to amend the vesting schedule. No such approval was requested nor is expected to be sought.

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Options outstanding at December 31, 2005 were as follows:

(in thousands, except per share data)

Option price per share		Expiration	Number of options outstanding	Options exercisable	Weighted average exercise price
$	7.250	2007	32	32	$	7.25
	10.250	2008	32	32	10.25
	11.969-12.00	2009	49	49	11.97
	10.125-10.5	2010	152	152	10.39
	16.80	2011	130	130	16.80
	19.55	2012	120	120	19.55
	18.95-21.18	2013	120	118	21.14
	21.26-23.95	2014	164	159	23.83
	21.74-24.11	2015	3	2	22.61
			802	794	$	17.16

(16) Dividend Restriction

Bancorp’s principal source of funds is dividends received from the Bank. Under applicable banking laws, bank regulatory authorities must approve the declaration of dividends in any year if such dividends are in an amount in excess of the sum of net income of that year and retained earnings of the preceding two years. At January 1, 2006, the retained earnings of the Bank available for payment of dividends without regulatory approval were approximately $21,878,000.

(17) Commitments and Contingent Liabilities

As of December 31, 2005, the Bank had various commitments and contingent liabilities outstanding that arose in the normal course of business, such as standby letters of credit and commitments to extend credit, which are not reflected in the consolidated financial statements. In management’s opinion, commitments to extend credit of $322,132,000, including standby letters of credit of $13,453,000, represent normal banking transactions, and no significant losses are anticipated to result therefrom. This total is comprised largely of unused lines of credit for business and consumer customers, as well as unfunded portions of construction and development loans. The Bank’s maximum exposure to credit loss in the event of nonperformance by the other party to these commitments is represented by the contractual amount of these instruments. The Bank uses the same credit and collateral policies in making commitments and conditional guarantees as for on-balance sheet instruments. At December 31, 2005, no amounts have been accrued in the consolidated financial statements relating to these instruments.

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses. Since some of the unused commitments are expected to expire or may not be fully used, the total amount of commitments in the preceding table does not necessarily represent future cash requirements. The Bank evaluates each customer’s creditworthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary by the Bank upon extension of credit, is based on management’s credit evaluation of the customer. Collateral held varies but may include accounts receivable, inventory, property, plant and equipment, and income-producing commercial properties.

Standby letters of credit and financial guarantees written are conditional commitments issued by the Bank to guarantee the performance of a customer to a third party. Those guarantees are primarily issued to support private borrowing arrangements. Standby letters of credit generally have maturities of up to five years.

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The Bank leases certain facilities, improvements and equipment under non-cancelable operating leases. Future minimum lease commitments for these leases are $1,335,000 in 2006; $1,262,000 in 2007; $1,065,000 in 2008; $724,000 in 2009; $647,000 in 2010 and $5,006,000 in the aggregate thereafter. Rent expense, net of sublease income, was $1,290,000 in 2005, $1,179,000 in 2004, and $969,000 in 2003.

Also, as of December 31, 2005, there were pending legal actions and proceedings in which claims for damages are asserted. Management, after discussion with legal counsel, believes the ultimate result of these legal actions and proceedings will not have a material adverse effect on the consolidated financial position or results of operations of Bancorp.

(18) Fair Value of Financial Instruments

The estimated fair values of financial instruments at December 31 are as follows:

	2005					2004
(In thousands)	Carrying Amount		Fair Value			Carrying Amount		Fair Value
Financial assets
Cash and short-term investments	$	44,039	$	44,039		$	31,547	$	31,547
Mortgage loans held for sale	7,444		7,444			5,528		5,529
Securities	161,074		161,130			131,447		131,629
Federal Home Loan Bank stock	3,391		3,391			3,226		3,226
Loans, net	1,041,836		997,226			972,320		986,623
Accrued interest receivable	5,951		5,951			4,533		4,533
Financial liabilities
Deposits	$	1,031,357	$	1,031,357		$	950,083	$	951,951
Short-term borrowings	82,025		82,025			74,460		74,460
Long-term borrowings	60,769		60,933			50,799		51,407
Accrued interest payable	577		577			360		360
Off balance sheet financial instruments
Commitments to extend credit	—		—			—		—
Standby letters of credit	—		(202		)	—		(207		)

Management used the following methods and assumptions to estimate the fair value of each class of financial instrument for which it is practicable to estimate the value.

Cash, Short-Term Investments, Federal Home Loan Bank Stock, Accrued Interest Receivable/Payable and Short-Term Borrowings

For these short-term instruments, the carrying amount is a reasonable estimate of fair value.

Securities

For securities, fair value equals quoted market price, if available. If a quoted market price is not available, fair value is estimated using quoted market prices for similar securities or dealer quotes.

Mortgage loans held for sale

The fair value of mortgage loans held for sale is determined by market quotes for each loan based on loan type, term and size.

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Loans, net

The fair value of loans is estimated by discounting future cash flows using current rates at which similar loans would be made to borrowers with similar credit ratings and for the same remaining maturities.

Deposits

The fair value of demand deposits, savings accounts, and certain money market deposits is the amount payable on demand at the reporting date. The fair value of fixed-rate certificates of deposits is estimated by discounting the future cash flows using the rates currently offered for deposits of similar remaining maturities. If the discounted future cash flows are less than the current value, Bancorp utilizes the current payable instead of the present value of contracted maturities at the current origination rate.

Long-term Borrowings

Rates currently available to Bancorp for debt with similar terms and remaining maturities are used to estimate fair value of existing debt.

Commitments to Extend Credit and Standby Letters of Credit

The fair values of commitments to extend credit are estimated using fees currently charged to enter into similar agreements and the creditworthiness of the customers. The fair values of standby letters of credit are based on fees currently charged for similar agreements or the estimated cost to terminate them or otherwise settle the obligations with the counterparties at the reporting date.

Limitations

The fair value estimates are made at a specific point in time based on relevant market information and information about the financial instruments. Because no market exists for a significant portion of Bancorp’s financial instruments, fair value estimates are based on judgments regarding future expected loss experience, current economic conditions, risk characteristics of various financial instruments, and other factors. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision. Changes in assumptions could significantly affect the estimates.

(19) Regulatory Matters

Bancorp and the Bank are subject to various capital requirements prescribed by banking regulations and administered by federal banking agencies. Under these requirements, Bancorp and the Bank must meet minimum amounts and percentages of Tier I and total capital, as defined, to risk weighted assets and Tier I capital to average assets. Risk weighted assets are determined by applying certain risk weightings prescribed by the regulations to various categories of assets and off-balance sheet commitments. Capital and risk weighted assets may be further subject to qualitative judgments by regulators as to components, risk weighting and other factors. Failure to meet the capital requirements can result in certain mandatory, and possibly discretionary, corrective actions prescribed by the regulations or determined to be necessary by the regulators, which could materially affect the consolidated financial statements. Management believes Bancorp and the Bank met all capital requirements to which they were subject as of December 31, 2005.

As of December 2005 and 2004, the Bank’s primary regulator categorized the Bank as well capitalized under the regulatory framework. There are no conditions or events since those notifications that management believes have changed the Bank’s categories.

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A summary of Bancorp’s and the Bank’s capital ratios at December 31, 2005 and 2004 follows:

December 31, 2005

	Actual				Minimum For  Adequate				Minimum For Well Capitalized
(Dollars in thousands)	Amount		Ratio		Amount		Ratio		Amount		Ratio
Total risk-based capital (1)
Consolidated	$	158,222	14.56	%	$	86,935	8.00	%	$	108,669	10.00	%
Bank	147,066		13.62	%	86,409		8.00	%	108,011		10.00	%
Tier I risk-based capital (1)
Consolidated	146,037		13.44	%	43,468		4.00	%	65,202		6.00	%
Bank	134,881		12.49	%	43,204		4.00	%	64,806		6.00	%
Leverage (2)
Consolidated	$	146,037	11.15	%	$	39,281	3.00	%	$	65,468	5.00	%
Bank	134,881		10.35	%	39,089		3.00	%	65,148		5.00	%

December 31, 2004

	Actual				Minimum For  Adequate				Minimum For Well Capitalized
(Dollars in thousands)	Amount		Ratio		Amount		Ratio		Amount		Ratio
Total risk-based capital (1)
Consolidated	$	147,786	14.91	%	$	79,336	8.00	%	$	99,170	10.00	%
Bank	135,748		13.79	%	78,756		8.00	%	98,445		10.00	%
Tier I risk-based capital (1)
Consolidated	135,217		13.64	%	39,668		4.00	%	59,502		6.00	%
Bank	123,260		12.52	%	39,378		4.00	%	59,067		6.00	%
Leverage (2)
Consolidated	$	135,217	11.34	%	$	35,780	3.00	%	$	59,633	5.00	%
Bank	123,260		10.38	%	35,617		3.00	%	59,362		5.00	%

(1) Ratio is computed in relation to risk-weighted assets.

(2) Ratio is computed in relation to average assets.

57

(20) S.Y. Bancorp, Inc. (parent company only)

Condensed Balance Sheets

	December 31,
(In thousands)	2005		2004
Assets
Cash on deposit with subsidiary bank	$	2,312	$	2,270
Investment in and receivable from subsidiaries	139,721		131,018
Securities available for sale (amortized cost of $1,250 in 2005 and 2004)	1,298		1,363
Other assets	4,709		5,233
Total assets	$	148,040	$	139,884
Liabilities and stockholders’ equity
Other liabilities	$	1,624	$	2,618
Subordinated debentures	20,619		20,619
Stockholders’ equity	125,797		116,647
Total liabilities and stockholders’ equity	$	148,040	$	139,884

Condensed Statements of Income

	Years ended December 31,
(In thousands)	2005		2004		2003
Income - Dividends and interest from subsidiaries	$	11,541	$	6,807	$	8,099
Income - Interest income from securities	101		101		103
Income - other	—		11		—
Expenses	2,325		2,252		2,157
Income before income taxes and equity in undistributed net income of subsidiaries	9,317		4,667		6,045
Income tax benefit	759		730		700
Income before equity in undistributed net income of subsidiaries	10,076		5,397		6,745
Equity in undistributed net income of subsidiaries	11,568		13,515		10,964
Net income	$	21,644	$	18,912	$	17,709

58

Condensed Statements of Cash Flows

	Years ended December 31,
(In thousands)	2005			2004			2003
Operating activities
Net income	$	21,644		$	18,912		$	17,709
Adjustments to reconcile net income to net cash provided by operating activities:
Equity in undistributed net income of subsidiaries	(11,568		)	(13,515		)	(10,964		)
Decrease (increase) in receivable from subsidiaries	1,281			(1,553		)	(1,910		)
Non-cash compensations expense from early vesting of stock options, net of tax	32			—			—
Income tax benefit of stock options exercised	260			794			370
Increase (decrease) in other assets	560			(596		)	(2,394		)
(Decrease) increase in other liabilities	(736		)	(1,137		)	650
Net cash provided by operating activities	11,473			2,905			3,461
Financing activities
Proceeds from stock options	851			3,210			1,205
Common stock repurchases	(5,496		)	(228		)	(41		)
Cash dividends paid	(6,786		)	(4,953		)	(3,985		)
Net cash used in financing activities	(11,431		)	(1,971		)	(2,821		)
Net increase in cash	42			934			640
Cash at beginning of year	2,270			1,336			696
Cash at end of year	$	2,312		$	2,270		$	1,336

59

(21) Segments

The Bank’s, and thus Bancorp’s principal activities include commercial banking and investment management and trust. Commercial banking provides a full range of loans and deposit products to individual consumers and businesses. Investment management and trust provides wealth management services, estate planning and administration, retirement plan management and custodian or trustee services.

The financial information for each business segment reflects that which is specifically identifiable or allocated based on an internal allocation method. Income taxes are allocated based on the effective federal income tax rate adjusted for any tax exempt activity. All tax exempt activity and provision for loan losses have been allocated to the commercial banking segment. The measurement of the performance of the business segments is based on the management structure of the Bank and is not necessarily comparable with similar information for any other financial institution. The information presented is also not necessarily indicative of the segments’ operations if they were independent entities.

Principally, all of the net assets of S.Y. Bancorp, Inc. are involved in the commercial banking segment. Bancorp has goodwill of $682,000 related to the purchase of bank in southern Indiana in 1996. This purchase facilitated Bancorp’s expansion in southern Indiana. This goodwill has been assigned to the commercial banking segment.

Selected financial information by business segment follows:

	Years ended December 31,
(In thousands)	2005		2004		2003
Net interest income
Commercial banking	$	49,079	$	43,604	$	41,717
Investment management and trust	156		617		1,031
Total net interest income	$	49,235	$	44,221	$	42,748
Non-interest income
Commercial banking	$	16,309	$	15,249	$	16,197
Investment management and trust	10,813		9,427		8,301
Total non-interest income	$	27,122	$	24,676	$	24,498
Non-interest expenses
Commercial banking	$	38,836	$	33,965	$	33,740
Investment management and trust	5,776		5,128		4,885
Total non-interest expenses	$	44,612	$	39,093	$	38,625
Income Taxes
Commercial banking	$	8,058	$	7,081	$	6,806
Investment management and trust	1,818		1,721		1,556
Total income taxes	$	9,876	$	8,802	$	8,362
Net income
Commercial banking	$	18,269	$	15,717	$	14,818
Investment management and trust	3,375		3,195		2,891
Total net income	$	21,644	$	18,912	$	17,709

60

(22) Quarterly Operating Results (unaudited)

Following is a summary of quarterly operating results (unaudited) for 2005 and 2004:

(In thousands, except per	2005								2004
share data)	4th Qtr.		3rd Qtr.		2nd Qtr.		1st Qtr.		4th Qtr.		3rd Qtr.		2nd Qtr.		1st Qtr.
Interest income	$	19,702	$	18,561	$	17,631	$	16,449	$	15,891	$	15,121	$	14,737	$	14,791
Interest expense	6,595		5,833		5,490		5,190		4,589		4,193		3,696		3,841
Net interest income	13,107		12,728		12,141		11,259		11,302		10,928		11,041		10,950
Provision for loan losses	—		—		—		225		600		180		810		500
Net interest income after provision	13,107		12,728		12,141		11,034		10,702		10,748		10,231		10,450
Non-interest income	6,938		6,818		6,871		6,495		6,201		6,235		6,553		5,687
Non-interest expenses	11,978		10,939		11,088		10,607		9,761		9,702		10,032		9,598
Income before income taxes	8,067		8,607		7,924		6,922		7,142		7,281		6,752		6,539
Income tax expense	2,543		2,756		2,432		2,145		2,228		2,310		2,173		2,091
Net income	$	5,524	$	5,851	$	5,492	$	4,777	$	4,914	$	4,971	$	4,579	$	4,448
Basic earnings per share	$	0.40	$	0.42	$	0.40	$	0.34	$	0.35	$	0.36	$	0.33	$	0.33
Diluted earnings per share	0.39		0.41		0.39		0.34		0.35		0.35		0.32		0.32

Note:  The sum of basic and diluted earnings per share of each of the quarters in 2005 and 2004 may not add to the year to date amount reported in Bancorp’s consolidated financial statements due to rounding.

61

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders
S.Y. Bancorp, Inc.:

We have audited the accompanying consolidated balance sheets of S.Y. Bancorp, Inc. and subsidiary as of December 31, 2005 and 2004, and the related consolidated statements of income, changes in stockholders’ equity, comprehensive income, and cash flows for each of the years in the three-year period ended December 31, 2005. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of S.Y. Bancorp, Inc. and subsidiary as of December 31, 2005 and 2004, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2005, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of S.Y. Bancorp, Inc.’s  internal control over financial reporting as of December 31, 2005, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated March 14, 2006 expressed an unqualified opinion on management’s assessment of, and the effective operation of, internal control over financial reporting,

Louisville, Kentucky

March 14, 2006

62

Management’s Report on Consolidated Financial Statements

The accompanying consolidated financial statements and other financial data were prepared by the management of S.Y. Bancorp, Inc. (Bancorp), which has the responsibility for the integrity of the information presented. The consolidated financial statements have been prepared in conformity with U.S. generally accepted accounting principles and, as such, include amounts that are the best estimates and judgments of management with consideration given to materiality.

Management is further responsible for maintaining a system of internal controls designed to provide reasonable assurance that the books and records reflect the transactions of Bancorp and that its established policies and procedures are carefully followed. Management believes that Bancorp’s system, taken as a whole, provides reasonable assurance that transactions are executed in accordance with management’s general or specific authorization; transactions are recorded as necessary to permit preparation of financial statements in conformity with U.S. generally accepted accounting principles and to maintain accountability for assets; access to assets is permitted only in accordance with management’s general or specific authorization, and the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences.

Management also seeks to assure the objectivity and integrity of Bancorp’s financial data by the careful selection and training of qualified personnel, an internal audit function and organizational arrangements that provide an appropriate division of responsibility.

Bancorp’s independent auditors, KPMG LLP, have audited the consolidated financial statements. Their audit was conducted in accordance with the standards of the Public Company Accounting Oversight Board (United States) which provides for consideration of Bancorp’s internal controls to the extent necessary to determine the nature, timing, and extent of their audit tests.

The Board of Directors pursues its oversight role for the consolidated financial statements through the Audit Committee. The Audit Committee meets periodically and privately with management, the internal auditors, and the independent auditors to review matters relating to financial reporting, the internal control systems, and the scope and results of audit efforts. The internal and independent auditors have unrestricted access to the Audit Committee, with and without the presence of management, to discuss accounting, auditing, and financial reporting matters. The Audit Committee also recommends the appointment of the independent auditors to Board of Directors, and ultimately has sole authority to appoint or replace the independent auditors.

/s/ David P. Heintzman

David P. Heintzman

Chairman, President and Chief Executive Officer

/s/ Nancy B. Davis

Nancy B. Davis

Executive Vice President

and Chief Financial Officer

63

Item 9.Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None

Item 9A.Controls and Procedures

Bancorp maintains disclosure controls and procedures designed to ensure that it is able to collect the information it is required to disclose in the reports it files with the Securities and Exchange Commission (SEC), and to process, summarize and disclose this information within the time periods specified in the rules of the SEC. Based on their evaluation of Bancorp’s disclosure controls and procedures which took place as of December 31, 2005, the Chief Executive and Chief Financial Officers believe that these controls and procedures are effective to ensure that Bancorp is able to collect, process and disclose the information it is required to disclose in the reports it files with the SEC within the required time periods.

Based on the evaluation of Bancorp’s disclosure controls and procedures by the Chief Executive and Chief Financial Officers, no changes occurred during the fiscal quarter ended December 31, 2005 in Bancorp’s internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, Bancorp’s internal control over financial reporting.

Item 9B.     Other Information

None

64

Management’s Report on Internal Control Over Financial Reporting

The management of S.Y. Bancorp, Inc and subsidiary (Bancorp) is responsible for establishing and maintaining adequate internal control over financial reporting. Bancorp’s internal control over financial reporting is a process designed under the supervision of Bancorp’s Chief Executive Officer and Chief Financial Officer, and effected by Bancorp’s board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles. This process includes those policies and procedures that:

1.Pertain to the maintenance of records, that in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of Bancorp;

2.Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. generally accepted accounting principles, and that receipts and expenditures of Bancorp are being made only in accordance with authorizations of management and directors of Bancorp; and

3.Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of Bancorp’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with policies or procedures may deteriorate.

Management has assessed the effectiveness of its internal control over financial reporting as of December 31, 2005, based on the control criteria established in a report entitled Internal Control – Integrated Framework, issued by the Committee of Sponsoring Organizations (COSO) of the Treadway Commission. Based on such assessment, management has concluded that Bancorp’s internal control over financial reporting is effective as of December 31, 2005.

KPMG LLP, the independent registered public accounting firm that audited the consolidated financial statements of Bancorp included in this Annual Report on Form 10-K, has issued an attestation report on management’s assessment of the effectiveness of Bancorp’s internal control over financial reporting as of December 31, 2005. The report expresses unqualified opinions on management’s assessment and on the effectiveness of Bancorp’s internal control over financial reporting as of December 31, 2005.

/s/ David P. Heintzman

David P. Heintzman

Chairman, President and Chief Executive Officer

/s/ Nancy B. Davis

Nancy B. Davis

Executive Vice President

and Chief Financial Officer

65

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders
S.Y. Bancorp, Inc.:

We have audited management’s assessment, included in the accompanying Management’s Report on Internal Control Over Financial Reporting, that S.Y. Bancorp, Inc. and subsidiary (the Company) maintained effective internal control over financial reporting as of December 31, 2005, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express an opinion on management’s assessment and an opinion on the effectiveness of the Company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, evaluating management’s assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, management’s assessment that S.Y. Bancorp, Inc. maintained effective internal control over financial reporting as of December 31, 2005, is fairly stated, in all material respects, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Also, in our opinion, S.Y. Bancorp, Inc., maintained, in all material respects, effective internal control over financial reporting as of December 31, 2005, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of S.Y. Bancorp, Inc. and subsidiary as of December 31, 2005 and 2004, and the related consolidated statements of income, changes in stockholders’ equity, comprehensive income, and cash flows for each of the years in the three-year period ended December 31, 2005, and our report dated March 14, 2006 expressed an unqualified opinion on those consolidated financial statements.

Louisville, Kentucky

March 14, 2006

66

Part III

Item 10.      Directors and Executive Officers of the Registrant

Information regarding the directors and executive officers of Bancorp is incorporated herein by reference to the discussion under the heading, “ITEM 1. ELECTION OF DIRECTORS,” and SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE in Bancorp’s Proxy Statement for the 2006 Annual Meeting of Shareholders and the section captioned EXECUTIVE OFFICERS OF THE REGISTRANT in this Form 10-K.

Information regarding principal occupation of directors of Bancorp follows:

David H. Brooks – Retired, Former Chairman and Chief Executive Officer, S.Y. Bancorp, Inc. and Stock Yards Bank & Trust Company;

James E. Carrico – Managing Director, Acordia of Kentucky;

Charles R. Edinger, III – Vice President, J. Edinger & Son. Inc.;

Stanley A. Gall, M.D. – Professor of Obstetrics and Gynecology, University of Louisville;

David P. Heintzman – Chairman, President and Chief Executive Officer, S.Y. Bancorp, Inc. and Stock Yards Bank & Trust Company;

Carl G. Herde – Vice President of Finance and CFO, Baptist Healthcare System, Inc.;

Bruce P. Madison – President and CEO, Plumbers Supply Company, Inc.;

Nicholas X. Simon – President and CEO, Publishers Printing Company, LLC;

Norman Tasman – President, Tasman Industries Inc. and Tasman Hide Processing Inc.;

Robert L. Taylor – Professor of Management and Dean Emeritus, College of Business and Public Administration, University of Louisville;

Kathy C. Thompson – Senior Executive Vice President, S.Y. Bancorp, Inc. and Stock Yards Bank & Trust Company.

The Board of Directors of Bancorp has adopted a code of ethics for its chief executive officer and financial executives. A copy of the code of ethics is filed as an exhibit to this Annual Report.

Item 11.      Executive Compensation

Information regarding the compensation of Bancorp’s executive officers and directors is incorporated herein by reference to the discussion under the headings, “EXECUTIVE COMPENSATION AND OTHER INFORMATION – REPORT ON EXECUTIVE COMPENSATION” and “CORPORATE GOVERNANCE AND RELATED MATTERS – BOARD OF DIRECTORS’ MEETINGS, COMMITTEES AND FEES” in Bancorp’s Proxy Statement for the 2006 Annual Meeting of Shareholders.

Information appearing under the headings “REPORT ON EXECUTIVE COMPENSATION” and “Shareholder Return Performance Graph” in the section entitled “EXECUTIVE COMPENSATION AND OTHER INFORMATION” in Bancorp’s Proxy Statement for the 2006 Annual Meeting of Shareholders shall not be deemed to be incorporated by reference in this report, notwithstanding any general statement contained herein incorporating portions of such Proxy Statement by reference.

Item 12.      Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

The information required by this item is incorporated herein by reference to the discussion under the headings, “ITEM 1. ELECTION OF DIRECTORS” and “SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT,” in Bancorp’s Proxy Statement for the 2006 Annual Meeting of Shareholders.

67

Equity Compensation Plan Information

The following table furnishes common shares authorized for issuance under equity compensation plans. Bancorp has currently only issued stock options as equity compensation. The 1995 Stock Incentive Plan does include stock appreciation rights; however, it does not contain provisions for stock warrants. The 2005 Stock Incentive Plan includes provisions for options, restricted stock and stock appreciation rights. For further information on stock options see note 15 to the consolidated financial statements in this Form 10-K.

Plan Category	Number of securities to be issued upon exercise of outstanding options	Weighted- average exercise price of outstanding options		Number of securities remaining available for future issuance under equity compensation plans
Equity compensation plans approved by shareholders	802,040	$	17.16	698,500
Equity compensation plans not approved by shareholders	—	—		—

Item 13.      Certain Relationships and Related Transactions

The information required by this item is incorporated herein by reference to the discussion under the heading, “TRANSACTIONS WITH MANAGEMENT AND OTHERS,” in Bancorp’s Proxy Statement for the 2006 Annual Meeting of Shareholders.

Item 14.      Principal Accountant Fees and Services

The information required by this item is incorporated herein by reference to the discussion under the heading, “Fees Billed to S.Y. Bancorp by KPMG LLP During Fiscal Year Ended December 31, 2005,” in Bancorp’s Proxy Statement for the 2006 Annual Meeting of Shareholders.

Part IV

Item 15.  Exhibits and Financial Statement Schedules

(a) 1.The following financial statements are included in this Form 10-K:

Consolidated Balance Sheets - December 31, 2005 and 2004

Consolidated Statements of Income - years ended December 31, 2005, 2004 and 2003

Consolidated Statements of Changes in Stockholders’ Equity - years ended December 31, 2005, 2004 and 2003

Consolidated Statements of Comprehensive Income - years ended December 31, 2005, 2004 and 2003

Consolidated Statements of Cash Flows - years ended December 31, 2005, 2004 and 2003

Notes to Consolidated Financial Statements

(a) 2.List of Financial Statement Schedules

Schedules to the consolidated financial statements of Bancorp are omitted since they are either not required under the related instructions, are inapplicable, or the required information is shown in the consolidated financial statements or notes thereto.

68

(a) 3.List of Exhibits

3.1	Articles of Incorporation of Bancorp filed with the Secretary of State of Kentucky on January 12, 1988. Exhibit 3.1 to Annual Report on Form 10-K for the year ended December 31, 2001, of Bancorp is incorporated by reference herein.
3.2	Articles of Amendment to the Articles of Incorporation of Bancorp filed with the Secretary of State of Kentucky on May 8, 1989. Exhibit 3.2 to Annual Report on Form 10-K for the year ended December 31, 2001, of Bancorp is incorporated by reference herein.
3.3	Articles of Amendment to the Articles of Incorporation of Bancorp filed with the Secretary of State of Kentucky on June 30, 1994. Exhibit 3.3 to Annual Report on Form 10-K for the year ended December 31, 2001, of Bancorp is incorporated by reference herein.
3.4	Articles of Amendment to the Articles of Incorporation of Bancorp filed with the Secretary of State of Kentucky on April 29, 1998. Exhibit 3.4 to Annual Report on Form 10-K for the year ended December 31, 2001, of Bancorp is incorporated by reference herein.
3.5	Articles of Amendment to the Articles of Incorporation of Bancorp filed with the Secretary of State of Kentucky on April 23, 2003. Exhibit 3.5 to Annual Report on Form 10-K for the year ended December 31, 2003, of Bancorp is incorporated by reference herein.
3.6	Bylaws of Bancorp, as amended, currently in effect. Exhibit 3.5 to Annual Report on Form 10-K for the year ended December 31, 2001, of Bancorp is incorporated by reference herein.
4.1	Rights agreement dated as of April 23, 2003, between S.Y. Bancorp, Inc. and Wachovia Bank, National Association, as rights agent. Exhibit 1 to Form 8-A filed April 23, 2003, is incorporated by reference herein.
10.1*	S.Y. Bancorp, Inc. Stock Option Plan as amended. Exhibit 10.1 to Annual Report on Form 10-K for the year ended December 31, 2001, of Bancorp is incorporated by reference herein.
10.2*	Stock Yards Bank & Trust company Senior Officers Security Plan adopted December 23, 1980. Exhibit 10.2 to Annual Report on Form 10-K for the year ended December 31, 2001, of Bancorp is incorporated by reference herein.
10.3*	Stock Yards Bank & Trust Company Executive Nonqualified “Excess” Plan available to directors and certain management employees.
10.4*	Form of Adoption Agreement for Stock Yards Bank Director’s Deferred Compensation Plan between Stock Yards Bank & Trust Company and certain directors.
10.5*	Form of Adoption Agreement for Stock Yards Bank Executive Nonqualified “Excess” Plan between Stock Yards Bank & Trust Company and certain executive officers.
10.6*	Stock Yards Bank & Trust Company 2005 Restated Senior Officers Security Plan Exhibit 10.1 to Form 8-K filed April 22, 2005, is incorporated by reference herein.
10.7*	2005 Restated Senior Executive Severance Agreement dated as of April 22, 2005 between Stock Yards Bank & Trust Company and David P. Heintzman, Exhibit 10.2 to Form 8-K filed April 22, 2005, is incorporated by reference herein.
10.8*	2005 Restated Senior Executive Severance Agreement dated as of April 22, 2005 between Stock Yards Bank & Trust Company and Kathleen C. Thompson, Exhibit 10.3 to Form 8-K filed April 22, 2005, is incorporated by reference herein.
10.9*	2005 Restated Senior Executive Severance Agreement dated as of April 22, 2005 between Stock Yards Bank & Trust Company and Nancy B. Davis, Exhibit 10.4 to Form 8-K filed April 22, 2005, is incorporated by reference herein.
10.10*	S.Y. Bancorp, Inc. 2005 Stock Incentive Plan. Exhibit 10.1 to Form 8-K filed May 2, 2005, is incorporated by reference herein.
14	Code of Ethics for the Chief Executive Officer and Financial Executives.
21	Subsidiaries of the Registrant.

69

23	Consent of Independent Registered Public Accounting Firm.
31.1	Certifications pursuant to Section 302 of the Sarbanes-Oxley Act by David P. Heintzman.
31.2	Certifications pursuant to Section 302 of the Sarbanes-Oxley Act by Nancy B. Davis.
32.1	Certifications pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 by David P. Heintzman.
32.2	Certifications pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 by Nancy B. Davis.

* Indicates matters related to executive compensation.

Copies of the foregoing Exhibits will be furnished to others upon request and payment of Bancorp’s reasonable expenses in furnishing the exhibits.

(b)Exhibits

The exhibits listed in response to Item 15(a) 3 are filed or furnished as a part of this report.

(c)Financial Statement Schedules

None

Where You Can Find More Information

Bancorp is subject to the informational requirements of the Securities Exchange Act of 1934 and accordingly files its annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, proxy statements and other information with the Securities and Exchange Commission (“SEC”). The public may read and copy any materials filed with the SEC at the SEC’s Public Reference Room at 100 F Street, NE, Washington, DC 20549. Please call the SEC at (800) SEC-0330 for further information on the Public Reference Room. Bancorp’s public filings are also maintained on the SEC’s Internet site that contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC. The address of that web site is http://www.sec.gov. In addition, Bancorp’s annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act may be accessed free of charge through Bancorp’s web site after we have electronically filed such material with, or furnished it to, the SEC. The address of that web site is http://www.syb.com.

70

Signatures

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

March 14, 2006	S.Y. BANCORP, INC.
	BY:	/s/ David P. Heintzman
		David P. Heintzman
		Chairman, President and Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

/s/ David P. Heintzman	Chairman, President, Chief Executive Officer	March 14, 2006
David P. Heintzman	and Director (principal executive officer)
/s/ Nancy B. Davis	Executive Vice President and Chief Financial	March 14, 2006
Nancy B. Davis	Officer (principal financial and accounting
	officer)
/s/ David H. Brooks	Director	March 14, 2006
David H. Brooks
/s/ James E. Carrico	Director	March 14, 2006
James E. Carrico
/s/ Charles R. Edinger, III	Director	March 14, 2006
Charles R. Edinger, III
/s/ Stanley A. Gall, M.D.	Director	March 14, 2006
Stanley A. Gall, M.D.
/s/ Carl G. Herde	Director	March 14, 2006
Carl G. Herde
/s/ Bruce P. Madison	Director	March 14, 2006
Bruce P. Madison
/s/ Nicholas X. Simon	Director	March 14, 2006
Nicholas X. Simon
/s/ Norman Tasman	Director	March 14, 2006
Norman Tasman
s/ Robert L. Taylor	Director	March 14, 2006
Robert L. Taylor
/s/ Kathy C. Thompson	Senior Executive Vice President and Director	March 14, 2006
Kathy C. Thompson

71

Index to Exhibits

Exhibit Number

3.1	Articles of Incorporation of Bancorp filed with the Secretary of State of Kentucky on January 12, 1988. Exhibit 3.1 to Annual Report on Form 10-K for the year ended December 31, 2001, of Bancorp is incorporated by reference herein.
3.2	Articles of Amendment to the Articles of Incorporation of Bancorp filed with the Secretary of State of Kentucky on May 8, 1989. Exhibit 3.2 to Annual Report on Form 10-K for the year ended December 31, 2001, of Bancorp is incorporated by reference herein.
3.3	Articles of Amendment to the Articles of Incorporation of Bancorp filed with the Secretary of State of Kentucky on June 30, 1994. Exhibit 3.3 to Annual Report on Form 10-K for the year ended December 31, 2001, of Bancorp is incorporated by reference herein.
3.4	Articles of Amendment to the Articles of Incorporation of Bancorp filed with the Secretary of State of Kentucky on April 29, 1998. Exhibit 3.4 to Annual Report on Form 10-K for the year ended December 31, 2001, of Bancorp is incorporated by reference herein.
3.5	Articles of Amendment to the Articles of Incorporation of Bancorp filed with the Secretary of State of Kentucky on April 23, 2003. Exhibit 3.5 to Annual Report on Form 10-K for the year ended December 31, 2003, of Bancorp is incorporated by reference herein.
3.6	Bylaws of Bancorp, as amended, currently in effect. Exhibit 3.5 to Annual Report on Form 10-K for the year ended December 31, 2001, of Bancorp is incorporated by reference herein.
4.1	Rights agreement dated as of April 23, 2003, between S.Y. Bancorp, Inc. and Wachovia Bank, National Association, as rights agent. Exhibit 1 to Form 8A filed April 23, 2003, is incorporated by reference herein.
10.1*	S.Y. Bancorp, Inc. Stock Option Plan as amended. Exhibit 10.1 to Annual Report on Form 10-K for the year ended December 31, 2001, of Bancorp is incorporated by reference herein.
10.2*	Stock Yards Bank & Trust company Senior Officers Security Plan adopted December 23, 1980. Exhibit 10.2 to Annual Report on Form 10-K for the year ended December 31, 2001, of Bancorp is incorporated by reference herein.
10.3*	Stock Yards Bank & Trust Company Executive Nonqualified “Excess” Plan available to directors and certain management employees.
10.4*	Form of Adoption Agreement for Stock Yards Bank Director’s Deferred Compensation Plan between Stock Yards Bank & Trust Company and certain directors.
10.5*	Form of Adoption Agreement for Stock Yards Bank Executive Nonqualified “Excess” Plan between Stock Yards Bank & Trust Company and certain executive officers.
10.6*	Stock Yards Bank & Trust Company 2005 Restated Senior Officers Security Plan Exhibit 10.1 to Form 8-K filed April 22, 2005, is incorporated by reference herein.
10.7*	2005 Restated Senior Executive Severance Agreement dated as of April 22, 2005 between Stock Yards Bank & Trust Company and David P. Heintzman, Exhibit 10.2 to Form 8-K filed April 22, 2005, is incorporated by reference herein.

72

10.8*	2005 Restated Senior Executive Severance Agreement dated as of April 22, 2005 between Stock Yards Bank & Trust Company and Kathleen C. Thompson, Exhibit 10.3 to Form 8-K filed April 22, 2005, is incorporated by reference herein.
10.9*	2005 Restated Senior Executive Severance Agreement dated as of April 22, 2005 between Stock Yards Bank & Trust Company and Nancy B. Davis, Exhibit 10.4 to Form 8-K filed April 22, 2005, is incorporated by reference herein.
10.10*	S.Y. Bancorp, Inc. 2005 Stock Incentive Plan. Exhibit 10.1 to Form 8-K filed May 2, 2005, is incorporated by reference herein.
14	Code of Ethics for the Chief Executive Officer and Financial Executives.
21	Subsidiaries of the Registrant.
23	Consent of Independent Registered Public Accounting Firm.
31.1	Certifications pursuant to Section 302 of the Sarbanes-Oxley Act by David P. Heintzman.
31.2	Certifications pursuant to Section 302 of the Sarbanes-Oxley Act by Nancy B. Davis.
32.1	Certifications pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 by David P. Heintzman.
32.2	Certifications pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 by Nancy B. Davis.

* Indicates matters related to executive compensation.

73

EX-10.3

Exhibit 10.3

THE EXECUTIVE

NONQUALIFIED “EXCESS” PLAN™

Plan Document

© 2003 Executive Benefit Services, Inc. 4140 ParkLake Avenue, Suite 500 Raleigh, NC 27612

THE EXECUTIVE
NONQUALIFIED “EXCESS” PLAN™

TABLE OF CONTENTS

		Page
Section 1.	Purpose:	1
Section 2.	Definitions:	1
2.1	“Accrued Benefit”	1
2.2	“Active Participant”	1
2.3	“Adoption Agreement”	2
2.4	“Beneficiary”	2
2.5	“Board”	2
2.6	“Committee”	2
2.7	“Compensation”	2
2.8	“Crediting Date”	2
2.9	“Deferred Compensation Account”	2
2.10	“Disability”	2
2.11	“Education Account”	3
2.12	“Education Subaccount”	3
2.13	“Education Recipient”	3
2.14	“Effective Date”	3
2.15	“Employee”	3
2.16	“Employer”	4
2.17	“Employer Credits”	4
2.18	“Independent Contractor”	4
2.19	“In-Service Account”	4
2.20	“Normal Retirement Date”	4
2.21	“Participant”	5
2.22	“Participating Employer”	5
2.23	“Plan”	5
2.24	“Plan Administrator”	5
2.25	“Plan Year”	5
2.26	“Qualifying Distribution Event”	5
2.27	“Retire” or “Retirement”	5
2.28	“Retirement Account”	5
2.29	“Salary Deferral Agreement”	6
2.30	“Salary Deferral Credits”	6
2.31	“Service”	6
2.32	“Sponsor”	6
2.33	“Spouse” or “Surviving Spouse”	6
2.34	“Trust”	6
2.35	“Trustee”	6
2.36	“Years of Service”	6

i

Section 3.	Participation:	7
Section 4.	Credits to Deferred Compensation Account:	7
4.1	Salary Deferral Credits	7
4.2	Employer Credits	8
4.3	Deferred Compensation Account	8
Section 5.	Qualifying Distribution Events:	8
5.1	Death of a Participant	8
5.2	Disability of a Participant	9
5.3	Termination of Service	9
5.4	Retirement	9
Section 6.	Distributions While in Service:	9
6.1	In-Service Withdrawals	9
6.2	Financial Hardship Withdrawals	10
6.3	“Haircut” Withdrawals	11
6.4	Education Withdrawals	11
Section 7.	Qualifying Distribution Events Payment Options:	12
7.1	Payment Options	12
7.2	Prepayment	13
Section 8.	Vesting:	13
Section 9.	Accounts; Deemed Investment; Adjustments to Account:	14
9.1	Accounts	14
9.2	Deemed Investments	14
9.3	Adjustments to Deferred Compensation Account	14
Section 10.	Benefit Exchange:	15
Section 11.	Transfer to Qualified Plan:	15
11.1	Maximize Qualified Plan Deferrals	15
11.2	Maximize Qualified Plan Match	16
11.3	Transfer Deferral to Qualified Plan	16
11.4	Credit Match to Qualified Plan	16
11.5	Compliance with Qualified Plan	17
Section 12.	Administration by Committee:	17
12.1	Membership of Committee	17
12.2	Committee Officers; Subcommittee	17
12.3	Committee Meetings	17
12.4	Transaction of Business	18
12.5	Committee Records	18
12.6	Establishment of Rules	18
12.7	Conflicts of Interest	18

ii

12.8	Correction of Errors	18
12.9	Authority to Interpret Plan	19
12.10	Third Party Advisors	19
12.11	Compensation of Members	19
12.12	Expense Reimbursement	19
12.13	Indemnification	19
Section 13.	Contractual Liability; Trust:	20
13.1	Contractual Liability	20
13.2	Trust	20
Section 14.	Allocation of Responsibilities:	21
14.1	Board	21
14.2	Committee	21
14.3	Plan Administrator	21
Section 15.	Benefits Not Assignable; Facility of Payments:	21
15.1	Benefits not Assignable	21
15.2	Payments to Minors and Others	22
Section 16.	Beneficiary:	22
Section 17.	Amendment and Termination of Plan:	23
Section 18.	Communication to Participants:	23
Section 19.	Claims Procedure:	24
19.1	Filing of a Claim for Benefits	24
19.2	Notification to Claimant of Decision	24
19.3	Procedure for Review	25
19.4	Decision on Review	25
19.5	Action by Authorized Representative of Claimant	25
Section 20.	Miscellaneous Provisions:	26
20.1	Set off	26
20.2	Notices	26
20.3	Lost Distributees	26
20.4	Reliance on Data	27
20.5	Receipt and Release for Payments	27
20.6	Headings	27
20.7	Continuation of Employment	27
20.8	Merger or Consolidation; Assumption of Plan	28
20.9	Construction	28

iii

THE EXECUTIVE
NONQUALIFIED “EXCESS” PLAN™

Section 1.Purpose:

By execution of the Adoption Agreement, the Employer has adopted the Plan set forth herein to provide a means by which certain management Employees and Independent Contractors of the Employer may elect to defer receipt of current Compensation from the Employer in order to provide Retirement and other benefits on behalf of such Employees and Independent Contractors of the Employer, as selected in the Adoption Agreement. The Plan is not intended to be a tax-qualified retirement plan under Section 401(a) of the Internal Revenue Code (the “Code”). The Plan is intended to be an unfunded plan maintained primarily for the purpose of providing deferred compensation benefits for a select group of management or highly compensated employees under Sections 201(2), 301(a)(3) and 401(a)(1) of the Employee Retirement Income Security Act of 1974 and independent contractors.

Section 2.Definitions:

As used in the Plan, including this Section 2, references to one gender shall include the other and, unless otherwise indicated by the context:

2.1“Accrued Benefit” means, with respect to each Participant, the balance credited to his Deferred Compensation Account.

2.2“Active Participant” means, with respect to any day or date, a Participant who is in Service on such day or date; provided, that a Participant shall cease to be an Active Participant immediately upon a determination by the Committee that the Participant has ceased to be an Employee or Independent Contractor, or that the Participant no longer meets the eligibility requirements of the Plan.

2.3“Adoption Agreement” means the written agreement pursuant to which the Employer adopts the Plan. The Adoption Agreement is a part of the Plan as applied to the Employer.

2.4“Beneficiary” means the person, persons, entity or entities designated or determined pursuant to the provisions of Section 16 of the Plan.

2.5“Board” means the Board of Directors of the Employer, if the Employer is a corporation. If the Employer is not a corporation, “Board” shall mean the Employer.

2.6“Committee” means the administrative committee provided for in Section 12.

2.7“Compensation” shall have the meaning designated in the Adoption Agreement.

2.8“Crediting Date” means the date designated in the Adoption Agreement for crediting the amount of any Salary Deferral Credits to the Deferred Compensation Account of a Participant. Employer Credits may be credited to the Deferred Compensation Account of a Participant on any day that securities are traded on a national securities exchange.

2.9“Deferred Compensation Account” means the sum of the amounts credited to the Retirement Account, the In-Service Account and the Education Account of each Participant, as applicable. The Deferred Compensation Account of each Participant shall be adjusted as provided in Section 9.

2.10“Disability” means disability as defined in the Adoption Agreement.

2

2.11“Education Account” means a separate account to be kept for each Participant that can be divided into one or more Education Subaccounts as described in Section 6.4. The Education Account shall be established, adjusted for payments, credited with Salary Deferral Credits, and credited or debited for deemed investment gains or losses in the same manner and at the same time as such adjustments are made to the Deferred Compensation Account under Section 9 and in accordance with the rules and elections in effect under Section 9.

2.12“Education Subaccount” means the subaccount of the Education Account which is maintained with respect to an Education Recipient. If the Participant does not designate more than one Education Recipient, the Education Account shall be the Education Subaccount with respect to such Education Recipient.

2.13“Education Recipient” means the individual designated by the Participant in the Salary Deferral Agreement with respect to whom the Participant will create an Education Subaccount.

2.14“Effective Date” shall be the date designated in the Adoption Agreement as of which the Plan first becomes effective.

2.15“Employee” means an individual in the Service of the Employer if the relationship between the individual and the Employer is the legal relationship of employer and employee and if the individual is a highly compensated or management employee of the Employer. An individual shall cease to be an Employee upon the Employee’s termination of Service.

3

2.16“Employer” means the Employer identified in the Adoption Agreement, and any Participating Employer which adopts this Plan. The Employer may be a corporation, a limited liability company, a partnership or sole proprietorship. All references herein to the Employer shall be applied separately to each such Employer as if the Plan were solely the Plan of that Employer.

2.17“Employer Credits” means the amounts credited to the Participant’s Retirement Account by the Employer pursuant to the provisions of Section 4.2.

2.18“Independent Contractor” means an individual in the Service of the Employer if the relationship between the individual and the Employer is not the legal relationship of employer and employee. An individual shall cease to be an Independent Contractor upon the termination of the Independent Contractor’s Service. An Independent Contractor shall include a director of the Employer who is not an Employee.

2.19“In-Service Account” means a separate account to be kept for each Participant, as described in Section 6.1. The In-Service Account shall be established, adjusted for payments, credited with Salary Deferral Credits, and credited or debited for deemed investment gains or losses in the same manner and at the same time as such adjustments are made to the Deferred Compensation Account under Section 9 and in accordance with the rules and elections in effect under Section 9.

2.20“Normal Retirement Date” of a Participant is designated in the Adoption Agreement. The “Retirement Date” of a Participant means the date the Participant attains his Retirement Age.

4

2.21“Participant” means with respect to any Plan Year an Employee or Independent Contractor who has been designated by the Committee as a Participant and who has entered the Plan or who has an Accrued Benefit under the Plan.

2.22“Participating Employer” means any trade or business (whether or not incorporated) which adopts this Plan with the consent of the Employer identified in the Adoption Agreement.

2.23“Plan” means The Executive Nonqualified Excess Plan™, as herein set out or as duly amended. The name of the Plan as applied to the Employer shall be designated in the Adoption Agreement.

2.24“Plan Administrator” means the person designated in the Adoption Agreement. If the Plan Administrator designated in the Adoption Agreement is unable to serve, the Employer shall be the Plan Administrator.

2.25“Plan Year” means the twelve-month period ending on the last day of the month designated in the Adoption Agreement.

2.26“Qualifying Distribution Event” means the Participant’s Retirement or the termination of Participant’s Service with the Employer for any reason, including as a result of his death or Disability, as described in Section 5.

2.27“Retire” or “Retirement” means Retirement within the meaning of Section 5.4.

2.28“Retirement Account” means a separate account to be kept for each Participant, as described in Section 4.3. The Retirement Account shall be established, adjusted for payments, credited with Salary Deferral Credits and Employer Credits, and credited or debited for deemed investment gains or losses in the same manner and at the same time as such

5

adjustments are made to the Deferred Compensation Account under Section 9 and in accordance with the rules and elections in effect under Section 9.

2.29“Salary Deferral Agreement” means a written agreement entered into between a Participant and the Employer pursuant to the provisions of Section 4.1

2.30“Salary Deferral Credits” means the amounts credited to the Participant’s Deferred Compensation Account by the Employer pursuant to the provisions of Section 4.1.

2.31“Service” means employment by the Employer as an Employee. If the Participant is an Independent Contractor, “Service” shall mean the period during which the contractual relationship exists between the Employer and the Participant.

2.32“Sponsor” means Executive Benefit Services, Inc.

2.33“Spouse” or “Surviving Spouse” means, except as otherwise provided in the Plan, the legally married spouse or surviving spouse of a Participant.

2.34“Trust” means the trust fund established pursuant to Section 13.2, if designated by the Employer in the Adoption Agreement.

2.35“Trustee” means the trustee, if any, named in the agreement establishing the Trust and such successor or additional trustee as may be named pursuant to the terms of the agreement establishing the Trust.

2.36“Years of Service” means each Plan Year of Service completed by the Participant. For vesting purposes, Years of Service shall be calculated from the date designated in the Adoption Agreement.

6

Section 3.Participation:

The Committee in its discretion shall designate each Employee or Independent Contractor who is eligible to participate in the Plan. An Employee or Independent Contractor designated by the Committee as a Participant who has not otherwise entered the Plan shall enter the Plan and become a Participant as of the date determined by the Committee. A Participant who separates from Service with the Employer and who later returns to Service will not be an Active Participant under the Plan except upon satisfaction of such terms and conditions as the Committee shall establish upon the Participant’s return to Service, whether or not the Participant shall have an Accrued Benefit remaining under the Plan on the date of his return to Service.

Section 4.Credits to Deferred Compensation Account:

4.1Salary Deferral Credits. To the extent provided in the Adoption Agreement, each Active Participant may elect, by entering into a Salary Deferral Agreement with the Employer, to defer his Compensation from the Employer by a dollar amount or percentage specified in the Salary Deferral Agreement. The amount of the Participant’s Salary Deferral Credit shall be credited by the Employer to the Deferred Compensation Account maintained for the Participant pursuant to Section 9. The following special provisions shall apply with respect to the Salary Deferral Credits of a Participant:

4.1.1The Employer shall credit to the Participant’s Deferred Compensation Account on each Crediting Date an amount equal to the total Salary Deferral Credit for the period ending on such Crediting Date.

4.1.2An election pursuant to Section 4.1 shall be made by the Participant by executing and delivering a Salary Deferral Agreement to the Committee. The Salary Deferral Agreement shall become effective with respect to such Participant as of the first full payroll period commencing on or immediately following the first day of the Plan Year which occurs after the date such Salary Deferral Agreement is received by the Committee; provided, that a Participant who first becomes a Participant in the Plan during a Plan Year may enter into a Salary Deferral Agreement to be effective as of the first payroll period next following the date he enters the Plan. A Participant’s election shall continue

7

in effect, unless earlier modified by the Participant, until the Service of the Participant is terminated, or, if earlier, until the Participant ceases to be an Active Participant under the Plan.

4.1.3A Participant may unilaterally modify a Salary Deferral Agreement (either to increase or decrease the portion of his future Compensation which is subject to salary deferral within the percentage limits set forth in Section 4.1 of the Adoption Agreement) by providing a written modification of the Salary Deferral Agreement to the Employer. The modification shall become effective as of the first full payroll period commencing on or immediately following the first day of the Plan Year which occurs after the date such written modification is received by the Committee. The Participant may terminate the Salary Deferral Agreement effective as of the date designated in the Adoption Agreement.

4.1.4The Committee may from time to time establish policies or rules governing the manner in which Salary Deferral Credits may be made.

4.2Employer Credits. If designated by the Employer in the Adoption Agreement, the Employer shall cause the Committee to credit to the Deferred Compensation Account of each Active Participant an Employer Credit as determined in accordance with the Adoption Agreement.

4.3Deferred Compensation Account. Unless otherwise designated by the Participant in the Salary Deferral Agreement, all Salary Deferral Credits made pursuant to Section 4.1 shall be credited to the Retirement Account of the Participant. All Employer Credits made pursuant to Section 4.2 shall be made to the Retirement Account of the Participant. The Retirement Account is a part of the Deferred Compensation Account of a Participant and shall be distributed upon a Qualifying Distribution Event.

Section 5.Qualifying Distribution Events:

5.1Death of a Participant. If a Participant dies while in Service, the Employer shall pay a benefit to the Participant’s Beneficiary in the amount designated in the Adoption Agreement. Payment of such benefit shall be made by the Employer pursuant to Section 7. If a Participant dies following his Retirement or termination of Service for any

8

reason, including Disability, and before all payments to him under the Plan have been made, the balance of the Participant’s vested Accrued Benefit shall be paid by the Employer to the Participant’s Beneficiary pursuant to Section 7, and such balance shall be determined as of the commencement date of the payments.

5.2Disability of a Participant. If a Participant suffers a Disability while in Service prior to his Normal Retirement Date, he shall terminate Service with the Employer as of the date of the establishment of his Disability, whereupon he shall commence receiving payment of his vested Accrued Benefit, determined as of the commencement date of the payments. Such benefit shall be paid by the Employer as provided in Section 7.

5.3Termination of Service. If the Service of a Participant with the Employer shall be terminated for any reason other than Retirement, Disability or death, his vested Accrued Benefit shall be paid to him by the Employer as provided in Section 7, and such Accrued Benefit shall be determined as of the commencement date of the payments. If a Participant’s Accrued Benefit is not fully vested at his termination of employment, he shall forfeit that portion of his Accrued Benefit that is not fully vested. If he subsequently returns to Service with the Employer, he shall be treated as a new Participant for purposes of determining the vested portion of his Accrued Benefit.

5.4Retirement. A Participant who is in Service on or after his Normal Retirement Date shall be eligible to Retire and commence receiving payment of his Accrued Benefit. Payment of such benefit shall be made by the Employer pursuant to Section 7.

Section 6.Distributions While in Service:

6.1In-Service Withdrawals. If the Employer designates in the Adoption Agreement that in-service withdrawals are permitted under the Plan, a Participant may elect in the Salary Deferral Agreement to withdraw a designated amount from his Deferred

9

Compensation Account at the specified time or times designated by the Participant in the Salary Deferral Agreement, and the Participant’s In-Service Account shall be credited with the amount designated for in-service withdrawals. The following special provisions shall apply with respect to the In-Service Account:

6.1.1Notwithstanding any provision in this Section 6 to the contrary, if Participant incurs a Qualifying Distribution Event prior to the date on which the entire balance of his In-Service Account has been distributed to him, then the balance in the In-Service Account on the date of the Qualifying Distribution Event shall be distributed to him in the same manner and at the same time as his Deferred Compensation Account is distributed to him under Section 7 and in accordance with the rules and elections in effect under Section 7.

6.1.2If permitted by the Employer in the Adoption Agreement, a Participant may defer the date of any withdrawal from the In-Service Account by giving notice of the new withdrawal date to the Committee within the time limits specified in the Adoption Agreement.

6.2Financial Hardship Withdrawals. If the Employer designates in the Adoption Agreement that financial hardship withdrawals are permitted under the Plan, a distribution of the Deferred Compensation Account may be made to a Participant on account of financial hardship, subject to the following provisions:

6.2.1A Participant may, at any time prior to his Retirement or termination of Service for any reason, including Disability, make application to the Committee to receive a distribution in a lump sum of all or a portion of the vested Accrued Benefit credited to his Deferred Compensation Account (determined as of the date the distribution, if any, is made under this Section 6.2) because of an unforeseeable emergency that results in severe financial hardship to the Participant. A distribution because of an unforeseeable emergency shall not exceed the amount required to meet the immediate financial need created by the unforeseeable emergency and not otherwise reasonably available from other resources of the Participant. Examples of an unforeseeable emergency shall include but shall not be limited to those financial needs arising on account of a sudden or unexpected illness or accident of the Participant or of a dependent of the Participant, loss of the Participant’s property due to casualty, or other similar extraordinary and unforeseeable circumstances arising as a result of events beyond the control of the Participant.

10

6.2.2The Participant’s request for a distribution on account of financial hardship must be made in writing to the Committee. The request must specify the nature of the financial hardship, the total amount requested to be distributed from the Deferred Compensation Account, and the total amount of the actual expense incurred or to be incurred on account of financial hardship.

6.2.3If a distribution under this Section 6.2 is approved by the Committee, such distribution will be made as soon as practicable following the date it is approved. The processing of the request shall be completed as soon as practicable from the date on which the Committee receives the properly completed written request for a distribution on account of a financial hardship. If a Participant’s termination of Service occurs after a request is approved in accordance with this Section 6.2.3, but prior to distribution of the full amount approved, the approval of the request shall be automatically null and void and the benefits which the Participant is entitled to receive under the Plan shall be distributed in accordance with the applicable distribution provisions of the Plan. Only one financial hardship distribution shall be made within any Plan Year.

6.2.4The Committee may from time to time adopt additional policies or rules governing the manner in which such distributions may be made so that the Plan may be conveniently administered.

6.3“Haircut” Withdrawals. If the Employer designates in the Adoption Agreement that “haircut” withdrawals are permitted under the Plan, a Participant in Service may at his option make one or more withdrawals from his Deferred Compensation Account by written request to the Committee; provided, however, that a Participant who requests a withdrawal under this Section 6.3 shall incur a penalty (the “haircut”) equal to a percentage (not less than 10%), as designated by the Employer in the Adoption Agreement, of the amount withdrawn, and this penalty shall be forfeited from the Deferred Compensation Account of the Participant notwithstanding the provisions of Section 8.

6.4Education Withdrawals. If the Employer designates in the Adoption Agreement that education withdrawals are permitted under the Plan, a Participant may elect in the Salary Deferral Agreement for a designated percentage or dollar amount of the Salary Deferral Credits to be credited to the Education Account of the Education Recipient designated by the Participant. If the Participant designates more than one Education Recipient, the

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Education Account shall be divided into Education Subaccounts for each Education Recipient, and the Participant may designate in the Salary Deferral Agreement the percentage or dollar amount of each Salary Deferral Credit to be credited to each Education Subaccount. In the absence of a clear designation, all credits made to the Education Account shall be equally allocated to each Education Subaccount. As soon as practicable after the date designated by the Participant in the Salary Deferral Agreement, the Employer shall pay to the Participant the balance in the Education Subaccount with respect to such Education Recipient in the manner designated by the Participant in the Salary Deferral Agreement and permitted by the Employer in the Adoption Agreement. The following special provisions shall apply with respect to the Education Account:

6.4.1Notwithstanding any provision in this Section 6 to the contrary, if a Participant incurs a Qualifying Distribution Event prior to the date on which the entire balance of the Education Account has been distributed to him, then the balance in the Education Account on the date of the Qualifying Distribution Event shall be distributed to him in the same manner and at the same time as his Deferred Compensation Account is distributed to him under Section 7 and in accordance with the rules and elections in effect under Section 7.

6.4.2If permitted by the Employer in the Adoption Agreement, a Participant may defer the date of any withdrawal from the Education Account by giving notice of the new withdrawal date to the Committee within the time limits specified in the Adoption Agreement.

Section 7.Qualifying Distribution Events Payment Options:

7.1Payment Options. The Employer shall designate in the Adoption Agreement the payment options available upon a Qualifying Distribution Event. Upon a Participant’s entry into the Plan, the Participant shall elect among these designated payment options the method under which his vested Accrued Benefit or, in the event of his death, any benefit payable as a result, will be distributed; provided, however, that if permitted by the Employer in the Adoption Agreement, a Participant may change the method of payment by

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giving notice of the new payment method to the Committee within the time limits specified in the Adoption Agreement. In the event the Participant fails to make a valid designation of the payment method, the distribution will be made in a single lump sum payment. Notwithstanding any election made by the Participant, the vested Accrued Benefit of the Participant will be distributed in a single lump sum payment if the amount of such benefit does not exceed the dollar limit specified by the Employer in the Adoption Agreement, if applicable.

7.2Prepayment. Notwithstanding any other provisions of this Plan, if a Participant or any other person (a “recipient”) is entitled to receive payments under the Plan, the Committee in its sole discretion may direct the Employer to prepay all or any part of the payments remaining to be made to or on behalf of the recipient, or to shorten the payment period. The amount of such prepayment shall be in full satisfaction of the Employer’s obligations hereunder to the recipient and to all persons claiming under or through the recipient with respect to the payments being prepaid. In the event of a partial prepayment, the Committee shall designate which installments are being prepaid and, if applicable, the accounts of the Participant from which such prepayments shall be debited. The Committee’s determinations under this Section 7.2 shall be final and conclusive upon all parties claiming benefits under this Plan.

Section 8.Vesting:

A Participant shall be fully vested in the portion of his Deferred Compensation Account attributable to Salary Deferral Credits, and all income, gains and losses attributable thereto. A Participant shall become fully vested in the portion of his Deferred Compensation Account attributable to Employer Credits, and income, gains and losses attributable thereto, in accordance with the vesting schedule and provisions designated by the Employer in the Adoption Agreement.

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Section 9.Accounts; Deemed Investment; Adjustments to Account:

9.1Accounts. The Committee shall establish a book reserve account, entitled the “Deferred Compensation Account,” on behalf of each Participant. The Committee shall also establish a Retirement Account, In-Service Account and Education Account as a part of the Deferred Compensation Account of each Participant, if applicable. The amount credited to the Deferred Compensation Account shall be adjusted pursuant to the provisions of Section 9.3.

9.2Deemed Investments. The Deferred Compensation Account of a Participant shall be credited with an investment return determined as if the account were invested in one or more investment funds made available by the Committee. The Participant shall elect the investment funds in which his Deferred Compensation Account shall be deemed to be invested. Such election shall be made in the manner prescribed by the Committee and shall take effect upon the entry of the Participant into the Plan. The investment election of the Participant shall remain in effect until a new election is made by the Participant. In the event the Participant fails for any reason to make an effective election of the investment return to be credited to his account, the investment return shall be determined by the Committee.

9.3Adjustments to Deferred Compensation Account. With respect to each Participant who has a Deferred Compensation Account under the Plan, the amount credited to such account shall be adjusted by the following debits and credits, at the times and in the order stated:

9.3.1The Deferred Compensation Account shall be debited each business day with the total amount of any payments made from such account since the last preceding business day to him or for his benefit.

9.3.2The Deferred Compensation Account shall be credited on each Crediting Date with the total amount of any Salary Deferral Credits and Employer Credits to such account since the last preceding Crediting Date.

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9.3.3The Deferred Compensation Account shall be credited or debited on each day securities are traded on a national stock exchange with the amount of deemed investment gain or loss resulting from the performance of the investment funds elected by the Participant in accordance with Section 9.2. The amount of such deemed investment gain or loss shall be determined by the Committee and such determination shall be final and conclusive upon all concerned.

Section 10.Benefit Exchange:

If elected by the Employer in the Adoption Agreement, the Employer and the Participant may enter into an agreement under which the Participant’s vested Accrued Benefit may be exchanged for another nonqualified benefit in accordance with rules established by the Committee.

Section 11.Transfer to Qualified Plan:

If elected by the Employer in the Adoption Agreement and directed by the Participant in the Salary Deferral Agreement, the Employer shall transfer amounts from the Deferred Compensation Account of the Participant to the account of the Participant under a tax-qualified retirement plan maintained by the Employer and identified in the Adoption Agreement (the “Qualified Plan”) in accordance with the following procedures:

11.1Maximize Qualified Plan Deferrals. As soon as administratively feasible after the end of each Plan Year, the Employer shall determine the amount of Salary Deferral Credits made to the Deferred Compensation Account of the Participant for the Plan Year (excluding the amount of deemed investment gain or loss with respect thereto) which is eligible for transfer to the Qualified Plan. Such amount shall be determined so as to permit the maximum allocation to the account of the Participant under the Qualified Plan for the Plan Year without exceeding the limitations applicable to the Qualified Plan (including by way of illustration and not limitation, the limitations under Sections 402(g) and 401(k)(3) of the Code, and any successors thereto).

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11.2Maximize Qualified Plan Match. As soon as administratively feasible after the end of each Plan Year, the Employer shall determine the amount of any Employer Credits made as a matching amount to the Deferred Compensation Account of the Participant for the Plan Year (excluding the amount of deemed investment gain or loss with respect thereto) which is eligible for transfer to the Qualified Plan. Such amount shall be determined so as to permit the maximum allocation to the account of the Participant under the Qualified Plan for the Plan Year without exceeding the limitations applicable to the Qualified Plan (including by way of illustration and not limitation, the limitation under Section 401(m)(2) of the Code, and any successors thereto).

11.3Transfer Deferral to Qualified Plan. No later than two and one-half months following the end of the Plan Year, the Employer shall debit the amount determined under Section 11.1 from the Deferred Compensation Account of the Participant. If the Participant has directed in the Salary Deferral Agreement that such transfer be made, the Employer shall allocate such amount to the account of the Participant under the Qualified Plan. If the Participant has not directed such transfer, the Employer shall distribute such amount from the Deferred Compensation Account to the Participant.

11.4Credit Match to Qualified Plan. No later than two and one-half months following the end of the Plan Year, the Employer shall debit the amount determined under Section 11.2 from the Deferred Compensation Account of the Participant. If the transfer described in Section 11.3 is made, the Employer shall allocate the amount determined under Section 11.2 to the account of the Participant under the Qualified Plan. If such transfer is not made and the Participant receives a distribution of the amount determined under Section 11.1, the Participant shall forfeit the amount determined under Section 11.2.

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11.5Compliance with Qualified Plan. In its sole discretion, the Employer may make multiple transfers or distributions under this Section 11 during the Plan Year; provided, however, that no transfers shall be made under this Section 11 if precluded by the terms of the Qualified Plan.

Section 12.Administration by Committee:

12.1Membership of Committee. The Committee shall consist of at least three individuals who shall be appointed by the Board to serve at the pleasure of the Board. Any member of the Committee may resign, and his successor, if any, shall be appointed by the Board. The Committee shall be responsible for the general administration and interpretation of the Plan and for carrying out its provisions, except to the extent all or any of such obligations are specifically imposed on the Board.

12.2Committee Officers; Subcommittee. The members of the Committee may elect Chairman and may elect an acting Chairman. They may also elect a Secretary and may elect an acting Secretary, either of whom may be but need not be a member of the Committee. The Committee may appoint from its membership such subcommittees with such powers as the Committee shall determine, and may authorize one or more of its members or any agent to execute or deliver any instruments or to make any payment on behalf of the Committee.

12.3Committee Meetings. The Committee shall hold such meetings upon such notice, at such places and at such intervals as it may from time to time determine. Notice of meetings shall not be required if notice is waived in writing by all the members of the Committee at the time in office, or if all such members are present at the meeting.

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12.4Transaction of Business. A majority of the members of the Committee at the time in office shall constitute a quorum for the transaction of business. All resolutions or other actions taken by the Committee at any meeting shall be by vote of a majority of those present at any such meeting and entitled to vote. Resolutions may be adopted or other action taken without a meeting upon written consent thereto signed by all of the members of the Committee.

12.5Committee Records. The Committee shall maintain full and complete records of its deliberations and decisions. The minutes of its proceedings shall be conclusive proof of the facts of the operation of the Plan.

12.6Establishment of Rules. Subject to the limitations of the Plan, the Committee may from time to time establish rules or by-laws for the administration of the Plan and the transaction of its business.

12.7Conflicts of Interest. No individual member of the Committee shall have any right to vote or decide upon any matter relating solely to himself or to any of his rights or benefits under the Plan (except that such member may sign unanimous written consent to resolutions adopted or other action taken without a meeting), except relating to the terms of his Salary Deferral Agreement.

12.8Correction of Errors. The Committee may correct errors and, so far as practicable, may adjust any benefit or credit or payment accordingly. The Committee may in its discretion waive any notice requirements in the Plan; provided, that a waiver of notice in one or more cases shall not be deemed to constitute a waiver of notice in any other case. With respect to any power or authority which the Committee has discretion to exercise under the Plan, such discretion shall be exercised in a nondiscriminatory manner.

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12.9Authority to Interpret Plan. Subject to the claims procedure set forth in Section 18 the Plan Administrator and the Committee shall have the duty and discretionary authority to interpret and construe the provisions of the Plan and to decide any dispute which may arise regarding the rights of Participants hereunder, including the discretionary authority to construe the Plan and to make determinations as to eligibility and benefits under the Plan. Determinations by the Plan Administrator and the Committee shall apply uniformly to all persons similarly situated and shall be binding and conclusive upon all interested persons.

12.10Third Party Advisors. The Committee may engage an attorney, accountant, actuary or any other technical advisor on matters regarding the operation of the Plan and to perform such other duties as shall be required in connection therewith, and may employ such clerical and related personnel as the Committee shall deem requisite or desirable in carrying out the provisions of the Plan. The Committee shall from time to time, but no less frequently than annually, review the financial condition of the Plan and determine the financial and liquidity needs of the Plan. The Committee shall communicate such needs to the Employer so that its policies may be appropriately coordinated to meet such needs.

12.11Compensation of Members. No fee or compensation shall be paid to any member of the Committee for his Service as such.

12.12Expense Reimbursement. The Committee shall be entitled to reimbursement by the Employer for its reasonable expenses properly and actually incurred in the performance of its duties in the administration of the Plan.

12.13Indemnification. No member of the Committee shall be personally liable by reason of any contract or other instrument executed by him or on his behalf as a member of the Committee nor for any mistake of judgment made in good faith, and the Employer shall

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indemnify and hold harmless, directly from its own assets (including the proceeds of any insurance policy the premiums for which are paid from the Employer’s own assets), each member of the Committee and each other officer, employee, or director of the Employer to whom any duty or power relating to the administration or interpretation of the Plan may be delegated or allocated, against any unreimbursed or uninsured cost or expense (including any sum paid in settlement of a claim with the prior written approval of the Board) arising out of any act or omission to act in connection with the Plan unless arising out of such person’s own fraud, bad faith, willful misconduct or gross negligence.

Section 13.Contractual Liability; Trust:

13.1Contractual Liability. The obligation of the Employer to make payments hereunder shall constitute a contractual liability of the Employer to the Participant. Such payments shall be made from the general funds of the Employer, and the Employer shall not be required to establish or maintain any special or separate fund, or otherwise to segregate assets to assure that such payments shall be made, and the Participant shall not have any interest in any particular assets of the Employer by reason of its obligations hereunder. To the extent that any person acquires a right to receive payment from the Employer, such right shall be no greater than the right of an unsecured creditor of the Employer.

13.2Trust. If so designated in Section 2.34 of the Adoption Agreement, the Employer may establish a Trust with the Trustee, pursuant to such terms and conditions as are set forth in the Trust Agreement. The Trust, if and when established, is intended to be treated as a grantor trust for purposes of the Code. The establishment of the Trust is not intended to cause Participants to realize current income on amounts contributed thereto, and the Trust shall be so interpreted and administered.

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Section 14.Allocation of Responsibilities:

The persons responsible for the Plan and the duties and responsibilities allocated to each are as follows:

14.1Board.

(i)To amend the Plan;

(ii)To appoint and remove members of the Committee; and

(iii)To terminate the Plan.

14.2Committee.

(i)To designate Participants;

(ii)To interpret the provisions of the Plan and to determine the rights of the Participants under the Plan, except to the extent otherwise provided in Section 19 relating to claims procedure;

(iii)To administer the Plan in accordance with its terms, except to the extent powers to administer the Plan are specifically delegated to another person or persons as provided in the Plan;

(iv)To account for the Accrued Benefits of Participants; and

(v)To direct the Employer in the payment of benefits.

14.3Plan Administrator.

(i)To file such reports as may be required with the United States Department of Labor, the Internal Revenue Service and any other government agency to which reports may be required to be submitted from time to time; and

(ii)To administer the claims procedure to the extent provided in Section 19.

Section 15.Benefits Not Assignable; Facility of Payments:

15.1Benefits not Assignable. No portion of any benefit credited or paid under the Plan with respect to any Participant shall be subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance or charge, and any attempt so to anticipate, alienate, sell, transfer, assign, pledge, encumber or charge the same shall be void, nor shall any

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portion of such benefit be in any manner payable to any assignee, receiver or any one trustee, or be liable for his debts, contracts, liabilities, engagements or torts. Notwithstanding the foregoing, in the event that all or any portion of the benefit of a Participant is transferred to the former spouse of the Participant incident to a divorce, the Committee shall maintain such amount for the benefit of the former spouse until distributed in the manner required by an order of any court having jurisdiction over the divorce, and the former spouse shall be entitled to the same rights as the Participant with respect to such benefit.

15.2Payments to Minors and Others. If any individual entitled to receive a payment under the Plan shall be physically, mentally or legally incapable of receiving or acknowledging receipt of such payment, the Committee, upon the receipt of satisfactory evidence of his incapacity and satisfactory evidence that another person or institution is maintaining him and that no guardian or committee has been appointed for him, may cause any payment otherwise payable to him to be made to such person or institution so maintaining him. Payment to such person or institution shall be in full satisfaction of all claims by or through the Participant to the extent of the amount thereof.

Section 16.Beneficiary:

The Participant’s Beneficiary shall be the person or persons designated by the Participant on the Beneficiary designation form provided by and filed with the Committee or its designee. If the Participant does not designate a Beneficiary, the Beneficiary shall be his Surviving Spouse. If the Participant does not designate a Beneficiary and has no Surviving Spouse, the Beneficiary shall be the Participant’s estate. The designation of a Beneficiary may be changed or revoked only by filing a new Beneficiary designation form with the Committee or its designee. If a Beneficiary (the “primary Beneficiary”) is receiving or is entitled to receive payments under the Plan and dies before receiving all of the payments due him, the balance to

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which he is entitled shall be paid to the contingent Beneficiary, if any, named in the Participant’s current Beneficiary designation form. If there is no contingent Beneficiary, the balance shall be paid to the estate of the primary Beneficiary. Any Beneficiary may disclaim all or any part of any benefit to which such Beneficiary shall be entitled hereunder by filing a written disclaimer with the Committee before payment of such benefit is to be made. Such a disclaimer shall be made in a form satisfactory to the Committee and shall be irrevocable when filed. Any benefit disclaimed shall be payable from the Plan in the same manner as if the Beneficiary who filed the disclaimer had died on the date of such filing.

Section 17.Amendment and Termination of Plan:

The Board may amend any provision of the Plan or terminate the Plan at any time; provided, that in no event shall such amendment or termination reduce any Participant’s Accrued Benefit as of the date of such amendment or termination, nor shall any such amendment affect the terms of the Plan relating to the payment of such Accrued Benefit.

Notwithstanding the foregoing, the Plan shall be terminated upon the occurrence of one or more of the events designated in the Adoption Agreement. Upon the occurrence of a termination event, the Accrued Benefit of each Participant may become fully vested and payable to the Participant in a lump sum if designated by the Employer in the Adoption Agreement.

Section 18.Communication to Participants:

The Employer shall make a copy of the Plan available for inspection by Participants and their beneficiaries during reasonable hours at the principal office of the Employer.

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Section 19.Claims Procedure:

The following claims procedure shall apply with respect to the Plan:

19.1Filing of a Claim for Benefits. If a Participant or Beneficiary (the “claimant”) believes that he is entitled to benefits under the Plan which are not being paid to him or which are not being accrued for his benefit, he shall file a written claim therefor with the Plan Administrator. In the event the Plan Administrator shall be the claimant, all actions which are required to be taken by the Plan Administrator pursuant to this Section 19 shall be taken instead by another member of the Committee designated by the Committee.

19.2Notification to Claimant of Decision. Within 90 days after receipt of a claim by the Plan Administrator (or within 180 days if special circumstances require an extension of time), the Plan Administrator shall notify the claimant of his decision with regard to the claim. In the event of such special circumstances requiring an extension of time, there shall be furnished to the claimant prior to expiration of the initial 90-day period written notice of the extension, which notice shall set forth the special circumstances and the date by which the decision shall be furnished. If such claim shall be wholly or partially denied, notice thereof shall be in writing and worded in a manner calculated to be understood by the claimant, and shall set forth: (i) the specific reason or reasons for the denial; (ii) specific reference to pertinent provisions of the Plan on which the denial is based; (iii) a description of any additional material or information necessary for the claimant to perfect the claim and an explanation of why such material or information is necessary; and (iv) an explanation of the procedure for review of the denial and the time limits applicable to such procedures, including a statement of the claimant’s right to bring a civil action under ERISA following an adverse benefit determination on review.

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19.3Procedure for Review. Within 60 days following receipt by the claimant of notice denying his claim, in whole or in part, or, if such notice shall not be given, within 60 days following the latest date on which such notice could have been timely given, the claimant shall appeal denial of the claim by filing a written application for review with the Committee. Following such request for review, the Committee shall fully and fairly review the decision denying the claim. Prior to the decision of the Committee, the claimant shall be given an opportunity to review pertinent documents and to submit issues and comments in writing.

19.4Decision on Review. The decision on review of a claim denied in whole or in part by the Plan Administrator shall be made in the following manner:

19.4.1Within 60 days following receipt by the Committee of the request for review (or within 120 days if special circumstances require an extension of time), the Committee shall notify the claimant in writing of its decision with regard to the claim. In the event of such special circumstances requiring an extension of time, written notice of the extension shall be furnished to the claimant prior to the commencement of the extension. If the decision on review is not furnished in a timely manner, the claim shall be deemed denied as of the close of the initial 60-day period (or the close of the extension period, if applicable).

19.4.2With respect to a claim that is denied in whole or in part, the decision on review shall set forth specific reasons for the decision, shall be written in a manner calculated to be understood by the claimant, and shall cite specific references to the pertinent Plan provisions on which the decision is based.

19.4.3The decision of the Committee shall be final and conclusive.

19.5Action by Authorized Representative of Claimant. All actions set forth in this Section 19 to be taken by the claimant may likewise be taken by a representative of the claimant duly authorized by him to act in his behalf on such matters. The Plan Administrator and the Committee may require such evidence as either may reasonably deem necessary or advisable of the authority to act of any such representative.

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Section 20.Miscellaneous Provisions:

20.1Set off. Notwithstanding any other provision of this Plan, the Employer may reduce the amount of any payment otherwise payable to or on behalf of a Participant hereunder by the amount of any loan, cash advance, extension of credit or other obligation of the Participant to the Employer that is then due and payable, and the Participant shall be deemed to have consented to such reduction.

20.2Notices. Each Participant who is not in Service and each Beneficiary shall be responsible for furnishing the Committee or its designee with his current address for the mailing of notices and benefit payments. Any notice required or permitted to be given to such Participant or Beneficiary shall be deemed given if directed to such address and mailed by regular United States mail, first class, postage prepaid. If any check mailed to such address is returned as undeliverable to the addressee, mailing of checks will be suspended until the Participant or Beneficiary furnishes the proper address. This provision shall not be construed as requiring the mailing of any notice or notification otherwise permitted to be given by posting or by other publication.

20.3Lost Distributees. A benefit shall be deemed forfeited if the Plan Administrator is unable to locate the Participant or Beneficiary to whom payment is due on or before the fifth anniversary of the date payment is to be made or commence; provided, that the deemed investment rate of return pursuant to Section 9.2 shall cease to be applied to the Participant’s account following the first anniversary of such date; provided further, however, that such benefit shall be reinstated if a valid claim is made by or on behalf of the Participant or Beneficiary for all or part of the forfeited benefit.

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20.4Reliance on Data. The Employer, the Committee and the Plan Administrator shall have the right to rely on any data provided by the Participant or by any Beneficiary. Representations of such data shall be binding upon any party seeking to claim a benefit through a Participant, and the Employer, the Committee and the Plan Administrator shall have no obligation to inquire into the accuracy of any representation made at any time by a Participant or Beneficiary.

20.5Receipt and Release for Payments. Subject to the provisions of Section 20.1, any payment made from the Plan to or with respect to any Participant or Beneficiary, or pursuant to a disclaimer by a Beneficiary, shall, to the extent thereof, be in full satisfaction of all claims hereunder against the Plan and the Employer with respect to the Plan. The recipient of any payment from the Plan may be required by the Committee, as a condition precedent to such payment, to execute a receipt and release with respect thereto in such form as shall be acceptable to the Committee.

20.6Headings. The headings and subheadings of the Plan have been inserted for convenience of reference and are to be ignored in any construction of the provisions hereof.

20.7Continuation of Employment. The establishment of the Plan shall not be construed as conferring any legal or other rights upon any Employee or any persons for continuation of employment, nor shall it interfere with the right of the Employer to discharge any Employee or to deal with him without regard to the effect thereof under the Plan.

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20.8Merger or Consolidation; Assumption of Plan. No employer-party to the Plan shall consolidate or merge into or with another corporation or entity, or transfer all or substantially all of its assets to another corporation, partnership, trust or other entity (a “Successor Entity”) unless such Successor Entity shall assume the rights, obligations and liabilities of the employer-party under the Plan and upon such assumption, the Successor Entity shall become obligated to perform the terms and conditions of the Plan. Nothing herein shall prohibit the assumption of the obligations and liabilities of the Employer under the Plan by any Successor Entity.

20.9Construction. The Employer shall designate in the Adoption Agreement the state according to whose laws the provisions of the Plan shall be construed and enforced, except to the extent that such laws are superseded by ERISA.

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EX-10.4

Exhibit 10.4

The Stock Yards Bank
Director’s Deferred Compensation Plan

ADOPTION AGREEMENT

THIS AGREEMENT is made the           day of                                 ,                    , by Stock Yards Bank and Trust Company (the “Employer”), having its principal office at 1040 East Main Street, Louisville, KY 40206 and EXECUTIVE BENEFIT SERVICES, INC. (the “Sponsor”), having its principal office at 4140 ParkLake Avenue, Suite 500, Raleigh, NC 27612.

W I T N E S S E T H:

WHEREAS, the Sponsor has established the Stock Yards Bank Director’s Deferred Compensation Plan (the “Plan”); and

WHEREAS, the Employer desires to adopt the Plan as an unfunded, nonqualified deferred compensation plan: and

WHEREAS, the Employer has been advised by the Sponsor to obtain legal and tax advice from its professional advisors before adopting the Plan, and that the Sponsor disclaims all liability for the legal and tax consequences which result from the elections made by the Employer in this Adoption Agreement;

NOW, THEREFORE, the Employer hereby adopts the Plan in accordance with the terms and conditions set forth in this Adoption Agreement:

ARTICLE I

Terms used in this Adoption Agreement shall have the same meaning as in the Plan, unless some other meaning is expressly herein set forth. The Employer hereby represents and warrants that the Plan has been adopted by the Employer upon proper authorization and the Employer hereby elects to adopt the Plan for the benefit of its Participants as referred to in the Plan. By the execution of this Adoption Agreement, the Employer hereby agrees to be bound by the terms of the Plan.

This Adoption Agreement may only be used in connection with the Stock Yards Bank Director’s Deferred Compensation Plan. The Sponsor will inform the Employer of any amendments to the Plan or of the discontinuance or abandonment of the Plan. For questions concerning the Plan, the Employer may call the Sponsor at (919) 833-1042.

©2003 Executive Benefit Services, Inc.

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ARTICLE II

The Employer hereby makes the following designations or elections for the purpose of the Plan [Section references below correspond to Section references in the Plan]:

2.7Compensation: The “Compensation” of a Participant shall mean all of each Participant’s [check desired option(s)]:

o	(A)	Compensation received as an Employee reportable in box 1, Wages, Tips and other Compensation, on Form W-2.
o	(B)	Annual base salary.
o	(C)	Annual bonus.
o	(D)	Long term incentive plan compensation.
ý	(E)	Compensation received as an Independent Contractor reportable on Form 1099.
o	(F)	Commissions.
o	(G)	other [specify]:	.

Notwithstanding the foregoing, Compensation ý SHALL o SHALL NOT include Salary Deferral Credits under this Plan and amounts contributed by the Participant pursuant to a Salary Deferral Agreement to another employee benefit plan of the Employer which are not includible in the gross income of the Employee under Section 125, 132(f)(4), 402(e)(3), 402(h) or 403(b) of the Code.

2.8Crediting Date: The Deferred Compensation Account of a Participant shall be credited with the amount of any Salary Deferral Credits to such account at the time designated below [check desired Crediting Date]:

o	(A)	The last business day of each Plan Year.
o	(B)	The last business day of each calendar quarter during the Plan Year.
o	(C)	The last business day of each month during the Plan Year.
o	(D)	The last business day of each payroll period during the Plan Year.
ý	(E)	Any business day on which Salary Deferral Credits are received by the Sponsor.
o	(F)	Other [specify]:	.

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2.10Disability: The disability of a Participant shall be determined as follows:

o	(A)	The Employee participating in the Plan shall be considered to be disabled when he has been determined to be disabled for the purposes of any long term disability insurance covering the Participant that is sponsored by the Employer
ý	(B)	The Participant shall be considered to be disabled when he has been determined to be disabled for purposes of the Federal Social Security Act.
o	(C)	Other:
			.

2.14Effective Date [check desired option]:

o	(A)	This is a newly-established Plan, and the Effective Date of the Plan is                                           .
ý	(B)	This is an amendment and restatement of a plan named Stock Yards Bank Director’s Deferred Compensation Plan with an effective date of March 1, 2001. The Effective Date of this amended and restated Plan is                                        .  This is amendment number 5.

2.20Normal Retirement Date: The Normal Retirement Date of a Participant shall be: [check desired option]:

ý	(A)	The attainment of age 70.
o	(B)	The later of age             or the              anniversary of the participation commencement date. The participation commencement date is the first day of the first Plan Year in which the Participant commenced participation in the Plan.
o	(C)	The completion of        Years of Service.
o	(D)	The completion of         Years of Service and attainment of age        .

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2.22Participating Employer(s):  As of the Effective Date, the following Participating Employer(s) are parties to the Plan [list all employer-parties, including the Employer]:

Name of Employer	Address	Telephone No.	EIN
Stock Yards Bank and Trust Company	1040 East Main Street	(502) 625-9122	61-0354170
	Louisville, KY 40206

2.23Plan: The name of the Plan as applied to the Employer is:

Stock Yards Bank Director’s Deferred Compensation Plan.

2.24Plan Administrator: The Plan Administrator shall be [check desired option]:

ý	(A)	Committee.
o	(B)	Employer.
o	(C)	Other (specify):	.

2.25Plan Year: The Plan Year shall be the 12 consecutive calendar month period ending on the last day of the month of December, and each anniversary thereof.

4

2.34Trust:  [check desired option]:

o	(A)	The Employer does desire to establish a “rabbi” trust for the purpose of setting aside assets of the Employer contributed thereto for the payment of benefits under the Plan.
o	(B)	The Employer does not desire to establish a “rabbi” trust for the purpose of setting aside assets of the Employer contributed thereto for the payment of benefits under the Plan.
ý	(C)	The Employer desires to establish a “rabbi” trust for the purpose of setting aside assets of the Employer contributed thereto for the payment of benefits under the Plan upon the occurrence of the following event(s): Upon the happening of a Change in Control as hereafter defined. A Change In Control shall occur upon (1) the acquisition by any person of 50% or  more of the voting power of the Employer’s outstanding voting stock, (2) five or more of the current members of the Board of Directors ceasing to be members of the Board unless ceasing any replacement director was  elected by a vote of either at least 75% of the remaining directors, or at least 75% of the shares entitled to vote on such replacement, or (3) approval by the shareholders of the Employer of (A) a merger or  consolidation with another corporation if the stockholders of the Employer immediately before such vote will not, as a result of such merger or consolidation, own more than 50% of the voting stock of the corporation resulting from such merger or consolidation, or (B) a complete liquidation of the Employer or the sale of all, or substantially all, of the assets of the Employer. Notwithstanding the foregoing, a Change in Control shall not occur solely because 50% or more of the voting stock of the Employer is acquired by (i) a trust which is part of the Employer’s or subsidiary’s ‘s employee benefit plan, or (ii) by a corporation which, immediately following such acquisition, is owned directly or indirectly by the stockholders of the Employer in the same  proportion as their ownership of stock in the Employer immediately prior to such acquisition. In the event a Change in Control occurs, you will be notified by the Committee.

5

4.1          Salary Deferral Credits:  A Participant may elect to have his Compensation (as selected in Section 2.7 of this Adoption Agreement) reduced by the following annual percentage or amount as designated in writing to the Committee [check the applicable options]:

o	(A)	Annual base salary:
		[Complete the following blanks only if a minimum or maximum deferral is desired]:
		Minimum deferral:$                        or                       %
		Maximum deferral:$                        or                       %
o	(B)	Annual bonus:
		[Complete the following blanks only if a minimum or maximum deferral is desired]:
		Minimum deferral:$                        or                       %
		Maximum deferral:$                        or                       %
ý	(C)	Other: 1099 Income.
		[Complete the following blanks only if a minimum or maximum deferral is desired]:
		Minimum deferral:$                        or           0         %
		Maximum deferral:$                        or         100       %
o	(D)	Not applicable – no salary deferral provision.

4.1.2       Termination of Salary Deferrals:  A Participant may terminate his Salary Deferral Agreement effective as of [check desired option]:

ý	(A)	The first full payroll period commencing after the date written notice of the termination is received
by the Committee.
o	(B)	The first day of the Plan Year occurring after the date written notice of the termination is received by the Committee.
o	(C)	Not applicable – no salary deferral provision.

6

4.2          Employer Credits:  The Employer will make Employer Credits in the following manner [check a maximum of 2 desired option(s)]:

o	(A)	Employer Matching Credits:  The Employer may make matching credits to the Deferred Compensation Account of each Employee Participant in an amount determined as follows [check desired option(s)]:
	o	(i)	% of the Participant’s Salary Deferral Credits.
	o	(ii)	% of the first         % of the Participant’s Compensation which is elected as a Salary Deferral Credit.
	o	(iii)	An amount determined each Plan Year by the Employer.
	o	(iv)	The Employer shall not match amounts provided above in excess of $               or in excess of         % of the Participant’s Compensation per Plan Year.
	o	(v)	Other:		.
	ý	(vi)	Not applicable – no Employer matching credits provision.
o	(B)	Employer Profit Sharing Credits:  The Employer may make profit sharing credits to the Deferred Compensation Account of each Active Employee Participant in an amount determined as follows:
	o	(i)	Such amount out of the current or accumulated net profit of the Employer for such year as the Employer in its sole discretion shall determine.
	o	(ii)	Such amount as the Employer in its sole discretion shall determine without regard to current or accumulated net profit.
	o	(iii)	The Employer shall not make profit sharing credits in excess of $              , or in excess of         % of the Participant’s Compensation per Plan Year.
	o	(iv)	Other:
				.
	ý	(v)	Not applicable – no Employer profit sharing provision.
o	(C)	Other [describe]:
				.

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5.1          Death of a Participant:  If the Participant dies while in Service, the Employer shall pay a benefit to the Beneficiary in an amount equal to the Accrued Benefit of the Participant determined as of the date payments to the Beneficiary commence, plus [check if desired]:

o	(A)	An amount to be determined by the Committee.
o	(B)	Other [specify]:	.
ý	(C)	No additional benefits.

6.1          In-Service Withdrawals:  In-service withdrawals may be made from the Plan [check desired option]:

ý	(A)	Yes.
		(i)	The In-Service Account may be withdrawn only after the account has been established for [check desired option]:
			ý	(a)A minimum of 3 years (insert minimum of 2 years.)
			o	(b)Not applicable.
		(ii)	A Participant may defer the date of any scheduled in-service withdrawal by giving notice of the new withdrawal date to the Committee [check desired option]:
			o	(a)At least         (insert minimum of 12) months prior to the scheduled withdrawal date.
			ý	(b)Not applicable.
o	(B)	No in-service withdrawals.

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6.2          Financial Hardship Withdrawals:  Financial hardship withdrawals may be made from the Plan [check desired option]:

ý	(A)	Yes.
o	(B)	No.

6.3          “Haircut” Withdrawals:  “Haircut” withdrawals may be made from the Plan [check desired option]:

o	(A)	Yes.  If a Participant obtains a “haircut” withdrawal, the Participant shall forfeit 10% (specify percentage not less than 10%) of the amount of withdrawal.
ý	(B)	No “haircut” withdrawals.

6.4          Education Withdrawals:  Education withdrawals may be made from the Plan [check desired option]:

ý	(A)	Yes.
		(i)	Education withdrawals may be made in installment payments over no more than 6 years.
		(ii)	A Participant may defer the date of any scheduled education withdrawal by giving notice of the new withdrawal date to the Committee [check desired option]:
			o	(a)At least         (insert minimum of 12) months prior to the scheduled withdrawal date.
			ý	(b)Not applicable.
o	(B)	No education withdrawals.

9

7.1Payment Options:  Any benefit payable under the Plan upon a Qualifying Distribution Event may be made to the Participant or his Beneficiary (as applicable) in any of the following payment forms, as selected by the Participant upon his entry into the Plan [check desired option(s)]:

ý	(A)	A lump sum in cash as soon as practicable following the date of the Qualifying Distribution Event.
ý	(B)	Approximately equal annual installments over a term no longer than 10 years as elected by the Participant upon his entry into the Plan.
	ý	(i)	Payment of the benefit shall commence as soon as practicable after the following date [select desired option]:
		o	(a)	The first business day of the calendar year following the date of the Qualifying Distribution Event.
		o	(b)	The first business day of the calendar quarter following the date of the Qualifying Distribution Event.
		ý	(c)	The first business day of the calendar month following the date of the Qualifying Distribution Event.
		The payment of each annual installment shall be made on the anniversary of the date selected for the commencement of the installment payments in this subsection (i).  The amount of the annual installment shall be adjusted on each anniversary date of the commencement of the installment payments for credits or debits to the Participant’s account pursuant to Section 9 of the Plan. Such adjustment shall be made by dividing the balance in the Deferred Compensation Account on each such date (following adjustment on such date) by the number of annual installments remaining to be paid hereunder; provided that the last annual installment due under the Plan shall be the entire amount credited to the Participant’s account on the date of the payment.
	ý	(ii)	Notwithstanding the payment option elected by the Participant, the vested Accrued Benefit of the Participant will be distributed in a single lump payment if the amount of such benefit on the date that payment is to commence does not exceed [check desired option]:
		o	(a)	$                  (Insert desired cash out amount).
		ý	(b)	Not applicable.
ý	(C)	A Participant may defer the date of any scheduled payment by giving notice of the new payment date to the Committee [check desired option]:
	o	(i)	(a)At least         (insert minimum of 12) months prior to the scheduled payment date.
	ý	(ii)	(b)Not applicable.

10

ý	(D)	Other [specify]: A Participant may change an initial form of payment election by a writing
	delivered to the Employer to select either a lump sum or installments as allowed in Section 7.1 (A) and (B) above, at any time up to the date director status ends or, with respect to accounts paid while still a director, before the December 31 of the year prior to the year in which payment is to begin.

8.Vesting: An Active Participant shall be fully vested in the Employer Credits made to the Deferred Compensation Account upon occurrence of the following events [check or complete all that apply]:

o	(A)	Normal Retirement Date.
o	(B)	Death.
o	(C)	Disability.
o	(D)	Completion of that number of Years of Service specified below:
	o	(i)	Employer Matching Credits [complete if applicable]:
		o	(a)	Immediate 100% vesting.
		o	(b)	100% vesting after       Years of Service.
		o	(c)	100% vesting at age        .
		o	(d)
				Number of Years			Vested
				of Service			Percentage
				Less than		1		%
						1		%
						2		%
						3		%
						4		%
						5		%
						6		%
						7		%
						8 or more		%
		For this purpose, Years of Service of a Participant shall be calculated from the date designated below [check desired option]:
			o	(1)	First Day of Service.
			o	(2)	Effective Date of the Plan Participation.
			o	(3)	Each Crediting Date. Under this option (3), each Employer Matching Credit shall vest based on the Years of Service of a Participant from the Crediting Date on which each Employer Credit is made to his or her Deferred Compensation Account.

11

o	(ii)	Employer Profit Sharing Credits [complete if applicable]:
	o	(a)	Immediate 100% vesting.
	o	(b)	100% vesting after       Years of Service.
	o	(c)	100% vesting at age        .
	o	(d)
			Number of Years			Vested
			of Service			Percentage
			Less than		1		%
					1		%
					2		%
					3		%
					4		%
					5		%
					6		%
					7		%
					8		%
					9		%
					10 or more		%
	For this purpose, Years of Service of a Participant shall be calculated from the date designated below [check desired option]:
		o	(1)	First Day of Service.
		o	(2)	Effective Date of the Plan Participation.
		o	(3)	Each Crediting Date. Under this option (3), each Employer Profit Sharing Credit shall vest based on the Years of Service of a Participant from the Crediting Date on which each Employer Credit is made to his or her Deferred Compensation Account.

12

o	(iii)	Other Employer Credits [complete if applicable]:
	o	(a)	Immediate 100% vesting.
	o	(b)	100% vesting after       Years of Service.
	o	(c)	100% vesting at age        .
	o	(d)
			Number of Years			Vested
			of Service			Percentage
			Less than		1		%
					1		%
					2		%
					3		%
					4		%
					5		%
					6		%
					7		%
					8		%
					9		%
					10 or more		%
	For this purpose, Years of Service of a Participant shall be calculated from the date designated below [check desired option]:
		o	(1)	First Day of Service.
		o	(2)	Effective Date of the Plan Participation.
		o	(3)	Each Crediting Date. Under this option (3), each Other Employer Credit shall vest based on the Years of Service of a Participant from the Crediting Date on which each Employer Credit is made to his or her Deferred Compensation Account.

10.          Benefit Exchange: The Employer elects to permit the Participant to exchange all or any portion of the vested Accrued Benefit under the Plan for another type of nonqualified benefit [check desired option]:

o	(A)	Yes.
ý	(B)	No.

11.          Transfer to Qualified Plan: The Employer elects to permit the Participant to direct the transfer of a portion of his benefit under this Plan to a tax-qualified retirement plan maintained by the Employer [check desired option]:

o	(A)	Yes. Insert name of Qualified Plan:	.
ý	(B)	No.

13

17. Amendment or Termination of Plan: [check or complete all that apply]:

ý	(A)	Notwithstanding any provision in this Adoption Agreement or the Plan to the contrary, Exhibit A shall be added to Section 4.1.5 of the Plan.
o	(B)	The Plan shall be terminated upon the occurrence of one or more of the following events [check if desired]:
	o	(i)	The amount of shareholders equity shown on the financial statements of the Employer for each of the two most recent fiscal years is less than $            .
	o	(ii)	The aggregate net loss (after tax) as reported on the financial statements of the Employer for the two most recent fiscal years is greater than $            .
	o	(iii)	There is a change of control of the Employer. For this purpose, a “change of control” shall be deemed to have occurred if: (A) any person other than an officer who is an Employee of the Employer for at least one year preceding the change of control, acquires or becomes the beneficial owner, directly or indirectly, of securities of the Employer representing       % [insert percentage] or more of the combined voting power of the Employer’s then outstanding securities and thereafter, the membership of the Board becomes such that a majority are persons who were not members of the Board at the time of the acquisition of securities; or (B) the Employer, or its assets, are acquired by or combined with another entity and less than a majority of the outstanding voting shares of such entity after the acquisition or combination are owned, immediately after the acquisition or combination, by the owners of voting shares of the Employer immediately prior to the acquisition or combination.
	o	(iv)	Other [specify]:
				.
ý	(C)	In the event of a termination of the Plan, the Employer elects that [check if desired]:
	o	(i)	Each Active Participant will become fully vested in the Deferred Compensation Account. [If not checked, the vesting provisions of Section 8 will continue to apply.]
	ý	(ii)	The Deferred Compensation Account will be immediately distributed to each Participant in a single lump sum payment. [If not checked the payment provisions of Section 7 will continue to apply.]

14

20.9Construction: The provisions of the Plan and Trust (if any) shall be construed and enforced according to the laws of the State of Kentucky, except to the extent that such laws are superseded by ERISA.

IN WITNESS WHEREOF, this Agreement has been executed as of the day and year first above stated.

	STOCK YARDS BANK AND TRUST COMPANY
	Name of Employer
By:
	Authorized Person
	Title

NOTE: Execution of this Adoption Agreement creates a legal liability of the Employer with significant tax consequences to the Employer and Participants. The Employer should obtain legal and tax advice from its professional advisors before adopting the Plan. The Sponsor disclaims all liability for the legal and tax consequences which result from the elections made by the Employer in this Adoption Agreement.

15

Exhibit A

Director fee’s deferred into the Stock Yards Bank Stock index are irrevocable. They may not be rebalanced or reallocated until a normal distribution event occurs. Future Director Fee Deferrals may be allocated into different investment indices.

16

EX-10.5

Exhibit 10.5

THE EXECUTIVE
NONQUALIFIED “EXCESS” PLAN™

ADOPTION AGREEMENT-Officers Plan

THIS AGREEMENT is made the 1st day of March, 2004, by Stock Yards Bank and Trust Company (the “Employer”), having its principal office at 1040 East Main Street, Louisville, KY 40206 and EXECUTIVE BENEFIT SERVICES, INC. (the “Sponsor”), having its principal office at 4140 ParkLake Avenue, Suite 500, Raleigh, NC 27612.

W I T N E S S E T H:

WHEREAS, the Sponsor has established The Executive Nonqualified Excess Plan™ (the “Plan”); and

WHEREAS, the Employer desires to adopt the Plan as an unfunded, nonqualified deferred compensation plan: and

WHEREAS, the Employer has been advised by the Sponsor to obtain legal and tax advice from its professional advisors before adopting the Plan, and that the Sponsor disclaims all liability for the legal and tax consequences which result from the elections made by the Employer in this Adoption Agreement;

NOW, THEREFORE, the Employer hereby adopts the Plan in accordance with the terms and conditions set forth in this Adoption Agreement:

ARTICLE I

Terms used in this Adoption Agreement shall have the same meaning as in the Plan, unless some other meaning is expressly herein set forth.  The Employer hereby represents and warrants that the Plan has been adopted by the Employer upon proper authorization and the Employer hereby elects to adopt the Plan for the benefit of its Participants as referred to in the Plan.  By the execution of this Adoption Agreement, the Employer hereby agrees to be bound by the terms of the Plan.

This Adoption Agreement may only be used in connection with The Executive Nonqualified Excess Plan™.  The Sponsor will inform the Employer of any amendments to the Plan or of the discontinuance or abandonment of the Plan.  For questions concerning the Plan, the Employer may call the Sponsor at (919) 833-1042.

Ó2003 Executive Benefit Services, Inc.

1

ARTICLE II

The Employer hereby makes the following designations or elections for the purpose of the Plan [Section references below correspond to Section references in the Plan]:

2.7          Compensation:  The “Compensation” of a Participant shall mean all of each Participant’s [check desired option(s)]:

ý	(A)	Compensation received as an Employee reportable in box 1, Wages, Tips and other Compensation, on Form W-2.
o	(B)	Annual base salary.
o	(C)	Annual bonus.
o	(D)	Long term incentive plan compensation.
o	(E)	Compensation received as an Independent Contractor reportable on Form 1099.
o	(F)	Commissions.
o	(G)	other [specify]:	.

Notwithstanding the foregoing, Compensation ý SHALL o SHALL NOT include Salary Deferral Credits under this Plan and amounts contributed by the Participant pursuant to a Salary Deferral Agreement to another employee benefit plan of the Employer which are not includible in the gross income of the Employee under Section 125, 132(f)(4), 402(e)(3), 402(h) or 403(b) of the Code.

2.8          Crediting Date: The Deferred Compensation Account of a Participant shall be credited with the amount of any Salary Deferral Credits to such account at the time designated below [check desired Crediting Date]:

o	(A)	The last business day of each Plan Year.
o	(B)	The last business day of each calendar quarter during the Plan Year.
o	(C)	The last business day of each month during the Plan Year.
o	(D)	The last business day of each payroll period during the Plan Year.
ý	(E)	Any business day on which Salary Deferral Credits are received by the Sponsor.
o	(F)	Other [specify]:	.

2

2.10        Disability: The disability of a Participant shall be determined as follows:

ý	(A)	The Employee participating in the Plan shall be considered to be disabled when he has been determined to be disabled for the purposes of any long term disability insurance covering the Participant that is sponsored by the Employer
o	(B)	The Participant shall be considered to be disabled when he has been determined to be disabled for purposes of the Federal Social Security Act.
o	(C)	Other:	.

2.14        Effective Date [check desired option]:

o	(A)	This is a newly-established Plan, and the Effective Date of the Plan is                                               .
ý	(B)	This is an amendment and restatement of a plan named Stock Yards Bank and Trust Company Nonqualified Deferred Compensation Plan  with an effective date of March 1, 2001. The Effective date of this amended and restated Plan is March 1, 2004 This is amendment number 1 to the Stock Yards Bank and Trust Company Nonqualifed Deferred Compensation Plan.

2.20 Normal Retirement Date: The Normal Retirement Date of a Participant shall be: [check desired option]:

ý	(A)	The attainment of age 65.
o	(B)	The later of age             or the              anniversary of the participation commencement date. The participation commencement date is the first day of the first Plan Year in which the Participant commenced participation in the Plan.
o	(C)	The completion of        Years of Service.
o	(D)	The completion of         Years of Service and attainment of age        .

3

2.22        Participating Employer(s):   As of the Effective Date, the following Participating Employer(s) are parties to the Plan [list all employer-parties, including the Employer]:

Name of Employer	Address	Telephone No.	EIN
Stock Yards Bank and Trust Company	1040 East Main Street	(502) 625-9122	61-0354170
	Louisville, KY 40206

2.23        Plan: The name of the Plan as applied to the Employer is:

The Executives Nonqualified Deferred Compensation Plan of Stock Yards Bank and Trust Company..

2.24        Plan Administrator: The Plan Administrator shall be [check desired option]:

ý	(A)	Committee.
o	(B)	Employer.
o	(C)	Other (specify):	.

2.25        Plan Year: The Plan Year shall be the 12 consecutive calendar month period ending on the last day of the month of December, and each anniversary thereof.

4

2.34        Trust: [check desired option]:

o	(A)	The Employer does desire to establish a “rabbi” trust for the purpose of setting aside assets of the Employer contributed thereto for the payment of benefits under the Plan.
o	(B)	The Employer does not desire to establish a “rabbi” trust for the purpose of setting aside assets of the Employer contributed thereto for the payment of benefits under the Plan.
ý	(C)	The Employer desires to establish a “rabbi” trust for the purpose of setting aside assets of the Employer contributed thereto for the payment of benefits under the Plan upon the occurrence of the following event(s): Upon the happening of a Change in Control as hereafter defined. A Change In Control shall occur upon (1) the acquisition by any person of 50% or  more of the voting power of the Employer’s outstanding voting stock, (2)  five or more of the current members of the Board of Directors ceasing to  be members of the Board unless ceasing any replacement director was  elected by a vote of either at least 75% of the remaining directors, or at  least 75% of the shares entitled to vote on such replacement, or (3)  approval by the shareholders of the Employer of (A) a merger or  consolidation with another corporation is the stockholders of the  Employer immediately before such vote will not, as a result of such  merger or consolidation, own more than 50% of the voting stock of the  corporation resulting from such merger or consolidation, or (B) a  complete liquidation of the Employer or the sale of all, or substantially  all, of the assets of the Employer. Notwithstanding the foregoing, a  Change in Control shall not occur solely because 50% or more of the  voting stock of the Employer is acquired by (i) a trust which is part of the  Employer’s or subsidiary’s ‘s employee benefit plan, or (ii) by a corporation which , immediately following such acquisition, is owned  directly or indirectly by the stockholders of the Employer in the same  proportion as their ownership of stock in the Employer immediately prior  to such acquisition. In the event a Change in Control occurs, you will be  notified by the Committee.

5

4.1       Salary Deferral Credits:   A Participant may elect to have his Compensation (as selected in  Section 2.7 of this Adoption Agreement) reduced by the following annual percentage or amount as  designated in writing to the Committee [check the applicable options]:

ý	(A)	Annual base salary:
		[Complete the following blanks only if a minimum or maximum deferral is desired]:
		Minimum deferral:	$	or		%
		Maximum deferral:	$	or	10	%
o	(B)	Annual bonus:
		[Complete the following blanks only if a minimum or maximum deferral is desired]:
		Minimum deferral:	$	or		%
		Maximum deferral:	$	or		%
o	(C)	Other:
		[Complete the following blanks only if a minimum or maximum deferral is desired]:
		Minimum deferral:	$	or		%
		Maximum deferral:	$	or		%
o	(D)	Not applicable – no salary deferral provision.

4.1.2       Termination of Salary Deferrals:   A Participant may terminate his Salary Deferral Agreement effective as of [check desired option]:

o	(A)	The first full payroll period commencing after the date written notice of the termination is received by the Committee.
ý	(B)	The first day of the Plan Year occurring after the date written notice of the termination is received by the Committee.
o	(C)	Not applicable – no salary deferral provision.

6

4.2          Employer Credits:   The Employer will make Employer Credits in the following manner [check a maximum of 2 desired option(s)]:

ý	(A)	Employer Matching Credits:   The Employer may make matching credits to the Deferred Compensation Account of each Employee Participant in an amount determined as follows [check desired option(s)]:
	o	(i)	% of the Participant’s Salary Deferral Credits.
	o	(ii)	% of the first         % of the Participant’s Compensation which is elected as a Salary Deferral Credit.
	ý	(iii)	An amount determined each Plan Year by the Employer.
	o	(iv)	The Employer shall not match amounts provided above in excess of $               or in excess of         % of the Participant’s Compensation per Plan Year.
	o	(v)	Other:
					.
	o	(vi)	Not applicable – no Employer matching credits provision.
ý	(B)	Employer Profit Sharing Credits:   The Employer may make profit sharing credits to the Deferred Compensation Account of each Active Employee Participant in an amount determined as follows:
	o	(i)	Such amount out of the current or accumulated net profit of the Employer for such year as the Employer in its sole discretion shall determine.
	ý	(ii)	Such amount as the Employer in its sole discretion shall determine without regard to current or accumulated net profit.
	o	(iii)	The Employer shall not make profit sharing credits in excess of $              , or in excess of         % of the Participant’s Compensation per Plan Year.
	o	(iv)	Other:
					.
	o	(v)	Not applicable – no Employer profit sharing provision.
o	(C)	Other [describe]:
				.

7

5.1          Death of a Participant:   If the Participant dies while in Service, the Employer shall pay a benefit to the Beneficiary in an amount equal to the Accrued Benefit of the Participant determined as of the date payments to the Beneficiary commence, plus [check if desired]:

o	(A)	An amount to be determined by the Committee.
o	(B)	Other [specify]:	.
ý	(C)	No additional benefits.

6.1          In-Service Withdrawals:   In-service withdrawals may be made from the Plan [check desired option]:

ý	(A)	Yes.
		(i)	The In-Service Account may be withdrawn only after the account has been established for [check desired option]:
			ý	(a)   A minimum of 3 years (insert minimum of 2 years.)
			o	(b)   Not applicable.
		(ii)	A Participant may defer the date of any scheduled in-service withdrawal by giving notice of the new withdrawal date to the Committee [check desired option]:
			o	(a)   At least         (insert minimum of 12) months prior to the scheduled withdrawal date.
			ý	(b)   Not applicable.
o	(B)	No in-service withdrawals.

8

6.2          Financial Hardship Withdrawals:   Financial hardship withdrawals may be made from the Plan [check desired option]:

ý	(A)	Yes.
o	(B)	No.

6.3          “Haircut” Withdrawals:   “Haircut” withdrawals may be made from the Plan [check desired option]:

o	(A)	Yes. If a Participant obtains a “haircut” withdrawal, the Participant shall forfeit 10% (specify percentage not less than 10%) of the amount of withdrawal.
ý	(B)	No “haircut” withdrawals.

6.4 Education Withdrawals: Education withdrawals may be made from the Plan [check desired option]:

ý	(A)		Yes.
			(i)	Education withdrawals may be made in installment payments over no more than 6 years.
			(ii)	A Participant may defer the date of any scheduled education withdrawal by giving notice of the new withdrawal date to the Committee [check desired option]:
				o	(a)	At least         (insert minimum of 12) months prior to the scheduled withdrawal date.
				ý	(b)	Not applicable.
o	(B)	No education withdrawals.

9

7.1          Payment Options:   Any benefit payable under the Plan upon a Qualifying Distribution Event may be made to the Participant or his Beneficiary (as applicable) in any of the following payment forms, as selected by the Participant upon his entry into the Plan [check desired option(s)]:

ý	(A)	A lump sum in cash as soon as practicable following the date of the Qualifying Distribution Event.
ý	(B)	Approximately equal annual installments over a term no longer than 10 years as elected by the Participant upon his entry into the Plan.
	ý	(i)	Payment of the benefit shall commence as soon as practicable after the following date [select desired option]:
		o	(a)	The first business day of the calendar year following the date of the Qualifying Distribution Event.
		o	(b)	The first business day of the calendar quarter following the date of the Qualifying Distribution Event.
		ý	(c)	The first business day of the calendar month following the date of the Qualifying Distribution Event.
		The payment of each annual installment shall be made on the anniversary of the date selected for the commencement of the installment payments in this subsection (i).  The amount of the annual installment shall be adjusted on each anniversary date of the commencement of the installment payments for credits or debits to the Participant’s account pursuant to Section 9 of the Plan. Such adjustment shall be made by dividing the balance in the Deferred Compensation Account on each such date (following adjustment on such date) by the number of annual installments remaining to be paid hereunder; provided that the last annual installment due under the Plan shall be the entire amount credited to the Participant’s account on the date of the payment.
	ý	(ii)	Notwithstanding the payment option elected by the Participant, the vested Accrued Benefit of the Participant will be distributed in a single lump payment if the amount of such benefit on the date that payment is to commence does not exceed [check desired option]:
		o	(a)	$                  (Insert desired cash out amount).
		ý	(b)	Not applicable.
ý	(C)	A Participant may defer the date of any scheduled payment by giving notice of the new payment date to the Committee [check desired option]:
	o	(i)	(a)	At least         (insert minimum of 12) months prior to the scheduled payment date.
	ý	(ii)	(b)	Not applicable.
o	(D)	Other [specify]:			.

10

8.     Vesting:   An Active Participant shall be fully vested in the Employer Credits made to the Deferred Compensation Account upon occurrence of the following events [check or complete all that apply]:

ý	(A)	Normal Retirement Date.
ý	(B)	Death.
ý	(C)	Disability.
o	(D)	Completion of that number of Years of Service specified below:
	ý	(i)	Employer Matching Credits [complete if applicable]:
		ý	(a)	Immediate 100% vesting.
		o	(b)	100% vesting after       Years of Service.
		o	(c)	100% vesting at age        .
		o	(d)	Number of Years of Service			Vested Percentage
				Less than		1		%
						1		%
						2		%
						3		%
						4		%
						5		%
						6		%
						7		%
						8		%
						9		%
						10 or more		%
		For this purpose, Years of Service of a Participant shall be calculated from the date designated below [check desired option]:
			o	(1)	First Day of Service.
			o	(2)	Effective Date of the Plan Participation.
			o	(3)	Each Crediting Date.   Under this option (3), each Employer Matching Credit shall vest based on the Years of Service of a Participant from the Crediting Date on which each Employer Credit is made to his or her Deferred Compensation Account.

11

ý	(ii)	Employer Profit Sharing Credits [complete if applicable]:
	ý	(a)		Immediate 100% vesting.
	o	(b)		100% vesting after       Years of Service.
	o	(c)		100% vesting at age        .
	o	(d)		Number of Years of Service			Vested Percentage
				Less than		1		%
						1		%
						2		%
						3		%
						4		%
						5		%
						6		%
						7		%
						8		%
						9		%
						10 or more		%
	For this purpose, Years of Service of a Participant shall be calculated from the date designated below [check desired option]:
		o	(1)		First Day of Service.
		o	(2)		Effective Date of the Plan Participation.
		o	(3)		Each Crediting Date. Under this option (3), each Employer Profit Sharing Credit shall vest based on the Years of Service of a Participant from the Crediting Date on which each Employer Credit is made to his or her Deferred Compensation Account.

12

o	(iii)	Other Employer Credits [complete if applicable]:
	o	(a)	Immediate 100% vesting.
	o	(b)	100% vesting after       Years of Service.
	o	(c)	100% vesting at age        .
	o	(d)	Number of Years of Service			Vested Percentage
			Less than		1		%
					1		%
					2		%
					3		%
					4		%
					5		%
					6		%
					7		%
					8		%
					9		%
					10 or more		%
	For this purpose, Years of Service of a Participant shall be calculated from the date designated below [check desired option]:
		o	(1)	First Day of Service.
		o	(2)	Effective Date of the Plan Participation.
		o	(3)	Each Crediting Date.   Under this option (3),   each Other Employer Credit shall vest based on the Years of Service of a Participant from the Crediting Date on which each Employer Credit is made to his or her Deferred Compensation Account.

10.          Benefit Exchange:   The Employer elects to permit the Participant to exchange all or any portion of the vested Accrued Benefit under the Plan for another type of nonqualified benefit [check desired option]:

o	(A)	Yes.
ý	(B)	No.

11.          Transfer to Qualified Plan:   The Employer elects to permit the Participant to direct the transfer of a portion of his benefit under this Plan to a tax-qualified retirement plan maintained by the Employer [check desired option]:

o	(A)	Yes. Insert name of Qualified Plan:	.
ý	(B)	No.

13

17.          Amendment or Termination of Plan: [check or complete all that apply]:

ý	(A)	Notwithstanding any provision in this Adoption Agreement or the Plan to the contrary, Section 8 of the Plan shall be amended to read as follows: See attached Exhibit A.
o	(B)	The Plan shall be terminated upon the occurrence of one or more of the following events [check if desired]:
	o	(i)	The amount of shareholders equity shown on the financial statements of the Employer for each of the two most recent fiscal years is less than $            .
	o	(ii)	The aggregate net loss (after tax) as reported on the financial statements of the Employer for the two most recent fiscal years is greater than $            .
	o	(iii)	There is a change of control of the Employer. For this purpose, a “change of control” shall be deemed to have occurred if: (A) any person other than an officer who is an Employee of the Employer for at least one year preceding the change of control, acquires or becomes the beneficial owner, directly or indirectly, of securities of the Employer representing       % [insert percentage] or more of the combined voting power of the Employer’s then outstanding securities and thereafter, the membership of the Board becomes such that a majority are persons who were not members of the Board at the time of the acquisition of securities; or (B)  the Employer, or its assets, are acquired by or combined with another entity and less than a majority of the outstanding voting shares of such entity after the acquisition or combination are owned, immediately after the acquisition or combination, by the owners of voting shares of the Employer immediately prior to the acquisition or combination.
	o	(iv)	Other [specify]:
				.
ý	(C)	In the event of a termination of the Plan, the Employer elects that [check if desired]:
	ý	(i)	Each Active Participant will become fully vested in the Deferred Compensation Account. [If not checked, the vesting provisions of Section 8 will continue to apply.]
	o	(ii)	The Deferred Compensation Account will be immediately distributed to each Participant in a single lump sum payment.  [If not checked the payment provisions of Section 7 will continue to apply.]

13

20.9        Construction:   The provisions of the Plan and Trust (if any) shall be construed and enforced according to the laws of the State of Kentucky, except to the extent that such laws are superseded by ERISA.

IN WITNESS WHEREOF, this Agreement has been executed as of the day and year first above stated.

	STOCK YARDS BANK AND TRUST COMPANY
	Name of Employer
By:
	Authorized Person
	Title

NOTE: Execution of this Adoption Agreement creates a legal liability of the Employer with significant tax consequences to the Employer and Participants. The Employer should obtain legal and tax advice from its professional advisors before adopting the Plan. The Sponsor disclaims all liability for the legal and tax consequences which result from the elections made by the Employer in this Adoption Agreement.

14

Exhibit A

If a Participant’s employment is terminated for “Cause,” as that term is defined below, the Participant shall forfeit all right, title, and interest in his or her Account values created by or attributed to Employer contributions.  The term “Cause” is defined to include: (i) being convicted of a felony or misdemeanor involving fraud, embezzlement, theft, or dishonesty or other criminal conduct against the Corporation; or (ii) dishonesty, breach of fiduciary duty or any material breach by the Participant.

15

EX-14

EXHIBIT 14

Code of Ethics for the Chief Executive Officer and Financial Executives

S.Y. Bancorp, Inc. and Stock Yards Bank & Trust Company are strongly committed to conducting business with honesty and integrity and in compliance with all applicable laws and regulations. Senior financial officers hold an important position in our corporate governance structure because of their role in balancing, protecting and preserving the interests of all of our stakeholders. This Code of Ethics for the Chief Executive Officer and Financial Executives contains specific principles to which the Chief Executive Officer, President, Chief Financial Officer, Controller and other financial, accounting and treasury officers (the “Financial Officers”) are expected to adhere. This Code of Ethics is intended to supplement the general corporate code of conduct.

This code is intended to be our Code of Ethics for Senior Financial Officers pursuant to the provisions of Section 406 of the Sarbanes-Oxley Act of 2002 and related rules of the Securities and Exchange Commission.

All Financial Officers will:

1.Act with honesty and integrity, avoiding actual or apparent conflicts of interest in personal and professional relationships.

2.Provide our stakeholders with information that is accurate, complete, objective, relevant, timely and understandable.

3.Comply with rules and regulations of federal, state, provincial and local governments, and other appropriate private and public regulatory agencies.

4.Act in good faith, responsibly, with due care, competence and diligence, without misrepresenting material facts or allowing one’s independent judgment to be subordinated.

5.Respect the confidentiality of information acquired in the course of one’s work except when authorized or otherwise legally obligated to disclose. Confidential information acquired in the course of one’s work will not be used for personal advantage.

6.Share knowledge and maintain skills important and relevant to our stakeholders’ needs.

7.Proactively promote ethical behavior as a responsible partner among peers in one’s work environment.

8.Achieve responsible use of and control over all assets and resources employed or entrusted to us.

9.Report known or suspected violations of this Code in accordance with all applicable rules of procedure.

10.Be accountable for adhering to this Code.

11.Not unduly or fraudulently influence, coerce, manipulate or mislead any authorized audit or interfere with any auditor engaged in the performance of an internal or independent audit of our financial statements or accounting books and records.

We will promptly disclose the nature of any amendment (other than administrative or non-substantive amendments) to or waiver from this Code of Ethics as may be required by applicable rules of the Securities and Exchange Commission and the NASDAQ.

EX-21

EXHIBIT 21

S.Y. Bancorp, Inc. Subsidiaries

Stock Yards Bank & Trust Company, a Kentucky Banking Corporation

1040 East Main Street

Louisville, KY 40206

S.Y. Bancorp Capital Trust I

1040 East Main Street

Louisville, KY 40206

EX-23

Exhibit 23

Consent of Independent Registered Public Accounting Firm

The Board of Directors

S.Y. Bancorp, Inc.:

We consent to the incorporation by reference in the registration statement (No. 333-128809, 333-128808, 33-96740, 33-96742, and 333-30530) on Form S-8 and No. 33-96744 on Form S-3 of S.Y Bancorp, Inc. of our reports dated March 14, 2006, with respect to the consolidated balance sheets of S.Y. Bancorp, Inc. as of December 31, 2005 and 2004, and the related consolidated statements of income, changes in stockholders’ equity, comprehensive income. and cash flows for each of the years in the three-year period ended December 31, 2005, management’s assessment of the effectiveness of internal control over financial reporting as of December 31, 2005 and the effectiveness of internal control over financial reporting as of December 31, 2005, which reports appear in the December 31, 2005 annual report on Form 10-K of S.Y. Bancorp, Inc.

Louisville, Kentucky

March 14, 2006

EX-31.1

Exhibit 31.1

SARBANES-OXLEY ACT SECTION 302

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

I, David P. Heintzman, certify that:

1. I have reviewed this annual report on Form 10-K of S.Y. Bancorp, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors:

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:  March 14, 2006

/s/ DAVID P. HEINTZMAN

David P. Heintzman

Chairman, President and Chief
Executive Officer

EX-31.2

Exhibit 31.2

SARBANES-OXLEY ACT SECTION 302

CERTIFICATION OF CHIEF FINANCIAL OFFICER

I, Nancy B Davis, certify that:

1. I have reviewed this annual report on Form 10-K of S.Y. Bancorp, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors:

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 14, 2006

/s/ NANCY B DAVIS

Nancy B Davis

Executive Vice President and Chief Financial
Officer

EX-32.1

Exhibit 32.1

SARBANES-OXLEY ACT SECTION 906

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

Pursuant to 18 U.S.C. section 1350, the undersigned officer of S.Y. Bancorp, Inc. (the “Company”) hereby certifies, to such officer’s knowledge, that the Company’s Annual Report on Form 10-K for the year ended December 31, 2005 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934 and that the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

	/s/ DAVID P. HEINTZMAN
Date: March 14, 2006	David P. Heintzman
	Chairman, President and Chief Executive
	Officer

A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

EX-32.2

Exhibit 32.2

SARBANES-OXLEY ACT SECTION 906

CERTIFICATION OF CHIEF FINANCIAL OFFICER

Pursuant to 18 U.S.C. section 1350, the undersigned officer of S.Y. Bancorp, Inc. (the “Company”) hereby certifies, to such officer’s knowledge, that the Company’s Annual Report on Form 10-K for the year ended December 31, 2005 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934 and that the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: March 14, 2006	/s/ NANCY B DAVIS
	Nancy B Davis
	Executive Vice President and
	Chief Financial Officer

A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.