-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, U4QuWHNdfn5h7n0ny0zr9I2+nHS4xGM6Dr6O130FCsogI/bMq8VTanKHdQpEPHJL dS0+K+A2Bdjw26xMDSd7SA== 0000912057-96-005371.txt : 19960329 0000912057-96-005371.hdr.sgml : 19960329 ACCESSION NUMBER: 0000912057-96-005371 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 19951231 FILED AS OF DATE: 19960328 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: S Y BANCORP INC CENTRAL INDEX KEY: 0000835324 STANDARD INDUSTRIAL CLASSIFICATION: STATE COMMERCIAL BANKS [6022] IRS NUMBER: 611137529 STATE OF INCORPORATION: KY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: 1934 Act SEC FILE NUMBER: 000-17262 FILM NUMBER: 96539581 BUSINESS ADDRESS: STREET 1: 1040 E MAIN ST CITY: LOUISVILLE STATE: KY ZIP: 40206 BUSINESS PHONE: 5025822571X302 MAIL ADDRESS: STREET 1: 1040 EAST MAIN STREET CITY: LOUISVILLE STATE: KY ZIP: 40206 10-K405 1 FORM 10-K405 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-K (Mark One) [ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE OF 1934 (FEE REQUIRED) For the fiscal year ended December 31, 1995 ----------------- OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED) For the transition period from ____________ to ____________ Commission File Number 0-17262 ------- S.Y. BANCORP, INC. ---------------------------------------------------- (Exact name of registrant as specified in its charter) Kentucky 61-1137529 ------------------------------- ------------------ (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 1040 East Main Street Louisville, Kentucky 40206 --------------------- ------- (Address of Principal (Zip Code) executive offices) Registrant's telephone number, including area code: (502) 582-2571 -------------- Securities registered pursuant to Section 12(b) of the Act: None ---- Securities registered pursuant to Section 12(g) of the Act: Common Stock, no par value -------------------------- (Title of Class) 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 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. [X] 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 X NO --- --- The aggregate market value of registrant's voting stock (Common Stock, no par value) held by non-affiliates of the registrant as of February 29, 1996, was $58,894,621. The number of shares of registrant's Common Stock, no par value, outstanding as of February 29, 1996, was 1,629,512. DOCUMENTS INCORPORATED BY REFERENCE Portions of Registrant's Annual Report to Shareholders for the year ended December 31, 1995, are incorporated by reference into Parts I and II, and portions of Registrant's definitive Proxy Statement dated March 20, 1996, are incorporated by reference into Part III. S.Y. BANCORP, INC FORM 10-K INDEX Page ---- PART I: Item 1. Business 1 Item 2. Properties 11 Item 3. Legal Proceedings 11 Item 4. Submission of Matters to a Vote of Security Holders 11 PART II: Item 5. Market for Registrant's Common Stock and Related Stockholder Matters 13 Item 6. Selected Financial Data 13 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 13 Item 8. Financial Statements and Supplementary Data 13 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 13 PART III: Item 10. Directors and Executive Officers of the Registrant 14 Item 11. Executive Compensation 14 Item 12. Security Ownership of Certain Beneficial Owners and Management 14 Item 13. Certain Relationships and Related Transactions 14 PART IV: Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K 15 SIGNATURES 17 PART I ITEM 1. BUSINESS S. Y. Bancorp, Inc. ("Bancorp"), a Kentucky corporation headquartered in Louisville, Kentucky, is a bank holding company registered with, and subject to supervision, regulation and examination by, the Board of Governors of the Federal Reserve System. Stock Yards Bank & Trust Company ("the Bank") is the wholly-owned subsidiary of Bancorp. Bancorp has no subsidiary other than the Bank. Bancorp conducts no active business operations; accordingly, the business of Bancorp is substantially the same as that of the Bank. The Bank was originally chartered and began operations as a state bank under the name "Stockyards Bank" in 1904. In 1972, the Bank was granted full trust powers and changed its name to "Stock Yards Bank & Trust Company." While primarily serving Jefferson County, Kentucky, the Bank also serves customers residing in the adjacent Kentucky counties of Oldham, Shelby and Bullitt and in Southern Indiana. The Bank engages in a wide range of commercial and personal banking activities, including the usual acceptance of deposits for checking, savings and time deposit accounts; making of secured and unsecured loans to corporation, individuals and others; issuance of letters of credit; leasing activities and rental of safe deposit boxes. The Bank's lending services include the making of commercial, industrial, real estate, installment and guaranteed student loans. Interest and fees on consumer, real estate and commercial loans constitute the largest contribution to the Bank's operating revenues. In addition, the Bank offers Visa credit card services through an agreement with a non-affiliated bank. Customers of the Bank also have access to automatic teller machines through a regional network. In 1992, Stock Yards Bank Mortgage Company, a division of the Bank, began operations. This division originates residential mortgage loans and sells the loans in the secondary market. The Mortgage division provides customers with a variety of options for home mortgages, including VA and FHA financing. The Bank provides a wide range of personal and corporate trust services. Assets under management in the Trust Department totaled approximately $343,000,000 at December 31, 1995. The Bank actively competes on the local and regional levels with other commercial banks and financial institutions for all types of deposits, loans, trust accounts, and providing financial and other services offered by the Bank. Many of the banks and other financial institutions with which the Bank competes have capital and resources substantially in excess of the capital and resources of the Bank. After being a unit bank for 85 years, the Bank opened its first branch facility in 1989. Two additional suburban offices opened in 1992, a fourth branch opened in January, 1993, a fifth opened in February, 1994 and a sixth opened in 1995. All branch offices are full service financial centers. See "ITEM 2. PROPERTIES." 1 At December 31,1995, the Bank had 188 full-time equivalent employees. Bancorp is a bank holding company registered under the Bank Holding Act of 1956, as amended, and is subject to supervision, regulation and examination by the Board of Governors of the Federal reserve System. Under the Bank Holding Company Act, a bank holding company is, with limited exceptions, prohibited from (i) acquiring direct or indirect ownership or control of any voting shares of any company which is not a bank or (ii) engaging in any activity other than managing or controlling the banks. Notwithstanding this prohibition, a bank holding company may engage or own shares of a company that engages solely in activities which the Federal Reserve Board has determined to be so closely related to banking, or managing or controlling banks, as to be a proper incident thereto. A bank holding company is required to file with the Federal Reserve Board annual reports and other information regarding its business operations and the business operations of its subsidiaries. It is also subject to examination by the Federal reserve Board and is required to obtain Federal Reserve Board approval prior to acquiring, directly or indirectly, ownership or control of any voting shares of any bank, if, after such acquisition, it would own or control, directly or indirectly, more than five percent of the voting stock of such bank unless it already owns a majority of the voting stock of such bank. The Bank is subject to regulation and supervision, of which regular bank examinations are a part, by the Kentucky Department of Financial Institutions and the Federal Deposit Insurance Corporation ("FDIC") which currently insures the deposits of the Bank to a maximum $100,000 per depositor. For this protection, the Bank pays a semi-annual statutory assessment and is subject to the rules and regulations of the FDIC pertaining to deposit insurance. The enactment of the Financial Reform, Recovery and Enforcement Act of 1989 (FIRREA), among other things, placed the savings and loans insurance fund under the control of the FDIC. FIRREA allows bank holding companies to acquire and operate savings associations. It has led to many structural changes in competition for loans, deposits and other services and affected collateral valuation methods. In December, 1991, the Federal Deposit Insurance Corporation Improvement Act (FDICIA)was enacted which, among other things, was intended to protect the federal deposit insurance fund by taking prompt actions with respect to under capitalized institutions. Stock Yards Bank & Trust Company has been designated as "well capitalized" by the FDIC. FDICIA contains numerous other provisions. The regulations implementing FDICIA are directed towards institutions with total assets of or greater than $500 million. Therefore, FDICIA is not yet applicable to Bancorp or the Bank. In September, 1994, the Riegle Community Development and Regulatory Improvement Act of 1994 ( the "Development Act") was enacted. The Development Act establishes financial and other assistance for entities involved primarily in community development activities. Provisions of the Development Act also make changes in a number of areas regarding regulation of banks. 2 In September, 1994, the Riegle-Neal Interstate Banking and Branching Act of 1994 (the "Interstate Banking Act") was enacted. Among other things, provisions of the Interstate Banking Act; (i) permit bank holding companies to acquire control of banks in any state beginning September, 1995, subject to certain restrictions; (ii) authorize interstate mergers by banks in different states, including branching through bank mergers, beginning June, 1997, subject to certain restrictions; and (iii) authorizes states to enact legislation permitting interstate de novo branching. The full impact of the Development Act and the Interstate Banking act will not be completely known until the enactment and implementation by the various federal banking agencies of the underlying regulations and actions required by the Acts. However, it is anticipated that the Development Act may reduce certain regulatory burdens on financial institutions and the Interstate Banking Act may facilitate consolidation within multilevel financial institutions and in the banking industry. Management expects that the Development Act and the Interstate Banking Act will have little if any effect on Bancorp. The tables and discussions appearing on pages 3-10 of this Form 10-K contain selected statistical information with respect to Bancorp and the Bank which should be read together with the consolidated financial statements of Bancorp included at pages 15 through 26 in Bancorp's Annual Report to Shareholders for the year ended December 31, 1995, incorporated herein by reference. DISTRIBUTION OF ASSETS, LIABILITIES AND SHAREHOLDERS' EQUITY; INTEREST RATES AND INTEREST DIFFERENTIAL The schedule captioned, "Average Balances and Interest Rates - Taxable Equivalent Basis", included on page 11 of Bancorps Annual Report to Shareholders for the years ended December 31, 1995 and 1994, is incorporated herein by reference and the following schedule captioned "Average Balances and Interest Rates - Taxable Equivalent Basis" for the year ended December 31, 1993, together show, for each major category of interest earning asset and interest bearing liability, the average amount outstanding, the interest earned or expensed on such amount, and the average rate earned or expensed for each of the years in the three year period ended December 31, 1995. The schedules also show net interest income, net income spreads and net interests margins (net interest income divided by total average earning assets, for each of the years in the three year period ended December 31, 1995. Total interest income includes the effects of taxable equivalent adjustments using a tax rate of 34%. Nonaccrual loans have been included in the average loan balances and are included in the calculation of average rates on loans. Yield on securities available for sale is computed using average amortized cost. The change in interest income and interest expense resulting from changes in volume and changes in rates for the years ended December 31, 1995 and 1994 are shown in the schedule captioned "Taxable Equivalent Rate/Volume Analysis" include on page 7 of Bancorp's Annual Report to Shareholders for the year ended December 31, 1995, incorporated herein by reference. The change in interest due to both rate and volume has been allocated to the change due to volume and the change due to rate in proportion to the relationship of the absolute dollar amounts of the change in each. 3 AVERAGE BALANCES AND INTEREST RATES - TAXABLE EQUIVALENT BASIS
YEAR 1993 Dollars in thousands Average Average balances Interest rate -------- -------- EARNING ASSETS Federal funds sold $ 7,464 $ 220 2.95 Mortgage loans held for sale 1,289 81 6.28 Securities U.S. Treasury and federal agencies 31,732 2,192 6.91 States and political subdivisions 4,863 407 8.37 Other securities 753 35 4.65 Loans, net of unearned income 177,629 13,856 7.80 -------- ------ ---- TOTAL EARNING ASSETS 223,731 16,791 7.50 ------ ---- Less allowance for loan losses 2,591 -------- 221,140 NON-EARNING ASSETS Cash and due from banks 8,826 Premises and equipment 3,090 Accrued interest receivable and other assets 2,959 ----- TOTAL ASSETS $236,015 -------- -------- INTEREST BEARING LIABILITIES Deposit Interest bearing demand deposits $15,247 $ 341 2.24% Savings deposits 7,592 192 2.53 Money market deposits 52,493 1,159 2.89 Time deposits 82,711 4,118 4.89 Securities sold under agreements to repurchase and federal funds purchased 17,475 517 2.96 Short-term borrowings 1,863 54 2.90 Subordinated debentures 617 31 5.02 -------- ------ ---- TOTAL INTEREST BEARING LIABILITIES 177,998 6,772 3.80 -------- ----- ---- NON-INTEREST BEARING LIABILITIES Non-interest bearing demand deposits 35,049 Accrued interest payable and other liabilities 1,957 -------- TOTAL LIABILITIES 215,004 STOCKHOLDERS' EQUITY 21,011 -------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $236,015 -------- -------- NET INTEREST INCOME $ 10,019 -------- -------- NET INTEREST SPREAD 3.70% ----- ----- NET INTEREST MARGIN 4.48% ----- -----
4 SECURITIES PORTFOLIO The carrying value of securities is summarized as follows:
In thousands December 31 1995 1994 1993 ----------- ---- ---- ---- Securities held to maturity U.S. Treasury and federal agency obligations $ 9,079 $24,798 $21,893 Mortgage-backed securities 10,046 6,957 9,354 Obligations of states and political subdivisions 7,585 3,697 4,248 Other 878 825 781 ------- ------- ------- $27,588 $36,277 $36,276 ------- ------- ------- ------- ------- ------- Securities available for sale U.S. Treasury and federal agency obligations $14,399 $ 4,034 $ 5,501 Obligations of states and political subdivisions - - 999 Mortgage-backed securities 1,146 - - ------- ------- ------- $15,545 $ 4,034 $ 6,500 ------- ------- ------- ------- ------- -------
The maturity distribution and weighted average interest rates of securities, except for Federal Home Loan Bank Stock, at December 31, 1995, are as follows:
After one After five Within but within but within After ten Dollars one year five years ten years years in thousands Amount Rate Amount Rate Amount Rate Amount Rate ------------ ------ ---- ------ ---- ------ ---- ------ ---- Securities held to maturity U.S. Treasury and federal agency obligations $ 2,998 5.38% $ 6,081 6.40% $ - -% $ - -% Mortgage-backed securities 4,277 6.62 3,875 6.84 1,894 7.20 - - Obligations of states and political subdivisions - - 3,104 5.94 4,481 5.51 - - ------- ----- ------- ----- ------ ----- ---- ---- $ 7,275 6.11% $13,060 6.42% $6,375 6.01% $ - -% ------- ----- ------- ----- ------ ----- ---- ---- ------- ----- ------- ----- ------ ----- ---- ---- Securities available for sale U.S. Treasury and federal agency obligations $ 3,044 8.46% $11,355 6.68% $ - -% $ - -% Mortgage-backed securities 181 6.00 965 6.00 ---- ----- ---- ---- ------ ----- ------- ----- ---- ----- ---- ---- $3,225 8.32% $12,320 6.63% $ - -% $ - -% ------ ----- ------- ----- ---- ---- ---- ---- ------ ----- ------- ----- ---- ---- ---- ----
5
LOAN PORTFOLIO The composition of loans is summarized as follows: In thousands December 31 1995 1994 1993 1992 1991 ----------- ---- ---- ---- ---- ---- Comercial and industrial $ 80,520 $ 77,661 $ 70,847 $ 61,357 $ 56,729 Real estate mortgage 152,945 113,351 99,167 90,961 78,095 Consumer 18,708 14,664 14,943 17,017 16,516 Lease financing 805 1,736 3,106 4,049 4,915 --------- --------- -------- -------- -------- $252,978 $207,412 $188,063 $173,384 $156,255 --------- --------- -------- -------- -------- --------- --------- -------- -------- --------
The following tables show the amounts of commercial and industrial loans, at December 31, 1995, which, based on remaining scheduled repayments of principal, are due in the periods indicated. Also shown are the amounts due after one year classified according to sensitivity to changes in interest rates.
Maturing ------------------------------------ After one but Within within After In thousands one five five December 31 year years years Total ------------ ------ ------ ----- ----- Comercial and industrial $14,561 $28,517 $37,442 $80,520 ------- ------- ------- ------- ------- ------- ------- -------
Interest sensitivity ----------- In thousands Fixed Variable December 31 rate rate ------------ ----- ----- Due after one but within five years $18,486 $10,031 Due after five years 2,041 35,401 ------ ------- $20,527 $45,432 ------- ------- ------- -------
6 The following table summarizes impaired loans (1995 only), nonaccrual, restructured and past-due loans. Loans are placed in a nonaccrual income status when, in the opinion of management, the prospects for recovering both principal and accrued interest are considered doubtful.
In thousands December 31 1995 1994 1993 1992 1991 ----------- ---- ---- ---- ---- ---- Nonaccrual loans $1,212 $ 367 $ 158 $ 70 $ 248 Accruing loans past due 90 days or more - - - 66 115 Restructured loans - 61 159 291 448 ---- ---- ---- ---- ---- $1,212 $ 428 $ 317 $ 427 $ 811 ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- Impaired loans $1,212 ----- -----
The average balance for impaired loans was $1,438,000 for 1995 and interest income recorded on these loans (cash basis) totaled $175,000. Information with respect to interest income on nonaccrual and restructured loans at December 31, 1994, 1993 and 1992 is as follows:
In thousands 1995 1994 1993 ----------- ---- ---- ---- Interest income that would have been recorded if all such loans were on a current basis in accordance with their original terms $ 41 $ 37 $ 17 --- --- --- --- --- --- Interest income that was recorded $135 $ 32 $ 25 --- --- --- --- --- ---
In addition to the nonperforming loans above, there were loans for which payments were current or less than 90 days past due where borrowers are experiencing financial difficulties. These loans of approximately $5,700,000 are monitored by management and considered in determining the level of the allowance for loan losses. 7 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:
In thousands December 31 1995 1994 1993 1992 1991 ----------- ---- ---- ---- ---- ---- Average loans, net of unearned income $229,674 $190,409 $177,629 $169,206 $145,704 ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- Balance of allowance for loan $ 3,649 $ 2,752 $ 2,179 $1,793 $1,731 losses at beginning of year Loans charged off Commercial and industrial 435 96 60 297 143 Real estate mortgage 13 9 171 36 436 Consumer 82 64 74 40 140 Lease financing - 15 22 23 32 ----- ----- ----- ----- ----- Total loans charged off 530 184 327 396 751 ----- ----- ----- ----- ----- Recoveries of loans previously charged off Commercial and Industrial 94 9 19 37 9 Real estate mortgage 13 36 12 6 44 Consumer 20 29 48 16 39 Lease financing 1 7 1 3 1 ----- ----- ----- ----- ----- Total recoveries 128 81 80 62 93 ----- ----- ----- ----- ----- Net loans charged off 402 103 247 334 658 Additions to allowance charged to expense 1,260 1,000 820 720 720 ----- ----- ----- ----- ----- Balance at end of year $4,507 $3,649 $2,752 $2,179 $1,793 ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- Ratio of net charge offs during year to average loans, net of unearned income .18% .05% .14% .20% .45% ----- ----- ----- ----- ----- ----- ----- ----- ----- -----
In determining the annual provision for loan losses charged to expense, management carefully considers many factors. Among these are the quality of the loan portfolio, previous loss experience, the size and composition of the loan portfolio and an assessment of the impact of current economic conditions on the financial condition of borrowers. In addition, the results of internal reviews of individual credits and periodic examinations by supervisory authorities and external auditors are considered. 8 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 future losses in any particular loan category.
1995 1994 1993 1992 1991 ---- ---- ---- ---- ---- In thousands at December 31 - --------------------------- Commercial and industrial $2,224 $1,672 $1,006 $ 873 $ 732 Real estate mortgage 1,072 933 846 503 541 Consumer 148 180 237 222 138 Lease financing 3 7 22 25 30 Unallocated 1,060 857 641 556 352 ----- ----- ----- ----- ----- $4,507 $3,649 $2,752 $2,179 $1,793 ----- ----- ----- ----- ----- ----- ----- ----- ----- -----
The ratio of loans in each category to total outstanding loans is as follows:
December 31 1995 1994 1993 1992 1991 - ----------- ---- ---- ---- ---- ---- Commercial and industrial 31.8% 37.5% 37.7% 35.4% 36.3% Real estate mortgage 60.5 54.6 52.7 52.5 50.0 Consumer 7.4 7.1 7.9 9.8 10.6 Lease financing .3 .8 1.7 2.3 3.1 ----- ----- ----- ----- ----- 100.0% 100.0% 100.0% 100.0% 100.0% ----- ----- ----- ----- ----- ----- ----- ----- ----- -----
DEPOSITS The average amount of deposits in the Bank and average rates paid on such deposits for the years indicated are summarized as follows:
1995 1994 1993 ---------------- ---------------- ---------------- Average Average Average Average Average Average Dollars in thousands Balance Rate Balance Rate Balance Rate - -------------------- ------- ---- ------- ---- ------- ---- Non-interest bearing demand deposits $44,340 - % $39,377 - % $35,049 - % Interest bearing demand deposits 25,471 2.55 21,325 2.20 15,247 2.24 Savings deposits 14,733 3.67 11,012 2.75 7,592 2.53 Money market deposits 48,540 3.78 56,155 3.07 52,493 2.89 Time deposits 118,611 5.70 81,098 4.41 82,711 4.98 ------- ---- ------- ---- ------- ---- ---- ---- ---- $251,695 $208,967 $193,092 ------- ------- ------- ------- ------- -------
9 Maturities of time certificates of deposit of $100,000 or more outstanding at December 31, 1995, are summarized as follows:
In thousands Amount ------------ ------ 3 months or less $ 6,037 Over 3 through 6 months 5,333 Over 6 through 12 months 13,844 Over 12 months 8,184 ------ $33,398 ------ ------
RETURN ON EQUITY AND ASSETS The following table presents various key financial ratios:
Year ended December 31 1995 1994 1993 ----------- ---- ---- ---- Return on average assets 1.37% 1.23% 1.07% Return on average stockholders' equity 15.62 13.30 11.97 Dividend pay out ratio 29.27 30.16 26.63 Average stockholders' equity to average assets 8.77 9.21 8.90
SHORT-TERM BORROWINGS Federal funds purchased represent overnight borrowings. Repurchase agreements have maturities of less than one month.
In thousands December 31 1995 1994 1993 ----------- ------------- ------------- ------------- Amount Rate Amount Rate Amount Rate ------ ---- ------ ---- ------ ---- Securities sold under agreements to repurchase Year end balance $12,349 5.17% $14,483 4.95% $20,193 3.07% Average during year 12,865 5.38 16,626 4.00 17,475 2.96 Maximum month end balance during year 14,595 19,929 22,232 Federal funds purchased Year end balance $ - -% $ - -% $ - -% Average during year 263 5.68 - - 46 3.18 Maximum month end balance during year 3,000 - 2,000
10 ITEM 2. PROPERTIES The principal offices of Bancorp and the Bank are located at 1040 East Main Street, Louisville, Kentucky, in a two story building containing approximately 28,000 square feet. The Bank also operates a drive-through facility, an operations center containing approximately 6,000 square feet adjacent to its main offices, a garage of approximately 5,000 square feet, and parking for approximately 100 customers and employees. The Bank also owns land and buildings at 4016 Poplar Level Road and 4537 Outer Loop which are used as branch facilities. Furthermore, in February, 1996 the Bank purchased a building adjacent to its main office. This building will be remodeled to house non customer contact departments of the Bank. Properties owned by the Bank are not presently encumbered. At December 31, 1995, the Bank leased the following four branch facilities in Louisville, Kentucky: 214 South Fifth Street- approximately 10,000 square feet; Lexington Road- approximately 6,000 square feet; Shelbyville Road- approximately 3,000 square feet; Dixie Highway- approximately 7,200 square feet with 3,600 feet sub-leased; The latter three offices have drive through facilities. See Notes 5 and 13 to Bancorp's consolidated financial statements for the year ended December 31, 1995, included at pages 21 and 23 in Bancorp's Annual Report to Shareholders for the year ended December 31, 1995, incorporated herein by reference, for additional information relating to amounts invested in premises, equipment and lease commitments. ITEM 3. LEGAL PROCEEDINGS See Note 13 to Bancorp's consolidated financial statements for the year ended December 31, 1995, included at page 23 in Bancorp's Annual Report to Shareholders for the year ended December 31, 1995, incorporated herein by reference, for information relating to legal proceedings. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None 11 EXECUTIVE OFFICERS OF THE REGISTRANT The following table lists the names, and ages (as of December 31, 1995) of all current executive officers of Bancorp and all persons who it is anticipated will be chosen as executive officers at the organization meeting of Bancorp's Board of Directors following the 1996 Annual Meeting of Shareholders of Bancorp to be held on April 24, 1996. Each executive officer is appointed by the Bancorp's Board of Directors to serve at the pleasure 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 Position and Offices of Executive Officer with Bancorp -------------------- -------------------- David H. Brooks Chairman and Chief Age 53 Executive Officer and Director David P. Heintzman President Age 36 and Director Kathy C. Thompson Executive Vice President, Age 34 Secretary and Director
12 PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS Information captioned "Market Data" on page 14 of Bancorp's Annual Report to Shareholders for the year ended December 31, 1995, is incorporated herein by reference. ITEM 6. SELECTED FINANCIAL DATA Information captioned "Selected Financial Data" on page 14 of Bancorp's Annual Report to Shareholders for the year ended December 31, 1995, is incorporated herein by reference. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Management's Discussion and Analysis of Results of Operations and Financial Condition on pages 5 through 13 of Bancorp's Annual Report to Shareholders for the year ended December 31, 1995, is incorporated herein by reference. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The following Consolidated Financial Statements of Bancorp and the Bank and Report of Independent Auditors included on pages 15 through 26 in Bancorp's Annual Report to Shareholders for the year ended December 31, 1995, are incorporated herein by reference: Consolidated Balance Sheets--December 31, 1995 and 1994 Consolidated Statements of Income--years ended December 31, 1995, 1994, and 1993. Consolidated Statements of Changes in Stockholders' Equity--years ended December 31, 1995, 1994, and 1993. Consolidated Statements of Cash Flows--years ended December 31, 1995, 1994, and 1993 Notes to Consolidated Financial Statements Report of Independent Auditors ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None 13 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, "ELECTION OF DIRECTORS," on pages 4 through 9 of Bancorp's definitive Proxy Statement for the 1996 Annual Meeting of Shareholders and the section captioned EXECUTIVE OFFICERS OF THE REGISTRANT on page 12 of form 10-K. 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 heading, "COMPENSATION OF EXECUTIVE OFFICERS AND DIRECTORS" on pages 12 through 18 of Bancorp's definitive Proxy Statement for the 1996 Annual Meeting of Shareholders. Information appearing under the headings "REPORT OF COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION" on pages 10 through 12 and "Shareholder Return Performance Graph" in the section entitled "COMPENSATION OF EXECUTIVE OFFICERS AND DIRECTORS" contained on page 17 in Bancorp's definitive Proxy Statement for the 1996 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 The information required by this item is incorporated herein by reference to the discussion under the headings, "ELECTION OF DIRECTORS" on pages 4 through 9 and "PRINCIPAL HOLDERS OF BANCORP'S COMMON STOCK," on pages 3 and 4 of Bancorp's definitive Proxy Statement for the 1996 Annual Meeting of 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," on page 18 of Bancorp's definitive Proxy Statement for the 1996 Annual Meeting of Shareholders. 14 PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K (a) 1. LIST OF FINANCIAL STATEMENTS The following Consolidated Financial Statements of Bancorp and the Bank and Report of Independent Auditors included in Bancorp's Annual Report to Shareholders for the year ended December 31, 1995 were incorporated by reference in Part II, Item 8. on page 13. Consolidated Balance Sheets--December 31, 1995 and 1994 Consolidated Statements of income--years ended December 31, 1995, 1994, and 1993. Consolidated Statements of Changes in Stockholders' Equity--years ended December 31, 1995, 1994, and 1993 Consolidated Statements of Cash Flows--years ended December 31, 1995, 1994, and 1993. Notes to Consolidated Financial Statements Report of Independent Auditors (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. (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 to Registration Statement on Form S-4 of Bancorp, File No. 33-22517, 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 19 to Annual Report on Form 10-K for the year ended December 31, 1989, 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, 1994, of Bancorp is incorporated by reference herein. 3.4 Bylaws of Bancorp, as amended, currently in effect. Exhibit 3.4 to Annual Report on Form 10-K for the year ended December 31, 1994, of Bancorp is incorporated by reference herein. 10.1 S.Y. Bancorp, Inc. Stock Option Plan as amended. Exhibit 4 to Registration Statement on Form S-8 of Bancorp, File No. 33-25885, is incorporated by reference herein. 15 10.2 Stock Yards Bank & Trust Company Senior officers Security Plan adopted December 23, 1980. Exhibit 10 to Annual Report on Form 10-K for the year ended December 31, 1988, of Bancorp is incorporated by reference herein. 10.3 Form of Indemnification Agreement between Stock Yards Bank & Trust Company, S.Y. Bancorp, Inc. and each member of the Board of Directors. Exhibit 10.3 to Annual Report on Form 10-K for the year ended December 31, 1994, of Bancorp is incorporated by reference herein. 10.4 Senior Executive Severance Agreement executed in July 1994 between Stock Yards Bank & Trust Company and David H. Brooks. Exhibit 10.4 to Annual Report on Form 10-K for the year ended December 31, 1994, of Bancorp is incorporated by reference herein. 10.5 Senior Executive Severance Agreement executed in July 1994 between Stock Yards Bank & Trust Company and David P. Heintzman. Exhibit 10.5 to Annual Report on Form 10-K for the year ended December 31, 1994, of Bancorp is incorporated by reference herein. 10.6 Senior Executive Severance Agreement executed in July 1994 between Stock Yards Bank & Trust Company and Kathy C. Thompson. Exhibit 10.6 to Annual Report on Form 10-K for the year ended December 31, 1994, of Bancorp is incorporated by reference herein. 10.7 S.Y. Bancorp, Inc. 1995 Stock Incentive Plan. 11 Statement re: computation of per share earnings. 13 Annual Report to Shareholders for the year ended December 31, 1995. This annual report shall not be deemed to be filed with the Commission except to the extent that information is specifically incorporated herein by reference. 21 Subsidiaries of the Registrant. 23 Independent Auditors' Consent. 27 Financial Data Schedule Copies of the foregoing Exhibits will be furnished to others upon request and payment of Bancorp's reasonable expenses in furnishing the exhibits. (b) REPORTS ON FORM 8-K None (c) EXHIBITS The exhibits listed in response to Item 14(a)3 are filed as a part of this report. (d) FINANCIAL STATEMENT SCHEDULES None 16 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 26, 1996 S.Y. BANCORP, INC. BY: /s/ David H. Brooks ------------------- David H. Brooks Chairman 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 H. Brooks Chairman and Chief March 26, 1996 - --------------------------- Executive Officer David H. Brooks and Director (principle executive officer) /s/ David P. Heintzman President March 26, 1996 - --------------------------- and Director David P. Heintzman /s/ Nancy B. Davis Vice President, March 26, 1996 - --------------------------- Treasurer Nancy B. Davis and Chief Financial Officer (principal financial and accounting officer) /s/ James E. Carrico Director March 26, 1996 - --------------------------- James E. Carrico /s/ Jack M. Crowner Director March 26, 1996 - --------------------------- Jack M. Crowner /s/ Charles R. Edinger, III Director March 26, 1996 - --------------------------- Charles R. Edinger, III /s/ Carl T. Fischer, Jr. Director March 26, 1996 - --------------------------- Carl T. Fischer, Jr. 17 /s/ Stanley A. Gall - --------------------------- Director March 26, 1996 Stanley A. Gall, M.D. /s/ Leonard Kaufman Director March 26, 1996 - --------------------------- Leonard Kaufman /s/ George R. Keller Director March 26, 1996 - --------------------------- George R. Keller /s/ Bruce P. Madison Director March 26, 1996 - --------------------------- Bruce P. Madison /s/ Henry A. Meyer Director March 26, 1996 - --------------------------- Henry A. Meyer /s/ Norman Tasman Director March 26, 1996 - --------------------------- Norman Tasman /s/ Kathy C. Thompson Senior Vice President, March 26, 1996 - --------------------------- Secretary and Kathy C. Thompson Director /s/ Bertrand A. Trompeter Director March 26, 1996 - --------------------------- Bertrand A. Trompeter 18 INDEX OF EXHIBITS EXHIBIT NUMBER - ------ EXHIBIT 3.1 Articles of Incorporation of Bancorp filed with the Secretary of State of Kentucky on January 12, 1988. Exhibit 3 to Registration Statement on Form S-4 of Bancorp, File No. 33-22517, 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 19 to Annual Report on Form 10-K for the year ended December 31, 1989, 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, 1994, of Bancorp is incorporated by reference herein. 3.4 Bylaws of Bancorp, as amended, currently in effect. Exhibit 3.4 to Annual Report on Form 10-K for the year ended December 31, 1994, of Bancorp is incorporated by reference herein. 10.1 S.Y. Bancorp, Inc. Stock Option Plan as amended. Exhibit 4 to Registration Statement on Form S-8 of Bancorp, File No. 33-25885, is incorporated by reference herein. EXHIBIT NUMBER - ------ EXHIBIT 10.2 Stock Yards Bank & Trust Company Senior Officers Security Plan adopted December 23, 1980. Exhibit 10 to the Annual Report on Form 10-K for the year ended December 31, 1989, of Bancorp, is incorporated by reference herein. 10.3 Form of Indemnification Agreement between Stock Yards Bank & Trust Company, S.Y. Bancorp, Inc. and each member of the Board of Directors. Exhibit 10.3 to the Annual Report on Form 10-K for the year ended December 31, 1994, of Bancorp is incorporated by reference herein. 10.4 Senior Executive Severance Agreement executed in July 1994 between Stock Yards Bank & Trust Company and David H. Brooks. Exhibit 10.4 to the Annual Report on Form 10-K for the year ended December 31, 1994, of Bancorp is incorporated by reference herein. 10.5 Senior Executive Severance Agreement executed in July 1994 between Stock Yards Bank & Trust Company and David P. Heintzman. Exhibit 10.5 to the Annual Report on Form 10-K for the year ended December 31, 1994, of Bancorp is incorporated by reference herein. 10.6 Senior Executive Severance Agreement executed in July 1994 between Stock Yards Bank & Trust Company and Kathy C. Thompson. Exhibit 10.6 to the Annual Report on Form 10-K for the year ended December 31, 1994, of Bancorp is incorporated by reference herein. 10.7 S.Y. Bancorp, Inc. 1995 Stock Incentive Plan 11 Statement re: computation of per share earnings. EXHIBIT NUMBER - ------ EXHIBIT 13 Annual Report to Shareholders for the year ended December 31, 1995. This annual report shall not be deemed to be filed with the Commission except to the extent that information is specifically incorporated herein by reference. 21 Subsidiaries of the Registrant. 23 Independent Auditors' Consent. 27 Financial Data Schedule EX-10.7 2 EXHIBIT 10.7 EXHIBIT 10.7 TO ANNUAL REPORT ON FORM 10-K S.Y. BANCORP, INC. 1005 STOCK INCENTIVE PLAN ------------------------- 1. PURPOSE. The name of this plan is the S.Y. Bancorp, Inc. 1995 Stock Incentive Plan (the "Plan"). The purpose of the Plan is to further the best interests of S.Y. Bancorp, Inc. (the "Company") by (a) assisting the Company and its Subsidiaries (as hereinafter defined) in attracting and retaining key employees and nonemployee directors and (b) providing such persons with an additional incentive to work to increase the value of the Company's stock by granting them a stake in the future of the Company which corresponds to the stake of each of the Company's shareholders. 2. DEFINITIONS. As used in this Plan, the following terms shall have the meanings set forth below: (a) "Award" shall mean any grant under the Plan in the form of Stock Options, Stock Appreciation Rights or any combination thereof. (b) "Board" shall mean the Board of Directors of the Company. (c) "Code" shall mean the Internal Revenue Code of 1986, as amended from time to time, or any successor thereto. (d) "Committee" shall mean the Compensation Committee of the Board, or any other committee the Board may subsequently appoint to administer the Plan. The Committee shall be composed of not less than three directors, each of whom is a Disinterested Person. (e) "Disabled" or "Disability" shall have the meaning assigned thereto in section 22(e)(3) of the Code. (f) "Disinterested Person" shall mean any person who is not and has not within the prior one year been eligible for selection as a person to whom Stock may be allocated or to whom Stock Options or Stock Appreciation Rights may be granted pursuant to this Plan or any other plan of the Company or any of its affiliates entitling the participants therein to acquire Stock, stock options, or stock appreciation rights of the Company or any of its affiliates. For purposes of this definition, the terms contained herein shall have the same meaning as they have in Rule 16b-3(d)(3) promulgated under the Securities Exchange Act of 1934. (g) "Eligible Employee" shall mean an employee of the Company, its Parent, if any, or any Subsidiary who is described in Section 5 of the Plan. (h) "Exercise Price" shall have the meaning set forth in Section 6(c) of the Plan. (i) "Fair Market Value" shall mean, as of any given date, with respect to any Awards granted hereunder, the mean of the high and low trading price of the stock on such date as reported on the National Association of Securities Dealers Automated Quotation System or, if the stock is admitted to trade on a national securities exchange, on such exchange; provided, however, that if any such quotation system or exchange is closed on any day on which Fair Market Value is to be determined, Fair Market Value shall be determined as of the first day immediately preceding such day on which such exchange or quotation system was open for trading. (j) "Incentive Stock Option" shall mean any stock option intended to qualify as an "incentive stock option" within the meaning of Section 422 of the Code. (k) "Insider" shall mean any individual who is subject to Section 16(b) of the Securities Exchange Act of 1934, as amended. (l) "Nonemployee Director" shall mean any person who is not an employee of the Company or any Subsidiary or affiliate (as such term is defined in Rule 405 of the Securities Act of 1933, as amended) of the Company and who on or after April 26, 1995 serves as a member of the Board. (m) "Nonqualified Stock Option" means any stock option granted under the Plan that is not designated as an Incentive Stock Option. (n) "Parent" shall have the meaning assigned thereto in Section 424 of the Code and the regulations promulgated thereunder. (o) "Rule 16b-3" shall mean Rule 16b-3, as promulgated by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended, or any successor regulation. (p) "Stock" shall mean the common stock, no par value, of the Company. (q) "Stock Appreciation Right" shall mean the right pursuant to an Award granted under Section 7 of the Plan, (i) in the case of a Related Stock Appreciation Right (as defined in Section 7 of the Plan), to surrender to the Company all or a portion of the related Stock Option and receive an amount equal to the excess of the Fair Market Value of one share of Stock as of the date such Stock Option or portion thereof is surrendered over the Exercise Price per share specified in such Stock Option, multiplied by the number of shares of Stock in respect of which such Stock Option is being surrendered, and (ii) in the case of a Freestanding Stock Appreciation Right (as defined in Section 7 of the Plan), to exercise such Freestanding Stock Appreciation Right and receive an amount equal to the excess of the Fair Market Value of one share of Stock as of the date of exercise over the price per share specified in such Freestanding Stock Appreciation Right, multiplied by the number of shares of Stock in respect of which such Freestanding Stock Appreciation Right is being exercised. (r) "Stock Option" shall mean any option to purchase shares of Stock granted pursuant to Section 6 of the Plan. (s) "Stock Ownership," whenever necessary to determine a person's stock ownership in the Company, its Parent or any Subsidiary, shall include stock actually owned and stock indirectly owned by application of the rules of attribution contained in section 424(d) of the Code. (t) "Subsidiary" shall have the meaning assigned thereto in section 424 of the Code and the regulations promulgated thereunder. A "Subsidiary" shall include any entity which becomes a Subsidiary after the date of adoption of this Plan. (u) "Surrendered Shares" shall mean the shares of Stock described in Section 7 of the Plan which (in lieu of being purchased) are surrendered for cash or Stock, or for a combination of cash and Stock, in accordance with Section 7. 3. ADMINISTRATION OF THE PLAN. The Plan shall be administered by the Committee. The Company, by action of the Committee, and subject to other provisions and limitations of this Plan, may from time to time grant Awards to such Eligible Employees as the Committee may in its sole discretion determine, for such number of shares of the Company's Stock and on such terms and conditions as the Committee may determine is its sole discretion. The Committee may make, publish, amend, and rescind such rules and practices as it may in its sole discretion deem necessary or helpful to the administration of the Plan and the issuance and exercise of Awards granted pursuant to the Plan. All decisions made by the Committee pursuant to the provisions of the Plan and as to the terms and conditions of any Award (and any agreements relating thereto) shall be final and binding on all persons. 4. AVAILABLE SHARES. The aggregate maximum number of shares of Stock reserved and available for issuance under this Plan shall be eighty thousand (80,000). All such shares shall be reserved to the extent the Company deems appropriate from authorized but unissued shares of Stock and from shares of Stock which have been reacquired by the Company. Any shares of Stock subject to a Stock Option which remain unissued after the cancellation, expiration or exchange of such Stock Option shall again become available for use under the Plan, but any Surrendered Shares which remain unissued after the surrender of a Stock Option under Section 7 of the Plan and any shares of Stock used to satisfy a withholding obligation under Section 6(g) of the Plan shall not again become available for use under the Plan. 5. EMPLOYEES ELIGIBLE TO PARTICIPATE IN THE PLAN. An Eligible Employee shall mean a salaried employee of the Company, its Parent, if any, or its Subsidiaries who is designated by the Committee, in its sole discretion, as eligible to receive Awards pursuant to this Plan. 6. STOCK OPTIONS. (a) FORM. The Stock Options granted pursuant to this Plan shall be in such form as the Committee may from time to time approve. Each grant of a Stock Option pursuant to this Plan shall be made in writing upon such terms and conditions as may be determined by the Committee at the time of grant, subject to the terms, conditions, and limitations set forth in this Plan. The grant of an option shall be evidenced by a written agreement executed by the Secretary of the Company and the Eligible Employee. (b) NATURE OF OPTIONS. The Committee shall have the right to grant any Eligible Employee either Incentive Stock Options or Nonqualified Stock Options, or both, and shall have the right to grant new Stock Options in exchange for outstanding Stock Options which have a higher or lower Exercise Price. Whether an option is to be an Incentive Stock Option or a Nonqualified Stock Option shall be determined by the Committee in its sole discretion. Each option that the Committee intends to constitute an Incentive Stock Option shall be specifically designated as such and each option that is not intended to constitute an Incentive Stock Option shall specifically state "This option is not an incentive stock option." If any option is issued without a specific designation, it shall be deemed to constitute a Nonqualified Stock Option. The Committee may, however, specifically provide that a Stock Option shall constitute an Incentive Stock Option to the extent of its exercise as to any particular number of shares and a Nonqualified Stock Option to the extent of the remainder of the shares, provided the Committee specifically provides that the Stock Option shall be deemed an Incentive Stock Option to the extent of the first shares exercised up to the number of shares as to which the Option is intended to constitute an Incentive Stock Option, and that the option shall be considered a Nonqualified Stock Option as to the remainder of the shares as to which it is exercised. (c) EXERCISE PRICE. The Stock Options granted pursuant to this Plan shall provide a specified price at which the shares subject to the Stock Option may be purchased (hereinafter called the "Exercise Price"). If any Stock Option issued pursuant to this Plan is designated as Incentive Stock Option, the Exercise Price for each share of Stock subject to the Incentive Stock Option shall, except as hereinafter provided, be an amount at least equal to the Fair Market Value of one share of Stock of the Company as of the date of grant of the Incentive Stock Option. Notwithstanding the above, in the event that on the date of grant of the Incentive Stock Option, an Eligible Employee owns stock (taking into account all classes of stock which are then outstanding) in the Company which possesses more than 10% of the total combined voting power of all classes of stock of the Company or owns stock of a Parent or a Subsidiary of the Company which possesses more than 10% of the total combined voting power of all classes of stock of the Company's Parent or its Subsidiary, the Exercise Price for each share of Stock subject to the Incentive Stock Option (to the extent required by the Code at the time of grant) shall be an amount equal to at least 110% of the Fair Market Value of one share of Stock of the Company as determined as of the date of grant of the Incentive Stock Option. (For purposes of this paragraph, the rules of attribution contained in section 424(d) of the Code (relating to the attribution of Stock Ownership) shall be applied to determine Stock Ownership.) (d) EXERCISE PERIOD. Each Stock Option by its terms shall provide the period during which it is exercisable, provided, however, no Stock Option shall be exercisable until the expiration of at least six months from the date the Stock Option is granted. Each Stock Option granted under this Plan shall provide an expiration date which date shall be set by the Committee but in no event shall the expiration date of any Stock Option that is designated an Incentive Stock Option be a date later than ten years from the date of grant of the Incentive Stock Option or, if the grantee of the Incentive Stock Option, at the time of grant, owns stock (taking into account all classes of stock then outstanding) possessing more than 10% of the total combined voting power of all classes of stock of the Company, its Parent, or any Subsidiary, the expiration date of each such Incentive Stock Option (to the extent required by the Code at the time of grant) shall not be more than five years from the date of grant. (For purposes of this paragraph, the rules of attribution contained in section 424(d) of the Code (relating to the attribution of Stock Ownership) shall be applied to determine Stock Ownership.) Each Incentive Stock Option issued under this Plan shall provide that, in the event of the retirement of an Eligible Employee, to the extent such option is then exercisable, such option may be exercised by the Eligible Employee within three months after the date of retirement. Each Incentive Stock Option issued pursuant to this Plan shall provide that, in the event of the Disability of an Eligible Employee while employed by the Company, its Parent or any Subsidiary, such option may thereafter be exercised by the Eligible Employee in accordance with all the terms and conditions of its original grant, including without limitation any applicable vesting requirements. In the event of the Disability of an Eligible Employee, all then outstanding Incentive Stock Options held by such Eligible Employee may be exercised at any time within twelve months after the date of determination of Disability as Incentive Stock Options, or thereafter until the stated expiration dates of the options as Nonqualified Stock Options. In the event of the death of an Eligible Employee while employed by the Company, its Parent or any Subsidiary, all then outstanding Stock Options held by such Eligible Employee shall become fully vested and immediately exercisable. Further, each Incentive Stock Option issued pursuant to this Plan shall provide that in the case of termination of employment by reason of the Eligible Employee's death, the Incentive Stock Option may be exercised by the Eligible Employee's estate or other person who receives the Stock Option by bequest or the laws of descent and distribution for a period of twelve months after the Eligible Employee's death. In no event shall the exercise period be extended beyond the time which the Eligible Employee would have been required to exercise the Incentive Stock Option had he not terminated employment, become disabled or died. The Committee shall, except as specifically restricted herein, in its own discretion, determine the term of Nonqualified Stock Options that are issued pursuant to this Plan and the circumstances in which such Nonqualified Stock Options shall be exercisable beyond the termination of employment, disability or death of the Eligible Employee; provided, that if the Nonqualified Stock Option does not specifically state when it may be exercised after the termination of the grantee's employment, death or disability, the Stock Option shall be governed by the provisions stated above for Incentive Stock Options. Except as otherwise provided in this Section 6 or Section 16 of the Plan, or as determined by the Committee in its sole discretion, if an Eligible Employee's employment with the Company, any Subsidiary or any Parent terminates (including termination for cause, voluntary resignation or other termination under mutually agreeable circumstances), all Stock Options held by the Eligible Employee will terminate immediately upon the effective date and time of the Eligible Employee's termination of employment. (e) TRANSFERABILITY OF OPTIONS. Each Stock Option granted under this Plan shall provide that such option shall be exercisable during the grantee's lifetime only by the grantee and that such option shall not be transferable by the grantee other than by will or the laws of descent and distribution. Stock Options granted pursuant to this Plan may, but need not, provide for exercise by the grantee's estate or other person who obtains the right to exercise the option by bequest or pursuant to the laws of descent and distribution. (f) METHOD OF EXERCISE. Stock Options may be exercised by giving written notice of exercise delivered in person or by mail at the Company's principal executive office, specifying the number of shares of Stock with respect to which the Stock Option is being exercised, accompanied by payment in full of the Exercise Price. Each Stock Option shall provide that payment of the Exercise Price may be made either in cash, by check acceptable to the Committee or, at the discretion of the Committee, in a number of shares of Stock of the Company having an aggregate Fair Market Value equal to the Exercise Price, or by a combination of the foregoing forms of consideration. The Committee may also (in its discretion) allow an Eligible Employee to pay such Exercise Price (in whole or in part) by electing that the Company withhold shares of Stock (that otherwise would be transferred to such Eligible Employee as a result of the exercise of such Stock Option) to the extent necessary to pay such Exercise Price. Any payment made in Stock shall be treated as equal to the Fair Market Value of such Stock on the date that a properly endorsed certificate for such Stock is delivered to the Committee or the date that Stock is treated by the Committee as withheld from the exercise of the Stock Option. Each Stock Option shall provide that the Exercise Price shall be payable upon or before the issuance of the Stock of the Company to be received pursuant to the exercise of the Stock Option. (g) STATEMENT AS TO WITHHOLDING OF FEDERAL INCOME OR OTHER TAXES. The exercise or surrender of any Stock Option granted under the Plan or the exercise of a Freestanding Stock Appreciation Right shall constitute an Eligible Employee's full and complete consent to whatever action the Committee deems necessary to satisfy the federal and state tax withholding requirements, if any, which the Committee in its discretion deems applicable to such exercise or surrender. The Committee shall also have the right to provide in an option agreement that an Eligible Employee may elect to satisfy federal and state tax withholding requirements through a reduction in the number of shares of Stock actually transferred to him or her under the Plan, and if the Eligible Employee is an Insider, any such election and any such reduction shall be effected so as to satisfy the conditions to the exemption under Rule 16b-3. (h) ADDITIONAL INCENTIVE STOCK OPTION LIMITATION. No Stock Option that is designated an Incentive Stock Option shall be issued pursuant to terms under which the right to exercise the Incentive Stock Option is affected by the exercise of another Stock Option or the right to exercise another Stock Option is affected by exercise of the Incentive Stock Option. (i) ANNUAL LIMIT ON INCENTIVE STOCK OPTIONS. To the extent that the aggregate Fair Market Value of Stock (determined as of the date an Incentive Stock Option is granted) with respect to which Incentive Stock Options first become exercisable in any calendar year exceeds $100,000, such Stock Options shall be treated as Nonqualified Stock Options. The Fair Market Value of Stock subject to any other option (determined as of the date such option is granted) which (1) satisfies the requirements of Section 422 of the Code and (2) is granted to an Eligible Employee under a plan maintained by the Company, a Subsidiary or a Parent shall be treated (for purposes of this $100,000 limitation) as if granted under the Plan. The Committee shall interpret and administer the limitations set forth in this Section 6(i) in accordance with Section 422(d) of the Code. 7. STOCK APPRECIATION RIGHTS. (a) GRANT AND EXERCISE. Stock Appreciation Rights may be granted either in conjunction with all or part of any Stock Option granted under the Plan ("Related Stock Appreciation rights") or alone ("Freestanding Stock Appreciation Rights") and, in either case, in addition to other Awards granted under the Plan. Eligible Employee shall enter into a Stock Appreciation Rights agreement with the Company if requested by the Committee, in such form as the Committee shall determine. (i) TIME OF GRANT. Related Stock Appreciation Rights related to a Nonqualified Stock Option may be granted either at or after the time of the grant of such Nonqualified Stock Option. Related Stock Appreciation Rights related to an Incentive Stock Option may be granted only at the time of the grant of such Incentive Stock Option. Freestanding Stock Appreciation Rights may be granted at any time. (ii) EXERCISABILITY. Related Stock Appreciation Rights shall be exercisable only at such time or times and only to the extent that the Stock Options to which they relate shall be exercisable in accordance with their terms and Freestanding Stock Appreciation Rights shall be exercisable from time to time in accordance with such terms and conditions as shall be determined by the Committee in its sole discretion at or after the time of grant; provided, however, that any Stock Appreciation Right granted to an Insider shall not be exercisable during the first six months from the date of grant of such Stock Appreciation Right, except that this additional limitation shall not apply in the event of death or Disability of the Insider prior to the expiration of the six-month period. A Related Stock Appreciation Right granted in connection with an Incentive Stock Option may be exercised only if and when the Fair Market Value of the Stock subject to the Incentive Stock Option exceeds the Exercise Price of such Stock Option. (iii) METHOD OF EXERCISE. Stock Appreciation Rights shall be exercised by an Eligible Employee by giving written notice of exercise delivered in person or by mail as required by the terms of any agreement evidencing the Stock Appreciation Right at the Company's principal executive office, specifying the number of shares of Stock in respect of which the Stock Appreciation Right is being exercised. If requested by the Committee, the Eligible Employee shall deliver to the Company the agreement evidencing the Stock Appreciation Right being exercised and, in the case of a Related Stock Appreciation Right, the Stock Option agreement evidencing any related Stock Option, for notation thereon of such exercise and return thereafter of such agreements to the Eligible Employee. (iv) AMOUNT PAYABLE. Upon the exercise of a Related Stock Appreciation Right, an Eligible Employee shall be entitled to receive an amount in cash or shares of Stock equal in value to the excess of the Fair Market Value of one share of Stock on the date of exercise over the Exercise Price per share specified in the related Stock Option, multiplied by the number of shares of Stock in respect of which the Related Stock Appreciation Right shall have been exercised, with the Committee having in its sole discretion the right to determine the form of payment. Upon the exercise of a Freestanding Stock Appreciation Right, an Eligible Employee shall be entitled to receive an amount in cash or shares of Stock equal in value to the excess of the Fair Market Value of one share of Stock on the date of exercise over the price per share specified in the Freestanding Stock Appreciation Right, which shall be not less than 100% of the Fair Market Value of the Stock on the date of grant, multiplied by the number of shares of Stock in respect of which the Freestanding Stock Appreciation Right shall have been exercised, with the Committee having in its sole discretion the right to determine the form of payment. (b) TERMS AND CONDITIONS. Stock Appreciation Rights granted under the Plan shall be subject to the following terms and conditions and shall contain such additional terms and conditions, not inconsistent with the terms of the Plan, as the Committee shall deem desirable. (i) TERMS OF STOCK APPRECIATION RIGHTS. The term of a Related Stock Appreciation Right shall be the same as the term of the related Stock Option. A Related Stock Appreciation Right or applicable portion thereof shall terminate and no longer be exercisable upon the exercise, termination, cancellation or surrender of the related Stock Option, except that, unless otherwise provided by the Committee in its sole discretion at or after the time of grant, a Related Stock Appreciation Right granted with respect to less than the full number of shares of Stock covered by a related Stock Option shall terminate and no longer be exercisable if and to the extent that the number of shares of Stock covered by the exercise, termination, cancellation or surrender of the related Stock Option exceeds the number of shares of Stock not covered by the Related Stock Appreciation Right. The term of each Freestanding Stock Appreciation Right shall be fixed by the Committee, but no Freestanding Stock Appreciation Right shall be exercisable more than ten years after the date such right is granted. (ii) TRANSFERABILITY OF STOCK APPRECIATION RIGHTS. Stock Appreciation Rights shall be transferable only when and to the extent that a Stock Option would be transferable under Section 6(e) of the Plan. (iii) TERMINATION OF EMPLOYMENT. In the event of the termination of employment of an Eligible Employee holding a Related Stock Appreciation Right, such right shall be exercisable to the same extent that the related Stock Option is exercisable after such termination. In the event of the termination of employment of the holder of a Freestanding Stock Appreciation Right, such right shall be exercisable to the same extent that a Stock Option with the same terms and conditions as such Freestanding Stock Appreciation Right would have been exercisable in the event of the termination of employment of the holder of such Stock Option. 8. GRANT OF OPTIONS TO NONEMPLOYEE DIRECTORS. Each Nonemployee Director who is serving as such on April 26, 1995, shall as of such date automatically (without any action by the Committee) be granted a Nonqualified Stock Option to purchase one thousand (1,000) shares of Stock for an Exercise Price equal to 100% of the Fair Market Value of the Stock on such date. Each Nonemployee Director who is first elected to serve as such after April 26, 1995 at any annual or special meeting of shareholders of the Company shall as of the date of such election automatically (without any action by the Committee) be granted a Nonqualified Stock Option to purchase on thousand (1,000) shares of Stock for an Exercise Price equal to 100% of the Fair Market Value of the Stock on such date. Subject to Section 16 of the Plan, a Nonemployee Director must serve continuously as a Nonemployee Director of the Company for a period of twelve consecutive months after the date such Stock Option is granted before he or she can exercise any part of such Stock Option. Thereafter, on and after the first anniversary of the date of granting the Stock Option and before the second anniversary, the Nonemployee Director may exercise the Stock Option with respect to not more than 20% of the number of shares of Stock covered thereby; on and after the second anniversary and before the third anniversary, the Nonemployee Director may exercise the Stock Option with respect to not more than 40% of the number of shares of Stock covered thereby; on and after the third anniversary and before the fourth anniversary, the Nonemployee Director may exercise the Stock Option with respect to not more than 60% of the number of shares of Stock covered thereby; on and after the fourth anniversary and before the fifth anniversary the Nonemployee Director may exercise the Stock Option with respect to not more than 80% of the number of shares of Stock covered thereby; and on and after the fifth anniversary and before the expiration of the stated term of the Stock Option, which shall be ten years from the date of its granting, the Nonemployee Director may at any time or from time to time exercise the Stock Option with respect to all or any portion of the shares of Stock covered thereby. If a Nonemployee Director's service with the Company terminates by reason of permanent or total disability, death or retirement or resignation from active service as a director of the Company, any Stock Option held by such Nonemployee Director may be exercised for a period of twelve months from the date of such termination or until the expiration of the Stock Option, whichever is shorter, to the extent to which the individual would on the date of exercise have been entitled to exercise the Stock Option if such individual had continued to serve as a Nonemployee Director; provided, however, if a Nonemployee Director's service with the Company terminates by reason of his or her attainment of the Company's mandatory retirement age for directors, all outstanding Stock Options granted under the Plan shall become fully vested and immediately exercisable. All applicable provisions of the Plan not inconsistent with this Section 8 shall apply to Nonqualified Stock Options granted to Nonemployee Directors; provided, however, that the Committee may not exercise discretion under any provision of the Plan with respect to Stock Options granted under this Section 8 to the extent that such discretion is inconsistent with Rule 16b-3. The maximum number of shares of Stock as to which Stock Options may be granted to any Nonemployee Director under the Plan, as in effect through April 25, 2005, shall be one thousand (1,000) shares of Stock. A grant of a Nonqualified Stock Option to a Nonemployee Director under this Section 8 is intended to allow such Nonemployee Director to be a Disinterested Person and all Nonqualified Stock Options granted to Nonemployee Directors as well as this Section 8 shall be construed to effect such intent. 9. TERMINATION OF EMPLOYMENT. The employment of an Eligible Employee by the Company shall not be deemed to have terminated for purposes of this Plan if the Eligible Employee is transferred to and becomes an employee of a Subsidiary or Parent of the Company. Further, The Eligible Employee's employment by the Company shall not be considered terminated if he becomes an employee of another corporation (the "Other Company") which assumes the Stock Options issued pursuant to this Plan or issues its own stock option in substitution of an option issued under this Plan in a transaction to which section 424(a) of the Code applies, provided he becomes an employee of the Other Company, its Subsidiary or its Parent at the time of the transaction. Absence on leave, whether paid or unpaid, approved by the management of the Company shall not constitute the termination of employment for any purpose of this Plan, provided the leave does not exceed ninety (90) days. To the extent required under Section 421 of the Code for favorable tax treatment for Incentive Stock Options, if the period of leave of absence exceeds ninety (90) days, the leave of absence shall be considered a termination of employment unless the Eligible Employee's right to return is guaranteed by statute or contract. If the Eligible Employee's right to return is not so guaranteed, the Eligible Employee shall be considered to have terminated his employment, for purposes of this Plan, as of the end of the ninetieth (90th) day of such absence. The immediately preceding two sentences shall apply solely for tax treatment purposes and not for any other purpose under the Plan. 10. REQUIREMENTS OF LAW. If any law, any regulation of the Securities and Exchange Commission, or any regulation of any other commission or agency having jurisdiction shall require the Company or the exercising optionee to take any action with respect to the shares of Stock to be acquired upon exercise of a Stock Option, then the date upon which the Company shall deliver or cause to be delivered the certificate or certificates for the shares of Stock shall be postponed until full compliance has been made with all such requirements of law or regulations. Further, if the Company shall so require at or before the time of the delivery of the shares with respect to which the exercise of a Stock Option has been made, the exercising optionee shall deliver to the Company his written statement that he intends to hold the shares so acquired by him on exercise of the Stock Option for investment only and not with a view to resale or other distribution thereof to the public. Further, in the event the Company shall have determined that in compliance with the Securities Act of 1933 or other applicable statute or regulation, it is necessary to register any of the shares of Stock with respect to which the exercise of a Stock Option has been made, or qualify such shares for exemption from any requirements of the Securities Act of 1933 or other applicable statutes or regulations, then the Company shall take such action at its own expense, but not until such action has been completed shall the shares subject to the Stock Option be delivered to the exercising optionee. Further, in the event at the time of exercise of the Stock Option shares of Stock of the Company shall be listed on any stock exchange, then if required to do so, the Company shall register the shares with respect to which exercise is so made in accordance with the provisions of the Securities Act of 1933 or any other applicable law or regulations, and the Company shall make prompt application for the listing of option shares on such stock exchange, again at the expense of the Company. 11. ADJUSTMENT. The number, kind or class (or any combination thereof) of shares of Stock reserved under Section 4 of the Plan, the number, kind or class (or any combination thereof) of shares of Stock subject to Awards granted under the Plan, the Exercise Price of any outstanding Stock Options and the price per share specified in a Freestanding Stock Appreciation Right shall be adjusted by the Board in an equitable manner to reflect any change in the capitalization of the Company, including, but not limited to, such changes as stock dividends or stock splits. Furthermore, the Board shall have the right to adjust (in a manner which satisfies the requirements of Section 424(a) of the Code) the number, kind or class (or any combination thereof) or shares of Stock reserved under Section 4 of the Plan, the number, kind or class (or any combination thereof) of shares of Stock subject to Awards granted under the Plan, the Exercise Price of any outstanding Stock Options and the price per share specified in a Freestanding Stock Appreciation Right in the event of any corporate transaction described in Section 424(a) of the Code which provides for the substitution or assumption of such Awards in order to take into account on an equitable basis the effect of such transaction. If any adjustment under this Section 11 would create a factional share of Stock or a right to acquire a fractional share of Stock, such fractional share shall be disregarded and the number of shares of Stock reserved under the Plan and the number subject to any Awards granted under the Plan shall be the next lower number of shares of Stock, rounding all fractions downward. An adjustment made under this Section 11 by the Board shall be conclusive and binding on all affected persons and, further, shall not constitute an increase in "the number of shares reserved under Section 4" within the meaning of Section 12 of the Plan. 12. AMENDMENT OR DISCONTINUANCE OF THE PLAN. The Plan may be amended by the Board from time to time to the extent that the Board deems necessary or appropriate; provided, however, (1) no such amendment shall be made absent the approval of the shareholders of the Company required under Section 422 of the Code (a) to increase the number of shares of Stock reserved for issuance under Section 4, or (b) to change the class of employees eligible to receive Awards under Section 5, (2) to the extent shareholder approval is required in order for the exemption set forth in Rule 16b-3 to be available in respect of Awards granted pursuant to the Plan, the Board shall not amend the Plan absent the approval of the shareholders of the Company in accordance with Rule 16b-3, (a) to increase materially (within the meaning of Rule 16b-3) the benefits accruing to any Insider under the Plan, (b) to increase materially (within the meaning of Rule 16b-3) the number of securities which may be issued under the Plan to Insiders, or (c) otherwise modify materially (within the meaning of Rule 16b-3) the requirements as to eligibility by Insiders for participation in the Plan, (3) no amendment shall be made to change the terms and conditions of a Stock Option which can be granted to a Nonemployee Director absent the approval of the shareholders of the Company, and (4) no provision of the Plan (including Section 8) shall be amended more than once every six months if amending such provision would result in the loss of an exemption under Rule 16b-3. Any amendment which specifically applies to Nonqualified Stock Options or Stock Appreciation Rights shall not require shareholder approval unless such approval is necessary to comply with Section 16 of the Securities Exchange Act of 1934, as amended, or Section 15 of the Plan. The Board also may suspend the granting of Awards under the Plan at any time and may terminate the Plan at any time; provided, however, the Board shall not have the right unilaterally to modify, amend or cancel any Award granted before such suspension or termination or otherwise impair any outstanding Award granted under the Plan unless (1) the Eligible Employee or Nonemployee Director consents in writing to such modification, amendment or cancellation or (2) there is a dissolution or liquidation of the Company or a transaction described in Section 11, Section 14 or Section 16 of the Plan. The Board may also vest the administration of the Plan in persons other than the Committee provided one member of any body that is vested with the power to administer the Plan shall be a member of the Board and all members of such body shall be Disinterested Persons. In the event that the authority to administer the Plan is vested in any body other than the Committee, the references herein to the Committee shall be considered to be references to that body. 13. COMPANY'S RIGHT TO TERMINATE EMPLOYEE NOT IMPAIRED. Notwithstanding the provisions of this Plan or the provisions of Awards granted pursuant to this Plan, the right of the Company (or its Parent or any Subsidiary) to terminate any employee shall not be in any manner affected or impaired by the adoption of this Plan or by the grant of Awards pursuant to the Plan. 14. LIQUIDATION OF THE COMPANY. In the event of the complete liquidation or dissolution of the Company, any Awards granted pursuant to the Plan remaining unexercised shall be deemed cancelled, without regard to or limitation by any other provisions of the Plan. 15. SHAREHOLDER APPROVAL. The Plan shall be submitted to a meeting of the shareholders of the Company, either at the regular annual meeting thereof or at a special meeting called for the purpose of the consideration of the Plan, and the Plan shall not become effective unless its adoption is approval by the shareholders of the company within twelve (12) months of its adoption by the Board. Upon approval by the shareholders, this Plan shall take effect without further action by the Company, provided such approval is obtained within twelve (12) months of the adoption of this Plan by the Board. Any Awards granted under the Plan prior to the Plan's approval by the shareholders of the Company shall be granted subject to such approval, and, absent timely approval of the Plan by such shareholders, such Awards shall be null and void. 16. SALE OR MERGER; CHANGE IN CONTROL (a) SALE OR MERGER. If the company agrees to sell all or substantially all of its assets for cash or property or for a combination of cash and property or agrees to any merger, consolidation, reorganization, division or other corporate transaction in which Stock is converted into another security or into the right to receive securities or property and such agreement does not provide for the assumption or substitution of the Awards granted under the Plan in accordance with Section 11 on a basis that is fair and equitable to holders of such Awards as determined by the Board, (1) each Award granted to an Eligible Employee at the direction and discretion of the Board (A) may (subject to such conditions, if any, as the Board deems appropriate under the circumstances) be cancelled unilaterally by the Company (i) in exchange for (x) a transfer to such Eligible Employee of the number of whole shares of Stock, if any, which he or she would have received if he or she had the right to surrender his or her outstanding Stock Option or Freestanding Stock Appreciation Right in full under Section 7 of the Plan and he or she exercised that right on the date set by the Board exclusively for Stock or (y) the right to exercise his or her outstanding Stock Option or Freestanding Stock Appreciation Right in full on any date before the date as of which the Board unilaterally cancels such Award in full or, if the exchange described in this Section 16(a)(1)(A)(i) would result in a violation of Section 16 of the Securities Exchange Act of 1934, as amended, for an Eligible Employee, (ii) may be canceled unilaterally by the Company after advance written notice to such Eligible Employee or (B) may be canceled unilaterally by the Company if the Exercise Price or price set forth in the Freestanding Stock Appreciation Right equals or exceeds the Fair Market Value of a share of Stock on a date set by the Board, and (2) each Stock Option ranted to a Nonemployee Director shall be canceled unilaterally by the Company on a date set by the Board to the extent unexercised on such date after advance written notice to each affected Nonemployee Director. (b) CHANGE IN CONTROL. If there is a Change in Control of the Company or a tender or exchange offer is made for Stock other than by the Company, the Board thereafter shall have the right (1) to take such action with respect to any unexercised Awards granted to Eligible Employees or all such Awards as the Board deems appropriate under the circumstances to protect the interest of the Company in maintaining the integrity of such grants under the Plan, including following the procedure set forth in Section 16(a) for a sale or merger of the Company with respect to such Awards and (2) to follow the procedures for Nonemployee Directors set forth in Section 16(a) with respect to any and all unexercised Nonqualified Stock Options granted to Nonemployee Directors. The Board shall have the right to take different action under this Section 16(b) with respect to different Eligible Employees or different groups of Eligible Employees, as the Board deems appropriate under the circumstances. For purposes of the Plan, a "Change in Control" of the Company shall be deemed to have occurred if: (i) any Person (as defined in this Section 16) is or becomes the Beneficial Owner (as defined in this Section 16) of securities of the Company representing 20% or more of the combined voting power of the Company's then outstanding securities (unless (A) such Person is the Beneficial Owner of 20% or more of such securities as of April 26, 1995 or (B) the event causing the 20% threshold to be crossed is an acquisition of securities directly from the Company); (ii) during any period of two consecutive years beginning after April 26, 1995, individuals who at the beginning of such period constitute the Board and any new director (other than a director designated by a person who has entered into an agreement with the Company to effect a transaction described in clause (i), (iii) or (iv) of this Change in Control definition) whose election or nomination for election was approved by vote of at least two-thirds of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved cease for any reason to constitute a majority of the Board; (iii) the shareholders of the Company approve a merger or consolidation of the Company with any other corporation (other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the entity surviving such merger or consolidation), in combination with voting securities of the Company or such surviving entity held by a trustee or other fiduciary pursuant to any employee benefit plan of the company or such surviving entity or of any Subsidiary of the Company or such surviving entity, at least 80% of the combined voting power of the securities of the Company or such surviving entity outstanding immediately after such merger or consolidation); or (iv) the shareholders of the Company approve a plan of complete liquidation or dissolution of the Company or an agreement for the sale or disposition by the Company of all or substantially all of the Company's assets. (c) For purposes of the definition of Change in Control, "Person" shall have the meaning ascribed to such term in Section 3(a)(9) of the Exchange Act as supplemented by Section 13(d)(3) of the Exchange Act; provided, however, that Person shall not include (i) the Company, any Subsidiary or any other Person controlled by the Company, (ii) any Trustee or other fiduciary holding securities under any employee benefit plan of the Company or of any Subsidiary, or (iii) a corporation owned, directly or indirectly, by the shareholders of the Company in substantially the same proportions as their ownership of securities of the Company. (d) For purposes of the definition of Change of control, a Person shall be deemed the "Beneficial Owner" of any securities which such Person, directly or indirectly, has the right to vote or dispose of or has "beneficial ownership" (within the meaning of Rule 13d-3 under the Exchange Act) of, including pursuant to any agreement, arrangement or understanding (whether or not in writing); provided, however, that: (i) a Person shall not be deemed the Beneficial Owner of any security as a result of an agreement, arrangement or understanding to vote such security (x) arising solely from a revocable proxy or consent given in response to a public proxy or consent solicitation made pursuant to, and in accordance with, the Exchange Act and the applicable rules and regulations thereunder or (y) made in connection with, or to otherwise participate in, a proxy or consent solicitation made, or to be made, pursuant to, and accordance with, the applicable provisions of the Exchange Act and the applicable rules and regulations thereunder; in either case described in clause (x) or clause (y) above, whether or not such agreement, arrangement or understanding is also then reportable by such Person on Schedule 13D under the Exchange Act (or any comparable or successor report); and (ii) a Person engaged in business as an underwriter of securities shall not be deemed to be the Beneficial Owner of any securities acquired through such Person's participation in good faith in a firm commitment underwriting until the expiration of forty days after the date of such acquisition. 17. QUALIFICATION OF OPTIONS ISSUED UNDER THE PLAN AS INCENTIVE STOCK OPTIONS. It is the intention of the Company that those Stock Options that are issued pursuant to the Plan that are designated as Incentive Stock Options shall constitute "incentive stock options" within the meaning of section 422 of the Code. However, in the event that any Stock Option so designated does not constitute an "incentive stock option" within the meaning of section 422 of the Code for any reason whatsoever, none of the Company, a Parent or Subsidiary or their shareholders, directors, officers or employees, shall be liable to any person for such failure to constitute an "incentive stock option." If the characterization of any Stock Option as an "incentive stock option" within the meaning of section 422 of the Code is challenged by the Internal Revenue Service, the Company may, but shall not be required to, pay the reasonable legal and accounting expenses incurred in an attempt to establish the characterization of the Stock Options issued under the Plan as "incentive stock options" within the meaning of section 422 of the Code. In all events, however, the Company shall make available to any Eligible Employee such factual information which is reasonably necessary to establish the characterization of the Stock Options for federal income tax purposes. It is intended that any Stock Option granted under the Plan that is not specifically designated as an Incentive Stock Option shall not constitute an Incentive Stock Option. 18. EFFECTIVE DATE OF THE PLAN. The Plan shall be effective on the date it is approved by the shareholders of the Company. 19. TERM OF THE PLAN. No Stock Option may be issued pursuant to the Plan on or after the earlier of (i) its termination by action of the Board; (ii) ten years from the earlier of the date of adoption of this Plan by the Board or its approval by the shareholders of the Company; or (iii) the date on which all of the Stock reserved under Section 4 of the Plan has (as a result of the surrender or exercise of Stock Options granted under the Plan) been issued or is no longer available for use under the Plan. 20. SHAREHOLDER RIGHTS. No Eligible Employee or Nonemployee Director shall have any rights as a shareholder of the Company as a result of the grant of an Award under the Plan or his or her exercise or surrender of such Award pending the actual delivery of any Stock subject to such Award to such Eligible Emplee or Nonemplyee Director. 21. CONSTRUCTION. The Plan shall be construed under the laws of the state of Kentucky. 22. OTHER CONDITIONS. Each agreement evidencing an Award may require that an Eligible Employee or Nonemployee Director (as a condition to the exercise of such Award) enter into any agreement or make such representations prepared by the Company, including any agreement which restricts the transfer of Stock acquired pursuant to the exercise of an Award or provides for the purchase of such Stock by the Company under certain circumstances. EX-11 3 EXHIBIT 11 EXHIBIT 11 STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS S.Y. BANCORP, INC. AND SUBSIDIARY
Years ended December 31 ----------------------- PRIMARY 1995 1994 1993 ---- ---- ---- Average shares outstanding 1,623,263 1,610,883 1,603,297 Effect of assumed conversion of stock options under treasury stock method 25,561 31,345 32,370 --------- -------- -------- 1,648,824 1,642,228 1,635,667 --------- --------- --------- --------- --------- --------- Net income $4,056,000 $3,101,000 $2,515,000 --------- --------- --------- --------- --------- --------- Per Share $ 2.46 $ 1.89 $ 1.54 --------- --------- --------- --------- --------- --------- FULLY DILUTED Average shares outstanding 1,623,263 1,610,883 1,603,297 Effect of assumed conversion of stock options under treasury stock method 26,419 33,444 35,224 --------- --------- --------- 1,649,682 1,644,327 1,638,521 --------- --------- --------- --------- --------- --------- Net income $4,056,000 $3,101,000 $2,515,000 --------- --------- --------- --------- --------- --------- Per Share $ 2.46 $ 1.89 $ 1.54 --------- --------- --------- --------- --------- ---------
EX-13 4 EXHIBIT 13 EXHIBIT 13 TO ANNUAL REPORT ON FORM 10-K Annual Report to Shareholders for the year ended December 31, 1995. This annual report shall not be deemed to be filed with the commission except to the extent that information is specifically incorporated herein by reference. 5 MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION 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). This discussion should be read in conjunction with Bancorp's consolidated financial statements and accompanying notes and other schedules presented elsewhere in this report. RESULTS OF OPERATIONS Net income was $4,056,000 or $2.46 per share on a fully-diluted basis in 1995. This compares to $3,101,000 or $1.89 per share and $2,515,000 or $1.54 per share in 1994 and 1993, respectively. The increase in 1995 earnings was attributable to several factors, the most notable of which was net interest income growth. Earnings include an 18.2% increase in fully taxable equivalent net interest income. All components of non- interest income increased resulting in an increase in total non-interest income of 34.1%. Partially offsetting the overall income increases were increases in non-interest expenses of 16.8%. Non-interest expenses increased in all categories except FDIC premiums. These increases are primarily related to continued expansion of our banking center network. 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 interest earning assets and the rate expensed on interest bearing liabilities. Net interest margin represents net interest income on a taxable equivalent basis as a percentage of 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 borrowed funds, and by changes in interest rates. The discussion that follows is based on tax equivalent interest data. Net interest income was $14,783,000, $12,502,000 and $10,019,000 for 1995, 1994 and 1993, respectively. This represents an 18.2% increase for 1995 over 1994 and a 24.8% increase for 1994 over 1993. These improvements in net interest income resulted from an increase in average earning assets and a relatively stable net interest spread. Average earning assets increased $39,521,000 to $278,314,000 in 1995 and increased $15,062,000 to $238,793,000 in 1994. Net interest spread and net interest margin were 4.37% and 5.31%, respectively, in 1995 and 4.48% and 5.24%, respectively, in 1994. Rates rose in the first quarter of 1995, held steady until mid year and then began falling. The Bank's prime lending rate was 8.5% at both December 31, 1995 and 1994. Its highest point was from February through early July of 1995 at 9.0%. Average rates earned on earning assets increased 104 basis points and average rates paid on interesting bearing liabilities increased 115 basis points when comparing 1995 to 1994. As shown by the Interest Rate Sensitivity Analysis, Bancorp's interest bearing liabilities slightly exceed its interest earning assets on a cumulative repricing basis through one year. This position, which is termed a negative interest sensitivity gap, generally allows for a positive impact on net interest income in periods of declining interest rates and a negative impact on net interest income during periods of rising interest rates. In Bancorp's case, during periods of falling rates, variable rate loans reprice immediately. While deposit rates will respond by dropping, they will not drop as quickly nor as drastically. To mitigate the impact of falling rates, Bancorp's interest rate risk management strategy has included a shift from primarily variable rate loans to a mix of variable and fixed rate loans, which at December 31, 1995, was 52% and 48%, respectively. For purposes of the Interest Rate Sensitivity Analysis, Bancorp includes 50% of interest bearing checking accounts in the 0-365 day categories and 50% of these accounts in the 1-5 year category. At December 31, 1995, the negative interest sensitivity gap was 1.9% through one year. Bancorp's one year cumulative gap position as of December 31, 1994 was a positive position of 1.4%. As interest rates change in the market, rates earned on assets do not necessarily move identically with rates paid on liabilities. Proper asset and liability management involves the matching of short-term interest sensitive assets and liabilities to reduce interest rate risk. The Bank manages its interest rate risk by adjusting the mix of fixed and variable rate loans. The Bank also attempts to match fixed rate loans and securities against longer term fixed rate time deposits. 6 MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION INTEREST RATE SENSITIVITY ANALYSIS DECEMBER 31, 1995
NON- INTEREST 0-90 91-180 181-365 1-5 OVER 5 BEARING (Dollars in thousands) DAYS DAYS DAYS YEARS YEARS FUNDS TOTAL - -------------------------------------------------------------------------------------------------------------------------------- ASSETS Loans, net of unearned income $141,098 $ 5,971 $11,138 $81,302 $16,126 $ 1,212 $256,847 Securities 5,125 1,115 4,260 25,380 6,375 878 43,133 Other assets - - - - - 24,374 24,374 -------- -------- -------- --------- -------- -------- -------- TOTAL ASSETS 146,223 7,086 15,398 106,682 22,501 26,464 $324,354 -------- -------- -------- --------- -------- -------- -------- -------- SOURCES OF FUNDS Interest bearing deposits 82,627 20,483 58,522 69,600 901 - $232,133 Short-term borrowings 13,094 - - - - - 13,094 Subordinated debentures - - - - 607 - 607 Non-interest bearing deposits - - - - - 48,460 48,460 Other liabilities - - - - - 2,446 2,446 Stockholders' equity - - - - - 27,614 27,614 -------- -------- -------- --------- -------- -------- -------- TOTAL SOURCES OF FUNDS 95,721 20,483 58,522 69,600 1,508 78,520 $324,354 -------- -------- -------- --------- -------- -------- -------- -------- INTEREST SENSITIVITY GAP 50,502 (13,397) (43,124) 37,082 20,993 (52,056) -------- -------- -------- --------- -------- -------- -------- -------- -------- --------- -------- -------- CUMULATIVE INTEREST SENSITIVITY GAP $ 50,502 $ 37,105 (6,019) $ 31,063 $ 52,056 $ - -------- -------- -------- --------- -------- -------- -------- -------- -------- --------- -------- -------- CUMULATIVE INTEREST SENSITIVITY GAP AS A PERCENT OF TOTAL ASSETS AT PERIOD END 15.6% 11.4% (1.9)% 9.6% 16.0% ------ ----- ------ ------ ------ ------ ----- ------ ------ ------
7 MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION The following table presents the increases in net interest income due to changes in volume and rate computed on a tax equivalent basis and indicates how net interest income in 1995 was impacted by volume increases and the higher average interest rate environment. The tax equivalent adjustments are based on a 34% tax rate.
TAXABLE EQUIVALENT RATE/VOLUME ANALYSIS 1995/1994 1994/1993 - ----------------------------------------------------------------------------------------------------------------------------------- INCREASE (DECREASE) INCREASE (DECREASE) NET DUE TO NET DUE TO (In thousands) CHANGE RATE VOLUME CHANGE RATE VOLUME - ----------------------------------------------------------------------------------------------------------------------------------- INTEREST INCOME Loans $5,813 $2,208 $3,605 $2,369 $1,332 $1,037 Federal funds sold 34 176 (142) 223 115 108 Mortgage loans held for sale 134 (2) 136 33 23 10 Securities U.S. Treasury and federal agencies (13) 8 (21) (15) (5) (10) States and political subdivisions 90 (32) 122 (82) (20) (62) Other securities 31 28 3 20 18 2 ------- ------ ------ ------ ------ ------ TOTAL INTEREST INcome 6,089 2,386 3,703 2,548 1,463 1,085 ------- ------ ------ ------ ------ ------ INTEREST EXPENSE Deposits Interest bearing demand deposits 180 81 99 128 (6) 134 Savings deposits 238 118 120 111 18 93 Money market deposits 111 364 (253) 203 94 109 Time deposits 3,178 1,228 1,950 (541) (462) (79) Securities sold under agreements to repurchase and federal funds purchased 42 200 (158) 148 174 (26) Short-term borrowings 45 44 1 16 15 1 Subordinated debentures 14 15 (1) - - - ------- ------ ------ ------ ------ ------ TOTAL INTEREST EXPENSE 3,808 2,050 1,758 65 (167) 232 ------- ------ ------ ------ ------ ------ NET INTEREST INCOME $2,281 336 $1,945 $2,483 $1,630 853 ------- ------ ------ ------ ------ ------ ------- ------ ------ ------ ------ ------
8 MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION PROVISION FOR LOAN LOSSES In determining the provision for loan losses charged to expense, management carefully considers many factors. Among these are the quality of the loan portfolio, previous loss experience, the size and composition of the loan portfolio and an assessment of the impact of current economic conditions on borrowers. Responding to these factors, management provided $1,260,000 in 1995. The provision for loan losses was $1,000,000 in 1994 and $820,000 in 1993. At December 31, 1995, the allowance for loan losses was 1.78% of year-end loans compared to 1.76% at December 31, 1994. While the Bank's charge off history has been well below industry average, management felt it prudent to increase the allowance for loan losses in 1995. The Bank has expanded to new locations and the loan portfolio has grown significantly. Management also considered the economic outlook as well as the credits on the classified and watch loan lists. The increased provision responded to these factors. The Bank's loan portfolio continues to be 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, 1995, is adequate to absorb anticipated losses in the loan portfolio as of this date. Statement of Financial Accounting Standards (SFAS) No. 114, "Accounting by Creditors for Impairment of a Loan," became effective for Bancorp in 1995. SFAS No. 114, as amended by SFAS No. 118, "Accounting by Creditors for Impairment of a Loan -- Income Recognition and Disclosures," sets forth methodology to be used in determining any impairment of loans where it is probable that a creditor will be unable to collect all principal and interest amounts due according to the contractual terms of the note. The adoption of SFAS Nos. 114 and 118 did not have a significant impact on Bancorp's financial condition or results of its operations. Presented below is a schedule of loan loss experience and selected data relating to the allowance for loan losses. SUMMARY OF LOAN LOSS EXPERIENCE
YEARS ENDED DECEMBER 31 - -------------------------------------------------------------------------------------------------------------- (Dollars in thousands) 1995 1994 1993 - -------------------------------------------------------------------------------------------------------------- Balance January 1 $3,649 $2,752 $2,179 Provision for loan losses 1,260 1,000 820 Loan charge-offs, net of recoveries (402) (103) (247) -------- -------- -------- Balance December 31 $4,507 $3,649 $2,752 -------- -------- -------- -------- -------- -------- Average loans, net of unearned income $229,674 $190,409 $177,629 Loans outstanding at year end, net of unearned income $252,937 $207,274 $187,700 RATIOS Provision for loan losses to average loans .55% .53% .46% Net charge-offs to average loans .18% .05% .14% Allowance for loan losses to average loans 1.96% 1.92% 1.55% Allowance for loan losses to year end loans 1.78% 1.76% 1.47% Loan loss coverage 17.95x 53.51x 17.57x
9 MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION NON-INTEREST INCOME AND EXPENSES Non-interest income increased by 34.1% in 1995 as compared to 1994, and decreased .2% in 1994 as compared to 1993. The largest component of non-interest income is investment management and trust fee income which increased 38.6% in 1995 and 12.3% in 1994. The investment management and trust department has established a reputation of personalized service and superior investment returns. Trust assets under management, through customer retention and attraction of new business, grew to $343 million as of December 31, 1995 as compared to $231 million as of December 31, 1994. Growth in the department's assets include both personal and employee benefit accounts. Service charges on deposit accounts increased 19.9% over 1994. Growth in deposit accounts, arising primarily from new banking locations, presented opportunities for increased fee income in this area. Additionally, rates for some deposit services were raised in 1995. The Bank operates a mortgage banking company as a department of the Bank. This department originates residential mortgage loans and sells the loans in the secondary market. The department offers conventional, VA and FHA financing as well as a program for low income first time home buyers. Loans are made for both purchase and refinancing of homes. Gains on sales of mortgage loans were $736,000 in 1995 as compared to $525,000 and $624,000 in 1994 and 1993, respectively. Interest rates on conventional mortgage loans directly impact the volume of business transacted by the mortgage banking department. Rates were at a twenty year low during 1993 and high loan volume boosted earnings in that year; as rates rose throughout 1994, the volume of loans originated declined. Falling rates in 1995 stimulated the volume of loans originated, and the increase in gains on sales of these loans is reflective of volume increases. Other non-interest income increased in 1995 as compared to 1994 by $153,000 or 49.8% and decreased $197,000 in 1994 compared to 1993. The 1995 increase is due to several contributing factors, none of which are individually significant. Other non-interest income was unusually high in 1993 due to insurance proceeds reimbursing prior years' losses and higher levels of fee income generated by the mortgage banking company. Total non-interest expenses increased 16.9% in 1995 over 1994, and 15.2% in 1994 over 1993. Salaries and employee benefits, the largest non-interest expense category, increased 17.6% in 1995 and 19.6% in 1994. The 1995 and 1994 increases occurred, in part, as a result of regular salary increases and new employees added to support the Bank's expansion. As of December 31, 1995, the Bank had 188 full time equivalent employees (FTEs). As of December 31, 1994, that total was 162 FTEs. Additionally, a performance incentive program was implemented in 1993; increasing earnings in 1993, 1994 and 1995 have qualified certain bank employees for incentive compensation. Further, as salary expense increases, so do corresponding employee benefit expenses. It should be noted there are no significant obligations for post-retirement or post-employment benefits. Net occupancy expense increased 19.3% in 1995 and 20.3% in 1994. Occupancy expenses have increased as the Bank has continued its expansion plans. In 1995 the Bank opened its Outer Loop banking center and Elizabethtown loan production office. In 1994 the Bank's Dixie Highway banking center opened. In 1993 and 1992, the Poplar Level, St. Matthews and Middletown banking centers were opened. Furniture and equipment expense increased 22.9% in 1995 compared to 1994 and 1.8% in 1994 compared to 1993. Expansion and investments in computer technology resulted in the significant 1995 increase. FDIC insurance premiums decreased 41.4% for 1995 and increased 5.2% for 1994. The decrease for 1995 is due entirely to revised premium rates charged to banks. The Bank is assessed the lowest possible premium rates based on evaluation factors addressed by regulators. In 1996 the Bank will pay only the $2,000 minimum charge assessed on well capitalized, well managed institutions. Other non-interest expenses increased 22.8% in 1995 and 11.8% in 1994. The increase in both years largely related to the Bank's expansion. Among costs which increased significantly were delivery, communication and supplies. Management continues to identify cost containment opportunities where expense reductions can be made without sacrificing the level of service to customers. INCOME TAXES Bancorp had income tax expense of $1,900,000 in 1995 compared to $1,411,000 in 1994 and $1,004,000 in 1993. The effective rates were 31.9%, 31.3%, and 28.5%, respectively. The increases in the effective tax rates are largely due to a decreasing proportion of tax exempt interest. 10 MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION FINANCIAL CONDITION EARNING ASSETS AND INTEREST BEARING LIABILITIES Total consolidated assets of Bancorp at December 31, 1995 increased 18.4% to $324,354,000 from $273,848,000 at December 31, 1994. Average assets for 1995 increased 16.9% over 1994 to $295,892,000. During 1995, Bancorp increased its net average earning assets to $55,310,000 from $50,062,000 during 1994. The growth of average earning assets was primarily in the area of loans with lesser increases in the areas of mortgage loans held for sale and securities. Loan demand continued to increase during 1995. Commercial and industrial loans increased 3.7% and real estate mortgage loans increased 34.9%. Consumer loans increased 27.6% and lease financing receivables decreased 53.6% as compared to the end of 1994. The Bank has made a management decision not to pursue lease financing as a primary line of business. Effective January 1, 1994, Bancorp adopted SFAS No. 115, "Accounting for Certain Investments in Debt and Equity Securities." The primary effects of the adoption of this accounting principle were that securities available for sale are carried at fair value, and unrealized gain and/or losses are reported, net of tax effect, as a separate component of stockholders' equity. As permitted by transition guidelines for SFAS No. 115, Bancorp reassessed the appropriateness of the classification of securities and, in December 1995, transferred securities with a book value of $15,117,000 and an unrealized gain of $370,000 from the held to maturity category to the available for sale category. Neither the Bank nor Bancorp holds any derivative financial instruments as defined by SFAS No. 119, "Disclosures About Derivative Financial Instruments and Fair Value of Financial Instruments." The Bank does have, in its portfolios of securities, FHLMC and FNMA issued collateralized mortgage obligations (CMOs) with a par value of approximately $9,600,000. Management monitors these securities on an ongoing basis and has determined these not to be high risk. With respect to the total portfolio of securities held to maturity, market value exceeded amortized cost at December 31, 1995 by 1.3%. At December 31, 1994, amortized cost exceeded market value by 2.8%. Growth of average interest bearing liabilities occurred in most categories; however money market deposit accounts and securities sold under agreements to repurchase decreased during 1995. With interest rates falling in the last half of 1995, some depositors chose to shift funds to time deposit accounts. Average time deposits increased 46% in 1995 from the 1994 average. Interest bearing demand deposits increased 19%, and savings accounts averaged 34% higher in 1995 as compared to 1994. Overall, average interest bearing deposits increased 22% in 1995. Average balances of securities sold under agreements to repurchase decreased 21% in 1995. Commercial depositors have the opportunity to enter into a sweep agreement whereby excess demand deposit balances are transferred to a separate account. This balance is then used to purchase securities sold under agreements to repurchase. Another sweep alternative was introduced in 1994 whereby excess balances are invested in third party mutual funds. Since that time, average balances of securities sold under agreements to repurchase have declined. 11 MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION AVERAGE BALANCES AND INTEREST RATES - TAXABLE EQUIVALENT BASIS
YEAR 1995 YEAR 1994 - ----------------------------------------------------------------------------------------------------------- AVERAGE AVERAGE AVERAGE AVERAGE (Dollars in thousands) BALANCES INTEREST RATE BALANCES INTEREST RATE - ----------------------------------------------------------------------------------------------------------- EARNING ASSETS Federal funds sold $ 7,635 $ 477 6.25% $ 10,490 $ 443 4.22% Mortgage loans held for sale 3,158 248 7.85 1,430 114 7.97 Securities U.S. Treasury and federal agencies 31,294 2,164 6.92 31,591 2,177 6.89 States and political subdivisions 5,706 415 7.27 4,073 325 7.98 Other securities 847 86 10.15 800 55 6.88 Loans, net of unearned income 229,674 22,038 9.60 190,409 16,225 8.52 -------- ------- ---- -------- ------- ---- TOTAL EARNING ASSETS 278,314 25,428 9.14 238,793 19,339 8.10 ------- ---- Less allowance for loan losses 4,115 3,157 -------- -------- 274,199 235,636 NON-EARNING ASSETS Cash and due from banks 10,721 9,180 Premises and equipment 5,672 4,057 Accrued interest receivable and other assets 5,300 4,266 -------- -------- TOTAL ASSETS $295,892 $253,139 -------- -------- -------- -------- INTEREST BEARING LIABILITIES Deposits Interest bearing demand deposits $25,471 $ 649 2.55% $ 21,325 $ 469 2.20% Savings deposits 14,733 541 3.67 11,012 303 2.75 Money market deposits 48,540 1,833 3.78 56,155 1,722 3.07 Time deposits 118,611 6,755 5.70 81,098 3,577 4.41 Securities sold under agreements to repurchase and federal funds purchased 13,128 707 5.39 16,626 665 4.00 Short-term borrowings 1,914 115 6.01 1,898 70 3.69 Subordinated debentures 607 45 7.41 617 31 5.02 -------- ------- ---- -------- ------- ---- TOTAL INTEREST BEARING LIABILITIES 223,004 10,645 4.77 188,731 6,837 3.62 -------- ------- ---- -------- ------- ---- NON-INTEREST BEARING LIABILITIES Non-interest bearing demand deposits 44,340 39,377 Accrued interest payable and other liabilities 2,584 1,711 -------- -------- TOTAL LIABILITIES 269,928 229,819 STOCKHOLDERS' EQUITY 25,964 23,320 -------- -------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $295,892 $253,139 -------- -------- -------- -------- NET INTEREST INCOME $14,783 $12,502 ------- ------- ------- ------- NET INTEREST SPREAD 4.37% 4.48% ---- ---- ---- ---- NET INTEREST MARGIN 5.31% 5.24% ---- ---- ---- ----
12 MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION NONPERFORMING LOANS AND ASSETS AND ALLOWANCE FOR LOAN LOSSES Nonperforming loans, which include nonaccrual loans and restructured loans, totaled $1,212,000 at December 31, 1995. The threshold at which loans are generally transferred to nonaccrual of interest status is 90 days past due, and at December 31, 1995, there were no accruing loans which were past due over ninety days which were not well secured and in the process of collection. Nonperforming loans aggregated $428,000 at December 31, 1994. These loans represent .48% of total loans at year end 1995 compared to .21% in 1994. Nonperforming assets include nonperforming loans and other real estate owned. Because there was no other real estate owned at December 31, 1995, nonperforming assets totaled $1,212,000. This represents .37% of total assets at year end compared to .16% in 1994. In addition to the nonperforming loans discussed above, there were loans for which payments were current or less than 90 days past due where borrowers are experiencing financial difficulties. These loans of approximately $5,700,000 are monitored by management and considered in determining the level of the allowance for loan losses. Management feels these loans present no significant loss exposure. The allowance for loan losses is discussed in detail under the heading "Provision for Loan Losses." LIQUIDITY The role of liquidity 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. Due to the nature of services offered by the Bank, management prefers to focus on transaction accounts and full service relationships with customers. However, because the Bank has approximately 2% of the market share in its market area, management has the ability to increase deposits at any time by offering rates slightly higher than the market rate. The Bank has a number of sources of funds to meet its liquidity needs on a daily basis. An increase in loans affects liquidity as the repayment of principal and interest are a daily source of funds. The deposit base, consisting of consumer and commercial deposits and large dollar denomination ($100,000 and over) certificates of deposit, is another source of funds. The majority of these deposits are from long-term customers and are 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 continue to provide an available source of liquidity, although this source is seldom used. 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. To date, the Bank has not accessed this source of funds. Bancorp's liquidity depends primarily on the dividends paid to it as the sole shareholder of the Bank. As discussed in note 12 to Bancorp's consolidated financial statements, the Bank may pay up to $5,162,000 in dividends to Bancorp without regulatory approval. CAPITAL At December 31, 1995, stockholders' equity totaled $27,614,000, an increase of $3,279,000 or 13.5% over 1994. This increase was due to the strong earnings of 1995 coupled with a philosophy to retain approximately 70% of earnings in equity. Cash dividends declared increased 26.3% over 1994 to $.72 per share. In September 1994 and 1993, the Board of Directors declared 10% stock dividends which were distributed in November, 1994 and 1993, respectively. These dividends were declared to enhance shareholder value by increasing the shares of Bancorp's stock outstanding and therefore provide for a wider distribution and improved marketability of Bancorp shares. 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. 13 MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION At December 31, 1995, Bancorp's tier 1 and total risk based capital ratios were 11.1% and 12.0%, respectively. These ratios exceed the 4.0% tier 1 and 8.0% total risk based capital minimums. A minimum leverage ratio, adopted by the Federal Reserve Board to assist in the assessment of capital adequacy, supplements the risk based capital requirements. The minimum leverage ratio is 3.0%; however, most bank holding companies are required to maintain a minimum in excess of that amount. Bancorp's leverage ratio at December 31, 1995 and 1994 was 8.4% and 8.9%, respectively. ACCOUNTING PRONOUNCEMENTS EFFECTIVE IN 1996 The Financial Accounting Standards Board issued several statements during 1995 which are effective for Bancorp beginning in 1996. SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long- Lived Assets to Be Disposed Of," requires long-lived assets be reviewed for appropriate valuation. Should events or changes in circumstances indicate future cash flows from the asset to be less than the carrying value, a loss should be recognized based upon the fair value of the asset. Long-lived assets to be disposed of will be reported at the lower of carrying value or fair value less costs to sell. For a banking organization, bank premises and equipment and other real estate acquired in satisfaction of a debt would be the most likely assets subject to this pronouncement. Because Bancorp's other real estate assets are carried at the lower of cost or fair value minus estimated selling costs, and bank premises and equipment are deployed in operating facilities, management does not expect the adoption of SFAS No. 121 to have an effect on Bancorp's financial position or results of operations. SFAS No. 122, "Accounting for Mortgage Servicing Rights," applies to all companies with mortgage banking operations. The Statement requires capitalization of mortgage servicing rights, regardless of whether they were acquired through purchase or origination activities. Prior to the issuance of the Statement, only purchased mortgage servicing rights were capitalized. The new standard effectively eliminates the accounting distinction between originated and purchased mortgage servicing rights. Bancorp's mortgage division sells loans servicing released and does not purchase loans or servicing rights. Therefore, this new standard will have no effect on Bancorp's financial position or results of operations. SFAS No. 123, "Accounting for Stock-Based Compensation," introduces the use of a new fair value based method of accounting for stock-based compensation arrangements, but permits companies to retain the current intrinsic value based method prescribed by Accounting Principles Board (APB) Opinion No. 25, "Accounting for Stock Issued to Employees." Under the fair value based method of accounting, compensation expense would be recognized for stock options and other equity instruments granted to employees based upon their fair value at the grant date. The intrinsic value based method prescribed by APB No. 25 recognizes compensation cost for stock options when the option exercise price is less than the market value of the underlying stock. Companies not following the new fair value method will be required to provide expanded disclosures of net income and earnings per share as if they had adopted the fair value accounting method. Bancorp intends to continue using the intrinsic value based method and will provide expanded disclosures related to the fair value method of accounting for stock-based compensation. 14 MARKET DATA AND SELECTED FINANCIAL DATA Bancorp's common stock is traded on the NASDAQ Small Cap market under the symbol SYBA. The table below sets forth the quarterly high and low market prices of Bancorp's common stock, and dividends declared per share. The payments of dividends by Bank to Bancorp is subject to the restriction described in note 12 to the consolidated financial statements. On December 31, 1995, Bancorp had 706 shareholders of record. MARKET DATA
YEAR 1995 YEAR 1994 - ---------------------------------------------------------------------------------------- CASH DIVIDENDS CASH DIVIDENDS QUARTER HIGH LOW DECLARED HIGH LOW DECLARED - ---------------------------------------------------------------------------------------- First $34.00 $29.00 $.160 $26.36 $25.00 $.120 Second 39.25 32.75 .180 28.18 25.68 .145 Third 39.38 36.50 .180 28.41 26.59 .145 Fourth 42.50 39.25 .200 29.50 27.25 .160
SELECTED FINANCIAL DATA
YEARS ENDED DECEMBER 31 - ------------------------------------------------------------------------------------------------------- (Dollars in thousands, except per share data) 1995 1994 1993 1992 1991 - ------------------------------------------------------------------------------------------------------- Net interest income $ 14,609 $ 12,338 $ 9,811 $ 8,729 $ 7,892 Provision for loan losses 1,260 1,000 820 720 720 Net income 4,056 3,101 2,515 2,005 1,907 PER SHARE DATA Primary net income $ 2.46 $ 1.89 $ 1.54 $ 1.24 $ 1.18 Fully diluted net income 2.46 1.89 1.54 1.23 1.18 Cash dividends declared .72 .57 .41 .33 .32 AVERAGES Stockholders' equity $ 25,964 $ 23,320 $ 21,011 $ 19,064 $ 17,349 Assets 295,892 253,139 236,015 225,704 203,021 Subordinated debentures 607 617 617 634 634 RATIOS Average stockholders' equity to average assets 8.77% 9.21% 8.90% 8.45% 8.55% Return on average stockholders' equity 15.62 13.30 11.97 10.52 10.99 Return on average assets 1.37 1.23 1.07 .89 .94
15 CONSOLIDATED FINANCIAL STATEMENTS CONSOLIDATED BALANCE SHEETS
DECEMBER 31 - -------------------------------------------------------------------------------------- (In thousands, except share data) 1995 1994 - -------------------------------------------------------------------------------------- ASSETS Cash and due from banks (note 2) $ 16,229 $ 10,350 Federal funds sold - 8,000 Mortgage loans held for sale 3,910 2,035 Securities available for sale (amortized cost $15,117 in 1995 and $4,002 in 1994) (note 3) 15,545 4,034 Securities held to maturity (approximate market value $27,933 in 1995 and $35,283 in 1994) (note 3) 27,588 36,277 Loans (note 4) 252,978 207,412 Less Allowance for loan losses 4,507 3,649 Unearned income 41 138 -------- -------- Net loans 248,430 203,625 Premises and equipment (note 5) 6,817 4,900 Accrued interest receivable 2,192 1,822 Other assets (note 6) 3,643 2,805 -------- -------- TOTAL ASSETS $324,354 $273,848 -------- -------- -------- -------- LIABILITIES Deposits (note 7) Non-interest bearing $ 48,460 $ 47,974 Interest bearing 232,133 181,802 -------- -------- Total deposits 280,593 229,776 Securities sold under agreements to repurchase 12,349 14,483 Short-term borrowings 745 2,831 Accrued interest payable and other liabilities (note 10) 2,446 1,816 Subordinated debentures (note 8) 607 607 -------- -------- TOTAL LIABILITIES 296,740 249,513 -------- -------- STOCKHOLDERS' EQUITY Common stock, no par value; 3,000,000 shares authorized; issued and outstanding 1,627,334 in 1995 and 1,620,311 in 1994 (note 11) 5,423 5,400 Surplus 13,245 13,137 Retained earnings (note 12) 8,664 5,777 Net unrealized gain on securities available for sale (note 3) 282 21 -------- -------- TOTAL STOCKHOLDERS' EQUITY 27,614 24,335 -------- -------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $324,354 $273,848 -------- -------- -------- --------
See accompanying notes to consolidated financial statements. 16 CONSOLIDATED FINANCIAL STATEMENTS CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31 - -------------------------------------------------------------------------------------------- (In thousands, except per share data) 1995 1994 1993 - -------------------------------------------------------------------------------------------- INTEREST INCOME Loans $21,988 $16,156 $13,767 Federal funds sold 477 443 220 Mortgage loans held for sale 248 114 81 U.S. Treasury and federal agencies 2,164 2,177 2,192 Obligations of states and political subdivisions 291 230 288 Other securities 86 55 35 ------- ------- ------- TOTAL INTEREST INCOME 25,254 19,175 16,583 ------- ------- ------- INTEREST EXPENSE Deposits 9,778 6,071 6,170 Securities sold under agreements to repurchase and federal funds purchased 707 665 517 Short-term borrowings 115 70 54 Subordinated debentures 45 31 31 ------- ------- ------- TOTAL INTEREST EXPENSE 10,645 6,837 6,772 ------- ------- ------- NET INTEREST INCOME 14,609 12,338 9,811 Provision for loan losses (note 4) 1,260 1,000 820 ------- ------- ------- NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 13,349 11,338 8,991 ------- ------- ------- NON-INTEREST INCOME Investment management and trust services 2,086 1,505 1,340 Gain on sales of securities available for sale - - 119 Gain on sales of mortgage loans held for sale 736 525 624 Service charges on deposit accounts 1,241 1,035 793 Other 460 307 504 ------- ------- ------- TOTAL NON-INTEREST INCOME 4,523 3,372 3,380 ------- ------- ------- NON-INTEREST EXPENSES Salaries and employee benefits (note 10) 6,694 5,692 4,761 Net occupancy expense 904 758 630 Furniture and equipment expense 1,175 956 939 FDIC insurance 261 445 423 Other 2,882 2,347 2,099 ------- ------- ------- TOTAL NON-INTEREST EXPENSES 11,916 10,198 8,852 ------- ------- ------- INCOME BEFORE INCOME TAXES 5,956 4,512 3,519 Income tax expense (note 6) 1,900 1,411 1,004 ------- ------- ------- NET INCOME 4,056 3,101 2,515 ------- ------- ------- ------- ------- ------- NET INCOME PER SHARE (NOTE 1) PRIMARY $ 2.46 $ 1.89 $ 1.54 ------- ------- ------- ------- ------- ------- FULLY DILUTED 2.46 1.89 1.54 ------- ------- ------- ------- ------- -------
See accompanying notes to consolidated financial statements. 17 CONSOLIDATED FINANCIAL STATEMENTS CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
THREE YEARS ENDED DECEMBER 31, 1995 - ----------------------------------------------------------------------------------------------------------------------------- COMMON STOCK NUMBER RETAINED NET UNREALIZED (In thousands, except for share and per share data) OF SHARES AMOUNT SURPLUS EARNINGS SECURITIES GAINS TOTAL - ----------------------------------------------------------------------------------------------------------------------------- Balance December 31, 1992 1,322,520 4,408 6,754 8,907 - 20,069 Net income - - - 2,515 - 2,515 Stock options exercised 5,860 20 51 - - 71 Cash dividends, $.41 per share - - - (654) - (654) 10% stock dividend 132,420 441 2,631 (3,072) - - --------- ------ ------- ------ ---- ------- Balance December 31, 1993 1,460,800 4,869 9,436 7,696 - 22,001 Net income - - - 3,101 - 3,101 Stock options exercised 12,912 42 88 - - 130 Cash dividends, $.57 per share - - - (918) - (918) 10% stock dividend 146,599 489 3,613 (4,102) - - Net unrealized gain on securities available for sale - - - - 21 21 --------- ------ ------- ------ ---- ------- Balance December 31, 1994 1,620,311 5,400 13,137 5,777 21 24,335 NET INCOME - - - 4,056 - 4,056 STOCK OPTIONS EXERCISED 7,023 23 108 - - 131 CASH DIVIDENDS, $.72 PER SHARE - - - (1,169) - (1,169) NET UNREALIZED GAIN ON SECURITIES AVAILABLE FOR SALE - - - - 261 261 --------- ------ ------- ------ ---- ------- BALANCE DECEMBER 31, 1995 1,627,334 $5,423 $13,245 $8,664 $282 $27,614 --------- ------ ------- ------ ---- ------- --------- ------ ------- ------ ---- -------
See accompanying notes to consolidated financial statements. 18 CONSOLIDATED FINANCIAL STATEMENTS CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31 - ---------------------------------------------------------------------------------------------------------- (In thousands) 1995 1994 1993 - ---------------------------------------------------------------------------------------------------------- OPERATING ACTIVITIES Net income $ 4,056 $ 3,101 $ 2,515 Adjustments to reconcile net income to cash provided by operating activities Provision for loan losses 1,260 1,000 820 Depreciation, amortization and accretion, net 819 736 733 Provision for deferred income taxes (247) (342) (179) Gain on sales of mortgage loans held for sale (736) (525) (624) Gain on sales of securities available for sale - - (119) Gain on sales of other real estate owned - - (19) (Increase) decrease in mortgage loans held for sale (1,139) 2,230 (743) (Increase) decrease in accrued interest receivable (370) (438) 12 (Increase) decrease in other assets (694) (654) 72 Increase (decrease) in accrued interest payable 415 92 (257) Increase in other liabilities 149 255 223 ---------- ---------- ---------- NET CASH PROVIDED BY OPERATING ACTIVITIES 3,513 5,455 2,434 ---------- ---------- ---------- INVESTING ACTIVITIES Net (increase) decrease in federal funds sold 8,000 (5,000) (1,000) Purchases of securities available for sale - (6,994) - Proceeds from sales of securities available for sale - - 1,839 Proceeds from maturities of securities available for sale 4,034 9,472 323 Purchases of securities held to maturity (36,967) (45,903) (29,100) Proceeds from maturities of securities held to maturity 30,483 45,805 29,166 Net increase in loans (46,065) (19,677) (15,148) Purchases of premises and equipment (2,712) (1,839) (1,206) Proceeds from sales of other real estate owned - - 563 ---------- ---------- ---------- NET CASH USED IN INVESTING ACTIVITIES (43,227) (24,136) (14,563) ---------- ---------- ---------- FINANCING ACTIVITIES Net increase in deposits 50,817 30,243 6,730 Net increase (decrease) in securities sold under agreements to repurchase and federal funds purchased (2,134) (5,710) 805 Net increase (decrease) in short-term borrowings (2,086) (1,225) 966 Decrease in subordinated debentures - (10) - Exercise of stock options 99 105 56 Cash dividends paid (1,103) (848) (597) ---------- ---------- ---------- NET CASH PROVIDED BY FINANCING ACTIVITIES 45,593 22,555 7,960 ---------- ---------- ---------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 5,879 3,874 (4,169) CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 10,350 6,476 10,645 ---------- ---------- ---------- CASH AND CASH EQUIVALENTS AT END OF YEAR $ 16,229 $ 10,350 $ 6,476 ---------- ---------- ---------- ---------- ---------- ----------
Income tax payments were $2,266,000 in 1995, $1,699,000 in 1994 and $1,258,000 in 1993. Cash paid for interest was $10,230,000 in 1995, $6,745,000 in 1994 and $7,029,000 in 1993. Noncash investing and financing activities aggregated $15,203,000 in 1995, $24,000 in 1994 and $6,737,000 in 1993. Included in these totals were transfers from loans to other real estate owned of $22,000 in 1995 and $225,000 in 1993, and a transfer of securities held to maturity to securities available for sale of $15,149,000 in 1995 and $6,500,000 in 1993. See accompanying notes to consolidated financial statements. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 19 (1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES BASIS OF PRESENTATION The consolidated financial statements have been prepared in conformity with generally accepted accounting principles (GAAP). The accounting policies which have a significant effect on financial position, results of operations and cash flows are summarized below. PRINCIPLES OF CONSOLIDATION, NATURE OF OPERATIONS AND USE OF ESTIMATES IN THE FINANCIAL STATEMENTS 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. The Bank engages in commercial and retail banking services, trust and investment management services, and mortgage banking services. The Bank's offices are located throughout Louisville and Jefferson County, Kentucky and its market area is Louisville and surrounding communities. The preparation of financial statements in conformity with GAAP requires management 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. STATEMENT OF CASH FLOWS For purposes of reporting cash flows, Bancorp considers cash and due from banks to be cash equivalents. SECURITIES Effective January 1, 1994, Bancorp adopted Statement of Financial Accounting Standards (SFAS) No. 115, "Accounting for Certain Investments in Debt and Equity Securities." The primary effects of the adoption of this principle were that securities available for sale are carried at fair value, and unrealized gains and/or losses are reported net of tax effect, as a separate component of stockholders' equity. Securities which are intended to be held until maturity are carried at amortized historical cost. Securities available for sale include securities which may be sold in response to changes in interest rates, resultant prepayment risk and other factors. Amortization of premiums and accretion of discounts are recorded using the interest method. Gains or losses on sales of securities are computed on a specific identification cost basis. LOANS Loans are stated at the unpaid principal balance. Interest income on loans is recorded on the accrual basis except for those loans in a nonaccrual income status. Interest received on non-accrual loans is either applied to principal or recorded as interest income according to management's judgement as to collectibility of principal. Loans are placed in a nonaccrual 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. Effective January 1, 1995, Bancorp adopted SFAS No. 114, "Accounting by Creditors for Impairment of a Loan," as amended by SFAS No. 118, "Accounting by Creditors for Impairment of a Loan -- Income Recognition and Disclosures." These statements require that impaired loans be measured based on the present value of future cash flows discounted at the loan's effective interest rate or as a practical alternative, at the loan's observable market price or fair value of the collateral if the loan is collateral dependent. The implementation of these accounting standards did not have a significant impact on Bancorp's financial position or results of operations. MORTGAGE LOANS HELD FOR SALE Mortgage loans held for sale are carried at the lower of aggregate cost or market value. Gains on sales of mortgage loans are recorded at the time of funding by an investor at the difference between the sales proceeds and the loan's carrying value. ALLOWANCE FOR LOAN LOSSES The allowance for loan losses is maintained at a level that adequately provides for potential losses. Management determines the adequacy of the allowance based on reviews of individual credits, recent loss experience, current economic conditions, the risk characteristics of the various categories of loans and such other factors that, in management's judgement, 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. PREMISES AND EQUIPMENT Premises and equipment are carried at cost, less accumulated depreciation and amortization. Depreciation of premises and equipment is computed using both accelerated and straight-line methods over the estimated useful lives of the assets. Leasehold improvements are amortized on the straight-line method over NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 20 the terms of the related lease or over the useful life of the improvements, whichever is shorter. OTHER ASSETS Included in other assets is real estate acquired in settlement of loans. Other real estate owned is carried at the lower of cost or 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. Expenses incurred in maintaining assets, write-downs to reflect subsequent declines in value and realized gains or losses are reflected in operations for the period. INCOME TAXES Bancorp accounts for income taxes in accordance with SFAS No. 109, "Accounting for Income Taxes," which requires the use of the asset and liability approach to accounting for income taxes. 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. Under Statement No. 109, the effect on deferred taxes and liabilities of a change in tax rates is recognized as income in the period that includes the enactment date. NET INCOME PER SHARE Net income per share has been computed on the basis of the weighted average number of shares of common stock outstanding each year, adjusted for the effects of common stock equivalents (stock options). Average shares outstanding for primary and fully diluted net income per share are presented below.
1995 1994 1993 - ----------------------------------------------------------- Primary 1,648,824 1,642,228 1,635,667 Fully diluted 1,649,682 1,644,327 1,638,521
(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. At December 31, 1995, the amount of those required reserve balances was approximately $3,374,000. (3) SECURITIES The amortized cost and approximate market value of securities available for sale as of December 31, 1995 and 1994 follow:
APPROXIMATE AMORTIZED UNREALIZED MARKET (In thousands) COST GAINS LOSSES VALUE - ------------------------------------------------------------------------ DECEMBER 31, 1995 U.S. Treasury and federal agencies $13,972 $427 $ - $14,399 Mortgage-backed securities 1,145 1 - 1,146 ------- ---- ---- ------- $15,117 $428 $ - $15,545 ------- ---- ---- ------- ------- ---- ---- ------- DECEMBER 31, 1994 U.S. Treasury and federal agencies 4,002 32 $ - 4,034 ------- ---- ---- ------- ------- ---- ---- -------
The amortized cost and approximate market value of securities held to maturity as of December 31, 1995 and 1994 follow:
Approximate Amortized Unrealized Market (In thousands) Cost Gains Losses Value - ------------------------------------------------------------------------ DECEMBER 31, 1995 U.S. Treasury and federal agencies $ 9,079 $127 $ - $ 9,206 Mortgage-backed securities 10,046 127 11 10,162 Obligations of states and political subdivisions 7,585 127 25 7,687 Other 878 - - 878 ------- ---- --- ------- $27,588 $381 $36 $27,933 ------- ---- --- ------- ------- ---- --- ------- DECEMBER 31, 1994 U.S. Treasury and federal agencies $24,798 $ 31 $ 623 $24,206 Mortgage-backed securities 6,957 3 342 6,618 Obligations of states and political subdivisions 3,697 2 65 3,634 Other 825 - - 825 ------- ---- ------ ------- $36,277 $ 36 $1,030 $35,283 ------- ---- ------ ------- ------- ---- ------ -------
As permitted under certain 1995 transition guidelines for SFAS No. 115, Bancorp reassessed the appropriateness of the classification of securities and, in December 1995, transferred securities with a book value of $15,117,000 and an unrealized net gain of $370,000 from the held to maturity to the available for sale category. A summary of debt securities as of December 31, 1995 based on maturity is presented below. Actual maturities may differ NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 21 from contractual maturities because issuers may have the right to call or prepay obligations. Therefore, in the case of mortgage backed securities, the expected remaining life is reflected rather than contractual maturities.
SECURITIES SECURITIES HELD TO MATURITY AVAILABLE FOR SALE - ------------------------------------------------------------------------ AMORTIZED APPROXIMATE AMORTIZED APPROXIMATE (In thousands) COST MARKET VALUE COST MARKET VALUE - ------------------------------------------------------------------------ Due within one year $ 7,275 $ 7,301 $ 3,182 $ 3,225 Due after one year through five years 13,060 13,346 11,935 12,320 Due after five years through ten years 6,375 6,408 - -
Securities with a par value, which approximates carrying value, of approximately $29,816,000 at December 31, 1995 and $32,862,000 at December 31, 1994 were pledged to secure public deposits and certain borrowings. (4) LOANS The composition of loans as of December 31, 1995 and 1994 follows:
(In thousands) 1995 1994 - -------------------------------------------------------- Commercial and industrial $ 80,520 $ 77,661 Real estate mortgage 152,945 113,351 Consumer 18,708 14,664 Lease financing 805 1,736 -------- -------- $252,978 $207,412 -------- -------- -------- --------
The bank's credit exposure is diversified with secured and unsecured loans to individuals, small businesses and corporations. No specific industry concentration exceeds 10% of loans. While the Bank has a diversified loan portfolio, a customer's ability to honor contracts is reliant 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 area which encompasses Louisville, Kentucky and surrounding communities. The principal balance of impaired loans at December 31, 1995 was approximately $1,212,000. Impaired loans with a Statement No. 114 valuation allowance were approximately $231,000. The amount of Statement No. 114 valuation allowance was $109,000. Impaired loans with no Statement No. 114 valuation allowance was $981,000. The average balance of impaired loans for 1995 was approximately $1,438,000. Interest income recorded on these loans was recorded on the cash basis and totaled $175,000. The principal balance of nonaccrual and restructured loans at December 31, 1994 was $428,000. Interest that would have been recorded if all such loans were on a current status in accordance with their original terms was approximately $37,000 in 1994 and $17,000 in 1993. The amount of interest income recorded for such loans was approximately $32,000 in 1994 and $25,000 in 1993. Loans to directors and their associates, including loans to companies of which directors are principal owners, and executive officers amounted to approximately $1,610,000 and $3,946,000 at December 31, 1995 and 1994, respectively. These loans were made on substantially the same terms, and interest rates and collateral, as those prevailing at the same time for other customers. During 1995 new loans of $4,004,000 were made to officers and directors and affiliated companies, repayments amounted to $4,305,000 and changes in directors, and/or their affiliated companies, involved a net decrease of $2,035,000. An analysis of the changes in the allowance for loan losses for the years ended December 31, 1995, 1994 and 1993 follows:
(In thousands) 1995 1994 1993 - -------------------------------------------------------------------- BALANCE AT JANUARY 1 $3,649 $2,752 $2,179 Provision for loan losses 1,260 1,000 820 ------ ------ ------ 4,909 3,752 2,999 ------ ------ ------ Loans charged off 530 184 327 Recoveries 128 81 80 ------ ------ ------ Net loan charge-offs 402 103 247 ------ ------ ------ BALANCE AT DECEMBER 31 $4,507 $3,649 $2,752 ------ ------ ------ ------ ------ ------
(5) PREMISES AND EQUIPMENT A summary of premises and equipment follows:
DECEMBER 31 - -------------------------------------------------------------------- (In thousands) 1995 1994 - -------------------------------------------------------------------- Land $ 1,403 $ 656 Buildings and improvements 5,049 4,047 Furniture and equipment 4,989 4,363 ------- ------ $11,441 9,066 Less accumulated depreciation and amortization 4,624 4,166 ------- ------ $ 6,817 $4,900 ------- ------ ------- ------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 22 (6) INCOME TAXES Income taxes consist of the following:
(In thousands) 1995 1994 1993 - --------------------------------------------------------------------- APPLICABLE TO OPERATIONS: Current $2,147 $1,753 $1,183 Deferred (247) (342) (179) ------- ------- ------- Total applicable to operations 1,900 1,411 1,004 CHARGED (CREDITED) TO STOCKHOLDERS' EQUITY: Unrealized gain on securities available for sale 134 11 - Stock options exercised (32) (25) (15) ------- ------- ------- $2,002 $1,397 989 ------- ------- ------- ------- ------- -------
An analysis of the difference between the statutory and effective tax rates follows:
YEARS ENDED DECEMBER 31 - --------------------------------------------------------------------- (In thousands) 1995 1994 1993 - --------------------------------------------------------------------- U.S. Federal income tax rate 34.0% 34.0% 34.0% Changes from statutory rate resulting from tax exempt interest (1.9) (2.4) (4.1) Other, net (.2) (.3) (1.4) -------- -------- -------- 31.9% 31.3% 28.5% -------- -------- -------- -------- -------- --------
The effects of temporary differences that gave rise to significant portions of the deferred tax assets and deferred tax liabilities were as follows:
YEARS ENDED DECEMBER 31 - ------------------------------------------------------------ (In thousands) 1995 1994 - ------------------------------------------------------------ DEFERRED TAX ASSETS Allowance for loan losses $1,309 $1,018 Deferred compensation 296 264 Other 51 42 ------ ------ TOTAL DEFERRED TAX ASSETS 1,656 1,324 ------ ------ ------ ------ DEFERRED TAX LIABILITIES Property and equipment 271 234 Securities 242 60 ------ ------ TOTAL DEFERRED TAX LIABILITIES 513 294 ------ ------ NET DEFERRED TAX ASSETS $1,143 $1,030 ------ ------ ------ ------
No valuation allowance for deferred tax assets was recorded as of December 31, 1995 because Bancorp and the Bank have had sufficient taxable income to allow for utilization of the future deductible amounts within the carryback period. (7) DEPOSITS Included in deposits are certificates of deposit and other time deposits in denominations of $100,000 or more in the amounts of $33,398,000 and $22,482,000 at December 31, 1995 and 1994, respectively. Interest expense related to certificates of deposit and other time deposits in denominations of $100,000 or more was $1,545,000, $837,000 and $1,074,000, respectively, for the years ended December 31, 1995, 1994 and 1993. (8) SUBORDINATED DEBENTURES The Bank has redeemable subordinated debentures outstanding which are due October 1, 2049. The interest on these debentures is at a variable rate equal to one percent less than the Bank's prime rate adjusted annually on January 1 of each year. The Bank's prime rate was 8.5% at December 31, 1995. The debentures are subordinated in right of payment to the claims of creditors and depositors of the Bank. The debentures are subject to redemption only by the Bank at 100% of the principal amount thereof, 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. (9) ADVANCES FROM THE FEDERAL HOME LOAN BANK The Bank has entered into an agreement with the Federal Home Loan Bank of Cincinnati (FHLB) which enables the Bank to borrow under terms to be established at the time of the advance. Advances from the FHLB would be collateralized by certain first mortgage loans under a blanket mortgage collateral agreement and FHLB stock. The Bank has not taken any advances under this agreement. (10) EMPLOYEE BENEFIT PLANS The Bank has an employee stock ownership plan, a money purchase plan and a deferred income (401(k)) profit sharing plan. These plans are defined contribution plans and are available to all employees meeting the eligibility requirements. The expenses related to all plans for 1995, 1994 and 1993 were $457,000, $400,000 and $351,000, respectively. Contributions are made in accordance with the terms of the plans. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 23 The Bank also sponsors an unfunded, non-qualified, defined benefit retirement plan for certain key officers. At December 31, 1995 the accumulated obligation for this plan was $1,025,000. Expense under the plan was $71,000 in 1995, $104,000 in 1994 and $97,000 in 1993. The Bank's obligation for other post-retirement and post-employment benefits is not significant. (11) COMMON STOCK OPTIONS In 1995 shareholders approved a stock incentive plan which provides for granting of options to Bank employees and non-employee directors to purchase up to 80,000 shares of common stock. Under this plan, options for 54,600 shares were granted in 1995 leaving 25,400 available for future grant. Bancorp also has a stock option plan under which all options have been granted. Outstanding options are exercisable with the exception of those granted in 1995 and 1994 which vest 20% per year over a five year period. All options were granted at the fair market value of common stock at time of grant and expire ten years after grant except for 18,700 options to purchase stock at $3.45 per share (below fair market value at time of grant) which never expire. Activity with respect to outstanding options follows:
SHARES PRICE PER SHARE - ------------------------------------------------------------------ Outstanding at December 31, 1992 56,265 $ 3.45 - $24.79 Exercised in 1993 (6,743) 3.45 - 24.79 Expired in 1993 (1,936) 17.35 - 24.79 -------- Outstanding at December 31, 1993 47,586 3.45 - 24.79 Exercised in 1994 (13,570) 7.03 - 17.35 Granted in 1994 12,680 25.68 -------- Outstanding at December 31, 1994 46,696 3.45 - 25.68 Exercised in 1995 (7,023) 7.03 - 29.00 Granted in 1995 54,600 29.00 - 33.50 -------- OUTSTANDING AT DECEMBER 31, 1995 94,273 $ 3.45 - $33.50 -------- ------ ------ -------- ------ ------
(12) 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, 1996, the retained earnings of the Bank available for payment of dividends without regulatory approval were approximately $5,162,000. (13) COMMITMENTS AND CONTINGENT LIABILITIES As of December 31, 1995, the Bank had various commitments and contingent liabilities outstanding which arose in the normal course of business, such as standby letters of credit and commitments to extend credit, which are properly not reflected in the consolidated financial statements. In management's opinion, commitments to extend credit of $63,382,000, including standby letters of credit of $8,156,000, represent normal banking transactions, and no significant losses are anticipated to result therefrom. The Bank's exposure to credit loss in the event of non-performance 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 it does for on-balance sheet instruments. Market risk arises on fixed rate commitments if interest rates move adversely subsequent to the extension of the commitment. 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 many of the commitments are expected to expire without being drawn upon, the total commitment amounts do 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 counterparty. 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. Bancorp is involved in various claims and legal actions arising in the ordinary course of business. Management believes the ultimate disposition of these matters will not have a material adverse effect on Bancorp's consolidated financial position or results of operations. NOTES TO CONSOLIDATED FIANANCIAL STATEMENTS 24 The Bank leases certain facilities and improvements under non-cancelable operating leases. Future minimum lease commitments for these leases are $439,000 in 1996, $424,000 in 1997, $397,000 in 1998, $322,000 in 1999 and $300,000 in 2000 and $1,487,000 in the aggregate thereafter until 2005. Rent expense, net of sublease income, was $446,000 in 1995, $399,000 in 1994 and $292,000 in 1993. (14) FAIR VALUE OF FINANCIAL INSTRUMENTS The estimated fair values of Bancorp's financial instruments are as follows:
CARRYING FAIR (In thousands) AMOUNT VALUE - ------------------------------------------------------------ DECEMBER 31, 1995 FINANCIAL ASSETS Cash and short-term investments $ 16,229 $ 16,229 Securities 43,133 43,478 Loans 252,340 253,332 FINANCIAL LIABILITIES Deposits $ 280,593 $ 282,007 Short-term borrowings 13,094 13,094 Subordinated debentures 607 607 Commitments to extend credit - - Standby letters of credit - 122 DECEMBER 31, 1994 FINANCIAL ASSETS Cash and short-term investments $ 18,350 $ 18,350 Securities 40,311 39,317 Loans 205,660 201,896 FINANCIAL LIABILITIES Deposits $ 229,776 $ 229,431 Short-term borrowings 17,314 17,314 Subordinated debentures 607 607 Commitments to extend credit - - Standby letters of credit - 107
The following methods and assumptions were used to estimate the fair value of each class of financial instrument for which it is practicable to estimate that value. CASH, SHORT-TERM INVESTMENTS AND SHORT-TERM BORROWINGS For these short-term investments, 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. LOANS The fair value of loans is estimated by discounting the 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-maturity certificates of deposit is estimated by discounting the future cash flows using rates currently offered for deposits of similar remaining maturities. OTHER DEBT 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 credit-worthiness 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 discreet 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. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 25 (15) S.Y. BANCORP, INC. (PARENT COMPANY ONLY) CONDENSED BALANCE SHEETS
DECEMBER 31 - ----------------------------------------------------------------- (In thousands) 1995 1994 - ----------------------------------------------------------------- ASSETS Cash on deposit with subsidiary bank $ 723 $ 705 Investment in subsidiary bank 26,566 23,363 Dividend receivable 325 259 Other assets 453 267 ------- ------- TOTAL ASSETS $28,067 $24,594 ------- ------- ------- ------- LIABILITIES AND STOCKHOLDERS' EQUITY Dividends payable $ 325 $ 259 Other liabilities 128 - Stockholders' equity 27,614 24,335 ------- ------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $28,067 $24,594 ------- ------- ------- -------
CONDENSED STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31 - ------------------------------------------------------------------ (In thousands) 1995 1994 1993 - ------------------------------------------------------------------ Income - Dividends from subsidiary bank $1,169 $ 918 $ 654 Expenses 83 56 51 ------ ----- ----- Income before income taxes and equity in undistributed net income of subsidiary 1,086 862 603 Federal income tax benefit 28 19 17 ------ ----- ----- Income before equity in undistributed net income of subsidiary 1,114 881 620 Equity in undistributed net income of subsidiary 2,942 2,220 1,895 ------ ----- ----- NET INCOME $4,056 $3,101 $2,515 ------ ----- ----- ------ ----- -----
CONDENSED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31 - ------------------------------------------------------------------------------------------------ (In thousands) 1995 1994 1993 - ------------------------------------------------------------------------------------------------ CASH FLOWS FROM OPERATING ACTIVITIES Net income $ 4,056 $ 3,101 $ 2,515 Adjustment to reconcile net income to net cash provided by operating activities Equity in undistributed net income of subsidiary (2,942) (2,220) (1,895) Increase in dividend receivable (66) (70) (57) Increase in other assets (154) (23) (14) Increase in other liabilities 128 - - -------- -------- -------- NET CASH PROVIDED BY OPERATING ACTIVITIES 1,022 788 549 -------- -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES Exercise of stock options 99 105 56 Cash dividends paid (1,103) (848) (597) -------- -------- -------- NET CASH USED IN FINANCING ACTIVITIES (1,004) (743) (541) -------- -------- -------- NET INCREASE IN CASH 18 45 8 CASH AT BEGINNING OF YEAR 705 660 652 -------- -------- -------- CASH AT END OF YEAR $ 723 $ 705 $ 660 -------- -------- -------- -------- -------- --------
REPORT OF INDEPENDENT AUDITORS 26 TO THE SHAREHOLDERS AND BOARD OF DIRECTORS, S.Y. BANCORP, INC.: We have audited the accompanying consolidated balance sheets of S.Y. Bancorp, Inc. (Bancorp) and subsidiary as of December 31, 1995 and 1994, and the related consolidated statements of income, changes in stockholders' equity, and cash flows for each of the years in the three-year period ended December 31, 1995. These consolidated financial statements are the responsibility of Bancorp'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 generally accepted auditing standards. 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, 1995 and 1994, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 1995, in conformity with generally accepted accounting principles. As discussed in note 1 to the consolidated financial statements, Bancorp adopted the provisions of the Financial Accounting Standards Board's Statement of Financial Accounting Standards No. 115, "Accounting for Certain Investments in Debt and Equity Securities," in 1994. KPMG PEAT MARWICK LLP Louisville, Kentucky January 19, 1996 EX-21 5 EXHIBIT 21 EXHIBIT 21 TO ANNUAL REPORT ON FORM 10-K Subsidiaries of the Registrant. Stock Yards Bank & Trust Company 1040 East Main Street Louisville, Kentucky 40206 EX-23 6 EXHIBIT 23 EXHIBIT 23 CONSENT OF INDEPENDENT AUDITORS The Board of Directors S.Y. Bancorp, Inc. We consent to incorporation by reference in the Registration Statements Nos. 33- 96740, 33-96742 and 33-25885 on Form S-8 and 33-96744 on Form S-3 of S.Y. Bancorp, Inc. of our report dated January 19, 1996, relating to the consolidated balance sheets of S.Y. Bancorp, Inc. and subsidiary as of December 31, 1995 and 1994, and the related consolidated statements of income, changes in stockholders' equity, and cash flows for each of the years in the three-year period ended December 31, 1995, which report appears in the 1995 annual report to shareholders, which is incorporated by reference in the December 31, 1995 Form 10-K of S.Y. Bancorp, Inc. Our report refers to a change in the method of accounting for certain investments in debt and equity securities in 1994. Louisville, Kentucky March 27, 1996 EX-27 7 EXHIBIT 27
9 This schedule contains summary financial information extracted from the consolidated financial statements of S. Y. Bancorp, Inc. and is qualified in its entirety by reference to such financial statements. 1,000 YEAR DEC-31-1995 JAN-01-1995 DEC-31-1995 16,229 0 0 0 15,545 27,588 27,933 252,937 4,507 324,354 280,593 745 14,795 607 0 0 5,423 22,191 324,354 21,988 2,541 725 25,254 9,778 10,645 14,609 1,260 0 11,916 5,956 4,056 0 0 4,056 2.46 2.46 9.14 1,212 0 0 5,700 3,649 530 128 4,507 3,447 0 1,060
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