FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
For the quarterly period ended June 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _________________ to ______________________.
Commission file number 17262.
S. Y. BANCORP, INC.
(Exact name of registrant as specified in its charter)
Kentucky 61-1137529
(State or other jurisdiction) (I.R.S. Employer Identification No.)
1040 East Main Street, Louisville, Kentucky, 40206
(Address of principal executive offices)
(502) 582-2571
(Registrant's telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all
reports 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 ___
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Common Stock, no par value - 3,276,475
shares issued and outstanding at August 12, 1997
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
The following consolidated financial statements of S.Y. Bancorp, Inc.
and Subsidiaries, Stock Yards Bank & Trust Company (Kentucky)
and Stock Yards Bank & Trust Company (Indiana), are submitted herewith:
Consolidated Balance Sheets
June 30, 1997 and December 31, 1996
Consolidated Statements of Income
for the three months ended June 30, 1997 and 1996
Consolidated Statements of Income
for the six months ended June 30, 1997 and 1996
Consolidated Statements of Cash Flows
for the six months ended June 30, 1997 and 1996
Notes to Consolidated Financial Statements
<PAGE>
<TABLE>
S. Y. BANCORP, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
June 30, 1997 and December 31, 1996
<CAPTION>
<S>
June 30, 1997 December 31, 1996
(In thousands, except share data)
Assets
<C> <C>
Cash and due from banks $ 22,986 $ 15,348
Federal funds sold 600 4,500
Mortgage loans held for sale 4,922 4,362
Securities available for sale (amortized
cost $29,500 in 1997 and $19,111 in 1996) 29,610 19,441
Securities held to maturity (approximate market
value $31,006 in 1996 and $56,055 in 1996) 31,011 56,079
Loans 327,926 301,548
Allowance for loan losses 5,575 5,155
------- -------
Net loans 322,351 296,393
Premises and equipment 12,582 10,079
Accrued interest receivable 2,684 2,299
Other assets 6,928 6,864
------- -------
TOTAL ASSETS $433,674 $415,365
======= =======
Liabilities and Stockholders' Equity
Deposits
Non-interest bearing $ 67,110 $ 63,627
Interest bearing 306,215 291,624
------- -------
Total deposits 373,325 355,251
Securities sold under agreements
to repurchase and federal funds purchased 16,911 19,728
Short-term borrowings 3,969 2,668
Accrued interest payable and
other liabilities 3,315 3,427
Long-term debt 2,185 2,697
------- -------
TOTAL LIABILITIES 399,705 383,771
======= =======
Stockholders' equity
Common stock, no par value; 5,000,000
shares authorized; 3,275,675 and
3,271,480 shares issued and
outstanding in 1997 and 1996, respectively 5,465 5,451
Surplus 13,480 13,390
Retained earnings 14,950 12,535
Net unrealized gain on securities
available for sale, net of tax 74 218
------- ------
TOTAL STOCKHOLDERS' EQUITY 33,969 31,594
------- -------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $433,674 $415,365
======= =======
See accompanying notes to consolidated financial statements
</TABLE>
<PAGE>
<TABLE>
S.Y. BANCORP, INC. AND SUBSIDIARIES
Consolidated Statements of Income
For the three months ended June 30, 1997 and 1996
<CAPTION> 1997 1996
(In thousands, except share and per share data)
<S>
Interest income <C> <C>
Loans $7,405 $6,123
Federal funds sold 63 27
Mortgage loans held for sale 72 150
U.S. Treasury and Federal agencies 915 590
Obligations of states and political
subdivisions 98 99
----- -----
Total interest income 8,553 6,989
----- -----
Interest expense
Deposits 3,389 2,780
Securities sold under agreements
to repurchase and federal funds purchased 243 183
Short-term borrowings 30 18
Long-term debt 43 12
----- -----
Total interest expense 3,705 2,993
----- -----
Net interest income 4,848 3,996
Provision for loan losses 225 180
Net interest income after ----- -----
provision for loan losses 4,623 3,816
----- -----
Non-interest income
Investment management and trust services 862 608
Service charges on deposit accounts 496 382
Gains on sales of mortgage loans
held for sale 275 294
Other 220 129
----- -----
Total non-interest income 1,853 1,413
----- -----
Non-interest expenses
Salaries and employee benefits 2,316 1,889
Net occupancy expense 278 252
Furniture and equipment expense 414 327
Other 883 784
----- -----
Total non-interest expenses 3,891 3,252
----- -----
Income before income taxes 2,585 1,977
Income tax expense 864 641
----- -----
Net income $1,721 $1,336
===== =====
Net income per share
Primary and fully diluted $ .51 $ .40
===== =====
Average common shares
Primary 3,397,506 3,364,358
Fully diluted 3,399,799 3,368,534
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
S.Y. BANCORP, INC. AND SUBSIDIARY
Consolidated Statements of Income
For the six months ended June 30, 1997 and 1996
<CAPTION> 1997 1996
(In thousands, except share and per share data)
<S>
Interest income <C> <C>
Loans $14,466 $11,981
Federal funds sold 243 76
Mortgage loans held for sale 129 231
U.S. Treasury and Federal agencies 1,738 1,133
Obligations of states and political
subdivisions 194 195
------ ------
Total interest income 16,770 13,616
------ ------
Interest expense
Deposits 6,752 5,485
Securities sold under agreements
to repurchase and federal funds purchased 395 334
Short-term borrowings 52 38
Long-term debt 86 23
----- -----
Total interest expense 7,285 5,880
----- -----
Net interest income 9,485 7,736
Provision for loan losses 450 360
----- -----
Net interest income after
provision for loan losses 9,035 7,376
----- -----
Non-interest income
Investment management and trust services 1,508 1,139
Service charges on deposit accounts 940 735
Gains on sales of mortgage loans
held for sale 488 489
Gains on sales of securities
available for sale 80 35
Other 417 249
----- -----
Total non-interest income 3,433 2,647
----- -----
Non-interest expenses
Salaries and employee benefits 4,633 3,722
Net occupancy expense 533 484
Furniture and equipment expense 771 672
Other 1,750 1,577
----- -----
Total non-interest expenses 7,687 6,455
Income before income taxes 4,781 3,568
Income tax expense 1,577 1,160
----- -----
Net income $3,204 $2,408
===== =====
Net income per share
Primary and fully diluted $ .94 $ .72
===== =====
Average common shares
Primary 3,390,675 3,358,552
Fully diluted 3,395,395 3,367,978
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
S.Y. BANCORP, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
For the six months ended June 30, 1997 and 1996
<CAPTION>
(In thousands)
<S> 1997 1996
Operating Activities <C> <C>
Net income $ 3,204 $ 2,408
Adjustments to reconcile net income to net cash
provided (used) by operating activities:
Provision for loan losses 450 360
Depreciation, amortization and accretion, net 649 510
Gains on sales of mortgages held for sale ( 488) ( 489)
Gains on sales of securities available for sale ( 80) ( 35)
(Increase) decrease in mortgage loans held for sale ( 72) ( 3,587)
(Increase) decrease in accrued interest receivable ( 385) ( 20)
(Increase) decrease in other assets ( 197) ( 312)
Increase (decrease) in accrued interest payable 78 63
Increase (decrease) in other liabilities 256) 397
------- -------
Net cash provided (used) by operating activities 2,903 ( 705)
------- -------
Investing Activities
Net (increase) decrease in federal funds sold 3,900 -
Purchases of securities held to maturity ( 10,994) ( 16,500)
Purchases of securities available for sale ( 17,749) ( 6,996)
Proceeds from maturities of securities held to maturity 36,128 9,164
Proceeds from maturities of securities available for sale 3,348 1,010
Proceeds from sales of securities available for sale 4,026 4,885
Proceeds from sales of other real estate owned 172 -
Net (increase) decrease in loans ( 26,408) ( 18,240)
Purchases of premises and equipment ( 3,115) ( 1,663)
-------- --------
Net cash provided (used) by investing activities ( 10,692) ( 28,340)
-------- --------
Financing Activities
Net increase (decrease) in deposits 18,074 20,104
Net increase (decrease) in securities sold under
agreements to repurchase and federal funds purchased ( 2,817) 4,454
Net increase (decrease) in short-term borrowings 1,301 2,977
Issuance of common stock for options and dividend
reinvestment plan 104 84
Cash dividends paid ( 723) ( 655)
Repayments of long-term debt ( 512) -
------ -------
Net cash provided (used) by financing activities 15,427 26,964
------ ------
Net increase (decrease) in cash and cash equivalents 7,638 ( 2,081)
Cash and cash equivalents at beginning of period 15,348 16,229
------- -------
Cash and cash equivalents at end of period $ 22,986 $ 14,148
======= ========
Income tax payments were $1,644,000 in 1997, and $1,276,000 in 1996.
Cash paid for interest was $7,363,000 in 1997, and $5,817,000 in 1996.
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
S.Y. BANCORP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(1) Summary of Significant Accounting Policies
The accompanying unaudited consolidated financial statements have
been prepared in accordance with the instructions to Form 10-Q and
do not include all information and footnotes required by generally
accepted accounting principles for complete financial statements.
The consolidated financial statements of S.Y. Bancorp, Inc. and
Subsidiaries reflect all adjustments (consisting only of adjustments
of a normal recurring nature) which are, in the opinion of management,
necessary for a fair presentation of financial condition and results
of operations for the interim periods.
The consolidated financial statements include the accounts of S.Y.
Bancorp, Inc. and its wholly owned subsidiaries, Stock Yards Bank &
Trust Company, a Kentucky bank, and Stock Yards Bank & Trust Company,
an Indiana bank. All significant intercompany transactions have been
eliminated in consolidation. The Indiana Bank was acquired on October 1,
1996, and its operations are reflected in the consolidated financial
statements subsequent to that date.
A description of other significant accounting policies is presented
in the Consolidated Financial Statements for the year ended
December 31, 1996 included in S.Y. Bancorp, Inc.'s Annual Report,
and its Form 10-K for the year then ended.
Interim results for the quarter and/or six month period ended
June 30, 1997 are not necessarily indicative of the results for the
entire year.
Bancorp's common stock split 2-for-1 in August, 1996. The split
was effected in the form of a 100% stock dividend. All share
and per share information has been restated to reflect the stock split.
On January 1, 1997, Bancorp implemented Statement of Financial
Accounting Standard ("SFAS") No. 125, "Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities."
Under this standard, accounting for transfers and servicing of
financial assets and extinguishments of liabilities is based on control.
After a transfer of financial assets, an entity recognizes the
financial and servicing assets it controls and the liabilities it has
incurred, derecognizes financial assets when control has been surrendered
and derecognizes liabilities when extinguished. The implementation of SFAS
No. 125 did not have a material effect on Bancorp's consolidated
financial statements because Bancorp does not have sgnificant transactions
of this nature.
<PAGE>
(2) Allowance for Loan Losses
An analysis of the changes in the allowance for loan losses for the
six months ended June 30 follows (in thousands):
1997 1996
Beginning balance $5,155 $4,507
Provision for loan losses 450 360
Loans charged off ( 52) ( 54)
Recoveries 22 25
----- -----
Ending balance $5,575 $4,838
===== =====
Information regarding impaired loans at June 30, 1997 follows:
Recorded investment in impaired loans $ 855,000
Impaired loans with Statement 114 valuation allowance $ 9,000
Amount of Statement 114 valuation allowance $ 9,000
Amount of impaired loans without Statement 114
valuation allowance $ 846,000
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
This item discusses the results of operations for S.Y. Bancorp, Inc.
("Bancorp"), and its subsidiaries, Stock Yards Bank & Trust Company
("the Kentucky Bank") and Stock Yards Bank & Trust Company ("the Indiana Bank")
for the three and six months ended June 30, 1997 and compares those periods
with the same periods of the previous year. Unless otherwise indicated, all
references in this discussion to the "Banks" include Bancorp. In addition,
the discussion describes the significant changes in the financial condition
of the Banks that have, occurred during the first six months of 1997 compared to
December 31, 1996. This discussion should be read in conjunction with
the consolidated financial statements and accompanying notes presented in
Part I, Item 1 of this report.
A. RESULTS OF OPERATIONS
Net income of $1,721,000 for the three months ended June 30, 1997
increased $385,000 or 28.8% from $1,336,000 for the comparable 1996
period. Net income per share on a fully diluted basis was $.51 for
the second quarter of 1997, an increase of 27.5% from the $.40 for the
same period in 1996. Return on average assets and return on average
stockholders' equity were 1.62% and 20.63%, respectively, for the second
quarter of 1997, compared to 1.65% and 18.52%, respectively, for the same
period in 1996.
<PAGE>
Net income of $3,204,000 for the six months ended June 30, 1997 increased
$796,000 or 33.1% from $2,408,000 for the comparable 1996 period. Net income
per share on a fully diluted basis was $.94 for the first six months of 1997,
an increase of 30.6% from the $.72 for the same period in 1996. Return on
average assets and return on average stockholders' equity were 1.55% and
19.70%, respectively, for the first six months of 1997, compared to
1.47% and 16.93%, respectively, for the same period in 1996.
The following paragraphs provide an analysis of the significant
factors affecting operating results and financial condition.
Net Interest Income
In thousands except percentages
Three Months Ended Six Months Ended
June 30 June 30
1997 1996 1997 1996
Interest income $ 8,553 $ 6,989 $ 16,770 $ 13,616
Tax equivalent 45 52 89 103
----- ----- ------ ------
Interest income, tax
equivalent basis 8,598 7,041 16,859 13,719
Total interest expense 3,705 2,993 7,285 5,880
------ ------ ------ ------
Net interest income , tax
equivalent basis (1) $ 4,893 $ 4,048 $ 9,574 $ 7,839
====== ====== ====== ======
Net interest spread (2),
annualized 4.17% 4.23% 4.12% 4.17%
Net interest margin (3),
annualized 4.98% 5.13% 4.95% 5.08%
Notes:
(1) Net interest income, the most significant component of the Banks'
earnings,is total interest income less total interest expense. 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.
(2) Net interest spread is the difference between the taxable equivalent rate
earned on interest earning assets less the rate expensed on interest bearing
liabilities.
<PAGE>
(3) Net interest margin represents net interest income on a taxable
equivalent basis as a percentage of average interest 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.
Fully taxable equivalent net interest income of $4,893,000 for the three
months ended June 30, 1997 increased $845,000 or 20.9% from $4,048,000 for the
same period last year. For the six months ended June 30, 1997, net interest
income of $9,574,000 increased $1,735,000 or 22.1 % from $7,839,000 for
the same period last year. Net interest spread and net interest margin were
4.17% and 4.98%, respectively, for the second quarter of 1997 and 4.23% and
5.13%, respectively, for the second quarter of 1996. Net interest spread and
margin were 4.12% and 4.95%, respectively, for the first six months of
1997 and 4.17% and 5.08%, respectively, for the same period in 1996.
In the relatively stable interest rate environment, higher yielding
interest earning assets have matured. Thus, net interest spread and
margin are decreasing.
Average earning assets increased $79,733,000, or 25.7% to $389,982,000
for the first six months of 1997 compared to 1996. Average interest bearing
liabilities increased $69,231,000 or 27.7% to $319,452,000 for the first six
months of 1997 compared to 1996.
Interest rate sensitivity has a major impact on the earnings of the Banks.
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 interest sensitive assets
and liabilities to reduce interest rate risk. The Banks manage interest rate
risk by primarily making variable rate loans. The Banks do, however, make
fixed rate loans which are matched, along with investment securities against
longer term fixed rate time deposits. The Banks' largest interest earning
asset is loans and approximately half of the loan portfolio is comprised of
variable rate loans. Variable rate loans reprice immediately with a change
in prime rates. Deposits, the Banks' largest interest bearing liability, do
not respond nearly as quickly nor as significantly to changes in market
interest rates. At June 30, 1997, interest earning assets repricing within
one year slightly exceeded interest bearing liabilities repricing
within one year. A position of interest earning assets repricing more quickly
than interest bearing liabilities generally allows for a positive impact on
net interest income in periods of rising interest rates and a negative impact
in periods of declining interest rates. The cumulative interest sensitivity
gap through one year was approximately 6.5% and Bancorp believes it has the
ability to effectively manage its interest sensitivity gap to control the degree
of interest rate risk on the balance sheet.
<PAGE>
Provision for Loan Losses
The allowance for loan losses is based on management's continuing review 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 judgment, deserve current recognition in
estimating loan losses.
An analysis of the changes in the allowance for loan losses and selected
ratios follow:
Six months ended
June 30
(In thousands except percentages)
1997 1996
Balance at January 1 $ 5,155 $ 4,507
Provision for loan losses 450 360
Loan charge-offs, net of recoveries ( 30) ( 29)
------- --------
Balance at June 30 $ 5,575 $ 4,838
======= =======
Average loans, net of unearned income $314,736 $262,159
Provision for loan losses to average loans (1) .29% .27%
Net loan charge-offs to average loans (1) .02% .02%
Allowance for loan losses to average loans 1.77% 1.85%
Allowance for loan losses to period-end loans 1.70% 1.78%
(1) Amounts annualized
Non-interest Income and Expenses
The following table sets forth the major components of non-interest income and
expenses for the three and six months ended June 30, 1997 and 1996.
In thousands
Three Months Ended Six Months Ended
June 30 June 30
1997 1996 1997 1996
Non-interest income
Investment management and
trust services $ 862 $ 608 $ 1,508 $ 1,139
Service charges on
deposit accounts 496 382 940 735
Gains on sales of mortgage
loans held for sale 275 294 488 489
Gains on sales of securities
available for sale - - 80 35
Other 220 129 417 249
----- ----- ---- -----
Total non-interest income $1,853 $1,413 $ 3,433 $ 2,647
====== ===== ====== ======
<PAGE>
Non-interest expenses
Salaries and employee
benefits $2,316 $1,889 $ 4,633 $ 3,722
Net occupancy expense 278 252 533 484
Furniture and equipment
expense 414 327 771 672
Other 883 784 1,750 1,577
------ ----- ----- -----
Total non-interest
expenses $3,891 $3,252 $ 7,687 $ 6,455
===== ===== ===== =====
Non-interest income increased $440,000, or 31.1%, for the second quarter
of 1997, and $786,000 or 30.0% for the first six months of 1997, compared to
the same periods in 1996. Trust income increased $254,0000 or 41.8% in the
second quarter of 1997 and $369,000 or 32.4% in the first half of 1997, as
compared to the same periods in 1996. Trust assets under management at June 30,
1997 were $595,000,000 as compared to $470,000,000 at December 31, 1996.
Service charges on deposit accounts increased $114,000 or 29.8% in the
second quarter of 1997 and $205,000 or 27.9% in the first six months of 1997,
as compared to the same periods in 1996. Growth in deposit accounts spurred
by the introduction of new deposit products and by the opening of new branch
offices has presented opportunities for increased fee income in this area.
Additionally, rates for some deposit services were raised in the second
quarter of 1996.
Gains on sales of mortgage loans were $275,000 in the second quarter of
1997 compared to $294,000 in 1996 and $488,000 in the first half of 1997, as
compared to $489,000 in 1996. The Kentucky Bank operates a mortgage banking
company which originates residential mortgage loans and sells the loans in
the secondary market. The volume of loans originated by the mortgage company
has increased more than the gains on sales would indicate. Profit margins on
these loans have decreased markedly as competition in the industry has
increased.
Gains on sales of securities available for sale during the first quarter
of both 1997 and 1996 occurred as management sold lower yielding, shorter
term securities for intermediate term, higher yielding securities.
Other non-interest income increased $91,000 or 70.5% in the second
quarter of 1997 and $168,000 or 67.5% in the first half of 1997 compared to
1996. Numerous factors contribute to this increase including the addition of a
brokerage function in the first quarter of 1996.
<PAGE>
Non-interest expenses increased $639,000 or 19.6% for the second quarter
of 1997 and $1,232,000 or 19.1% for the first six months of 1997 compared to
the same periods in 1996. Salaries and employee benefits increased $427,000,
or 22.6%, for the second quarter of 1997 and $911,000 or 24.5% for the first
half of 1997 compared to the same periods in 1996. These increases arose in
part from regular salary increases. Also, employees have been added
throughout 1997 and 1996 with the opening of new branches. The Banks had 231
full time equivalent employees as of June 30, 1997 and 207 full time
equivalents as of June 30, 1996. In addition, the Banks have an incentive
plan in place which is based on profitability and employee performance.
Expense accrues throughout the year, and with higher earnings and a growing
employee base, these incentives have increased. Net occupancy expense
increased $26,000 or 10.3% in the second quarter of 1997 and $49,000 or 10.1%
for the first six months of 1997, as compared to 1996. Furniture and equipment
expense increased $87,000, or 26.6%, for the second quarter of 1997 and $99,000
or 14.7% for the first half of 1997 compared to 1996. These increases are
largely due to the opening of new banking centers. In 1996 the Kentucky Bank
opened its Stony Brook and Springhurst banking centers and the Indiana Bank
was acquired. In 1997, the Stony Brook branch moved into its permanent
facility, and the historic rehabilitation of the Bourbon Stockyards Exchange
building was completed. Virtually all non-customer contact employees moved
into this building during the second quarter of 1997. Additionally, the
Banks continue to update computer equipment and software as technology
advances. These additions flow through the statement of income as
depreciation expense. Other non-interest expenses have increased 12.6% in
the second quarter and 11.0% in the first half of 1997 as compared to 1996.
Again, these increases are reflective of the Banks' expansion. Also,
goodwill amortization related to the Indiana Bank acquisition
is included in 1997 totals. That amount was $35,000 in the first half of 1997.
Income Taxes
Bancorp had income tax expense of $1,577,000 for the first six months of
1997 compared to $1,160,000 for the same period in 1996. The effective rate
was 33.0% in 1997 and 32.5% in 1996. The increase in the effective tax rate
is due to a decreasing proportion of tax exempt interest.
B. FINANCIAL CONDITION
Total Assets
Total assets increased $18,309,000 from December 31, 1996 to June 30, 1997.
Average assets for the first six months of 1997 were $416,327,000. Total
assets at June 30, 1997 increased $79,640,000 from June 30, 1996, representing a
22.5% increase. Since year end, loans have increased approximately $26.4
million; cash, due from banks and federal funds sold increased $3.7 million;
securities available for sale increased $10.2 million, and securities held to
maturity decreased $25.1 million.
<PAGE>
Nonperforming Loans and Assets
Nonperforming loans, which include nonaccrual and loans past due over 90
days, totaled $855,000 at June 30, 1997 and $854,000 at December 31, 1996. This
represents .26% of total loans at June 30, 1997 compared to .28% at December
31, 1996.
Nonperforming assets, which include nonperforming loans, other real
estate owned and repossessed assets, totaled $973,000 at June 30, 1997 and
$1,129,000 at December 31, 1996. This represents .22% of total assets at
June 30, 1997 compared to .27% at December 31, 1996.
C. LIQUIDITY
The role of liquidity is to ensure that 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 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 deposits.
The Banks have 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 relatively stable consumer and commercial deposits, and large
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. In addition, federal funds purchased continue
to be a source of funds. Other sources of funds available to meet daily
needs include the sale of securities under agreements to repurchase and
funds made available under a treasury tax and loan note agreement with the
federal government. Also, the Kentucky Bank is a member of the Federal Home
Loan Bank of Cincinnati (FHLB). As a member of the FHLB, the Kentucky Bank
has access to credit products of the FHLB. These credit services provide the
Kentucky Bank with another source of funds. To date, the Kentucky 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 Banks. At June 30, 1997, the Banks may pay up to
$9,173,000 in dividends to Bancorp without regulatory approval.
D. CAPITAL RESOURCES
At June 30, 1997, stockholders' equity totaled $33,969,000, an increase
of $2,375,000 since December 31, 1996. One component of equity is net
unrealized gain (loss) on securities available for sale, net of tax.
Fluctuations in the bond market resulted in a net unrealized gain as
of June 30, 1997. The unrealized gain on securities available for sale,
net of tax, showed a $218,000 gain at year end and a $74,000 gain as
of June 30, 1997.
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 values of both balance sheet and off-balance
sheet items are adjusted to reflect credit risks.
<PAGE>
At June 30, 1997, and December 31, 1996, the Banks' and Bancorp's tier 1
total risk based capital and leverage ratios were 9.83%, 11.20% and
7.78%, respectively. These ratios exceed the 4.00% tier 1, 8.0% total risk
based capital and 4% leverage ratio minimums. Capital ratios of the Kentucky
Bank and the consolidated entity have decreased slowly. Despite record
earnings and conservative dividend policies, with the rapid expansion of
the Kentucky Bank assets have increased faster than capital has grown.
Management monitors this situation and plans to maintain capital ratios
within well capitalized parameters.
E. NEW ACCOUNTING PRONOUNCEMENTS
In February 1997, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 128 "Earnings Per Share" and SFAS No. 129 "Disclosure of Information
About Capital Structure." SFAS No. 128 simplifies the computation of earnings
per share ("EPS") by replacing the presentation of primary EPS with a
presentation of basic EPS. The Statement requires dual presentation of basic
and diluted EPS by entities with complex capital structures. Basic EPS
includes no dilution and is computed by dividing income available to common
shareholders by the weighted average number of common shares outstanding for
the period. Diluted EPS reflects the potential dilution of securities that
could share in the earnings of an entity, similar to fully diluted EPS.
SFAS No. 128 is effective for financial statements issued for periods
ending after December 15, 1997, including interim periods, and requires
restatement of all prior period EPS data presented. Bancorp does not expect
the implementation of this Statement to have a material effect on the
financial statements.
SFAS No. 129 establishes standards for disclosing information about an
entity's capital structure. This Statement contains no change in disclosure
requirements for companies that were subject to previously existing
requirements. This Statement was issued to eliminate the exemption
of nonpublic entities from certain previously issued disclosure requirements.
This Statement is effective for financial statements for periods ending
after December 15, 1997. Implementation of this Statement will not have a
material effect on Bancorp's financial statements.
Part II - Other Information
Item 4. Submission of Matters to a Vote of Security Holders
On April 23, 1997, at the Annual Meeting of Shareholders of S.Y. Bancorp,
Inc., the following matters were submitted to a vote of shareholders.
Represented in person or by proxy were 2,130,226 shares, and those shares
were as follows.
(1)Fixing the number of directors at fifteen (15) and electing at the Annual
Meeting five (5) directors:
FOR: 2,116,346 AGAINST: 2,085 ABSTAIN: 11,796
<PAGE>
(2) Election of Directors: Bancorp has a staggered board of Directors. The
following individuals were nominated in 1996. All nominees were elected.
FOR AGAINST ABSTAIN
James Carrico 10,639,006 10,110 -
Jack Crowner 10,646,266 2,850 -
Leonard Kaufman 10,642,636 6,480 -
George Keller 10,622,347 26,768 -
Bruce Madison 10,643,557 5,560 -
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
(11) Computation of Per Share earnings
(b) Reports on Form 8-K
The registrant was not required to file a Form 8-K for any of the three
months ended June 30, 1997.
SIGNATURES
Pursuant to the requirements 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.
S.Y. BANCORP, INC.
Date: August 12, 1997 By: /s/ David H. Brooks
David H. Brooks, Chairman
and Chief Executive Officer
Date: August 12, 1997 By: /s/ David P. Heintzman
David P. Heintzman, President
Date: August 12, 1997 By: /s/ Nancy B. Davis
Nancy B. Davis, Senior Vice
President, Treasurer and Chief
Financial Officer
<PAGE>
STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS
S.Y. Bancorp, Inc. and Subsidiaries
For the Three Months For the Six Months
Ended June 30 Ended June 30
1997 1996 1997 1996
PRIMARY
Average shares
outstanding 3,275,257 3,267,772 3,274,143 3,264,252
Effect of assumed conversion
of stock options under
treasury stock method 122,249 96,586 116,532 94,300
3,397,506 3,364,358 3,390,675 3,358,552
Net income $1,721,000 $1,336,000 $3,204,000 $2,408,000
Per share $ .51 $ .40 $ .94 $ .72
FULLY DILUTED
Average shares
outstanding 3,275,257 3,267,772 3,274,143 3,264,252
Effect of assumed conversion
of stock options under
treasury stock method 124,542 100,762 121,252 103,726
3,399,799 3,368,534 3,395,395 3,367,978
Net income $1,721,000 $1,336,000 $3,204,000 $2,408,000
Per share $ .51 $ .40 $ .94 $ .72
All share and per share information has been restated to reflect the 2-for-1
stock split which occurred in the third quarter of 1996.
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1997
<PERIOD-END> JUN-30-1997 JUN-30-1997
<CASH> 22,986 22,986
<INT-BEARING-DEPOSITS> 0 0
<FED-FUNDS-SOLD> 600 600
<TRADING-ASSETS> 0 0
<INVESTMENTS-HELD-FOR-SALE> 29,610 29,610
<INVESTMENTS-CARRYING> 31,011 31,011
<INVESTMENTS-MARKET> 31,006 31,006
<LOANS> 327,926 327,926
<ALLOWANCE> 5,575 5,575
<TOTAL-ASSETS> 433,674 433,674
<DEPOSITS> 373,325 373,325
<SHORT-TERM> 3,969 3,969
<LIABILITIES-OTHER> 20,226 20,226
<LONG-TERM> 2,185 2,185
0 0
0 0
<COMMON> 5,465 5,465
<OTHER-SE> 28,504 28,504
<TOTAL-LIABILITIES-AND-EQUITY> 433,674 433,674
<INTEREST-LOAN> 7,405 14,466
<INTEREST-INVEST> 1,013 1,932
<INTEREST-OTHER> 135 372
<INTEREST-TOTAL> 8,553 16,770
<INTEREST-DEPOSIT> 3,389 6,752
<INTEREST-EXPENSE> 3,705 7,285
<INTEREST-INCOME-NET> 4,848 9,485
<LOAN-LOSSES> 225 450
<SECURITIES-GAINS> 0 80
<EXPENSE-OTHER> 3,891 7,687
<INCOME-PRETAX> 2,585 4,781
<INCOME-PRE-EXTRAORDINARY> 2,585 4,781
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 1,721 3,204
<EPS-PRIMARY> .51 .94
<EPS-DILUTED> .51 .94
<YIELD-ACTUAL> 8.75 8.72
<LOANS-NON> 855 855
<LOANS-PAST> 0 0
<LOANS-TROUBLED> 0 0
<LOANS-PROBLEM> 4,930 4,930
<ALLOWANCE-OPEN> 5,359 5,155
<CHARGE-OFFS> 21 52
<RECOVERIES> 12 22
<ALLOWANCE-CLOSE> 5,575 5,575
<ALLOWANCE-DOMESTIC> 5,575 5,575
<ALLOWANCE-FOREIGN> 0 0
<ALLOWANCE-UNALLOCATED> 1,095 1,095
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