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 March 31, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 17262
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S. Y. BANCORP, INC.
(Exact name of registrant as specified in its charter)
Kentucky 61-1137529
(State or other jurisdiction (I.R.S. Employer
or organization) Identification No.)
1040 East Main Street, Louisville, Kentucky, 40206
Address of principal executive offices)
(Zip Code)
(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 1 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- 6,628,482
shares issued and outstanding at May 5, 2000
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
The following consolidated financial statements of S.Y. Bancorp,
Inc. and Subsidiary, Stock Yards Bank & Trust Company, are submitted
herewith:
-- Unaudited Consolidated Balance Sheets
March 31, 2000 and December 31, 1999
-- Unaudited Consolidated Statements of Income
for the three months ended March 31, 2000 and 1999
-- Unaudited Consolidated Statements of Cash Flows
for the three months ended March 31, 2000 and 1999
-- Unaudited Consolidated Statement of Changes in Stockholders'
Equity for the three months ended March 31, 2000
-- Unaudited Consolidated Statement of Comprehensive Income
for the three months ended March 31, 2000 and 1999
-- Notes to Unaudited Consolidated Financial Statements
<PAGE>
S.Y. BANCORP, INC. AND SUBSIDIARY
Unaudited Consolidated Balance Sheets
March 31, 2000 and December 31, 1999
March 31, 2000 December 31, 1999
(In thousands, except share data)
Assets
Cash and due from banks $ 25,611 $ 27,813
Federal funds sold 7,604 6,000
Mortgage loans held for sale 3,151 2,608
Securities available for sale (amortized
cost $61,081 in 2000 and $64,705 in 1999) 58,903 62,833
Securities held to maturity (approximate market
value $19,469 in 2000 and $21,173 in 1999) 19,806 21,398
Loans 582,135 546,858
Allowance for loan losses 7,842 7,336
------- -------
Net loans 574,293 539,522
Premises and equipment 16,565 16,420
Accrued interest receivable and other assets 13,512 13,221
------- -------
Total Assets $719,445 $689,815
======= =======
Liabilities and Stockholders' Equity
Deposits
Non-interest bearing $ 99,579 $ 88,975
Interest bearing 513,414 480,987
------- -------
Total deposits 612,993 569,962
Securities sold under agreements
to repurchase and federal funds purchased 42,982 53,455
Short-term borrowings 676 3,954
Accrued interest payable and
other liabilities 8,918 10,090
Long-term debt 2,100 2,100
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Total Liabilities 667,669 639,561
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Stockholders' equity
Common stock, no par value; 10,000,000
shares authorized; 6,634,694 and
6,647,059 shares issued and outstanding
in 2000 and 1999, respectively 5,590 5,627
Surplus 14,374 14,602
Retained earnings 33,372 31,376
Accumulated other comprehensive loss ( 1,560) ( 1,351)
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Total Stockholders' Equity 51,776 50,254
------- -------
Total Liabilities and Stockholders' Equity $719,445 $689,815
======= =======
See accompanying notes to unaudited consolidated financial statements.
<PAGE>
S.Y. BANCORP, INC. AND SUBSIDIARY
Unaudited Consolidated Statements of Income
For the three months ended March 31, 2000 and 1999
2000 1999
(In thousands, except share and per share data)
Interest income
Loans $12,255 $9,904
Federal funds sold 59 136
Mortgage loans held for sale 44 126
U.S. Treasury and Federal agencies 867 948
Obligations of states and political
subdivisions 256 195
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Total interest income 13,481 11,309
------ ------
Interest expense
Deposits 5,367 4,480
Securities sold under agreements
to repurchase and federal funds purchased 632 410
Short-term borrowings 28 17
Long-term debt 41 36
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Total interest expense 6,068 4,943
------ ------
Net interest income 7,413 6,366
Provision for loan losses 580 560
------ ------
Net interest income after
provision for loan losses 6,833 5,806
------ ------
Non-interest income
Investment management and trust services 1,458 1,248
Service charges on deposit accounts 984 780
Gains on sales of mortgage loans held for sale 253 492
Gains on sales of securities available for sale - 100
Other 627 411
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Total non-interest income 3,322 3,031
------ ------
Non-interest expenses
Salaries and employee benefits 3,823 3,139
Net occupancy expense 437 406
Furniture and equipment expense 603 524
Other 1,480 1,425
------ ------
Total non-interest expenses 6,343 5,494
------ ------
Income before income taxes 3,812 3,343
Income tax expense 1,220 1,099
------ ------
Net income $ 2,592 $ 2,244
====== ======
Net income per share
Basic $ .39 $ .34
====== ======
Diluted $ .38 $ .33
====== ======
Average common shares
Basic 6,637,836 6,625,752
========= =========
Diluted 6,826,908 6,875,102
========= =========
See accompanying notes to unaudited consolidated financial statements.
<PAGE>
S.Y. BANCORP, INC. AND SUBSIDIARY
Unaudited Consolidated Statements of Cash Flows
For the three months ended March 31, 2000 and 1999
2000 1999
(In thousands)
Operating activities
Net Income
Adjustments to reconcile net income to net cash $ 2,592 $2,244
provided (used) by operating activities:
Provision for loan losses 580 560
Depreciation, amortization and accretion, net 480 397
Gains on sales of mortgages held for sale ( 253) ( 492)
Gains on sales of securities available for sa - ( 100)
Origination of mortgage loans held for sale ( 12,572) (31,162)
Proceeds from sales of mortgage loans held for sale 12,282 34,653
(Increase) decrease in accrued interest receivable and
other assets ( 211) ( 218)
Increase (decrease) in accrued interest payable and
other liabilities ( 1,168) 1,054
------ -------
Net cash provided (used) by operating activities 1,730 6,936
------ -------
Investing activities
Net (increase) decrease in federal funds sold ( 1,604) ( 8,000)
Purchases of securities available for sale ( 1,431) ( 42,564)
Proceeds from maturities of securities available for sale - 45,771
Proceeds from maturities of securities held to maturity 1,590 1,773
Proceeds from sales of securities available for sale 5,026 5,667
Net (increase) decrease in loans ( 35,351) ( 19,402)
Purchases of premises and equipment ( 577) ( 1,412)
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Net cash provided (used) by investing activities ( 32,347) ( 18,167)
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Financing activities
Net increase (decrease) in deposits 43,031 2,750
Net increase (decrease) in securities sold under
agreements to repurchase and federal funds purchased ( 10,473) 5,689
Net increase (decrease) in short-term borrowings ( 3,278) 1,450
Issuance of common stock for options and dividend
reinvestment plan 208 387
Common stock purchases ( 473) -
Cash dividends paid ( 600) ( 494)
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Net cash provided (used) by financing activities 28,415 9,782
------ ------
Net increase (decrease) in cash and cash equivalents ( 2,202) ( 1,449)
Cash and cash equivalents at beginning of period 27,813 21,661
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Cash and cash equivalents at end of period $ 25,611 $ 20,212
======= =======
Income tax payments were $0 in 2000, and $875,000 in 1999.
Cash paid for interest was $6,064,000 in 2000, and $4,925,000 in 1999.
See accompanying notes to unaudited consolidated financial statements.
<PAGE>
S.Y. BANCORP, INC. & SUBSIDIARY
Unaudited Consolidated Statement of Changes in Stockholders' Equity
For the three months ended March 31, 2000
<TABLE>
Accumulated
Common Stock Other
Number of Retained Comprehensive
Shares Amount Surplus Earnings Loss Total
(In thousands, except share
and per share data)
<S> <C> <C> <C> <C> <C> <C>
Balance December 31, 1999 6,647,059 $ 5,627 $ 14,602 $ 31,376 $( 1,351) $ 50,254
Net income - - - 2,592 - 2,592
Change in other
comprehensive loss,
net of tax - - - - (209) (209)
Shares issued for stock
options exercised and
employee benefit plans 11,185 37 171 - - 208
Cash dividends, $.09 per
share - - - (596) - (596)
Shares repurchased ( 23,550) ( 74) ( 399) - - (473)
--------- ------ ------- ------ ------ ------
Balance March 31, 2000 6,634,694 $ 5,590 $ 14,374 $ 33,372 $( 1,560) $ 51,776
========= ====== ======= ====== ====== ======
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
<PAGE>
S.Y. BANCORP, INC. & SUBSIDIARY
Unaudited Consolidated Statement of Comprehensive Income
For the three months ended March 31, 2000 and 1999
2000 1999
(In thousands)
Net income $ 2,592 $ 2,244
Other comprehensive income (loss), net of tax:
Unrealized holding gains (losses) arising
during the period ( 209) ( 316)
Less reclassification adjustment for gains
included in net income - 65
---- ----
Other comprehensive income (loss) ( 209) ( 381)
---- ----
Comprehensive income $ 2,383 $ 1,863
===== =====
See accompanying notes to unaudited consolidated financial statements.
<PAGE>
S.Y. BANCORP, INC. AND SUBSIDIARY
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 Subsidiary 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 subsidiary, Stock Yards Bank &
Trust Company. All significant intercompany transactions have been
eliminated in consolidation.
A description of other significant accounting policies is presented
in the notes to the Consolidated Financial Statements for the year ended
December 31, 1999 included in S.Y. Bancorp, Inc.'s Annual Report on
Form 10-K for the year then ended.
Interim results for the quarter and three months ended
March 31, 2000 are not necessarily indicative of the results for the
entire year.
(2) Allowance for Loan Losses
An analysis of the changes in the allowance for loan losses for
the three months ended March 31 follows (in thousands):
2000 1999
Beginning balance $7,336 $6,666
Provision for loan losses 580 560
Loans charged off ( 90) ( 251)
Recoveries 16 10
Ending balance $7,842 $6,985
===== =====
<PAGE>
(3) Net Income per share
The following table reflects, for the three months periods ended
March 31, the numerators (net income)and denominators (average shares
outstanding) for the basic and diluted net income per share
computations (in thousands except per share data).
2000 1999
Net income, basic and diluted $ 2,592 $ 2,244
===== =====
Average shares outstanding 6,638 6,626
Effect of dilutive securities 189 249
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Average shares outstanding
including dilutive securities $ 6,827 $ 6,875
===== =====
Net income per share, basic $ .39 $ .34
===== =====
Net income per share, diluted $ .38 $ .33
===== =====
<PAGE>
(4) Segments
The Bank's, and thus Bancorp's principal activities include
commercial and retail banking, investment management and trust, and
mortgage banking. Commercial and retail banking provides a full range
of loans and deposit products to individual consumers and businesses.
Investment management and trust provides wealth management services
including private banking, brokerage, estate planning and
administration, retirement plan management, and custodian or trustee
services. Mortgage banking originates residential loans and sells them,
servicing released, to the secondary market.
The financial information for each business segment reflects that
which is specifically identifiable or allocated based on an internal
allocation method. Allocations have been consistently applied for
all periods presented. The measurement of the performance of the
business segments is based on the management structure of the Bank
and is not necessarily comparable with similar information for any
other financial institution. The information presented is also not
necessarily indicative of the segments' operations if they were
independent entities.
Selected financial information by business segment for the
three months ended March 31, 2000 and 1999 follows:
2000 1999
(In thousands)
Net interest income
Commercial and retail banking $ 6,907 $ 6,007
Investment management and trust 397 287
Mortgage banking 109 72
----- -----
Total $ 7,413 $ 6,366
===== =====
Non-interest income
Commercial and retail banking $ 1,343 $ 1,073
Investment management and trust 1,636 1,329
Mortgage banking 343 629
----- -----
Total $ 3,322 $ 3,031
===== =====
Net income
Commercial and retail banking $ 1,914 $ 1,582
Investment management and trust 616 542
Mortgage banking 62 120
----- -----
Total $ 2,592 $ 2,244
===== =====
<PAGE>
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 subsidiary, Stock Yards Bank & Trust Company for
the three months ended March 31, 2000 and compares that period with the
same period of the previous year. Unless otherwise indicated, all
references in this discussion to the "Bank" include Bancorp. In addition,
the discussion describes the significant changes in the financial
condition of Bancorp and the Bank that have occurred during the first
three months of 2000 compared to December 31, 1999. This discussion
should be read in conjunction with the consolidated financial statements
and accompanying notes presented in Part I, Item 1 of this report.
This report contains forward-looking statements under the Private
Securities Litigation Reform act that involve risks and uncertainties.
Although Bancorp believes the assumptions underlying the forward-looking
statements contained herein are reasonable, any of these assumptions could
be inaccurate. Therefore, there can be no assurance forward-looking
statements included herein will prove to be accurate. Factors that could
cause actual results to differ from results discussed in forward-looking
statements include, but are not limited to: economic conditions both
generally and more specifically in the market in which Bancorp and its
subsidiary operate; competition for Bancorp's customers from other
providers of financial services; government legislation and regulation
which change from time to time and over which Bancorp has no control;
changes in interest rates; material unforeseen changes in liquidity,
results of operations, or financial condition of Bancorp's customers;
other risks detailed in Bancorp's filings with the Securities and
Exchange Commission, all of which are difficult to predict and many
of which are beyond the control of Bancorp.
A. RESULTS OF OPERATIONS
Net income of $2,592,000 for the three months ended March 31, 2000
increased $348,000 or 15.5% from $2,244,000 for the comparable 1999
period. Basic net income per share was $.39 for the first quarter
of 2000, an increase of 14.7% from the $.34 for the same period in 1999.
Net income on a diluted basis was $.38 for the first quarter of 2000
compared to $.33 for the first quarter of 1999. This represents a 15.2%
increase. Return on average assets and return on average stockholders'
equity were 1.50% and 20.47%, respectively, for the first quarter of 2000,
compared to 1.52% and 20.10%, respectively, for the same period in 1999.
<PAGE>
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
March 31
2000 1999
Interest income $ 13,481 $11,309
Tax equivalent 112 86
------ ------
Interest income, tax equivalent basis 13,593 11,395
Total interest expense 6,068 4,943
------ ------
Net interest income, tax equivalent basis (1) $ 7,525 $ 6,452
====== ======
Net interest spread (2), annualized 3.96% 4.02%
====== ======
Net interest margin (3), annualized 4.68% 4.72%
====== ======
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.
(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 $7,525,000 for the
three months ended March 31, 2000 increased $1,073,000 or 16.6% from
$6,452,000 for the same period last year. Net interest spread and net
interest margin were 3.96% and 4.68%, respectively, for the first quarter
of 2000 and 4.02% and 4.72%, respectively, for the first quarter of 1999.
Average earning assets increased $90,458,000, or 16.3% to
$645,174,000 for the first quarter of 2000 compared to 1999. Average
interest bearing liabilities increased $76,779,000 or 16.5% to
$542,048,000 for the first three months of 2000 compared to 1999.
<PAGE>
Managing interest rate risk is fundamental for the financial
services industry. The primary objective of interest rate risk
management is to neutralize effects of interest rate changes on net
income. By using both on and off-balance sheet financial instruments,
Bank management evaluates interest rate sensitivity while attempting
to optimize net interest income within the constraints of prudent
capital adequacy, liquidity needs, market opportunities and customer
requirements.
Bancorp uses an earnings simulation model to measure and evaluate
the impact of changing interest rates on earnings. The simulation model
is designed to reflect the dynamics of all interest earning assets,
interest bearing liabilities and off-balance sheet financial instruments,
combining factors affecting rate sensitivity into a one year forecast.
By forecasting management's estimate of the most likely rate environment
and adjusting those rates up and down the model can reveal approximate
interest rate risk exposure. The March 31, 2000 simulation analysis
indicates that an increase in interest rates would have a positive effect
on net interest income, and a decrease in interest rates would have a
negative effect on net interest income.
Interest Rate Simulation Sensitivity Analysis
(Dollars in thousands except per share information)
Net Interest Net Income Diluted EPS
Income Change Change Change
Increase 200bp $ 478 $ 166 $ 0.02
Increase 100bp 87 43 0.01
Decrease 100bp (903) (586) (0.09)
Decrease 200bp (1,308) (859) (0.13)
To assist in achieving a desired level of interest rate sensitivity,
management entered into an off-balance sheet interest rate collar which
was designed to mitigate the effect of a drop in interest rates.
Derivative financial instruments can be a cost and capital efficient
method of modifying interest rate risk sensitivity.
<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:
Three months ended
March 31
(In thousands except percentages)
2000 1999
Balance at January 1 $ 7,336 $ 6,666
Provision for loan losses 580 560
Loan charge-offs, net of recoveries ( 74) ( 241)
------- -------
Balance at March 31 $ 7,842 $ 6,985
======= =======
Average loans, net of unearned income $561,785 $455,238
======= =======
Provision for loan losses to average loans (1) .40% .49%
======= =======
Net loan charge-offs to average loans (1) .05% .22%
======= =======
Allowance for loan losses to average loans 1.40% 1.53%
======= =======
Allowance for loan losses to period-end loans 1.35% 1.49%
======= =======
(1) Amounts annualized
<PAGE>
Non-interest Income and Expenses
The following table sets forth the major components of non-interest
income and expenses for the three months ended March 31, 2000 and 1999.
In thousands
Three Months Ended
March 31
2000 1999
Non-interest income
Investment management and trust services $1,458 $1,248
Service charges on deposit accounts 984 780
Gains on sales of mortgage loans held for sale 253 492
Gains on sales of securities available for sale - 100
Other 627 411
Total non-interest income $3,322 $3,031
===== =====
Non-interest expenses
Salaries and employee benefits $3,823 $3,139
Net occupancy expense 437 406
Furniture and equipment expense 603 524
Other 1,480 1,425
----- -----
Total non-interest expenses $6,343 $5,494
===== =====
Non-interest income increased $291,000, or 9.6%, for the first quarter
of 2000, compared to the same period in 1999. Trust income increased
$210,000 or 16.8% in the first quarter of 2000, as compared to the same
period in 1999. Trust assets under management at March 31, 2000 were $953
million as compared to $914 million at December 31, 1999 and $780 million
at March 31, 1999.
<PAGE>
Service charges on deposit accounts increased $204,000 or 26.2% in
the first quarter of 2000 as compared to the same period in 1999.
Opening new branch offices and promotion of retail accounts have presented
opportunities for growth in deposit accounts and increased fee income.
Additionally, in March the Bank began offering an overdraft service to
retail depositors. The service allows checking customers meeting specific
criteria to incur overdrafts up to a predetermined limit, generally $500.
For each check paid resulting in or increasing an overdraft, the customer
pays the standard overdraft charge. During March, 2000, these fees
totaled approximately $80,000.
Gains on sales of mortgage loans were $253,000 in the first quarter
of 2000 compared to $492,000 in 1999. The Bank operates a mortgage
banking company which originates residential mortgage loans and sells the
loans in the secondary market. Favorable interest rates in early 1999
stimulated home buying and refinancing. As interest rates have increased
mortgage loan volume, particularly refinancing, has decreased, resulting
in a corresponding decrease in revenues.
Gains on sales of securities available for sale during the first
quarter of 1999 occurred as management sold lower yielding, shorter
term securities for intermediate term, higher yielding securities.
No sales of securities occurred in 2000
Other non-interest income increased $216,000 or 52.6% in the first
quarter of 2000 compared to 1999. Numerous factors contributed to this
increase, including $96,000 from full service brokerage, $57,000 from
check card income and $39,000 from ATM surcharges.
Non-interest expenses increased $849,000 or 15.5% for the first
quarter of 2000 compared to the same period in 1999. Salaries and
employee benefits increased $684,000, or 21.8%, for the first quarter
of 2000 compared to the same period in 1999. Employees continue
to be added to support the Bank's growth. The Bank had 310 full
time equivalent employees as of March 31, 2000 and 286 full time
equivalents as of March 31, 1999. These increases also arose
in part from regular salary increases. Net occupancy expense
increased $31,000 or 7.6% in thefirst quarter of 2000 as compared
to 1999. Furniture and equipment expense increased $79,000
or 15.1%, for the first quarter of 2000 compared to 1999.
These increases are largely due to the addition of new banking
centers. Other non-interest expenses have increased $55,000 or
3.9% in the first quarter of 2000 as compared to 1999.
<PAGE>
Income Taxes
Bancorp had income tax expense of $1,220,000 for the first
three months of 2000, compared to $1,099,000 for the same period
in 1999. The effective rate was 32.0% in 2000 and 32.9% in 1999.
B. FINANCIAL CONDITION
Total Assets
Total assets increased $29,630,000 from December 31, 1999 to
March 31, 2000. Average assets for the first three months of 2000 were
$691,535,000. Total assets at March 31, 2000 increased $96,958,000 from
March 31, 1999, representing a 15.6% increase. Since year end, loans have
increased approximately $35.3 million; cash and due from banks and federal
funds sold decreased $.6 million; securities available for sale decreased
$3.9 million, and securities held to maturity decreased $1.6 million.
Mortgage loans available for sale increased $.5 million.
Nonperforming Loans and Assets
Nonperforming loans, which include non-accrual and loans past due
over 90 days, totaled $4,473,000 at March 31, 2000 and $4,416,000 at
December 31, 1999. This represents .77% of total loans at March 31, 2000
compared to .81% at December 31, 1999.
Nonperforming assets, which include non-performing loans, other real
estate and repossessed assets, totaled $4,556,000 at March 31, 2000 and
$4,057,000 at December 31, 1999. The Company had no other real estate
at either date. This represents .63% of total assets at March 31, 2000
compared to .65% at December 31, 1999.
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. Management believes it 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. The deposit base, consisting of relatively stable
consumer and commercial deposits, and large denomination
($100,000 and over) certificates of deposit, is a 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. In addition, federal
funds purchased continue to be an available source of funds.
<PAGE>
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 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 needed to access this source of funds.
Additionally, the Bank has an available line of credit and federal funds
purchased lines with correspondent banks totaling $38 million.
Bancorp's liquidity depends primarily on the dividends paid to it as
the sole shareholder of the Bank. At March 31, 2000, the Bank may pay up
to $15,900,000 in dividends to Bancorp without regulatory approval
subject to the ongoing capital requirements of the Bank. During the
quarter the Bank paid dividends to Bancorp totaling $632,000.
D. CAPITAL RESOURCES
At March 31, 2000, stockholders' equity totaled $51,776,000, an
increase of $1,522,000 since December 31, 1999. One component of equity
is accumulated other comprehensive income which for Bancorp consists of
net unrealized gains on securities available for sale, and a minimum
pension liability adjustment, net of taxes. Accumulated other
comprehensive losses were $1,560,000 at March 31, 2000 and $1,351,000 at
December 31, 1999. The change since year end is a reflection of the
effect of rising interest rates on the valuation of the Bank's
portfolio of securities available for sale.
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.
At March 31, 2000, Bancorp's tier 1 total risk based capital and
leverage ratios were 8.99%, 10.30% and 7.21%, respectively. These ratios
exceed the minimum required by regulators to be well capitalized. Capital
ratios has declined in the first quarter of 2000 primarily as a result of
the stock buy back program announced in November, 1999. The Board of
Directors authorized a 200,000 share common stock buy back program
representing approximately 3% of its common stock. The repurchased shares
may be used for, among other things, issuance of shares for the stock
options or employee stock ownership or purchase plans. As of
March 31, 2000, 46,550 shares had been repurchased for a total cost of
$1,013,000. Management monitors this situation and plans to maintain
capital ratios within well capitalized parameters.
D RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In June, 1998, the Financial Accounting Standards Board issued
Statement No. 133, "Accounting for Derivative Instruments and Hedging
Activities." This statement standardizes the accounting for
derivative instruments. Under this standard, entities are required
to carry all derivative instruments on the balance sheet at fair value.
<PAGE>
The accounting for changes in the fair value (i.e., gains or losses)
of a derivative instrument depends on whether it has been designated and
qualifies as part of a hedging relationship and, if so, on the reason
for holding it. If certain conditions are met, entities may elect to
designate a derivative instrument as a hedge of exposures to changes in
fair values, cash flows, or foreign currencies. If the hedged exposure is
a fair value exposure, the gain or loss on the derivative instrument is
recognized in earnings in the period of change together with the
offsetting loss or gain on the hedged item attributable to the risk being
hedged. If the hedged exposure is a cash flow exposure, the effective
portion of the gain or loss on the derivative instrument is reported
initially as a component of other comprehensive income and subsequently
reclassified into earnings when the forecasted transaction affects
earnings. Any amounts excluded from the assessment of hedge
effectiveness as well as the ineffective portion of the gain or loss is
reported in earnings immediately. Accounting for foreign currency hedges
is similar to the accounting for fair value and cash flow hedges. If the
derivative instrument is not designated as a hedge, the gain or loss is
recognized in earnings in the period of change.
During 1999 the Financial Accounting Standards Board issued Statement
No. 137 which delays the effective date of Statement 133 until
January 1, 2001; however, early adoption is permitted. On adoption, the
provisions of Statement 133 must be applied prospectively. Bancorp has
not determined when it will adopt Statement 133 nor has it determined the
impact that Statement 133 will have on its financial statements.
Management believes that such determination will not be meaningful until
closer to the date of initial adoption.
<PAGE>
Part II - Other Information
Item 3. Quantitative and Qualitative Disclosures about Market Risk
Information required by this item is include in Item 2,
"Management's Discussion and Analysis of Financial
Condition and Results of Operations."
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 6. Exhibits and Reports on Form 8-K
(a) Reports on Form 8-K
The registrant was not required to file a Form 8-K for any of
the three months ended March 31, 2000.
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: May 10, 2000 By: /s/ David H. Brooks
----------------------------
David H. Brooks, Chairman
and Chief Executive Officer
Date: May 10, 2000 By: /s/ David P. Heintzman
----------------------------
David P. Heintzman, President
Date: May 10, 2000 By: /s/ Nancy B. Davis
-----------------------------
Nancy B. Davis, Executive Vice
President, Treasurer and Chief
Financial Officer
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