Edgar Filing: S Y BANCORP INC

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended June 30, 2010

¨	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 1-13661

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 executive offices including 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 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 o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ¨ No o

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

Large accelerated filer o		Accelerated filer x

Non-accelerated filer o		Smaller reporting company o
(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.). Yes ¨ No x

The number of shares of the registrant’s Common Stock, no par value, outstanding as of July 29, 2010, was 13,702,339.

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S.Y. BANCORP, INC. AND SUBSIDIARY

Index

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 Condensed Consolidated Balance Sheets
	June 30, 2010 and December 31, 2009

–	Unaudited Condensed Consolidated Statements of Income
	for the three and six months ended June 30, 2010 and 2009

–	Unaudited Condensed Consolidated Statements of Cash Flows
	for the six months ended June 30, 2010 and 2009

–	Unaudited Condensed Consolidated Statement of Changes in Stockholders’ Equity
	for the six months ended June 30, 2010

–	Unaudited Condensed Consolidated Statements of Comprehensive Income
	for the three and six months ended June 30, 2010 and 2009

–	Notes to Unaudited Condensed Consolidated Financial Statements

Item 2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations

Item 3.		Quantitative and Qualitative Disclosures about Market Risk

Item 4.		Controls and Procedures

PART II – OTHER INFORMATION

Item 2.		Unregistered Sales of Equity Securities and Use of Proceeds

Item 6.		Exhibits

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S.Y. BANCORP, INC. AND SUBSIDIARY

Unaudited Condensed Consolidated Balance Sheets

June 30, 2010 and December 31, 2009

(In thousands, except share data)

	(Unaudited)
	June 30,		December 31,
	2010		2009
Assets
Cash and due from banks	$	32,171	$	25,773
Federal funds sold	42,649		6,651
Mortgage loans held for sale	6,763		13,249
Securities available for sale (amortized cost of $205,396 in 2010 and $224,488 in 2009)	211,731		228,225
Securities held to maturity (fair value of $27 in 2010 and $37 in 2009)	25		35
Federal Home Loan Bank stock and other securities	5,772		5,547
Loans	1,477,304		1,435,462
Less allowance for loan losses	22,933		20,000
Net loans	1,454,371		1,415,462
Premises and equipment, net	28,143		28,016
Bank owned life insurance	25,621		25,130
Accrued interest receivable	5,953		5,745
Other assets	46,279		37,646
Total assets	$	1,859,478	$	1,791,479
Liabilities and Stockholders’ Equity
Deposits:
Non-interest bearing	$	250,427	$	211,352
Interest bearing	1,223,404		1,206,832
Total deposits	1,473,831		1,418,184
Securities sold under agreements to repurchase	53,759		51,321
Federal funds purchased	18,437		19,518
Other short-term borrowings	1,483		1,809
Accrued interest payable	455		427
Other liabilities	38,130		45,223
Federal Home Loan Bank advances	70,448		60,453
Subordinated debentures	40,900		40,930
Total liabilities	1,697,443		1,637,865
Stockholders’ equity:
Preferred stock, no par value. Authorized 1,000,000 shares; no shares issued or outstanding	—		—
Common stock, no par value. Authorized 20,000,000 shares; issued and outstanding 13,695,379 and 13,606,532 shares in 2010 and 2009, respectively	6,540		6,244
Additional paid-in capital	11,409		9,729
Retained earnings	140,200		135,442
Accumulated other comprehensive income	3,886		2,199
Total stockholders’ equity	162,035		153,614
Total liabilities and stockholders’ equity	$	1,859,478	$	1,791,479

See accompanying notes to unaudited condensed consolidated financial statements.

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S.Y. BANCORP, INC. AND SUBSIDIARY

Unaudited Condensed Consolidated Statements of Income

For the three and six months ended June 30, 2010 and 2009

(In thousands, except per share data)

	For three months ended				For six months ended
	June 30,				June 30,
	2010		2009		2010		2009
Interest income:
Loans	$	19,715	$	19,204	$	38,929	$	37,947
Federal funds sold	19		17		44		20
Mortgage loans held for sale	53		105		119		181
Securities — taxable	1,376		1,187		2,780		2,608
Securities — tax-exempt	285		284		533		558
Total interest income	21,448		20,797		42,405		41,314
Interest expense:
Deposits	3,394		4,664		7,076		9,337
Fed funds purchased	8		16		17		38
Securities sold under agreements to repurchase	81		49		168		108
Federal Home Loan Bank advances	556		868		1,081		1,648
Subordinated debentures	862		883		1,722		1,758
Total interest expense	4,901		6,480		10,064		12,889
Net interest income	16,547		14,317		32,341		28,425
Provision for loan losses	2,384		2,200		5,079		3,825
Net interest income after provision for loan losses	14,163		12,117		27,262		24,600
Non-interest income:
Investment management and trust services	3,232		2,801		6,493		5,472
Service charges on deposit accounts	2,119		2,038		4,003		3,849
Bankcard transaction revenue	863		747		1,614		1,406
Gains on sales of mortgage loans held for sale	445		444		830		943
Brokerage commissions and fees	503		437		959		822
Bank owned life insurance income	248		245		491		488
Other	576		1,352		1,629		1,645
Total non-interest income	7,986		8,064		16,019		14,625
Non-interest expenses:
Salaries and employee benefits	8,319		7,669		16,408		15,069
Net occupancy expense	1,296		1,013		2,572		2,021
Data processing expense	1,322		1,248		2,459		2,279
Furniture and equipment expense	321		307		635		599
FDIC insurance expense	531		1,245		1,002		1,667
Other	2,655		2,548		5,183		4,664
Total non-interest expenses	14,444		14,030		28,259		26,299
Income before income taxes	7,705		6,151		15,022		12,926
Income tax expense	2,149		1,863		4,485		3,901
Net income	$	5,556	$	4,288	$	10,537	$	9,025
Net income per share:
Basic	$	0.41	$	0.32	$	0.77	$	0.67
Diluted	$	0.40	$	0.31	$	0.77	$	0.66
Average common shares:
Basic	13,690		13,564		13,668		13,532
Diluted	13,790		13,729		13,752		13,683

See accompanying notes to unaudited condensed consolidated financial statements.

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S.Y. BANCORP, INC. AND SUBSIDIARY

Unaudited Condensed Consolidated Statements of Cash Flows

For the six months ended June 30, 2010 and 2009

(In thousands)

	2010			2009
Operating activities:
Net income	$	10,537		$	9,025
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan losses	5,079			3,825
Depreciation, amortization and accretion, net	1,653			1,009
Deferred income tax benefit	(1,184		)	(848		)
Gain on sales of mortgage loans held for sale	(830		)	(943		)
Origination of mortgage loans held for sale	(54,494		)	(139,441		)
Proceeds from sale of mortgage loans held for sale	61,810			127,875
Bank owned life insurance income	(491		)	(488		)
Decrease in value of private investment fund	(368		)	(142		)
Loss on the sale of premises and equipment	2			—
(Loss) gain on the sale of other real estate	(51		)	2
Stock compensation expense	455			328
Excess tax benefits from share-based compensation arrangements	(48		)	(98		)
Reversal of valuation of mortgage servicing rights	—			(176		)
(Increase) decrease in accrued interest receivable and other assets	(7,804		)	1,336
Increase in accrued interest payable and other liabilities	11,257			851
Net cash provided by operating activities	25,523			2,115
Investing activities:
Purchases of securities available for sale	(91,798		)	(116,082		)
Proceeds from maturities of securities available for sale	110,259			64,032
Proceeds from maturities of securities held to maturity	10			4
Net increase in loans	(63,540		)	(51,731		)
Purchases of premises and equipment	(1,353		)	(723		)
Proceeds from disposal of premises and equipment	3			—
Proceeds from sale of other real estate	887			58
Net cash used in investing activities	(45,532		)	(104,442		)
Financing activities:
Net increase in deposits	55,647			66,088
Net increase in securities sold under agreements to repurchase and federal funds purchased	1,357			25,599
Net (decrease) increase in other short-term borrowings	(326		)	585
Proceeds from Federal Home Loan Bank advances	10,000			20,460
Repayments of Federal Home Loan Bank advances	(5		)	(2		)
Repayments of subordinated debentures	(30		)	(30		)
Issuance of common stock for options and dividend reinvestment plan	442			1,060
Excess tax benefits from share-based compensation arrangements	48			98
Common stock repurchases	(79		)	(296		)
Cash dividends paid	(4,649		)	(4,589		)
Net cash provided by financing activities	62,405			108,973
Net increase in cash and cash equivalents	42,396			6,646
Cash and cash equivalents at beginning of period	32,424			27,113
Cash and cash equivalents at end of period	$	74,820		$	33,759
Supplemental cash flow information:
Income tax payments	$	4,080		$	4,495
Cash paid for interest	10,036			12,995
Supplemental non-cash activity:
Transfers from loans to other real estate owned	$	1,364		$	60

See accompanying notes to unaudited condensed consolidated financial statements.

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S.Y. BANCORP, INC. AND SUBSIDIARY

Unaudited Condensed Consolidated Statement of Changes in Stockholders’ Equity

For the six months ended June 30, 2010

(In thousands, except per share data)

												Accumulated
	Common stock											other
	Number of					Additional			Retained			comprehensive
	shares		Amount			paid-in capital			earnings			income		Total
Balance December 31, 2009	13,607		$	6,244		$	9,729		$	135,442		$	2,199	$	153,614

Net income	—		—			—			10,537			—		10,537

Change in accumulated other comprehensive income, net of tax	—		—			—			—			1,687		1,687

Stock compensation expense	—		—			455			—			—		455

Stock issued for stock options exercised and dividend reinvestment plan	44		149			461			—			—		610

Stock issued for non-vested restricted stock	54		181			961			(1,142		)	—		—

Cash dividends, $0.34 per share	—		—			—			(4,669		)	—		(4,669		)

Shares repurchased or cancelled	(10	)	(34		)	(197		)	32			—		(199		)

Balance June 30, 2010	13,695		$	6,540		$	11,409		$	140,200		$	3,886	$	162,035

See accompanying notes to unaudited condensed consolidated financial statements.

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S.Y. BANCORP, INC. AND SUBSIDIARY

Unaudited Condensed Consolidated Statements of Comprehensive Income

For the three and six months ended June 30, 2010 and 2009

(In thousands)

	Three months ended					Six months ended
	June 30,					June 30,
	2010		2009			2010		2009
Net income	$	5,556	$	4,288		$	10,537	$	9,025
Other comprehensive income, net of tax:
Unrealized gains (losses) on securities available for sale:
Unrealized gains (losses) arising during the period (net of tax of $598, ($58), $908 and ($451), respectively)	1,110		(108		)	1,687		(838		)
Other comprehensive income (loss)	1,110		(108		)	1,687		(838		)
Comprehensive income	$	6,666	$	4,180		$	12,224	$	8,187

See accompanying notes to unaudited condensed consolidated financial statements.

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S.Y. BANCORP, INC. AND SUBSIDIARY

Notes to Unaudited Condensed Consolidated Financial Statements

(1) Summary of Significant Accounting Policies

The accompanying unaudited condensed 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 U.S. generally accepted accounting principles (US GAAP) for complete financial statements. The consolidated financial statements of S.Y. Bancorp, Inc. (“Bancorp”) and its 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 (“Bank”). S.Y. Bancorp Capital Trust II is a Delaware statutory trust that is a wholly-owned unconsolidated finance subsidiary of S.Y. Bancorp, Inc. Significant intercompany transactions and accounts 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, 2009 included in S.Y. Bancorp, Inc.’s Annual Report on Form 10-K. Certain reclassifications have been made in the prior year financial statements to conform to current year classifications. Bancorp has evaluated subsequent events for recognition or disclosure up to the date on which financial statements were issued.

Interim results for the three and six month periods ended June 30, 2010 are not necessarily indicative of the results for the entire year.

Critical Accounting Policies

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

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

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S.Y. BANCORP, INC. AND SUBSIDIARY

(2) Securities

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

June 30, 2010	Amortized		Unrealized
Securities available for sale	Cost		Gains		Losses		Fair Value
(in thousands)

Government sponsored enterprise obligations	$	102,084	$	3,098	$	—	$	105,182
Mortgage-backed securities	56,312		2,487		—		58,799
Obligations of states and political subdivisions	45,750		915		100		46,565
Trust preferred securities of financial institutions	1,250		—		65		1,185

Total securities available for sale	$	205,396	$	6,500	$	165	$	211,731

December 31, 2009	Amortized		Unrealized
Securities available for sale	Cost		Gains		Losses		Fair Value
(in thousands)

U.S. Treasury and other U.S. government obligations	$	3,000	$	19	$	—	$	3,019
Government sponsored enterprise obligations	122,761		2,006		79		124,688
Mortgage-backed securities	65,179		1,519		17		66,681
Obligations of states and political subdivisions	32,298		689		175		32,812
Trust preferred securities of financial institutions	1,250		—		225		1,025

Total securities available for sale	$	224,488	$	4,233	$	496	$	228,225

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S.Y. BANCORP, INC. AND SUBSIDIARY

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

June 30, 2010	Amortized		Unrealized				Fair
Securities held to maturity	Cost		Gains		Losses		Value
(in thousands)

Mortgage-backed securities	$	25	$	2	$	—	$	27

December 31, 2009	Amortized		Unrealized				Fair
Securities held to maturity	Cost		Gains		Losses		Value
(in thousands)

Mortgage-backed securities	$	35	$	2	$	—	$	37

In addition to the available for sale and held to maturity portfolios, investment securities held by Bancorp include certain securities which are not readily marketable. This category includes holdings of Federal Home Loan Bank of Cincinnati (FHLB) stock which are required for borrowing availability, and are classified as restricted securities. Other securities consist of a Community Reinvestment Act (CRA) investment which matures in 2014, and is fully collateralized with a government agency security of similar duration. These securities are carried at cost as follows:

	June 30,		December 31,
Federal Home Loan Bank stock and other securities	2010		2009
(in thousands)

Federal Home Loan Bank stock	$	4,771	$	4,546
Other securities	1,001		1,001
Total Federal Home Loan Bank stock and other securities	$	5,772	$	5,547

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S.Y. BANCORP, INC. AND SUBSIDIARY

A summary of securities as of June 30, 2010 based on contractual maturity is presented below. Actual maturities may differ from contractual maturities because some issuers have the right to call or prepay obligations.

	Securities				Securities
	Available for Sale				Held to Maturity
(In thousands)	Amortized Cost		Fair Value		Amortized Cost		Fair Value

Due within one year	$	26,426	$	26,462	$	—	$	—
Due within one year through five years	80,001		82,438		—		—
Due within five years through ten years	39,043		40,419		24		25
Due after ten years	59,926		62,412		1		2

	$	205,396	$	211,731	$	25	$	27

Securities with unrealized losses at June 30, 2010 and December 31, 2009, not recognized in income are as follows:

	Less than 12 months				12 months or more				Total
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
(In thousands)	Value		Losses		Value		Losses		Value		Losses

June 30, 2010
Government sponsored enterprise obligations	$	—	$	—	$	—	$	—	$	—	—
Obligations of states and political subdivisions	9,303		71		2,053		29		11,356		100
Trust preferred securities of financial institutions	—		—		1,185		65		1,185		65

Total temporarily impaired securities	$	9,303	$	71	$	3,238	$	94	$	12,541	$	165

December 31, 2009
Government sponsored enterprise obligations	$	13,402	$	79	$	—	$	—	$	13,402	$	79
Mortgage-backed securities	9,692		17		—		—		9,692		17
Obligations of states and political subdivisions	8,084		175		—		—		8,084		175
Trust preferred securities of financial institutions	—		—		1,025		225		1,025		225

Total temporarily impaired securities	$	31,178	$	271	$	1,025	$	225	$	32,203	$	496

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S.Y. BANCORP, INC. AND SUBSIDIARY

The investment portfolio includes a significant level of obligations of states and political subdivisions. The issuers of the bonds are generally school districts or essential-service public works projects. The bonds are primarily concentrated in Kentucky, Indiana and Ohio. Each of these securities has a rating of A or better by a recognized bond rating agency.

Unrealized losses on Bancorp’s investment securities portfolio have not been recognized in income because the securities are of high credit quality, the decline in fair values is largely due to changes in the prevailing interest rate and credit environment since the purchase date, management does not intend to sell the investments, and it is not likely that the Bancorp will be required to sell the investments before recovery of their amortized cost bases, which may be maturity. The fair value is expected to recover as the securities reach their maturity date and/or the interest rate and credit environment returns to conditions similar to when the securities were purchased. These investments consist of 22 and 14 separate investment positions as of June 30, 2010 and December 31, 2009 that are not considered other-than-temporarily impaired. Based on these detailed reviews, Bancorp has not recorded other-than-temporary losses on any securities held at June 30, 2010.

As of June 30, 2010, Bancorp had four securities with a total carrying value of $3,238,000 which had been impaired for 12 months or longer. Two of these are obligations of a large school district in Kentucky with a total amortized cost of $2,082,000 and an unrealized loss totaling $29,000 caused by interest rate changes and other market conditions. The remaining two are trust preferred securities with a total amortized cost of $1,250,000 and an unrealized loss totaling $65,000 caused by interest rate changes and other market conditions. As of June 30, 2010, one of the trust preferred securities has a credit rating below investment grade — Caa1 by Moody’s Investor Service. This security has an amortized cost of $1,000,000, a carrying value of $959,600, and an unrealized loss of $40,400. Management evaluates the impairment of securities on a quarterly basis, considering various factors including issuer financial condition, agency rating, payment prospects, impairment duration and general industry condition. Based on the evaluation as of June 30, 2010, management is of the opinion that none of the securities is other-than-temporarily impaired. Management does not intend to sell the investments, and it is not likely that Bancorp will be required to sell the investments before recovery of their amortized cost bases, which may be maturity.

(3) Stock-Based Compensation

The fair value of all new and modified awards granted, net of estimated forfeitures, is recognized as compensation expense. These forfeiture estimates are based on historical experience.

Bancorp currently has one stock-based compensation plan. Initially, in the 2005 Stock Incentive Plan, there were 735,000 shares of common stock reserved for issuance of stock based awards. At Bancorp’s Annual Meeting of Shareholders held on April 21, 2010, shareholders approved a proposal to amend the 2005 Stock Incentive Plan to reserve an additional 700,000 shares of common stock for issuance under the plan. As of June 30, 2010, there were 763,680 shares available for future awards.

Bancorp’s 1995 Stock Incentive Plan expired in 2005; however, options granted under this plan expire as late as 2015. Options and stock appreciation rights (SARs) granted generally have been subject to a vesting schedule of 20% per year. Prior to 2009, those granted to certain executive officers vested six months after grant date. Restricted shares generally vest over three to five years, with limited exceptions of shorter vesting schedules due to anticipated retirement. All awards under both plans were granted at an exercise price equal to the market value of common stock at the time of grant and expire ten years after the grant date.

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S.Y. BANCORP, INC. AND SUBSIDIARY

Bancorp recognized, within salaries and employee benefits in the consolidated statements of income, stock-based compensation expense as follows:

	For three months ended				For six months ended
	June 30,				June 30,
	2010		2009		2010		2009
Stock-based compensation expense before income taxes	$	247,200	$	179,900	$	455,200	$	328,200
Deferred tax benefit	86,500		63,000		159,300		114,900
Reduction of net income	$	160,700	$	116,900	$	295,900	$	213,300

Bancorp expects to record an additional $498,000 of stock-based compensation expense in 2010. As of June 30, 2010, Bancorp has $2,862,000 of unrecognized stock-based compensation expense that will be recorded as compensation expense over the next five years as awards vest. Bancorp received cash of $429,000 and $808,000 from the exercise of options during the first six months of 2010 and 2009, respectively.

The fair value of Bancorp’s stock options and SARs is estimated at the date of grant using the Black-Scholes option pricing model, a leading formula for calculating the value of stock options. This model requires the input of subjective assumptions, changes to which can materially affect the fair value estimate. The fair value of restricted shares is determined by Bancorp’s closing stock price on the date of grant. The following assumptions were used in SAR/option valuations at the grant date in each year:

	2010		2009

Dividend yield	2.18	%	2.11	%
Expected volatility	23.87		23.59
Risk free interest rate	3.57		3.11
Forfeitures	5.96		5.96
Expected life of options and SARs (in years)	7.6		7.7

The expected life of options is based on actual experience of past like-term awards. All outstanding options have a 10-year contractual term. Bancorp evaluated historical exercise and post-vesting termination behavior when determining the expected life of options and SARs.

The dividend yield and expected volatility are based on historical information corresponding to the expected life of awards granted. The expected volatility is the volatility of the underlying shares for the expected term on a monthly basis. The risk free interest rate is the implied yield currently available on U.S. Treasury issues with a remaining term equal to the expected life of the awards.

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S.Y. BANCORP, INC. AND SUBSIDIARY

A summary of stock option and SARs activity and related information for the six months ended June 30, 2010 follows. The number of options and SARs and aggregate intrinsic value are stated in thousands.

											Weighted
					Weighted				Weighted		Average
					Average		Aggregate		Average		Remaining
	Options				Exercise		Intrinsic		Fair		Contractual
	and SARs		Exercise Price		Price		Value		Value		Life

At December 31, 2009
Vested and exercisable	730		$	9.82-26.83	$	20.50	$	1,664	$	4.52	4.42
Unvested	276		20.90-26.83		23.81		—		5.41		7.93
Total outstanding	1,006		9.82-26.83		21.41		1,664		4.76		5.38

Granted	85		21.03		21.03		166		5.31
Exercised	(44	)	9.82-22.81		12.40		445		2.54
Forfeited	(10	)	22.14-26.83		23.91		2		5.41

At June 30, 2010
Vested and exercisable	763		9.82-26.83		21.33		1,811		4.73		4.38
Unvested	274		21.03-26.83		22.85		231		5.36		8.23
Total outstanding	1,037		9.82-26.83		21.73		$	2,042	4.90		5.40

Vested during quarter	—		—		—		$	—	—

The aggregate intrinsic value of stock options exercised was calculated as the difference in the closing price of Bancorp’s common shares on the date of exercise and the exercise price, multiplied by the number of shares exercised.

The weighted average fair values of options and SARs granted in 2010 and 2009 were $5.31 and $5.36, respectively.

In the first quarter of 2010, Bancorp granted 84,558 SARs at the current market price of $21.03 and a fair value of $5.31. Also, in the first quarter of 2010, Bancorp granted 54,292 shares of common stock at the current market price of $21.03. No SARs or common stock grants were awarded in the second quarter of 2010.

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(4) Allowance for Loan Losses and Impaired Loans

An analysis of the changes in the allowance for loan losses for the six months ended June 30, 2010 and 2009 follows (in thousands):

	2010			2009
Beginning balance January 1,	$	20,000		$	15,381
Provision for loan losses	5,079			3,825
Loans charged off	(2,560		)	(2,458		)
Recoveries	414			329
Ending balance June 30,	$	22,933		$	17,077

Information about impaired loans follows (in thousands):

	June 30, 2010		December 31, 2009
Principal balance of impaired loans	$	13,187	$	11,208
Impaired loans with a valuation allowance	8,715		8,688
Amount of valuation allowance	1,685		1,676
Impaired loans with no valuation allowance	4,472		2,520
Average balance of impaired loans for the period	12,505		7,005

(5) Federal Home Loan Bank Advances

The Bank had outstanding borrowings of $70.5 million, at June 30, 2010, comprised of six separate advances as detailed in the table below (in thousands).

Amount

Type

Amortization

Maturity

Call Feature

Next Call Date

20,000

Fixed rate

None

December 2010

Quarterly

June 2010

20,000

Fixed rate

None

May 2012

Quarterly

May 2010

10,000

Fixed rate

None

April 2012

Non callable

10,000

Fixed rate

None

April 2014

Non callable

10,000

Fixed rate

None

May 2014

Non callable

448

Fixed rate

15 Year

April 2024

Non callable

70,448

For the first five advances, interest payments are due monthly, with principal due at maturity. For the sixth advance, principal and interest payments are due monthly based on a 15 year amortization schedule. The weighted average rate of these six advances was 3.33% at June 30, 2010. Advances from the FHLB are collateralized by certain commercial and residential real estate mortgage loans under a blanket mortgage collateral agreement and FHLB stock.

The Bank’s agreement with the Federal Home Loan Bank of Cincinnati (FHLB) enables the Bank to borrow up to an additional $129.8 million as of June 30, 2010 under terms to be established at the time of the advance. The Bank also has a standby letter of credit from the FHLB for $10 million outstanding at June 30, 2010. Under Kentucky law, customer cash balances in Investment Management and Trust accounts, may be retained as deposits in the Bank. Kentucky law requires these deposit accounts to be backed by some form of collateral above the $250,000 per account protection provided by the FDIC. The

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standby letter of credit from the FHLB collateralizes these accounts beyond the FDIC protection as required by Kentucky law.

(6) Goodwill and Intangible Assets

US GAAP requires that goodwill and intangible assets with indefinite useful lives be tested for impairment at least annually. Annual evaluations have resulted in no charges for impairment. Bancorp currently has goodwill from the acquisition of a bank in southern Indiana in the amount of $682,000. This goodwill is assigned to the commercial banking segment of Bancorp.

Mortgage servicing rights (MSRs) are amortized in proportion to and over the period of estimated net servicing income, considering appropriate prepayment assumptions. MSRs are evaluated quarterly for impairment by comparing the carrying value to the fair value. The estimated fair values of MSRs at June 30, 2010 and December 31, 2009 were $1,762,000 and $2,475,000, respectively. The total outstanding principal balances of loans serviced for others were $212,640,000 and $194,414,000 at June 30, 2010, and December 31, 2009 respectively. Changes in the net carrying amount of MSRs for the six months ended June 30, 2010 and 2009 are shown in the following table.

(in thousands)	2010			2009
Balance at beginning of period	$	1,616		$	426
Originations	257			633
Amortization	(236		)	(95		)
Impairment reversal	—			176
Balance at June 30	$	1,637		$	1,140

(7) Defined Benefit Retirement Plan

The Bank sponsors an unfunded, non-qualified, defined benefit retirement plan for certain key officers. Benefits vest based on years of service. The actuarially determined pension costs are expensed and accrued over the service period, and benefits are paid from the Bank’s assets. The Bank maintains life insurance policies on certain current and former executives, the income from which will help to offset the cost of benefits. The net periodic benefits costs, which include interest cost and amortization of net losses, totaled $31,000 and $32,000 for the three months ended June 30, 2010 and 2009, respectively. For the six months ended June 30, 2010 and 2009, the net periodic benefit costs totaled $62,000 and $64,000, respectively.

(8) Commitments and Contingent Liabilities

As of June 30, 2010, Bancorp had various commitments outstanding that arose in the normal course of business, including standby letters of credit and commitments to extend credit, which are properly not reflected in the financial statements. In management’s opinion, commitments to extend credit of $360,328,000 including standby letters of credit of $16,673,000 represent normal banking transactions, and no significant losses are anticipated to result from these commitments as of June 30, 2010. Commitments to extend credit were $379,075,000, including letters of credit of $26,655,000, as of December 31, 2009. Bancorp’s exposure to credit loss in the event of nonperformance by the other party to these commitments is represented by the contractual amount of these instruments. Bancorp uses the same credit and collateral policies in making commitments and conditional guarantees as for on-balance sheet instruments.

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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. Commitments to extend credit are mainly made up of commercial lines of credit, construction and development loans and home equity credit lines. Since some of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. Bancorp evaluates each customer’s creditworthiness on a case by case basis. The amount of collateral obtained, if deemed necessary by Bancorp upon extension of credit, is based on management’s credit evaluation of the customer. Collateral held varies but may include accounts receivable, inventory, property, plant and equipment, income producing commercial properties, residential properties and real estate under development.

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

Bancorp has commercial customers who entered into interest rate swap agreements with another financial institution to manage their own interest rate risk. Bancorp assisted two customers by guaranteeing performance of the swaps with the other financial institutions. Accordingly, Bancorp entered into risk participation agreements as a guarantor. The agreement stipulates that, in the event of default by the Bank’s customer on the interest rate swap, Bancorp will reimburse a portion of the loss, if any, borne by the other financial institution. These interest rate swaps are normally collateralized — generally with real property, inventories and equipment — by the customer, which limits Bancorp’s credit risk associated with the agreements. The terms of the agreements range from 10 to 32 months. The maximum potential future payment guaranteed by Bancorp cannot be readily estimated, because it is dependent upon the fair value of the interest rate swaps at the time of default. If an event of default on all contracts had occurred at June 30, 2010, Bancorp would have been required to make payments of approximately $362,000. Management believes the unamortized fee income of $15,000 recorded in other liabilities materially approximates the fair value of these guarantees.

Bancorp has commercial customers who require international letters of credit for their business needs. Bancorp assisted several customers by guaranteeing performance of the letters of credit with a correspondent financial institution. Accordingly, Bancorp has entered into an agreement whereby Bancorp is ultimately liable for the repayment in the event of non-performance by our customer. The terms of the agreements range from 2 to 10 months. If an event of default on all contracts had occurred at June 30, 2010, Bancorp would have been required to make payments of approximately $2,673,000. These letters of credit are normally collateralized — generally with inventories and receivables — by the customer, which limits Bancorp’s credit risk associated with the agreements.

(9) Preferred Stock

At Bancorp’s 2003 annual meeting of shareholders, the shareholders approved an amendment to the Articles of Incorporation to create a class of preferred stock and authorize 1,000,000 shares of this preferred stock with no par value. The relative rights, preferences and other terms of this stock or any series within the class will be determined by the Board of Directors prior to any issuance. Some of this preferred stock will be used in connection with a shareholders’ rights plan upon the occurrence of certain triggering events. None of this stock had been issued as of June 30, 2010.

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(10) Net Income Per Share

The following table reflects, for the three ended June 30, 2010 and 2009, net income (the numerator) and average shares outstanding (the denominator) for the basic and diluted net income per share computations:

	Three months ended				Six months ended
	June 30				June 30
	2010		2009		2010		2009
Net income, basic and diluted	$	5,556	$	4,288	$	10,537	$	9,025
Average shares outstanding	13,690		13,564		13,668		13,532
Effect of dilutive securities	100		165		84		151

Average shares outstanding including dilutive securities	13,790		13,729		13,752		13,683

Net income per share, basic	$	0.41	$	0.32	$	0.77	$	0.67
Net income per share, diluted	$	0.40	$	0.31	$	0.77	$	0.66

(11) Segments

The Bank’s, and thus Bancorp’s, principal activities include commercial banking and investment management and trust. Commercial banking provides a full range of loan and deposit products to individuals, consumers and businesses. Commercial banking also includes the Bank’s mortgage banking and securities brokerage activity. Investment management and trust provides wealth management services including investment management, trust and estate administration, retirement plan services and financial planning.

The financial information for each business segment reflects that which is specifically identifiable or allocated based on an internal allocation method. Principally, all of the net assets of Bancorp are involved in the commercial banking segment. Income taxes are allocated to the investment management and trust segment based on the marginal federal tax rate since all activity giving rise to the difference between marginal and effective tax rates occurs in the commercial banking segment. The measurement of the performance of the business segments is based on the management structure of the Bank and is not necessarily comparable with similar information for any other financial institution. The information presented is also not indicative of the segments’ operations, if they were independent entities.

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Selected financial information by business segment for the three and six month periods ended June 30, 2010 and 2009 follows:

	Three months				Six Months
	ended June 30				ended June 30
(In thousands)	2010		2009		2010		2009
Net interest income
Commercial banking	$	16,503	$	14,249	$	32,250	$	28,278
Investment management and trust	44		68		91		147
Total	$	16,547	$	14,317	$	32,341	$	28,425
Provision for loan losses:
Commercial banking	$	2,384	$	2,200	$	5,079	$	3,825
Investment management and trust	—		—		—		—
Total	$	2,384	$	2,200	$	5,079	$	3,825
Non-interest income:
Commercial banking	$	4,754	$	5,263	$	9,526	$	9,153
Investment management and trust	3,232		2,801		6,493		5,472
Total	$	7,986	$	8,064	$	16,019	$	14,625
Non-interest expense:
Commercial banking	$	12,519	$	12,327	$	24,516	$	23,074
Investment management and trust	1,925		1,703		3,743		3,225
Total	$	14,444	$	14,030	$	28,259	$	26,299
Tax expense
Commercial banking	$	1,676	$	1,455	$	3,490	$	3,063
Investment management and trust	473		408		995		838
Total	$	2,149	$	1,863	$	4,485	$	3,901
Net income:
Commercial banking	$	4,678	$	3,530	$	8,691	$	7,469
Investment management and trust	878		758		1,846		1,556
Total	$	5,556	$	4,288	$	10,537	$	9,025

(12) Income Taxes

US GAAP provides guidance on financial statement recognition and measurement of tax positions taken, or expected to be taken, in tax returns. As of June 30, 2010 and December 31, 2009 the gross amount of unrecognized tax benefits was $230,000. If recognized, all of the tax benefits would increase net income, resulting in a decrease of the effective tax rate. The amount of unrecognized tax benefits may increase or decrease in the future for various reasons including adding amounts for current tax year positions, expiration of open income tax returns due to statutes of limitation, changes in management’s judgment about the level of uncertainty, status of examination, litigation and legislative activity and the addition or elimination of uncertain tax positions.

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Bancorp’s policy is to report interest and penalties, if any, related to unrecognized tax benefits in income tax expense. As of June 30, 2010 and December 31, 2009, the amount accrued for the potential payment of interest and penalties was $20,000.

(13) Derivative Financial Instruments

Bancorp typically manages its interest rate risk without the use of hedging instruments, and currently does not have derivative financial instruments employed for any reason except for the accommodation of customers as described below.

Bancorp offers interest rate swaps to customers desiring long-term fixed rate lending whereby Bancorp receives interest at a fixed rate and pays interest at a variable rate. Simultaneously Bancorp enters into an interest rate swap agreement with a correspondent bank whereby Bancorp pays interest at a fixed rate and receives interest at a variable rate. Because of matching terms of offsetting contracts and the collateral provisions mitigating any non-performance risk, changes in fair value subsequent to initial recognition have an insignificant effect on earnings.

At June 30, 2010, Bancorp’s interest rate swaps are recognized as other assets and liabilities in the consolidated statements of financial condition at fair value. Bancorp’s derivative instruments have not been designated as hedging instruments. These undesignated derivative instruments are recognized on the consolidated balance sheet at fair value, with changes in fair value, due to changes in prevailing interest rates, recorded in other noninterest income.

The above interest rate swap agreements derive their value from underlying interest rates. These transactions involve both credit and market risk. The notional amounts are amounts on which calculations, payments, and the value of the derivative are based. Notional amounts do not represent direct credit exposures. Direct credit exposure is limited to the net difference between the calculated amounts to be received and paid, if any. Bancorp is exposed to credit-related losses in the event of nonperformance by the counterparties to these agreements. Bancorp controls the credit risk of its financial contracts through credit approvals, limits and monitoring procedures, and does not expect any counterparties to fail their obligations.

At June 30, 2010, two of the outstanding swap agreements have a forward-effective date in the fourth quarter of 2010. The remaining swap agreements had cash flow payments due in the second quarter of 2010. Exchanges of cash flows related to the interest rate swap agreements for the second quarter of 2010 were offsetting and therefore had no effect on Bancorp’s earnings or cash flows.

At June 30, 2010 and December 31, 2009, Bancorp had contracts to make payments at a variable rate determined by a specified index (1 month LIBOR) in exchange for receiving payments at a fixed rate. Correspondingly, at June 30, 2010 and December 31, 2009, Bancorp had contracts to make payments at a fixed rate in exchange for receiving payments at a variable rate determined by a specified index (1 month LIBOR). A summary of the contracts is as follows:

	Receiving						Paying
	June 30,			December 31,			June 30,		December 31,
(dollar amounts in thousands)	2010			2009			2010		2009
Notional amount	$	5,393		$	5,500		$	5,393	$	5,500
Weighted average maturity	8.6			9.1			8.6		9.1
Fair value	$	(332	)	$	(94	)	$	332	$	94

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To reduce credit risk related to the use of derivative instruments, Bancorp obtains collateral. The amount and nature of the collateral obtained is based on Bancorp’s credit evaluation of the customer. In addition, per the terms of the agreement with the correspondent bank, Bancorp may be required to post collateral for swaps with negative fair values and vice versa.

(14) Fair Value Measurements

Bancorp adopted the provisions of the authoritative guidance for fair value measurements. This guidance is definitional and disclosure oriented and addresses how companies should approach measuring fair value when required by US GAAP; it does not create or modify any current US GAAP requirements to apply fair value accounting. The guidance prescribes various disclosures about financial statement categories and amounts which are measured at fair value, if such disclosures are not already specified elsewhere in US GAAP.

The authoritative guidance defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between participants at the measurement date. The guidance also establishes a hierarchy to group assets and liabilities carried at fair value in three levels based upon the markets in which the assets and liabilities trade and the reliability of assumptions used to determine fair value. These levels are:

· Level 1 Valuation is based upon quoted prices for identical instruments traded in active markets.

· Level 2 Valuation is based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market.

· Level 3 Valuation is generated from model-based techniques that use significant assumptions not observable in the market. These unobservable assumptions would reflect internal estimates of assumptions that market participants would use in pricing the asset or liability. Valuation techniques could include pricing models, discounted cash flows and other similar techniques.

Bancorp’s policy is to maximize the use of observable inputs and minimize the use of unobservable inputs in fair value measurements. Where there exists limited or no observable market data, Bancorp uses its own estimates generally considering characteristics of the asset/liability, the current economic and competitive environment and other factors. For this reason, results cannot be determined with precision and may not be realized on an actual sale or immediate settlement of the asset or liability.

Bancorp’s investment securities available for sale are recorded at fair value on a recurring basis. Other accounts including mortgage loans held for sale, mortgage servicing rights, impaired loans and other real estate owned may be recorded at fair value on a non-recurring basis, generally in the application of lower of cost or market adjustments or write-downs of specific assets.

The portfolio of investment securities available for sale is comprised of debt securities of the U.S. Treasury and other U.S. government-sponsored corporations, mortgage-backed securities, obligations of state and political subdivisions, and trust preferred securities of other banks. Certain trust preferred securities are priced using quoted prices of identical securities in an active market. These measurements are classified as Level 1 in the hierarchy above. All other securities are priced using standard industry models or matrices with various assumptions such as yield curves, volatility, prepayment speeds, default rates, time value, credit rating and market prices for the instruments. These assumptions are generally observable in the market place and can be derived from or supported by observable data. These measurements are classified as Level 2 in the hierarchy above.

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Interest rate swaps are valued using primarily Level 2 inputs. Fair value measurements are obtained from an outside pricing service. Prices obtained are generally based on dealer quotes, benchmark forward yield curves, and other relevant observable market data. For purposes of potential valuation adjustments to derivative positions, Bancorp evaluates the credit risk of its counterparties as well as its own credit risk. To date, Bancorp has not realized any losses due to a counterparty’s inability to perform and the change in value of derivative assets and liabilities attributable to credit risk was not significant during 2010.

Below are the carrying values of assets measured at fair value on a recurring basis (in thousands).

	Fair Value at June 30, 2010
(In thousands)	Total		Level 1		Level 2		Level 3
Assets

Investment securities available for sale

Government sponsored enterprise obligations	$	105,182	$	—	$	105,182	$	—
Mortgage-backed securities	58,799		—		58,799		—
Obligations of states and political subdivisions	46,565		—		46,565		—
Trust preferred securities of financial institutions	1,185		1,185		—		—

Total investment securities available for sale	211,731		1,185		210,546		—

Interest rate swap	332		—		332		—

Total Assets	$	212,063	$	1,185	$	210,878	$	—

Liabilities

Interest rate swap	$	332	$	—	$	332	$	—

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	Fair value at December 31, 2009
(In thousands)	Total		Level 1		Level 2		Level 3
Assets

Investment securities available for sale

U.S. Treasury and other U.S. government obligations	$	3,019	$	—	$	3,019	$	—
Government sponsored enterprise obligations	124,688		—		124,688		—
Mortgage-backed securities	66,681		—		66,681		—
Obligations of states and political subdivisions	32,812		—		32,812		—
Trust preferred securities of financial institutions	1,025		1,025		—		—

Total investment securities available for sale	228,225		1,025		227,200		—

Interest rate swap	94				94		—

Total Assets	$	228,319	$	1,025	$	227,294	$	—

Liabilities

Interest rate swap	$	94	$	—	$	94	$	—

Mortgage loans held for sale are carried at the lower of cost or market value. The portfolio is comprised of residential real estate loans and fair value is based on specific prices of underlying contracts for sales to investors. These measurements are classified as Level 2. Because the fair value of the loans held for sale exceeded their carrying value, they are not included in the table for June 30, 2010 or December 31, 2009.

Mortgage servicing rights (MSRs) are recorded at fair value upon capitalization, are amortized to correspond with estimated servicing income, and are periodically assessed for impairment based on fair value at the reporting date. Fair value is based on a valuation model that calculates the present value of estimated net servicing income. The model incorporates assumptions that market participants would use in estimating future net servicing income. These measurements are classified as Level 3. For the year ended December 31, 2009, the MSR valuation allowance reversals totaled $176,000. A corresponding increase of $176,000 was included in earnings for 2009. At June 30, 2010 and December 31, 2009 there was no valuation allowance for the mortgage servicing rights, as the fair value exceeded the cost. Accordingly, the MSRs are not included in the table for 2010 or 2009.

Bancorp’s investment in a bank in one of Bancorp’s expansion markets, included in other assets, is recorded as an equity-method investment. As of June 30, 2010, the carrying value of the investment is $520,000, and is not included in the table below as the fair value of the investment exceeds the cost. Because Bancorp evaluated this investment based on a quoted price for this security in a market that is generally not active, the measurement was classified as Level 2.

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Other real estate owned, which is carried at the lower of cost or fair value, is periodically assessed for impairment based on fair value at the reporting date. Fair value is determined from external appraisals using judgments and estimates of external professionals. Many of these inputs are not observable and, accordingly, these measurements are classified as Level 3. At June 30, 2010 and December 31, 2009, the carrying value of other real estate owned was $1,978,000 and $1,556,000, respectively. Other real estate owned is not included in either table below, as the fair value of the properties exceeded their carrying value at June 30, 2010 and December 31, 2009.

Below are the carrying values of assets measured at fair value on a non-recurring basis (in thousands).

									Losses for 6 month
	Fair value at June 30, 2010								period ended
(in thousands)	Total		Level 1		Level 2		Level 3		June 30, 2010
Impaired loans	$	7,030	$	—	$	—	$	7,030	$	(755	)

									Losses for 6 month
	Fair value at December 31, 2009								period ended
(in thousands)	Total		Level 1		Level 2		Level 3		June 30, 2009
Impaired loans	$	7,012	$	—	$	—	$	7,012	$	(388	)

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(15) Fair Value of Financial Instruments

The estimated fair values of financial instruments are as follows:

	June 30, 2010					December 31, 2009
(In thousands)	Carrying Amount		Fair Value			Carrying Amount		Fair Value

Financial assets
Cash and short-term investments	$	74,820	$	74,820		$	32,424	$	32,424
Mortgage loans held for sale	6,763		7,268			13,249		13,268
Securities	211,756		211,758			228,260		228,262
Federal Home Loan Bank stock and other securities	5,772		5,772			5,547		5,547
Loans, net	1,454,371		1,477,485			1,415,462		1,440,374
Accrued interest receivable	5,953		5,953			5,745		5,745
Interest rate swap	332		332			94		94

Financial liabilities
Deposits	$	1,473,831	$	1,488,255		$	1,418,184	$	1,429,863
Short-term borrowings	73,679		74,000			72,648		72,765
Long-term borrowings	111,348		113,263			101,383		109,959
Accrued interest payable	455		455			427		427
Interest rate swap	332		332			94		94

Off balance sheet financial instruments
Commitments to extend credit	—		—			—		—
Standby letters of credit	—		(250		)	—		(400		)

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

Cash, Short-term investments, Federal Home Loan Bank stock, Accrued interest receivable/payable and Short-term borrowings

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

Securities

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

Mortgage loans held for sale

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

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Loans, net

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

Interest rate swaps

Fair value measurements are obtained from an outside pricing service. Prices obtained are generally based on dealer quotes, benchmark forward yield curves, and other relevant observable market data.

Deposits

The fair value of demand deposits, savings accounts, and certain money market deposits is the amount payable on demand at the reporting date. The fair value of fixed-rate certificates of deposits is estimated by discounting the future cash flows using the rates currently offered for deposits of similar remaining maturities.

Long-term borrowings

The fair value of long-term borrowings is estimated by discounting the future cash flows using estimates of the current market rate for instruments with similar terms and remaining maturities.

Commitments to extend credit and standby letters of credit

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

Limitations

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

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” or “Company”), and its subsidiary, Stock Yards Bank & Trust Company (“Bank”) for the three and six months ended June 30, 2010 and compares these periods with the same periods 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 six months of 2010 compared to

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the year ended December 31, 2009. This discussion should be read in conjunction with the unaudited condensed consolidated financial statements and accompanying notes presented in Part 1, 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. Factors that could cause actual results to differ from results discussed in forward-looking statements include, but are not limited to the following: economic conditions both generally and more specifically in the markets in which Bancorp and the Bank 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; and 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.

Overview of 2010 through June 30

Bancorp completed the second quarter and first six months of 2010 with more net income than the comparable periods of 2009 by 30% and 17%, respectively. The increases are due to loan growth, an improvement in net interest margin and increasing income from investment management and trust services, bankcard transaction revenue, and brokerage income, somewhat offset by a higher provision for loan losses and increasing non-interest expenses. Diluted earnings per share for the second quarter and first six months of 2010 increased 29.0% and 16.7% respectively.

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

Year-over-year total loans increased $79 million or 6%, and this was the driving force for growth in interest income. Increased loan volume more than offset the negative effect of declining interest rates over the past year. Despite deposit growth to support loan growth, interest expense declined due to lower funding costs on deposits and borrowings. The average rate earned on assets decreased in the first six months of 2010 compared to the same period in 2009 as the rates earned on loans and investments declined. Rates paid on liabilities decreased more than rates earned on assets, contributing to an increased net interest spread and net interest margin compared to the first six months of 2009.

Distinguishing Bancorp from other similarly sized community banks is its diverse revenue stream, and non-interest income continued to be a key contributor to earnings in the first six months of 2010. Total non-interest income increased 10% in the first six months of 2010 compared to the same period in 2009. The increase is due largely to increased income from investment management and trust services, as well as realized and unrealized gains on an investment in a domestic private investment fund. Income from investment management and trust services, which constitutes the single largest component of non-interest income increased 19% for the first six months of 2010 due to higher asset values and a modest increase in non-recurring estate fees. Revenue is earned as a percentage of the market value of the assets under management and therefore is tied directly to the broader market’s overall performance. In addition, Bancorp experienced increases in service charges on deposit accounts, bankcard transaction income, and brokerage income. Partially offsetting the increases were decreases

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in gains on sales of mortgage loans held for sale as the volume of transactions in that area has declined from an all-time high in 2009.

Higher non-interest expense for the first six months of 2010 was reflected in salaries and benefits, occupancy expenses, and data processing, partially offset by decreases on state bank taxes and FDIC insurance expense. Bancorp’s second quarter efficiency ratio was 58.10% compared with 57.31% in the first quarter of 2010 and 61.96% in the second quarter last year.

Also impacting 2010 results, Bancorp’s provision for loan losses was $5,079,000 for the first six months of 2010 compared to $3,825,000 for the same period in 2009. The increased provision results from a consistent allowance methodology that is driven by risk ratings. Management continues to be concerned that the current economic downturn and prospects for a slow recovery will continue to take a toll on Bancorp’s loan portfolio and underlying collateral values, extending its impact to lending relationships that have to date not been identified. Bancorp’s allowance for loan losses was 1.55% of total loans at June 30, 2010, compared with 1.39% of total loans at December 31, 2009, and 1.22% at June 30, 2009.

Tangible common equity (TCE), a non-GAAP measure, is a measure of a company’s capital which is useful in evaluating the quality and adequacy of capital. The ratio of tangible common equity to total tangible assets was 8.68% as of June 30, 2010, compared to 8.54% at December 31, 2009. See the Non-GAAP Financial Measures section for details on reconcilement to US GAAP measures.

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

a) Results Of Operations

Net income of $5,556,000 for the three months ended June 30, 2010 increased $1,268,000, or 29.6%, from $4,288,000 for the comparable 2009 period. Basic net income per share was $0.41 for the second quarter of 2010, an increase of 28.1% from the $0.32 for the second quarter of 2009. Net income per share on a diluted basis was $0.40 for the second quarter of 2010, compared to $0.31 for the second quarter of 2009; a 29.0% increase. Annualized return on average assets and annualized return on average stockholders’ equity were 1.23% and 13.93%, respectively, for the second quarter of 2010, compared to 1.01% and 11.53%, respectively, for the same period in 2009.

Net income of $10,537,000 for the six months ended June 30, 2010 increased $1,512,000, or 16.8%, from $9,025,000 for the comparable 2009 period. Basic net income per share was $0.77 for the first six months of 2010, compared to $0.67 for the same period of 2009. Net income per share on a diluted basis was $0.77 for the first six months of 2010 compared to $0.66 for the same period of 2009. Annualized return on average assets and annualized return on average stockholders’ equity were 1.18% and 13.35%, respectively, for the first six months of 2010, compared to 1.10% and 12.33%, respectively, for the same period in 2009.

Net Interest Income

The following tables present the average balance sheets for the three and six month periods ended June 30, 2010 and 2009 along with the related calculation of tax-equivalent net interest income, net interest margin and net interest spread for the related periods. See the notes following the tables for further explanation.

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Average Balances and Interest Rates — Taxable Equivalent Basis

	Three months ended June 30
	2010						2009
	Average				Average		Average				Average
(Dollars in thousands)	Balances		Interest		Rate		Balances		Interest		Rate

Earning assets:
Federal funds sold	$	32,260	$	19	0.24	%	$	30,751	$	17	0.22	%
Mortgage loans held for sale	3,966		53		5.36	%	7,953		105		5.30	%
Securities:
Taxable	167,618		1,322		3.16	%	137,466		1,137		3.32	%
Tax-exempt	33,388		408		4.90	%	28,010		406		5.81	%
FHLB stock	5,772		54		3.75	%	5,096		50		3.94	%
Loans, net of unearned income	1,460,147		19,918		5.47	%	1,390,379		19,346		5.58	%

Total earning assets	1,703,151		21,774		5.13	%	1,599,655		21,061		5.28	%

Less allowance for loan losses	22,592						16,691

	1,680,559						1,582,964
Non-earning assets:
Cash and due from banks	28,819						25,395
Premises and equipment	28,117						27,507
Accrued interest receivable and other assets	75,807						58,642

Total assets	$	1,813,302					$	1,694,508

Interest bearing liabilities:
Deposits:
Interest bearing demand deposits	$	249,326	$	117	0.19	%	$	226,177	$	121	0.21	%
Savings deposits	66,165		41		0.25	%	52,800		18		0.14	%
Money market deposits	430,963		805		0.75	%	319,739		534		0.67	%
Time deposits	469,642		2,431		2.08	%	517,486		3,991		3.09	%
Securities sold under agreements to repurchase	51,028		81		0.64	%	43,804		49		0.45	%
Fed funds purchased and other short term borrowings	18,498		8		0.17	%	28,082		16		0.23	%
FHLB advances	65,064		556		3.43	%	84,085		868		4.14	%
Long-term debt	40,900		862		8.45	%	40,930		883		8.65	%

Total interest bearing liabilities	1,391,586		4,901		1.41	%	1,313,103		6,480		1.98	%

Non-interest bearing liabilities:
Non-interest bearing demand deposits	225,769						195,128
Accrued interest payable and other liabilities	35,964						37,164
Total liabilities	1,653,319						1,545,395

Stockholders’ equity	159,983						149,113

Total liabilities and stockholders’ equity	$	1,813,302					$	1,694,508
Net interest income			$	16,873					$	14,581
Net interest spread					3.72	%					3.30	%
Net interest margin					3.97	%					3.66	%

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	Six months ended June 30
	2010						2009
	Average				Average		Average				Average
(Dollars in thousands)	Balances		Interest		Rate		Balances		Interest		Rate

Earning assets:
Federal funds sold	$	43,233	$	44	0.21	%	$	17,348	$	20	0.23	%
Mortgage loans held for sale	4,388		119		5.47	%	6,947		181		5.25	%
Securities:
Taxable	167,065		2,671		3.22	%	133,429		2,509		3.79	%
Tax-exempt	29,881		763		5.15	%	27,639		798		5.82	%
FHLB stock	5,661		109		3.88	%	4,722		99		4.23	%
Loans, net of unearned income	1,449,203		39,302		5.47	%	1,375,964		38,234		5.60	%

Total earning assets	1,699,431		43,008		5.10	%	1,566,049		41,841		5.39	%

Less allowance for loan losses	21,727						16,249

	1,677,704						1,549,800

Non-earning assets:
Cash and due from banks	27,354						25,441
Premises and equipment	28,028						27,652
Accrued interest receivable and other assets	71,910						58,315

Total assets	$	1,804,996					$	1,661,208

Interest bearing liabilities:
Deposits:
Interest bearing demand deposits	$	243,616	$	230	0.19	%	$	220,274	$	218	0.20	%
Savings deposits	64,159		83		0.26	%	49,595		25		0.10	%
Money market deposits	416,125		1,508		0.73	%	321,831		1,120		0.70	%
Time deposits	489,895		5,255		2.16	%	506,582		7,974		3.17	%
Securities sold under agreements to repurchase	53,225		168		0.64	%	48,182		108		0.45	%
Fed funds purchased and other
short term borrowings	18,727		17		0.18	%	22,976		38		0.33	%
FHLB advances	62,770		1,081		3.47	%	77,117		1,648		4.31	%
Long-term debt	40,902		1,722		8.49	%	40,931		1,758		8.66	%

Total interest
bearing liabilities	1,389,419		10,064		1.46	%	1,287,488		12,889		2.02	%

Non-interest bearing liabilities:
Non-interest bearing demand deposits	220,181						189,399
Accrued interest payable and other liabilities	36,274						36,690
Total liabilities	1,645,874						1,513,577

Stockholders’ equity	159,122						147,631

Total liabilities and stockholders’ equity	$	1,804,996					$	1,661,208
Net interest income			$	32,944					$	28,952
Net interest spread					3.64	%					3.37	%
Net interest margin					3.91	%					3.73	%

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Notes to the average balance and interest rate tables:

· Net interest income, the most significant component of the Bank’s 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 changes in interest rates.

· Net interest spread is the difference between the taxable equivalent rate earned on interest earning assets less the rate expensed on interest bearing liabilities.

· 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.

· Interest income on a fully tax equivalent basis includes the additional amount of interest income that would have been earned if investments in certain tax-exempt interest earning assets had been made in assets subject to federal taxes yielding the same after-tax income. Interest income on municipal securities and loans have been calculated on a fully tax equivalent basis using a federal income tax rate of 35%. The approximate tax equivalent adjustments to interest income were $326,000 and $264,000, respectively, for the three month periods ended June 30, 2010 and 2009 and $603,000 and $527,000, respectively, for the six month periods ended June 30, 2010 and 2009.

Fully taxable equivalent net interest income of $16,873,000 for the three months ended June 30, 2010 increased $2,292,000, or 15.7%, from $14,581,000 when compared to the same period last year. Net interest spread and net interest margin were 3.72% and 3.97%, respectively, for the second quarter of 2010 and 3.30% and 3.66%, respectively, for the second quarter of 2009.

Fully taxable equivalent net interest income of $32,944,000 for the six months ended June 30, 2010 increased $3,992,000, or 13.8%, from $28,952,000 when compared to the same period last year. Net interest spread and net interest margin were 3.64% and 3.91%, respectively, for the first six months of 2010 and 3.37% and 3.73%, respectively, for the first six months of 2009.

Approximately 40% of the Bank’s loans are variable rate and most of these loans are indexed to the Bank’s prime rate and may reprice as the prime rate changes. However, approximately $440 million, or 72% of variable rate loans, have reached their contractual floor of 4% or higher. Approximately $128 million or 21% of variable rate loans have no contractual floor; however, the Bank intends to establish floors whenever possible upon renewal of the loans. The remaining $45 million of variable rate loans, or 7% of variable rate loans, have contractual floors below 4%. The Bank’s variable rate loans are primarily comprised of commercial lines of credit and real estate loans. At inception, most of the Bank’s fixed rate loans are priced in relation to the five year Treasury bond and the persistence of low short term rates has held those rates low.

Average earning assets increased $133.4 million or 8.5%, to $1.699 billion for the first six months of 2010 compared to 2009, reflecting growth in the loan portfolio and investment securities. Average interest bearing liabilities increased $101.9 million, or 7.9%, to $1.389 billion for the first six months of 2010 compared to 2009 primarily due to increases in interest bearing demand and money market deposits, partially offset by decreases in certificates of deposits and FHLB borrowings.

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Asset/Liability Management and Interest Rate Risk

Managing interest rate risk is fundamental for the financial services industry. The primary objective of interest rate risk management is to neutralize effects of interest rate changes on net income. 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.

Interest Rate Simulation Sensitivity Analysis

Bancorp uses an earnings simulation model to estimate and evaluate the impact of changing interest rates on earnings. The simulation model is designed to reflect the dynamics of interest earning assets, interest bearing liabilities and off-balance sheet financial instruments. By estimating the effects of interest rate increases and decreases, the model can reveal approximate interest rate risk exposure. The simulation model is used by management to gauge approximate results given a specific change in interest rates at a given point in time. The model is therefore a tool to indicate earnings trends in given interest rate scenarios and does not indicate actual expected results. The June 30, 2010 simulation analysis, which shows very little interest rate sensitivity, indicates that an increase in interest rates of 100 to 200 basis points would have a slightly negative effect on net interest income, and a decrease of 100 to 200 basis points in interest rates would have a slightly positive impact. These estimates are summarized below.

	Net interest income change
Increase 200bp	(2.44	)%
Increase 100bp	(2.83	)
Decrease 100bp	3.47
Decrease 200bp	2.48

Approximately 30% of total loans are indexed to the prime rate, and have floors of 4% or higher. Since the prime rate is currently 3.25%, rates would have to increase more than 75 bp before the rates on such loans will increase. This effect, captured in our simulation analysis above, slightly offsets the normal positive impact of rising rates. Analysis of rates increasing more than 400 bp indicates a positive effect on net interest income.

The scenario of rates decreasing 200 bp is not reasonably possible given current low rates for short-term instruments and most deposits.

Undesignated derivative instruments described in Note 13 are recognized on the consolidated balance sheet at fair value, with changes in fair value, due to changes in prevailing interest rates, recorded in other noninterest income. Because of matching terms of offsetting contracts, in addition to collateral provisions which mitigate the impact of non-performance risk, changes in fair value subsequent to initial recognition have a minimal effect on earnings, and are therefore not included in the simulation analysis results above.

Provision for Loan Losses

The provision for loan losses increased $1,254,000 for the first six months of 2010 compared to the same period in 2009 in response to Bancorp’s assessment of risk in the loan portfolio. The provision for loan losses is calculated after considering credit quality factors, and ultimately relies on an overall internal analysis of the risk in the loan portfolio. Bancorp intends to continue with its historically conservative stance toward credit quality, remaining cautious in assessing the potential risk in the loan portfolio. Management has established loan grading procedures which result in specific allowance allocations for any

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estimated inherent risk of loss. For all loans graded, but not individually reviewed, a general allowance allocation is computed using factors typically developed over time based on actual loss experience. The specific and general allocations plus consideration of qualitative factors represent management’s best estimate of probable losses contained in the loan portfolio at the evaluation date. Although the allowance for loan losses is comprised of specific and general allocations the entire allowance is available to absorb any credit losses. Based on this detailed analysis of credit risk, management considers the allowance for loan losses adequate to cover probable losses inherent in the loan portfolio at June 30, 2010.

An analysis of the changes in the allowance for loan losses and selected ratios for the three and six month periods ended June 30, 2010 and 2009 follows:

	Three months ended June 30						Six months ended June 30
(Dollars in thousands)	2010			2009			2010			2009

Balance at the beginning of the period	$	21,811		$	16,208		$	20,000		$	15,381
Provision for loan losses	2,384			2,200			5,079			3,825
Loan charge-offs, net of recoveries	(1,262		)	(1,331		)	(2,146		)	(2,129		)
Balance at the end of the period	$	22,933		$	17,077		$	22,933		$	17,077
Average loans, net of unearned income	$	1,460,147		$	1,390,379		$	1,449,203		$	1,375,964
Provision for loan losses to average loans (1)	0.16		%	0.16		%	0.35		%	0.28		%
Net loan charge-offs to average loans (1)	0.09		%	0.10		%	0.15		%	0.15		%
Allowance for loan losses to average loans	1.57		%	1.23		%	1.58		%	1.24		%
Allowance for loan losses to period-end loans	1.55		%	1.22		%	1.55		%	1.22		%
Allowance to nonperforming loans	166.13		%	193.62		%	166.13		%	193.62		%

(1) Amounts not annualized

An analysis of net charge-offs by loan category for the three and six month periods ended June 30, 2010 and 2009 follows:

	Three Months					Six Months
(in thousands)	Ended June 30					Ended June 30
Net loan charge-offs (recoveries)	2010			2009		2010		2009
Commercial and industrial	$	658		$	199	$	786	$	415
Construction and development	(1		)	234		298		234
Real estate mortgage - commercial investment	195			—		448		55
Real estate mortgage - owner occupied commercial	95			593		235		593
Real estate mortgage - 1-4 family residential	115			286		244		361
Home equity	89			—		89		46
Consumer	111			19		46		425
Total net loan charge-offs	$	1,262		$	1,331	$	2,146	$	2,129

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Non-interest Income and Expenses

The following table sets forth the major components of non-interest income and expenses for the three and six month periods ended June 30, 2010 and 2009.

	Three months				Six months
	ended June 30				ended June 30
(In thousands)	2010		2009		2010		2009

Non-interest income:
Investment management and trust services	$	3,232	$	2,801	$	6,493	$	5,472
Service charges on deposit accounts	2,119		2,038		4,003		3,849
Bankcard transaction revenue	863		747		1,614		1,406
Gains on sales of mortgage loans held for sale	445		444		830		943
Brokerage commissions and fees	503		437		959		822
Bank owned life insurance income	248		245		491		488
Other	576		1,352		1,629		1,645
Total non-interest income	$	7,986	$	8,064	$	16,019	$	14,625
Non-interest expenses:
Salaries and employee benefits	$	8,319	$	7,669	$	16,408	$	15,069
Net occupancy expense	1,296		1,013		2,572		2,021
Data processing expense	1,322		1,248		2,459		2,279
Furniture and equipment expense	321		307		635		599
FDIC insurance expense	531		1,245		1,002		1,667
Other	2,655		2,548		5,183		4,664
Total non-interest expenses	$	14,444	$	14,030	$	28,259	$	26,299

Total non-interest income decreased $78,000, or 1.0%, for the second quarter of 2010 and increased $1,394,000, or 9.5% for the first six months of 2010, compared to the same periods in 2009.

Investment management and trust services income increased $431,000, or 15.4%, in the second quarter of 2010, as compared to the same period in 2009, primarily due to the impact of an increased market value of assets under management and a modest increase in executor fees. For the first six months of 2010, investment management and trust services income increased $1,021,000, or 18.7%, compared to 2009. Most fees earned for managing accounts are based on a percentage of market value on a monthly basis. Growth in assets from net new accounts and improving broader markets has resulted in an increase in investment management fees. Trust assets under management at June 30, 2010 were $1.50 billion, compared to $1.38 billion at June 30, 2009.

Service charges on deposit accounts increased $81,000, or 4.0%, in the second quarter of 2010, and $154,000, or 4.0%, for the first six months of 2010, as compared to the same periods in 2009. Service charge income is driven by transaction volume in deposit accounts, which can fluctuate throughout the year. Recent legislation requires that our customers “opt in” to access their overdraft protection beginning in the third quarter of 2010. While it is difficult to predict the impact of this change, management believes this requirement will result in some decline in service charge income in the second half of 2010.

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Bankcard transaction revenue increased $116,000, or 15.5%, in the second quarter of 2010, and increased $208,000, or 14.8%, for the first six months of 2010, as compared to the same periods in 2009. Primarily representing income the Bank derives from customers’ use of debit cards, results for the first six months of 2010 compared favorably to the same period in 2009 as bankcard transaction volume continues to increase. To earn higher interchange fees, Bancorp encourages its customers to process debit card transactions as signature-based transactions and has a rewards program to help with this effort. The upcoming overhaul of financial regulations may negatively impact this source of income. Approximately 80% of this revenue is interchange income based on rates set by service providers in a competitive market. In the future, this rate may be set by the Federal Reserve Board.

The Bank’s mortgage banking division originates residential mortgage loans to be sold in the secondary market. Interest rates on the loans sold are locked with the borrower and investor prior to closing the loans, thus Bancorp bears no interest rate risk related to these loans. The division offers conventional, VA and FHA financing, for purchases and refinances, as well as programs for low-income first time home buyers. The mortgage banking division also offers home equity conversion mortgages or “reverse” mortgages insured by the U.S. Department of Housing and Urban Development (HUD). These HUD loans provide homeowners 62 years of age or older a vehicle for converting equity in their homes to cash. Gains on sales of mortgage loans increased $1,000, or 0.2%, in the second quarter of 2010, as compared to the same period in 2009. For the six months ended June 30, 2009, gains on the sale of mortgage loans decreased 12.0% to $830,000 from $943,000 in 2009. Interest rates on mortgage loans directly impact the volume of business transacted by the mortgage banking division. Prevailing mortgage interest rates fell substantially in late 2008 and have remained at attractive levels through 2009 and 2010 helping contribute to a solid loan volume — mostly refinance activity. Also, the well-publicized availability of first-time homebuyer tax credits contributed to an increase in purchase activity in late 2009 and 2010. Volume reached an all-time high in 2009, and has declined in 2010 as many homeowners have already taken advantage of their refinance opportunities.

Brokerage commissions and fees increased $66,000, or 15.1%, in the second quarter of 2010, and increased 137,000 or 16.7% for the first six months of 2010, as compared to the same period in 2009. These increases corresponded to higher overall brokerage volume, as retail investors exhibited increased confidence in the overall market and the economic outlook.

Bank Owned Life Insurance (BOLI) income totaled $248,000 and $245,000 for the second quarter of 2010 and 2009, respectively, and totaled $491,000 and $488,000 for the first six months of 2010 and 2009, respectively. Bancorp purchases life insurance policies on the lives of certain officers and is the owner and beneficiary of the policies. Bancorp invests in these policies, known as BOLI, to provide an efficient form of funding for long-term retirement and other employee benefits costs.

Other non-interest income decreased $776,000, or 57.4%, in the second quarter of 2010 as compared to the same period in 2009, primarily due to a decrease of $510,000 in the value of the domestic private equity fund, a decrease of $143,000 in fees related to mortgage banking, such as title and application income, and a variety of other factors, none of which is individually significant. Other non-interest income decreased $16,000, or 1.0%, in the first six months of 2010 as compared to the same period in 2009, primarily due to a decrease of $144,000 in fees related to mortgage banking, such as title and application income, and a variety of other factors, none of which is individually significant, partially offset by an increase of $227,000 in the value of the domestic private investment fund.

Total non-interest expenses increased $414,000, or 3.0%, for the second quarter of 2010 as compared to the same period in 2009 and $1,960,000, or 7.5%, for the first six months of 2010 as compared to the same period in 2009.

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Salaries and employee benefits increased $650,000, or 8.5%, for the second quarter of 2010, and $1,339,000, or 8.9% for the first six months of 2010, as compared to the same periods of 2009, largely due to increases in salaries, bonus accruals and health insurance expense. The Bank had 474 and 457 full time equivalent employees as of June 30, 2010 and 2009; the expansion in Cincinnati contributed to the overall increase.

Net occupancy expense increased $283,000, or 27.9%, in the second quarter of 2010, and $551,000, or 27.3% in the first six months of 2010, as compared to the same periods of 2009, due to an increase in rent expense, some of which was a one-time charge to reflect the impact of leases with escalation clauses. Other contributing factors were the addition of a new branch in the Cincinnati market, along with increases in utilities and property taxes. Data processing expense increased $74,000 or 5.9% for the second quarter of 2010, and $180,000 or 7.9% for the first six months of 2010, as compared to the same period in 2009, primarily due to trust data processing expenses related to tax document preparation. Furniture and equipment expense increased $14,000 or 4.6% for the second quarter of 2010, and $36,000 or 6.0% for the first six months of 2010, as compared to the same period in 2009. This fluctuation relates to a variety of factors, none of which is individually significant.

FDIC insurance expense declined $714,000, or 57.3%, for the second quarter of 2010, and $665,000 or 39.9% for the first six months of 2010, as compared to the same periods in 2009. The decrease is due to a $786,000 special assessment recorded in the second quarter of 2009.

Other non-interest expenses increased $107,000 or 4.2% in the second quarter of 2010, and $519,000 or 11.1% in the first six months of 2010, as compared to the same periods in 2009. Included in this category are amortization expenses related to MSRs. Mortgage volume increased the amount of MSRs over 2009 and 2010, resulting in a corresponding increase of MSR amortization of $296,000 for the first six months of 2010 compared to the same period in 2009, partially offset by an impairment reversal of $159,000 in the first quarter, and $20,000 in the second quarter of 2009. The remaining year-to-date increases in other non-interest expenses are related to an increase of $226,000 in legal and professional fees, partially offset by a decrease of state bank taxes totaling $120,000, and a variety of factors including advertising, printing, mail and telecommunications, none of which is individually significant.

Income Taxes

In the second quarter of 2010, Bancorp recorded income tax expense of $2,149,000, compared to $1,863,000 for the same period in 2009. The effective rate for the three month period was 27.9% in 2010 and 30.3% in 2009. Bancorp recorded income tax expense of $4,485,000 for the first six months of 2010, compared to $3,901,000 for the same period in 2009. The effective rate for the six month period was 29.9% in 2010 and 30.2% in 2009. The decrease in the 2010 effective tax rate was primarily due to New Market and historic tax credits arising from Bancorp’s investment in a Louisville revitalization project in the second quarter of 2010.

Commitments

Bancorp utilizes a variety of financial instruments in the normal course of business to meet the financial needs of its customers. These financial instruments include commitments to extend credit and standby letters of credit. A discussion of Bancorp’s commitments is included in Note 8.

Other commitments discussed in Bancorp’s Annual Report on Form 10-K for the year ended December 31, 2009, have not materially changed since that report was filed, relative to qualitative and quantitative disclosures of fixed and determinable contractual obligations.

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b) Financial Condition

Balance Sheet

Total assets increased $68.0 million, or 3.8%, from $1.791 billion on December 31, 2009 to $1.859 billion on June 30, 2010. The most significant contributor of the increase in assets was loans, which increased $41.8 million in the first six months while investment securities decreased $16.5 million as a result of maturing short-term securities. Federal funds sold increased $36.0 million from the end of 2009. In addition to the loan growth represented on the consolidated balance sheet, total loans actually grew by an additional $9.1 million. This growth was offset by the decrease participation loans classified as secured borrowings noted in the “Elements of the Loan Portfolio” section below. Other assets increased $8.6 million, or 22.9%, largely due to Bancorp’s investment in a downtown revitalization project in the second quarter of 2010, which provides new market and historic tax credits.

Total liabilities increased $59.6 million, or 3.6%, from December 31, 2009 to $1.697 billion on June 30, 2010. The most significant component of the increase was in deposits of $55.6 million or 3.9% in support of loan growth. Securities sold under agreement to repurchase increased $2.4 million or 4.8%, while federal funds purchased decreased $1.1 million or 5.5%. Other short-term borrowings decreased $326 thousand or 18.0%. Other liabilities decreased $7.1 million or 15.7% as a result of a decrease in secured borrowings as noted in the “Elements of the Loan Portfolio” section below.

Elements of Loan Portfolio

The following table sets forth the major classifications of the loan portfolio.

(in thousands)
Loans by Type	June 30, 2010		December 31, 2009
Commercial and industrial	$	315,462	$	336,889
Construction and development	182,436		204,653
Real estate mortgage - commercial investment	337,830		326,421
Real estate mortgage - owner occupied commercial	304,540		230,001
Real estate mortgage - 1-4 family residential	161,466		147,342
Home equity - first lien	41,043		41,644
Home equity - junior lien	98,119		108,398
Consumer	36,408		40,114
Total loans	$	1,477,304	$	1,435,462

During 2010 Bancorp reviewed and standardized classifications of loan types. It was not feasible to obtain comparable amounts for reclassification of prior period presentation.

Bancorp enters into loan participation agreements with correspondent banks in the ordinary course of business to diversify credit risk. For certain participation loans, Bancorp has retained effective control of the loans, typically by restricting the participating institutions from pledging or selling their share of the loan without permission from Bancorp. US GAAP requires these loans to be recorded as secured borrowings. These loans are included in the loan totals above, and a corresponding liability is recorded in other liabilities. At June 30, 2010 and December 31, 2009, the total loans of this nature were $25,452,000 and $34,599,000 respectively. A corresponding decrease of $9,147,000 is reflected in other liabilities.

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Interest Reserves for Construction Loans

The establishment of interest reserves for construction and development loans is an established banking practice, but the handling of such interest reserves varies widely within the industry. Many of Bancorp’s construction and development loans provide for the use of interest reserves, and based upon its knowledge of general industry practices, Bancorp believes that its practices related to such interest reserves are appropriate and conservative. When Bancorp underwrites construction and development loans, it considers the expected total project costs, including hard costs such as land, site work and construction costs and soft costs such as architectural and engineering fees, closing costs, leasing commissions and construction period interest. Based on the total project costs and other factors, Bancorp determines the required borrower cash equity contribution and the maximum amount Bancorp is willing to loan. In the vast majority of cases, Bancorp requires that all of the borrower’s cash equity contribution be contributed prior to any material loan advances. This ensures that the borrower’s cash equity required to complete the project will in fact be available for such purposes. As a result of this practice, the borrower’s cash equity typically goes toward the purchase of the land and early stage hard and soft costs. This results in Bancorp funding the loan later as the project progresses, and accordingly Bancorp typically funds the majority of the budgeted construction period interest through loan advances. Bancorp monitors budgeted interest reserves and does not allow funds allocated to other items to be directed to interest without realized cost savings. Bancorp also looks to liquid guarantors who are able to make up a liquidity shortfall if required. The maximum committed balance of all construction and development loans which provide for the use of interest reserves at June 30, 2010 was approximately $70.0 million, of which $41.3 million was outstanding at June 30, 2010 and $28.7 million remained to be advanced. Bancorp typically underwrites these construction loans with loan to value ratios remaining within supervisory limits.

Non-performing Loans and Assets

Non-performing loans, which include non-accrual loans of $9,640,000, loans past due over 90 days and still accruing of $616,000, and loans accounted for as troubled debt restructuring of $3,548,000, totaled $13,804,000 at June 30, 2010. Non-performing loans were $12,101,000 at December 31, 2009 including $893,000 of loans past due over 90 days and still accruing and loans accounted for as troubled debt restructuring of $753,000. The increase reflected ongoing economic pressures as the recession continued and affected more borrowers. All loans past due over 90 days and still accruing are well-collateralized and are in the process of collection. Non-performing loans represent 0.93% of total loans at June 30, 2010 compared to 0.84% at December 31, 2009. As noted in the “Provision for Loan Losses” section of this report, non-performing loans are analyzed in management’s evaluation of the allowance and provision for loan losses.

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

(Dollars in thousands)	June 30, 2010			December 31, 2009

Non-accrual loans	$	9,640		$	10,455
Troubled debt restructuring	3,548			753
Loans past due 90 days or more and still accruing	616			893

Non-performing loans	13,804			12,101

Foreclosed real estate	1,978			1,556
Other foreclosed property	60			60

Non-performing assets	$	15,842		$	13,717

Non-performing loans as a percentage of total loans	0.93		%	0.84		%
Non-performing assets as a percentage of total assets	0.85		%	0.77		%
Allowance for loan losses as a percentage of non-performing loans	166		%	165		%

The increase in non-performing assets is largely due to the increase in one troubled debt restructuring, as well as other real estate owned. The addition of $2.8 million to troubled debt restructuring is confined to one borrower. Management believes it is in the best interest of the Bank to grant concessions to the customer and allow the customer adequate time to sell the property securing the loan and repay the loan. Because of the relatively low level of non-performing assets as compared to peers, Bancorp thus far has been able to approach loan workouts and collateral sales in an orderly fashion to minimize losses. Should market conditions worsen and non-performing loans spike, this flexibility may be reduced, and management may need to liquidate problem loans more rapidly, thus increasing the possibility of larger losses.

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The following table sets forth the major classifications of non-accrual loans:

(in thousands)
Non-accrual loans by type	June 30, 2010		December 31, 2009
Commercial and industrial	$	217	$	321
Construction and development	3,839		4,246
Real estate mortgage - commercial investment	2,344		2,024
Real estate mortgage - owner occupied commercial	798		2,122
Real estate mortgage - 1-4 family residential	1,613		1,256
Home equity	545		453
Consumer	284		33
Total loans	$	9,640	$	10,455

The decrease in non-accrual loans reflects charge-offs of certain non-accrual loans. Bancorp has five borrowers, all in our primary market, who account for $6,165,000 or 64% of total non-accrual loans. Each of these loans is secured by commercial or residential real estate, and at June 30, 2010 there was a total specific allocation in the allowance for loan losses totaling $575,000, representing management’s estimate of credit loss exposure.

Effects of Declines in Real Estate Collateral Values

Despite the fact that Bancorp’s principal market, Louisville, has only experienced a 2.3% decline in home prices since 2008 (Source: Federal Housing Finance Agency), further declines in collateral values, including commercial properties, may indirectly impact Bancorp’s ability to collect on certain real estate loans when borrowers are dependent on the values of the real estate as a source of cash flow. As borrowers experience difficulty, Bancorp evaluates their cash flow as well as the collateral value to determine prospects for collection. On an individual basis, loans are evaluated for changes in risk ratings, thereby affecting the provision and allowance for loan losses. Home equity loans are typically underwritten with consideration of the borrower’s overall financial strength, without reliance on the value of the collateral as a primary repayment source. Bancorp requires appraisals on real estate at application and assesses the transaction and market conditions to determine if updates are needed at renewal. Additionally, Bancorp typically evaluates the collateral condition and value upon classification as an impaired loan and upon foreclosure. Due to the above factors, the effects of declines in real estate collateral value have been considered in the allowance for loan losses.

c) Liquidity

The role of liquidity is to ensure that funds are available to meet depositors’ withdrawals and borrowers’ demands to fund credit commitments. This is accomplished by balancing changes in demand for funds with changes in the supply of those funds. Liquidity is provided by short-term liquid assets that can be converted to cash, investment securities available for sale, various lines of credit available to Bancorp, and the ability to attract funds from external sources, principally deposits. Management has maintained a significantly higher liquidity position in 2009 and 2010, which management considers prudent given the current operating environment. Management believes it has the ability to increase deposits at any time by offering rates slightly higher than the market rate.

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Bancorp’s most liquid assets are comprised of available for sale marketable investment securities, and federal funds sold. Federal funds sold totaled $42.6 million at June 30, 2010. These investments normally have overnight maturities and are used for general daily liquidity purposes. The fair value of the available for sale investment portfolio was $211.7 million at June 30, 2010, and included an unrealized net gain of $6.3 million. The portfolio includes maturities of approximately $58.5 million over the next twelve months, which, combined with federal funds sold, offer substantial resources to meet either new loan demand or reductions in Bancorp’s deposit funding base. Bancorp pledges portions of its investment securities portfolio to secure public fund deposits and securities sold under agreements to repurchase. At June 30, 2010, total investment securities pledged for these purposes comprised 38% of the available for sale investment portfolio, leaving $130.6 million of unpledged securities.

Bancorp has a large base of core customer deposits, defined as demand, savings, and money market deposit accounts. At June 30, 2010, such deposits totaled $1.017 billion and represented 69% of Bancorp’s total deposits. Because these core deposits are less volatile and are often tied to other products of Bancorp through long lasting relationships they do not put heavy pressure on liquidity. As of June 30, 2010, Bancorp had only $20.4 million or 1.4% of total deposits, in brokered deposits, which are entirely comprised of Certificate of Deposit Account Registry Service (CDARs) deposits, a program which allows Bancorp to accept customer deposits in excess of FDIC limits through reciprocal agreements with other network participating banks in order to offer FDIC insurance up to as much as $50 million in deposits.

With regard to credit available to Bancorp, the Bank is a member of the Federal Home Loan Bank of Cincinnati (“FHLB”). As a member, the Bank has access to credit products of the FHLB. As of June 30, 2010, the Bank’s additional borrowing capacity with the FHLB was approximately $129.8 million. Additionally, the Bank had federal funds borrowing lines with correspondent banks totaling $105 million.

Bancorp’s liquidity depends primarily on the dividends paid to it as the sole shareholder of the Bank. Bancorp had sufficient cash on hand from its 2008 trust preferred securities offering that it was not necessary for the Bank to fund quarterly cash dividends or quarterly interest payments on the trust preferred securities. At June 30, 2010, the Bank may pay up to $7.3 million in dividends to Bancorp without regulatory approval subject to the ongoing capital requirements of the Bank. Prior to the declaration of dividends, management considers the effect such payments will have on total stockholders’ equity and capital ratios.

d) Capital Resources

At June 30, 2010, stockholders’ equity totaled $162,035,000, an increase of $8,421,000 since December 31, 2009. See the Consolidated Statement of Changes in Stockholders’ Equity for further detail of the change in equity since the end of 2009. Accumulated other comprehensive income which, for Bancorp, consists of net unrealized gains and losses on securities available for sale and a minimum pension liability adjustment, net of taxes, totaled $3,886,000 at June 30, 2010 and $2,199,000 at December 31, 2009. The change since year end is a reflection of maturities within the portfolio and the effect of change in interest rates on the valuation of the Bank’s portfolio of securities available for sale. The unrealized pension liability is adjusted annually by reference to updated actuarial data.

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. To be categorized as well capitalized, the Bank must maintain a total risk-based capital ratio of at least 10%; a Tier 1 ratio of at least 6%; and a leverage ratio of at least 5%.

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The following table sets forth Bancorp’s and the Bank’s risk based capital amounts and ratios as of June 30, 2010 and December 31, 2009.

June 30, 2010	Actual				Minimum For Adequate				Minimum For Well Capitalized
(Dollars in thousands)	Amount		Ratio		Amount		Ratio		Amount		Ratio

Total risk-based capital (1)
Consolidated	$	217,356	13.71	%	$	126,831	8.00	%	$	NA	NA
Bank	169,651		10.81	%	125,551		8.00	%	156,939		10.00	%

Tier I risk-based capital (1)
Consolidated	187,467		11.83	%	63,387		4.00	%	NA		NA
Bank	139,960		8.92	%	62,762		4.00	%	94,143		6.00	%

Leverage (2)
Consolidated	$	187,467	10.36	%	$	54,286	3.00	%	NA		NA
Bank	139,960		7.93	%	52,948		3.00	%	$	88,247	5.00	%

December 31, 2009	Actual				Minimum For Adequate				Minimum For Well Capitalized
(Dollars in thousands)	Amount		Ratio		Amount		Ratio		Amount		Ratio

Total risk-based capital (1)
Consolidated	$	210,064	13.55	%	$	124,023	8.00	%	$	NA	NA
Bank	157,535		10.23	%	123,195		8.00	%	153,993		10.00	%

Tier I risk-based capital (1)
Consolidated	180,734		11.66	%	62,001		4.00	%	NA		NA
Bank	128,245		8.33	%	61,582		4.00	%	92,373		6.00	%

Leverage (2)
Consolidated	$	180,734	10.16	%	$	53,366	3.00	%	NA		NA
Bank	128,245		7.24	%	53,140		3.00	%	$	88,567	5.00	%

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

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

NA — Not applicable. Well capitalized is not defined for holding companies in regulatory framework.

The variance between the consolidated and the Bank’s capital ratios is largely due to the Bancorp’s 2008 issuance of $30 million of trust preferred securities and a special dividend of $25 million from the Bank to Bancorp in December 2009 as part of a strategy to minimize state bank taxes.

The ratio of tangible common equity to total tangible assets, both non-GAAP measures, stood at 8.68% as of June 30, 2010, versus 8.54% at December 31, 2009. Bancorp provides this ratio, in addition to those defined by banking regulators, because of its widespread use by investors as a means to evaluate the

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quality and adequacy of capital. See Non-GAAP Financial Measures section below for a reconciliation of the calculation of this measure to amounts reported under GAAP.

e) Non-GAAP Financial Measures

In addition to capital ratios defined by banking regulators, Bancorp considers various ratios when evaluating capital adequacy, including tangible common equity to tangible assets, and tangible common equity per share, all of which are non-GAAP measures. Bancorp believes these ratios are important because of their widespread use by investors as means to evaluate capital adequacy, as they reflect the level of capital available to withstand unexpected market conditions. Because GAAP does not include capital ratio measures, there are no GAAP financial measures comparable to these ratios. The following table reconciles Bancorp’s calculation of the measures to amounts reported under GAAP.

(in thousands, except per share data)	June 30, 2010			December 31, 2009
Total equity (a)	$	162,035		$	153,614
Less goodwill	(682		)	(682		)
Tangible common equity (c)	$	161,353		$	152,932

Total assets (b)	$	1,859,478		1,791,479
Less goodwill	(682		)	(682		)
Total tangible assets (d)	$	1,858,796		$	1,790,797

Total shareholders' equity to total assets (a/b)	8.71		%	8.57		%
Tangible common equity ratio (c/d)	8.68		%	8.54		%

Number of outstanding shares (e)	13,695			13,607

Book value per share (a/e)	$	11.83		$	11.29
Tangible common equity per share (c/e)	11.78			11.24

f) Recently Issued Accounting Pronouncements

In January 2010, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2010-06, Fair Value Measurements and Disclosures — Improving Disclosures about Fair Value Measurements. The update requires new disclosures including significant transfers in and out of Level 1 and Level 2 fair value measurements. Also, the ASU provides an update on the reconciliation for fair value measurements using significant unobservable inputs (Level 3). The new guidance is effective for interim and annual periods beginning after December 15, 2009, except for the update on the reconciliation of Level 3 fair value measurements, which is effective for fiscal years beginning after December 15, 2010. The portion that is currently effective did not have an impact on Bancorp’s consolidated financial statements. The portion that is not yet effective is also not expected to have an impact on Bancorp’s financial statements.

In July 2010, the FASB issued ASU No. 2010-20, Disclosures about the Credit Quality of Financing Receivables and the Allowance for Credit Losses, which requires significant new disclosures about the allowance for credit losses and the credit quality of financing receivables, which for Bancorp includes loans and standby letters of credit. The requirements are intended to enhance transparency regarding credit

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losses and the credit quality of loan and lease receivables. Under this statement, allowance for loan losses is to be disclosed by portfolio segment, while credit quality information, impaired loans and nonaccrual status are to be presented by class. Disclosure of the nature and extent, the financial impact and segment information of troubled debt restructurings will also be required. The disclosures are to be presented at the level of disaggregation that management uses when assessing and monitoring the portfolio’s risk and performance. This ASU is effective for interim and annual reporting periods after December 15, 2010. The adoption of ASU 2010-20 is expected to result in additional quarterly and annual disclosures beginning in the fourth quarter of 2010.

g) Recent Legislative Developments

The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the “Act”) was signed into law on July 21, 2010. Generally, the Act is effective the day after it was signed into law, but different effective dates apply to specific sections of the law. Uncertainty remains as to the ultimate impact of the Act, which could have an adverse impact on the financial services industry as a whole and on Bancorp’s business, results of operations and financial condition.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

Information required by this item is included in Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

Item 4. Controls and Procedures

Bancorp maintains disclosure controls and procedures designed to ensure that it is able to collect the information it is required to disclose in reports it files with the Securities and Exchange Commission (“SEC”), and to record, process, summarize and report this information within the time periods specified in the rules and forms of the SEC. Based on their evaluation of Bancorp’s disclosure controls and procedures as of the end of the quarterly period covered by this report, the Chief Executive and Chief Financial Officers believe that these controls and procedures are effective to ensure that Bancorp is able to collect, process and disclose the information it is required to disclose in reports it files with the SEC within the required time periods.

Based on the evaluation of Bancorp’s disclosure controls and procedures by the Chief Executive and Chief Financial Officers, there were no significant changes during the quarter ended June 30, 2010 in Bancorp’s internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, Bancorp’s internal control over financial reporting.

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PART II — OTHER INFORMATION

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

The following table shows information relating to the repurchase of shares of common stock by Bancorp during the three months ended June 30, 2010.

	Total number of Shares Purchased (1)	Average price Paid Per Share		Total number of Shares Purchased as Part of Publicly Announced Plan (2)	Maximum Number of Shares that May Yet Be Purchased Under the Plan
April 1 - April 30	—	$	—	—	—
May 1 - May 31	4,168	23.99		—	—
June 1 - June 30	—	—		—	—
Total	4,168	$	23.99	—	—

(1) Second quarter 2010 activity represents shares surrendered by officers, the fair value of which equaled the exercise price of stock options. This activity has no impact on the number of shares that may be purchased under a Board-approved plan.

(2) The Board of Directors of S.Y. Bancorp Inc. first approved a share buyback plan in 1999, and in February 2005, July 2007, and November 2007 expanded the plan to allow for the repurchase of additional shares. The stock repurchase program expired in November 2008, and has not been renewed.

Item 6. Exhibits

The following exhibits are filed or furnished as a part of this report:

Exhibit number		Description of exhibit
31.1		Certifications pursuant to Section 302 of the Sarbanes-Oxley Act by David P. Heintzman
31.2		Certifications pursuant to Section 302 of the Sarbanes-Oxley Act by Nancy B. Davis
32		Certifications pursuant to 18 U.S.C. Section 1350

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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 5, 2010	By:	/s/ David P. Heintzman
		David P. Heintzman, Chairman
		and Chief Executive Officer

Date: August 5, 2010	By:	/s/ Nancy B. Davis
		Nancy B. Davis, Executive Vice President,
		Treasurer and Chief Financial Officer