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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

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Form 10-K

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

S.Y. BANCORP, INC.
1040 East Main Street
Louisville, Kentucky 40206
(502) 582-2571

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

Securities registered pursuant to Section 12(g) of the Act:
None

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

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

        The aggregate market value of registrant's voting stock (Common Stock, no par value) held by non-affiliates of the registrant as of February 28, 2002, was $208,173,297.

        The number of shares of registrant's Common Stock, no par value, outstanding as of February 28, 2002, was 6,705,917.

Documents Incorporated by Reference

        Portions of Registrant's definitive proxy statement related to Registrant's Annual Meeting of Stockholders to be held on April 24, 2002 (the "Proxy Statement"), are incorporated by reference into Part III of this Form 10-K.

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S.Y. BANCORP, INC.
Form 10-K
Index

				Page
Part I:
Item 1.		Business		3
Item 2.		Properties		4
Item 3.		Legal Proceedings		4
Item 4.		Submission of Matters to a Vote of Security Holders		4
Part II:
Item 5.		Market for Registrant's Common Stock and Related Stockholder Matters		5
Item 6.		Selected Financial Data		6
Item 7.		Management's Discussion and Analysis of Financial Condition and Results of Operations		6
Item 7a.		Quantitative and Qualitative Disclosures About Market Risk		23
Item 8.		Financial Statements and Supplementary Data		23
Item 9.		Changes in and Disagreements with Accountants on Accounting and Financial Disclosure		47
Part III:
Item 10.		Directors and Executive Officers of the Registrant		47
Item 11.		Executive Compensation		47
Item 12.		Security Ownership of Certain Beneficial Owners and Management		47
Item 13.		Certain Relationships and Related Transactions		48
Part IV:
Item 14.		Exhibits, Financial Statement Schedules, and Reports on Form 8-K		48
Signatures				50
Index to Exhibits				51

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Part I

Item 1.    Business

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

Stock Yards Bank & Trust Company

        Stock Yards Bank & Trust Company is the only banking subsidiary of Bancorp and was originally chartered in 1904. The Bank is headquartered in Louisville, Kentucky and provides commercial and retail banking services in Louisville and southern Indiana through 17 full service banking offices (See "ITEM 2. PROPERTIES"). The Bank is chartered under the laws of the Commonwealth of Kentucky. In addition to traditional commercial and personal banking activities, the Bank has an investment management and trust department offering a wide range of trust and investment services. The Bank also originates and sells single-family residential mortgages through its operating division, Stock Yards Mortgage Company, and offers securities brokerage services through an arrangement with Raymond James Financial Services, Inc.

        At December 31, 2001, the Bank had 347 full-time equivalent employees. Employees are not subject to a collective bargaining agreement. Bancorp and the Bank consider their relationships with employees to be good.

        See Note 20 to Bancorp's consolidated financial statements for the year ended December 31, 2001 for information relating to the Bank's business segments.

Supervision and Regulation

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

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

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

        The Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 ("the 1994 Act") removed state law barriers to interstate bank acquisitions and permits the consolidation of interstate banking operations. Under the 1994 Act, adequately capitalized and managed bank holding companies may acquire banks in any state, subject to Community Reinvestment Act compliance, compliance with federal and state antitrust laws and deposit concentration limits and subject to any state laws restricting the transaction. Kentucky banks are also permitted to acquire a branch in another state if permitted by law of the other state. Kentucky currently does not permit de novo branching by out-of-state banks into

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Kentucky, and it does not permit an out-of-state bank to acquire a bank in Kentucky that has been in existence less than five years.

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

        In its 2000 session, the Kentucky General Assembly enacted a law allowing banks with a Kentucky charter and a CAMEL rating of 1 or 2 at its most recent state or federal examination to engage in any banking activity in which it could engage if: (a) it were operating as a national bank in any state, (b) it were operating as a state bank, state thrift or state savings bank in any state, or (c) it meets the qualified thrift lender test as determined by the Office of Thrift Supervision, or was operating as a federally chartered thrift or federal savings bank in any state.

        CAMEL ratings are used by examiners of financial institutions to rate these institutions in five categories. These categories are capital adequacy, asset quality, management effectiveness, quantity and quality of earnings and liquidity. Before a bank engages in any of the activities above, it must obtain a legal opinion specifying the statutory or regulatory provisions permitting the activity in which the bank intends to engage. The result of this legislation was to broaden the activities in which a Kentucky state chartered bank may engage.

Item 2.    Properties

        The principal offices of Bancorp and the Bank are located at 1040 East Main Street, Louisville, Kentucky. Adjacent to the main location is the Bank's operations center. In addition to the main office complex, the Bank owned eight branch properties at December 31, 2001 (one of which is located on leased land). The Bank also leased eight branch facilities. Of the seventeen banking locations, fourteen are located in Louisville and three are located in nearby southern Indiana. See Notes 5 and 16 to Bancorp's consolidated financial statements for the year ended December 31, 2001, for additional information relating to amounts invested in premises, equipment and lease commitments.

Item 3.    Legal Proceedings

        See Note 16 to Bancorp's consolidated financial statements for the year ended December 31, 2001, for information relating to legal proceedings.

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

        None

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Executive Officers of the Registrant

        The following table lists the names and ages (as of December 31, 2001) of all current executive officers of Bancorp. Each executive officer is appointed by Bancorp's Board of Directors to serve at the pleasure of the Board. There is no arrangement or understanding between any executive officer of Bancorp and any other person(s) pursuant to which he/she was or is to be selected as an officer.

        Mr. Brooks was appointed Chairman and Chief Executive Officer of Bancorp and the Bank in 1993. Prior thereto, he was President of Bancorp and the Bank.

        Mr. Heintzman was appointed President of Bancorp and the Bank in 1993. Prior thereto, he served as Treasurer and Chief Financial Officer of Bancorp and Executive Vice President of the Bank.

        Ms. Thompson was appointed Executive Vice President of Bancorp and the Bank in 1996. She joined the Bank in 1992 as Senior Vice President and is Manager of the Investment Management and Trust Department.

        Mr. Smith was appointed Executive Vice President of the Bank in 1996. Prior thereto, he was Senior Vice President of the Bank. He is primarily responsible for the commercial lending area of the Bank.

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

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

Part II

Item 5.    Market for Registrant's Common Stock and Related Stockholder Matters

        Bancorp's common stock is traded on the American Stock Exchange under the ticker symbol SYI. The table below sets forth the quarterly high and low market prices of Bancorp's common stock and dividends declared per share. The payment of dividends by the Bank to Bancorp is subject to the

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restriction described in Note 15 to the consolidated financial statements. On December 31, 2001, Bancorp had 949 shareholders of record.

		2001									2000
Quarter		High			Low			Cash Dividends Declared			High			Low			Cash Dividends Declared
First		$	24.50		$	20.25		$	0.11		$	22.50		$	18.63		$	0.09
Second			35.24			25.30			0.11			22.75			18.75			0.10
Third			34.45			29.15			0.11			22.00			19.00			0.10
Fourth			33.80			31.00			0.12			21.50			18.88			0.10

Item 6.    Selected Financial Data

Selected Consolidated Financial Data

		Years Ended December 31
		2001			2000			1999			1998			1997
		(Dollars In Thousands Except Per Share Data)
Net interest income		$	34,945		$	31,154		$	27,470		$	23,294		$	19,723
Provision for loan losses			4,220			2,840			1,635			1,600			1,000
Net income			13,542			11,592			9,706			8,218			6,534
Per share data
Net income, basic		$	2.03		$	1.75		$	1.46		$	1.25		$	1.00
Net income, diluted			1.96			1.70			1.41			1.21			0.96
Cash dividends declared			0.45			0.39			0.33			0.28			0.24
Average balances
Stockholders' equity		$	66,433		$	54,656		$	48,052		$	40,691		$	34,174
Assets			884,483			747,816			637,276			540,696			437,037
Long-term debt			14,026			2,100			2,100			2,100			2,259
Ratios
Return on average assets			1.53	%		1.55	%		1.52	%		1.52	%		1.50	%
Return on average stockholders' equity			20.38	%		21.21	%		20.20	%		20.20	%		19.12	%
Average stockholders' equity to average assets			7.51	%		7.31	%		7.54	%		7.53	%		7.82	%

        Per share information has been adjusted to reflect stock splits.

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

        The purpose of this discussion is to provide information as to the analysis of the consolidated financial condition and results of operations of S.Y. Bancorp, Inc. (Bancorp) and its wholly owned subsidiaries, Stock Yards Bank & Trust Company (the Bank) and S.Y. Bancorp Capital Trust I (the Trust). Bancorp, incorporated in 1988, has no active business operations. Thus, Bancorp's business is substantially the same as that of the Bank. The Bank has operated continuously since it opened in 1904. The Bank conducted business at one location for 85 years and then began branching. At December 31, 2001, the Bank had seventeen locations. The combined effect of added convenience with the Bank's focus on flexible, attentive customer service has been key to the Bank's growth and profitability. The wide range of services added by the wealth management group (investment management and trust, private banking and brokerage) and by the mortgage department help support the corporate philosophy of capitalizing on full service customer relationships.

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Critical Accounting Policies

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

        We have identified the accounting policy related to the allowance for loan losses as critical to the understanding of Bancorp's results of operations, since the application of this policy requires significant management assumptions and estimates that could result in materially different amounts to be reported if conditions or underlying circumstances were to change. The impact and any associated risks related to these policies on our business operations are discussed in the "Allowance for Loan Losses" section below.

Forward-Looking Statements

        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: economic conditions both generally and more specifically in the market in which Bancorp and its subsidiaries 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; or 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.

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

Results of Operations

        Net income was $13,542,000 or $1.96 per share on a diluted basis in 2001. This compares to $11,592,000 or $1.70 per share in 2000 and $9,706,000 or $1.41 per share in 1999. The increase in 2001 net income was attributable to growth in both net interest income and non-interest income that was partially offset by increased non-interest expenses. Earnings include a 12.5% increase in fully taxable equivalent net interest income and a 25.0% increase in non-interest income. All categories of non-interest income showed improvement when compared to the prior year. The strong results of our investment management and trust and mortgage departments for 2001 contributed significantly to this increase. Non-interest expenses increased 13.5%. Non-interest expenses increased in all categories reflective of continued expansion of the banking center network.

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

Net Interest Income

        Net interest income, the most significant component of Bancorp's earnings, is total interest income less total interest expense. Net interest spread is the difference between the taxable equivalent rate earned on average interest earning assets and the rate expensed on average interest bearing liabilities.

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Net interest margin represents net interest income on a taxable equivalent basis as a percentage of average earning assets. Net interest margin is affected by both the interest rate spread and the level of non-interest bearing sources of funds, primarily consisting of demand deposits and stockholders' equity. The level of net interest income is determined by the mix and volume of interest earning assets, interest bearing deposits and interest bearing liabilities and by changes in interest rates. The discussion that follows is based on tax equivalent interest data.

        Bancorp's net interest margin and net interest spread were affected negatively during the year by the unprecedented 475 basis point decrease in interest rates. Management believes that interest rates in 2002 will be less volatile and allow for improvement in the net interest margin and net interest spread during the year.

        Comparative information regarding net interest income follows:

		2001			2000			1999			2001/2000 Change		2000/1999 Change
		(Dollars In Thousands)
Net interest income, tax equivalent basis		$	35,548		$	31,601		$	27,839		12.5%		13.5%
Net interest spread			3.61	%		3.72	%		4.03	%	(11) bp		(31) bp
Net interest margin			4.27	%		4.51	%		4.72	%	(24) bp		(21) bp
Average earning assets		$	831,918		$	700,579		$	590,011		18.7%		18.7%
Prime rate at year end			4.75	%		9.50	%		8.50	%	(475) bp		100 bp
Average prime rate			6.93	%		9.24	%		8.44	%	(231) bp		80 bp

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

        Prime rate is included above to provide a general indication of the interest rate environment in which the Bank operates. The Bank's variable rate loans are indexed to the Bank's prime rate and reprice as the prime rate changes, unless they reach a contractual floor or ceiling. A significant amount of the Bank's variable rate loans reached their floor during the year.

Asset/Liability Management and Interest Rate Risk

        Managing interest rate risk is fundamental for the financial services industry. The primary objective of interest rate risk management is to neutralize effects of interest rate changes on net income. By considering both on and off-balance sheet financial instruments, 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 measure and evaluate the impact of changing interest rates on earnings. The simulation model is designed to reflect the dynamics of all interest earning assets, interest bearing liabilities and off-balance sheet financial instruments, combining factors affecting rate sensitivity into a one year forecast. By forecasting management's estimate of the most likely rate environment and adjusting those rates up and down the model can reveal approximate interest rate risk exposure. The December 31, 2001 simulation analysis indicates that an increase in

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interest rates would have a positive effect on net interest income, and a decrease in interest rates would have a negative effect on net interest income. These estimates are summarized below.

		Net Interest Income Change		Net Income Change
Increase 200 bp		3.87	%	6.80	%
Increase 100 bp		2.84		4.73
Decrease 100 bp		(3.78	)	(6.60	)
Decrease 200 bp		(6.13	)	(10.72	)

        To assist in achieving a desired level of interest rate sensitivity, management has in the past entered into derivative financial instruments that are designed to mitigate the effect of changes in interest rates. Derivative financial instruments can be a cost and capital efficient method of modifying interest rate risk sensitivity. The Bank had no derivative financial instruments at December 31, 2001.

        The following table presents the increases in net interest income due to changes in rate and volume computed on a tax equivalent basis and indicates how net interest income in 2001 and 2000 was impacted by volume increases and the lower average interest rate environment. The tax equivalent adjustments are based on a 35% tax rate. The change in interest due to both rate and volume has been allocated to the change due to rate and change due to volume in proportion to the relationship of the absolute dollar amounts of the change in each.

Taxable Equivalent Rate/Volume Analysis

				2001/2000									2000/1999
							Increase (Decrease) Due to									Increase (Decrease) Due to
				Net Change			Rate			Volume			Net Change			Rate			Volume
				(In Thousands)
Interest income
Loans				$	4,573		$	(4,698	)	$	9,271		$	12,429		$	1,570		$	10,859
Federal funds sold					193			(214	)		407			(340	)		208			(548	)
Mortgage loans held for sale					193			(30	)		223			(184	)		48			(232	)
Securities
	Taxable				210			(13	)		223			(234	)		(252	)		18
	Tax-exempt				269			(238	)		507			270			206			64
		Total interest income			5,438			(5,193	)		10,631			11,941			1,780			10,161
Interest expense
Deposits
	Interest bearing demand deposits				(242	)		(1,288	)		1,046			906			376			530
	Savings deposits				(303	)		(349	)		46			(47	)		(39	)		(8	)
	Money market deposits				(332	)		(745	)		413			549			282			267
	Time deposits				2,283			(529	)		2,812			5,839			2,322			3,517
Securities sold under agreements to repurchase and federal funds purchased					(868	)		(997	)		129			844			468			376
Other short-term borowings					(84	)		(81	)		(3	)		69			40			29
Long-term debt					1,038			16			1,022			19			19			—
		Total interest expense			1,492			(3,973	)		5,465			8,179			3,468			4,711
		Net interest income		$	3,946		$	(1,220	)	$	5,166		$	3,762		$	(1,688	)	$	5,450

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Provision for Loan Losses

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

		2001			2000			1999
		(Dollars In Thousands)
Provision for loan losses		$	4,220		$	2,840		$	1,635
Allowance to loans at year end			1.41	%		1.40	%		1.34	%
Allowance to average loans for year			1.52	%		1.52	%		1.49	%

        The provision for loan losses increased during the year due to significant loan growth and in consideration of loans charged off and the increase in non-performing loans during the year. See "Nonperforming Loans and Assets" for further discussion of non-performing loans. See "Summary of Loan Loss Experience" for further discussion of loans charged off during the year.

        The Bank's loan portfolio is diversified with no significant concentrations of credit. Geographically, most loans are extended to borrowers in the Louisville, Kentucky metropolitan area. The adequacy of the allowance is monitored on an ongoing basis and it is the opinion of management that the balance of the allowance for loan losses at December 31, 2001 is adequate to absorb losses inherent in the loan portfolio as of the financial statement date. See "Financial Condition-Allowance for Loan Losses" for more information on the allowance for loan losses.

Non-Interest Income and Non-Interest Expenses

        The following table provides a comparison of the components of non-interest income and expenses for 2001, 2000 and 1999. The table shows the dollar and percentage change from 2000 to 2001 and from 1999 to 2000. Below the table is a discussion of significant changes and trends.

											2001/2000					2000/1999
		2001			2000			1999			Change			%		Change			%
		(Dollars In Thousands)
Non-Interest income
Investment management and trust services		$	7,256		$	6,327		$	5,194		$	929		14.7	%	$	1,133		21.8	%
Service charges on deposit accounts			7,000			5,528			3,484			1,472		26.6	%		2,044		58.7	%
Gains on sales of mortgage loans held for sale			1,995			1,043			1,511			952		91.3	%		(468	)	(31.0	)%
Gains on sales of securities available for sale			—			—			100			—		—			(100	)	(100.0	)%
Other			3,012			2,517			2,331			495		19.7	%		186		8.0	%
		$	19,263		$	15,415		$	12,620		$	3,848		25.0	%	$	2,795		22.1	%
Non-interest expenses
Salaries and employee benefits			17,644			15,559			13,750			2,085		13.4	%		1,809		13.2	%
Net occupancy expense			1,861			1,800			1,711			61		3.4	%		89		5.2	%
Furniture and equipment expense			2,523			2,309			2,282			214		9.3	%		27		1.2	%
Other			8,278			7,036			6,388			1,242		17.7	%		648		10.1	%
		$	30,306		$	26,704		$	24,131		$	3,602		13.5	%	$	2,573		10.7	%

        The largest component of non-interest income is the income from investment management and trust services. This area of the Bank continues to grow through attraction of new business and customer retention. At December 31, 2001 assets under management totaled $1.179 billion compared to

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$1.056 billion at December 31, 2000 and $914 million as of December 31, 1999. Included in these totals are the assets of the Bank's investment portfolio. These amounts were $90 million at year end 2001, $77 million at year end 2000 and $76 million at year end 1999. Growth in the department's assets include both personal and employee benefit accounts.

        Growth in service charges on deposit accounts is primarily due to increased account volumes and an overdraft service for retail customers. Opening new branch offices and promotion of retail accounts have presented opportunities for growth in deposit accounts and increased fee income. The Bank also introduced a new retail deposit account product line during 2001 that has been successful at attracting new accounts. Additionally, in March 2000 the Bank began offering an overdraft service to retail depositors. The service allows checking customers meeting specific criteria to incur overdrafts up to a predetermined limit, generally $500. For each check paid resulting in our increasing an overdraft, the customer pays the standard overdraft charge.

        The Bank operates a mortgage banking company as a division of the Bank. This division originates residential mortgage loans and sells the loans in the secondary market. The division offers conventional, VA and FHA financing, as well as a program for low-income first time home buyers. Loans are made for both purchase and refinancing of homes. Virtually all loans originated by the mortgage banking company are sold in the secondary market with servicing rights released. The interest rates on the loans sold are locked with the buyer and Bancorp bears no interest rate risk related to these loans. Interest rates on conventional mortgage loans directly impact the volume of business transacted by the mortgage banking division. Favorable rates in early 1999 stimulated home buying and refinancing, however, beginning in the second quarter of 1999 and continuing through 2000, rising rates resulted in lower levels of activity, particularly refinancing. Mortgage rates again became favorable during the second half of 2001 and the fourth quarter of 2001 saw record volumes of activity.

        Other non-interest income has increased for several reasons and primarily reflects the Bank's growth. Contributing factors to the increase for 2001 include the continued growth of income related to debit cards and internet banking. Also contributing were income items related to the increase in mortgage banking activity such as application fees and title fees.

        Salaries and benefits are the largest component of non-interest expenses. Increases in personnel expense rose in part from regular salary increases. Officer increases are effective January 1 and non-officer increases are effective on each individual's anniversary date. Also, the Bank continues to add employees to support growth. At December 31, 2001, the Bank had 347 full-time equivalent employees compared to 327 at the same date in 2000 and 316 for 1999. There are no significant obligations for post-retirement or post-employment benefits.

        Net occupancy expenses have increased as the Bank has added banking centers. During 2001 and 1999, the Bank opened two locations; during 2000 the Bank opened one. At December 31, 2001 the Bank had seventeen banking center locations including the main office. Furniture and equipment expenses also have increased with the addition of banking centers. Further, the Bank continues to update computer equipment and software as technology advances. Costs of capital asset additions flow through the statement of income, over the lives of the assets, in the form of depreciation expense.

        Other non-interest expenses have increased from numerous factors and reflect the Bank's growth. Among the most significant costs that increased were marketing, advertising, mail and telephone. The increase in marketing and advertising reflects the introduction of a new product line of retail checking products during the year.

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Income Taxes

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

		2001			2000			1999
		(Dollars In Thousands)
Income tax expense		$	6,140		$	5,433		$	4,618
Effective tax rate			31.2	%		31.9	%		32.2	%

Financial Condition

Earning Assets and Interest Bearing Liabilities

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

											2001/2000					2000/1999
		2001			2000			1999			Change			%		Change			%
		(Dollars In Thousands)
Average earning assets		$	831,918		$	700,579		$	590,011		$	131,339		18.7	%	$	110,568		18.7	%
Average interest bearing liabilities			704,196			589,219			493,866			114,977		19.5	%		95,353		19.3	%
Average total assets			884,483			747,816			637,276			136,667		18.3	%		110,540		17.3	%
Total year end assets			937,293			852,260			689,815			85,033		10.0	%		162,445		23.5	%

        The Bank has experienced significant growth in earning assets over the last several years. Growth of average earning assets occurred primarily in the area of loans. Loan demand continued to be strong during 2001. From year end 2000 to year end 2001, commercial and industrial loans increased 10.9%. Construction and development loans increased 8.7%. Real estate mortgage loans increased 21.3%. Consumer loans increased 7.6%. Securities also grew during 2001 in conjunction with the overall growth in the asset size of Bancorp.

        The increase in average interest bearing liabilities from 2000 to 2001 occurred primarily in interest bearing demand deposits, time deposits and federal funds purchased. The increase in interest bearing demand deposits during the year was primarily a function of the poor performance of the stock market and lower interest rates. As the stock market continued to perform poorly during 2001, many investors moved their funds into deposit accounts. Because of lower interest rates, depositors tended to favor demand and money market deposits versus time deposits. The increase in federal funds purchased was due to the Bank's net funding position. Federal funds purchased are discussed further under the heading "Liquidity". Bancorp also issued $20 million of trust preferred securities during 2001. The net proceeds of $18.9 million were used to pay off existing long-term debt and to fund the continued growth of Bancorp. See Note 9 and Note 10 to the consolidated financial statements for more details on long-term debt and trust preferred securities, respectively.

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Average Balances and Interest Rates—Taxable Equivalent Basis

				Year 2001								Year 2000								Year 1999
				Average Balances			Interest			Average Rate		Average Balances			Interest			Average Rate		Average Balances			Interest			Average Rate
				(Dollars In Thousands)
Earning assets
Federal funds sold				$	14,384		$	634		4.41	%	$	6,242		$	441		7.07	%	$	14,795		$	781		5.28	%
Mortgage loans held for sale					5,375			376		7.00	%		2,235			183		8.19	%		5,141			368		7.16	%
Securities
	Taxable				64,125			3,616		5.64	%		57,434			3,406		5.93	%		59,860			3,640		6.08	%
	Tax-exempt				26,458			1,729		6.53	%		21,778			1,459		6.70	%		18,114			1,197		6.61	%
Loans, net of unearned income					721,576			59,918		8.30	%		612,890			55,345		9.03	%		492,101			42,907		8.72	%
Total earning assets					831,918			66,273		7.97	%		700,579			60,834		8.68	%		590,011			48,893		8.29	%
Less allowance for loan losses					10,356								8,613								7,172
					821,562								691,966								582,839
Non-earning assets
Cash and due from banks					29,251								25,672								23,996
Premises and equipment					18,428								16,729								16,454
Accrued interest receivable and other assets					15,242								13,449								13,987
Total assets				$	884,483							$	747,816							$	637,276
Interest bearing liabilities
Deposits
	Interest bearing demand deposits			$	164,589		$	3,886		2.36	%	$	127,056		$	4,128		3.25	%	$	110,049		$	3,222		2.93	%
	Savings deposits				30,016			390		1.30	%		28,053			693		2.47	%		28,345			740		2.61	%
	Money market deposits				66,020			1,696		2.57	%		53,423			2,027		3.79	%		45,789			1,478		3.23	%
	Time deposits				377,630			21,815		5.78	%		329,152			19,533		5.93	%		266,544			13,694		5.14	%
Securities sold under agreements to repurchase and federal funds purchased					49,610			1,668		3.36	%		47,088			2,536		5.39	%		39,231			1,692		4.31	%
Other short-term borrowings					2,305			67		2.91	%		2,347			151		6.43	%		1,808			82		4.54	%
Long-term debt					14,026			1,203		8.58	%		2,100			165		7.86	%		2,100			146		6.95	%
		Total interest bearing liabilities			704,196			30,725		4.36	%		589,219			29,233		4.96	%		493,866			21,054		4.26	%
Non-interest bearing liabilities
Non-interest bearing demand deposits					101,542								92,250								87,609
Accrued interest payable and other liabilities					12,312								11,691								7,749
		Total liabilities			818,050								693,160								589,224
		Stockholders' equity			66,433								54,656								48,052
		Total liabilities and stockholders' equity		$	884,483							$	747,816							$	637,276
		Net interest income					$	35,548							$	31,601							$	27,839
		Net interest spread								3.61	%							3.72	%							4.03	%
		Net interest margin								4.27	%							4.51	%							4.72	%

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Notes

•

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

•

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

•

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

•

Loan fees included in interest income amounted to $1,376,000, $989,000 and $939,000 in 2001, 2000 and 1999, respectively.

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Securities

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

        The carrying value of securities is summarized as follows:

			December 31
			2001			2000			1999
			(In Thousands)
Securities available for sale
	U.S. Treasury and federal agency obligations		$	51,696		$	51,553		$	50,115
	Mortgage-backed securities			4,382			996			1,128
	Obligations of states and political subdivisions			18,266			15,210			9,662
	Other			2,540			2,175			1,928
			$	76,884		$	69,934		$	62,833
Securities held to maturity
	U.S. Treasury and federal agency obligations		$	—		$	—		$	1,000
	Mortgage-backed securities			5,720			7,369			8,486
	Obligations of states and political subdivisions			8,158			9,520			11,912
			$	13,878		$	16,889		$	21,398

        The maturity distribution and weighted average interest rates of debt securities at December 31, 2001, are as follows:

		Within One Year					After One But Within Five Years				After Five But Within Ten Years				After Ten Years
		Amount			Rate		Amount		Rate		Amount		Rate		Amount		Rate
		(Dollars In Thousands)
Securities available for sale
U.S. Treasury and federal agencies		$	4,096		6.75	%	40,002		5.39	%	6,545		5.67	%	1,053		8.00	%
Mortgage-backed securities			—		—		—		—		802		6.50	%	3,580		6.50	%
Obligations of states and political subdivisions			—		—		3,603		4.42	%	5,542		4.77	%	9,121		5.14	%
		$	4,096		6.75	%	43,605		5.31	%	12,889		5.34	%	13,754		5.71	%
Securities held to maturity
Mortgage-backed securities		$	—		—		305		7.00	%	904		6.00	%	4,511		6.49	%
Obligations of states and political subdivisions			2,556		4.88	%	2,569		4.44	%	3,033		4.58	%	—		—
		$	2,556		4.88	%	2,874		4.71	%	3,937		4.91	%	4,511		6.49	%

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Loan Portfolio

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

		December 31
		2001			2000			1999			1998			1997
		(In Thousands)
Commercial and industrial		$	152,049		$	137,086		$	116,248		$	103,345		$	101,030
Construction and development			55,943			51,479			34,760			30,155			21,481
Real estate mortgage			506,081			417,170			349,164			277,994			217,830
Consumer			63,368			58,899			46,686			36,792			29,952
		$	777,441		$	664,634		$	546,858		$	448,286		$	370,293

        The following tables show the amounts of commercial and industrial loans, and construction and development loans at December 31, 2001 which, based on remaining scheduled repayments of principal, are due in the periods indicated. Also shown are the amounts due after one year classified according to sensitivity to changes in interest rates.

		Maturing
		Within One Year			After One But Within Five Years			After Five Years			Total
		(In Thousands)
Commercial and industrial		$	59,876		$	62,462		$	29,711		$	152,049
Construction and development			55,943			—			—			55,943

		Interest Sensitivity
		Fixed Rate			Variable Rate
		(In Thousands)
Due after one but within five years		$	51,044		$	11,418
Due after five years			8,908			20,803
		$	59,952		$	32,221

Nonperforming Loans and Assets

        Information summarizing nonperforming assets, including nonaccrual loans follows:

		December 31
		2001			2000			1999			1998			1997
		(Dollars In Thousands)
Nonaccrual loans		$	3,775		$	602		$	2,770		$	2,163		$	290
Loans past due 90 days or more and still accruing			1,346			2,342			1,645			197			682
Nonperforming loans		$	5,121		$	2,944		$	4,415		$	2,360		$	972
Foreclosed real estate			63			833			—			1,836			—
Other foreclosed property			—			—			85			58			—
Nonperforming assets		$	5,184		$	3,777		$	4,500		$	4,254		$	972
Nonperforming loans as a percentage of total loans			0.66	%		0.44	%		0.81	%		0.53	%		0.26	%
Nonperforming assets as a percentage of total assets			0.55	%		0.44	%		0.65	%		0.70	%		0.20	%

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        The increase in non-performing loans is primarily related to a few larger customers. Management believes these loans are well secured and expects little to no loss for Bancorp.

        The threshold at which loans are generally transferred to nonaccrual of interest status is 90 days past due unless they are well secured and in the process of collection. Interest income recorded on nonaccrual loans for 2001 totaled $157,000. Interest income that would have been recorded in 2001 if nonaccrual loans were on a current basis in accordance with their original terms was $512,000.

        In addition to the nonperforming loans discussed above, there were loans for which payments were current or less than 90 days past due where borrowers are experiencing significant financial difficulties. At December 31, 2001, these loans totaled approximately $1,353,000. These loans are monitored by management and considered in determining the level of the allowance for loan losses. Management believes these loans do not present significant exposure to loss. The allowance for loan losses is discussed further under the heading "Provision for Loan Losses".

Allowance for Loan Losses

        An allowance for loan losses has been established to provide for loans that may not be fully repaid. Loan losses arise primarily from the loan portfolio, but may also be generated from other sources such as commitments to extend credit, guarantees and standby letters of credit. The allowance for loan losses is increased by provisions charged to expense and decreased by charge-offs, net of recoveries. Loans are charged off by management when deemed uncollectible; however, collection efforts continue and future recoveries may occur.

        The allowance is maintained at a level considered by management to be adequate to cover losses that are inherent in the loan portfolio. Factors considered include past loss experience, general economic conditions and information about specific borrower situations including financial position and collateral values. Estimating inherent loss on any loan is subjective and ultimate losses may vary from current estimates. Estimates are reviewed periodically and adjustments are reported in income through the provision for loan losses in the periods in which they become known. The adequacy of the allowance for loan losses is monitored by the internal loan review staff and reported quarterly to the Audit Committee of the Board of Directors. In addition, various regulatory agencies, as an integral part of their examination process, periodically review the adequacy of Bancorp's allowance for loan losses. Such agencies may require Bancorp to make additional provisions to the allowance based upon their judgments about information available to them at the time of their examinations. Management believes that the allowance for loan losses is adequate to absorb inherent losses on existing loans that may become uncollectible. See "Provision for Loan Losses" for further discussion of the allowance for loan losses.

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Summary of Loan Loss Experience

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

				Years Ended December 31
				2001			2000			1999			1998			1997
				(Dollars In Thousands)
Average loans				$	721,576		$	612,890		$	492,101		$	412,935		$	329,162
Balance of allowance for loan losses at beginning of year				$	9,331		$	7,336		$	6,666		$	5,921		$	5,155
Loans charged off
	Commercial and industrial				1,203			424			644			146			75
	Real estate mortgage				634			546			43			54			26
	Consumer				952			480			348			735			183
		Total loans charged off			2,789			1,450			1,035			935			284
Recoveries of loans previously charged off
	Commercial and industrial				32			508			5			14			3
	Real estate mortgage				8			7			10			18			9
	Consumer				163			90			55			48			38
		Total recoveries			203			605			70			80			50
Net loans charged off					2,586			845			965			855			234
Additions to allowance charged to expense					4,220			2,840			1,635			1,600			1,000
		Balance at end of year		$	10,965		$	9,331		$	7,336		$	6,666		$	5,921
Ratio of net charge-offs during year to average loans					0.36	%		0.14	%		0.20	%		0.21	%		0.07	%

        The increase in commercial and industrial loans charged off during 2001 is primarily due to the partial charge-off of a few larger relationships. The increase in consumer loans charged off is a reflection of the economic downturn during 2001 and the Bank's aggressive policy of charging off non-performing consumer loans. The overall increase in net loans charged off is also a function of the increase in the size of the loan portfolio. See "Provision for Loan Losses" for discussion of the provision for loan losses.

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

		December 31
		2001			2000			1999			1998			1997
		(In Thousands)
Commercial and industrial		$	2,936		$	2,334		$	2,743		$	2,625		$	2,337
Construction and development			1,066			2,285			58			51			201
Real estate mortgage			3,024			1,693			1,351			1,739			2,034
Consumer			1,779			1,686			981			921			163
Unallocated			2,160			1,333			2,203			1,330			1,186
		$	10,965		$	9,331		$	7,336		$	6,666		$	5,921

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

		December 31
		2001		2000		1999		1998		1997
Commercial and industrial		19.6	%	20.6	%	21.2	%	23.1	%	27.3	%
Construction and development		7.2	%	7.7	%	6.4	%	6.7	%	5.8	%
Real estate mortgage		65.1	%	62.8	%	63.8	%	62.0	%	58.8	%
Consumer		8.1	%	8.9	%	8.6	%	8.2	%	8.1	%
		100.0	%	100.0	%	100.0	%	100.0	%	100.0	%

        Selected ratios relating to the allowance for loan losses follow:

Deposits

        Bancorp's core deposits consist of non-interest and interest bearing demand deposits, savings deposits, certificates of deposit under $100,000, certain certificates of deposit over $100,000 and IRAs. These deposits, along with other borrowed funds, are used by Bancorp to support its asset base. By adjusting rates offered to depositors, Bancorp is able to influence the amounts of deposits needed to

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meet its funding requirements. The average amount of deposits in the Bank and average rates paid on such deposits for the years indicated are summarized as follows:

		Years Ended December 31
		2001					2000					1999
		Average Balance			Average Rate		Average Balance			Average Rate		Average Balance			Average Rate
		(Dollars in Thousands)
Non-interest bearing demand deposits		$	101,542		—		$	92,250		—		$	87,609		—
Interest bearing demand deposits			164,589		2.36	%		127,056		3.25	%		110,049		2.93	%
Savings deposits			30,016		1.30	%		28,053		2.47	%		28,345		2.61	%
Money market deposits			66,020		2.57	%		53,423		3.79	%		45,789		3.23	%
Time deposits			377,630		5.78	%		329,152		5.93	%		266,544		5.14	%
		$	739,797				$	629,934				$	538,336

        Maturities of time deposits of $100,000 or more outstanding at December 31, 2001, are summarized as follows:

Short-Term Borrowings

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

        Information regarding securities sold under agreements to repurchase follows:

		Years Ended December 31
		2001					2000					1999
		Amount			Rate		Amount			Rate		Amount			Rate
		(Dollars in thousands)
Securities sold under agreements to repurchase
Year end balance		$	51,431		1.94	%	$	52,276		5.48	%	$	53,455		5.24	%
Average during year			48,376		3.39	%		40,731		5.23	%		38,847		4.31	%
Maximum month end balance during year			51,543					52,276					54,974

Liquidity

        The role of liquidity management is to ensure funds are available to meet depositors' withdrawal and borrowers' credit demands while at the same time maximizing profitability. This is accomplished by balancing changes in demand for funds with changes in the supply of those funds. Liquidity to meet the demand is provided by maturing assets, short-term liquid assets that can be converted to cash and the ability to attract funds from external sources, principally depositors. Due to the nature of services

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offered by the Bank, management prefers to focus on transaction accounts and full service relationships with customers. Management believes it has the ability to increase deposits at any time by offering rates slightly higher than the market rate.

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

        The Bank has a number of sources of funds to meet liquidity needs on a daily basis. The deposit base, consisting of consumer and commercial deposits and large dollar denomination ($100,000 and over) certificates of deposit, is a source of funds. The majority of these deposits come from long-term customers and are a stable source of funds. The Bank has no brokered deposits, and has an insignificant amount of deposits on which the rate paid exceeded the market rate by more than 50 basis points when the account was established. In addition, federal funds purchased continue to provide an available source of liquidity.

        Other sources of funds available to meet daily needs include the sales of securities under agreements to repurchase and funds made available under a treasury tax and loan note agreement with the federal government. Also, the Bank is a member of the Federal Home Loan Bank of Cincinnati (FHLB). As a member of the FHLB, the Bank has access to credit products of the FHLB. At December 31, 2001, the amount of available credit from the FHLB totaled $128 million. To date, the Bank has not needed to access this source of funds. Finally, the Bank has federal funds purchased lines with correspondent banks totaling $56 million and Bancorp has a $6 million line of credit with a correspondent bank.

        Bancorp's liquidity depends primarily on the dividends paid to it as the sole shareholder of the Bank. As discussed in Note 15 to Bancorp's consolidated financial statements, the Bank may pay up to $20,370,000 in dividends to Bancorp without regulatory approval subject to the ongoing capital requirements of the Bank.

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

Other Off-Balance Sheet Activities

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

        Bancorp provides customers with off-balance sheet credit support through loan commitments and standby letters of credit. Summarized credit-related financial instruments, including both commitments to extend credit and letters of credit at December 31, 2001 are as follows:

		Amount of Commitment Expiration Per Period
		Total			Less than 1 year		1-3 Years		3-5 Years		Over 5 Years
		(In Thousands)
Unused loan commitments		$	138,612		47,364		20,018		20,032		51,198
Standby letters of credit			10,835		6,933		371		3,531		—

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

        In addition to owned banking facilities, the Corporation has entered into long-term leasing arrangements to support the ongoing activities of Bancorp. The required payments under such commitments and long-term debt at December 31, 2001 are as follows:

		Payments Due by Period
		Total			Less than 1 Year		1-3 Years		3-5 Years		Over 5 Years
		(In Thousands)
Operating leases		$	4,412		676		1,026		836		1,874
Long-term debt			270		—		—		—		270
Long-term debt—trust preferred securities			20,000		—		—		—		20,000

Capital

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

        The increase in stockholders' equity from 2001 to 2000 was due to the strong earnings of 2001 coupled with a philosophy to retain approximately 75% of earnings in equity.

        Bank holding companies and their subsidiary banks are required by regulators to meet risk-based capital standards. These standards, or ratios, measure the relationship of capital to a combination of balance sheet and off-balance sheet risks. The value of both balance sheet and off-balance sheet items are adjusted to reflect credit risks. Note 18 to the consolidated financial statements provides more details of regulatory capital requirements, as well as, capital ratios of the Bank. Bancorp and the Bank exceed regulatory capital ratios required to be well capitalized. These ratios for Bancorp and the Bank had decreased over the last several years as assets grew more quickly than equity. In 2001, Bancorp issued $20 million of trust preferred securities which qualify as regulatory capital under Federal Reserve guidelines and significantly improved Bancorp's and the Bank's capital ratios. See Note 10 to the consolidated financial statements for more details on the trust preferred securities. Management considers the effects of growth on capital ratios as it contemplates plans for expansion.

        In January 1999, the Board of Directors declared a 2-for-1 stock split to be effected in the form of a 100% stock dividend. The new shares were distributed in February 1999. This capital change was made to enhance shareholder value by increasing the number of shares of Bancorp's stock outstanding and to reduce the per share market price of the stock. Per share information has been restated to reflect the stock splits. In November 1999, Bancorp announced a 200,000 share common stock buy back program representing approximately 3% of its common stock. The repurchased shares may be used for, among other things, issuance of shares for the stock options or employee stock ownership or purchase plans. At December 31, 2001, shares repurchased pursuant to this program totaled 92,071.

        A component of equity is accumulated other comprehensive income (losses) which for Bancorp consists of net unrealized gains or losses on securities available for sale and a minimum pension

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liability, both net of taxes. Accumulated other comprehensive income was $645,000 and $21,000 at December 31, 2001 and 2000, respectively. The $624,000 increase in accumulated other comprehensive income (losses) is primarily a reflection of the effect of the interest rate environment on the valuation of the Bank's portfolio of securities available for sale.

        The following table presents various key financial ratios:

		Years Ended December 31
		2001		2000		1999
Return on average assets		1.53	%	1.55	%	1.52	%
Return on average stockholders' equity		20.38	%	21.21	%	20.20	%
Dividend pay out ratio, based on basic EPS		22.17	%	22.29	%	22.60	%
Average stockholders' equity to average assets		7.51	%	7.31	%	7.54	%

Recently Issued Accounting Pronouncements

        In July 2001, the Financial Accounting Standards Board issued Statement No. 141, "Business Combinations" which supersedes Accounting Principles Board (APB) Opinion No. 16, "Business Combinations." Statement No. 141 eliminates the pooling-of-interests method of accounting for business combinations and modifies the application of the purchase accounting method. The elimination of the pooling-of-interests method is effective for transactions initiated after June 30, 2001. The remaining provisions of Statement No. 141 are effective for transactions accounted for using the purchase method that are completed after June 30, 2001.

        In July 2001, the Financial Accounting Standards Board also issued Statement of Financial Accounting Standards No. 142, "Goodwill and Intangible Assets" which supersedes APB Opinion No. 17, "Intangible Assets." Statement No. 142 eliminates the current requirement to amortize goodwill and intangible assets, addresses the amortization of intangible assets with a defined life and addresses impairment testing and recognition for goodwill and intangible assets. Statement No. 142 will apply to goodwill and intangible assets arising from transactions completed before and after the Statement's effective date. Statement No. 142 is effective January 1, 2002. Management believes the impact of adoption will be immaterial to Bancorp's consolidated financial statements, as current goodwill and intangible amortization is approximately $70,000 per year. At December 31, 2001, unamortized goodwill was $682,000.

        In August 2001, the Financial Accounting Standards Board issued Statement No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets" which addresses financial accounting and reporting for the impairment or disposal of long-lived assets. While Statement No. 144 supercedes Statement No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of," it retains many of the fundamental provisions of that statement. Statement No. 144 also supercedes the accounting and reporting provisions of APB Opinion No. 30, "Reporting the Results of Operations—Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions," for the disposal of a segment of a business. However, it retains the requirement in Opinion No. 30 to report separately discontinued operations and extends that reporting to a component of an entity that either has been disposed of (by sale, abandonment, or in a distribution to owners) or is classified as held for sale. By broadening the presentation of discontinued operations to include more disposal transactions, the Financial Accounting Standards Board has enhanced management's ability to provide information that helps financial statement users to assess the effects of a disposal transaction on the ongoing operations of an entity. Statement No. 144 is effective for fiscal years beginning after December 15, 2001 and interim financial periods within those fiscal years. Management believes that adopting Statement No. 144 will not have an impact on the consolidated financial statements.

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Quarterly Operating Results

        Following is a summary of quarterly operating results for 2001 and 2000:

			2001												2000
			4th Qtr.			3rd Qtr.			2nd Qtr.			1st Qtr.			4th Qtr.			3rd Qtr.			2nd Qtr.			1st Qtr.
			(In Thousands, Except Per Share Data)
Interest income			$	16,115		$	16,485		$	16,603		$	16,468		$	16,502		$	15,756		$	14,648		$	13,481
Interest expense				6,609			7,698			8,099			8,320			8,548			7,759			6,858			6,068
	Net interest income			9,506			8,787			8,504			8,148			7,954			7,997			7,790			7,413
Provision for loan losses				1,445			900			1,075			800			925			750			585			580
Net interest income after provision				8,061			7,887			7,429			7,348			7,029			7,247			7,205			6,833
Non-interest income				5,206			4,836			4,851			4,370			3,979			4,112			4,002			3,322
Non-interest expenses				7,888			7,811			7,367			7,240			6,703			6,743			6,915			6,343
Income before income taxes				5,379			4,912			4,913			4,478			4,305			4,616			4,292			3,812
Income tax expense				1,760			1,380			1,561			1,439			1,318			1,505			1,390			1,220
	Net income		$	3,619		$	3,532		$	3,352		$	3,039		$	2,987		$	3,111		$	2,902		$	2,592
Basic earnings per share			$	0.54		$	0.53		$	0.50		$	0.46		$	0.45		$	0.47		$	0.44		$	0.39
Diluted earnings per share				0.52			0.51			0.49			0.44			0.44			0.46			0.43			0.38

Item 7a.    Quantitative and Qualitative Disclosures About Market Risk

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

Item 8.    Financial Statements and Supplementary Data

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

        Consolidated Balance Sheets—December 31, 2001 and 2000

        Consolidated Statements of Income—years ended December 31, 2001, 2000 and 1999

        Consolidated Statements of Changes in Stockholders' Equity—years ended December 31, 2001, 2000 and 1999

        Consolidated Statements of Comprehensive Income—years ended December 31, 2001, 2000 and 1999

        Consolidated Statements of Cash Flows—years ended December 31, 2001, 2000 and 1999

        Notes to Consolidated Financial Statements

        Independent Auditors' Report

        Management's Report on Consolidated Financial Statements

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Consolidated Balance Sheets

				December 31,
				2001			2000
				(Dollars In Thousands)
Assets
Cash and due from banks				$	29,803		$	44,597
Federal funds sold					218			29,020
Mortgage loans held for sale					13,963			2,330
Securities available for sale (amortized cost $75,563 in 2001 and $69,601 in 2000)					76,884			69,934
Securities held to maturity (approximate fair value $14,174 in 2001 and $17,004 in 2000)					13,878			16,889
Loans					777,441			664,634
Less allowance for loan losses					10,965			9,331
Net loans					766,476			655,303
Premises and equipment					19,421			17,497
Accrued interest receivable and other assets					16,650			16,690
Total assets				$	937,293		$	852,260
Liabilities
Deposits
	Non-interest bearing			$	118,165		$	103,172
	Interest bearing				635,386			622,485
		Total deposits			753,551			725,657
Securities sold under agreements to repurchase and federal funds purchased					79,031			52,276
Other short-term borrowings					1,880			1,813
Accrued interest payable and other liabilities					10,877			10,126
Long-term debt					270			2,100
Long-term debt—trust preferred securities					20,000			—
Total liabilities					865,609			791,972
Stockholders' equity
Common stock, no par value; 10,000,000 shares authorized; issued and outstanding 6,672,294 in 2001 and 6,637,477 in 2000					5,711			5,595
Surplus					14,404			14,292
Retained earnings					50,924			40,380
Accumulated other comprehensive income					645			21
Total stockholders' equity					71,684			60,288
Total liabilities and stockholders' equity				$	937,293		$	852,260

See accompanying notes to consolidated financial statements.

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Consolidated Statements of Income

			Years Ended December 31,
			2001			2000			1999
			(In Thousands, Except Per Share Data)
Interest income
Loans			$	59,837		$	55,337		$	42,899
Federal funds sold				634			441			781
Mortgage loans held for sale				376			183			368
Securities
	Taxable			3,616			3,406			3,640
	Tax-exempt			1,208			1,020			836
Total interest income				65,671			60,387			48,524
Interest expense
Deposits				27,787			26,381			19,134
Securities sold under agreements to repurchase and federal funds purchased				1,668			2,536			1,692
Other short-term borrowings				67			151			82
Long-term debt				1,204			165			146
Total interest expense				30,726			29,233			21,054
Net interest income				34,945			31,154			27,470
Provision for loan losses				4,220			2,840			1,635
Net interest income after provision for loan losses				30,725			28,314			25,835
Non-interest income
Investment management and trust services				7,256			6,327			5,194
Service charges on deposit accounts				7,000			5,528			3,484
Gains on sales of mortgage loans held for sale				1,995			1,043			1,511
Gains on sales of securities available for sale				—			—			100
Other				3,012			2,517			2,331
Total non-interest income				19,263			15,415			12,620
Non-interest expenses
Salaries and employee benefits				17,644			15,559			13,750
Net occupancy expense				1,861			1,800			1,711
Furniture and equipment expense				2,523			2,309			2,282
Other				8,278			7,036			6,388
Total non-interest expense				30,306			26,704			24,131
Income before income taxes				19,682			17,025			14,324
Income tax expense				6,140			5,433			4,618
Net income			$	13,542		$	11,592		$	9,706
Net income per share, basic			$	2.03		$	1.75		$	1.46
Net income per share, diluted			$	1.96		$	1.70		$	1.41

See accompanying notes to consolidated financial statements.

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Consolidated Statements of Changes in Stockholders' Equity

		Three Years Ended December 31, 2001
		Common Stock
		Number of Shares		Amount			Surplus			Retained Earnings			Accumulated Other Comprehensive Income			Total
		(In Thousands, Except Share Data)
Balance December 31, 1998		6,593,338		$	5,535		$	14,075		$	23,868		$	465		$	43,943
Net income		—			—			—			9,706			—			9,706
Change in other comprehensive income, net of tax		—			—			—			—			(1,816	)		(1,816	)
Shares issued for stock options exercised and employee benefit plans		76,721			169			968			—			—			1,137
Cash dividends, $0.33 per share		—			—			—			(2,198	)		—			(2,198	)
Shares repurchased		(23,000	)		(77	)		(441	)		—			—			(518	)
Balance December 31, 1999		6,647,059			5,627			14,602			31,376			(1,351	)		50,254
Net income		—			—			—			11,592			—			11,592
Change in other comprehensive income, net of tax		—			—			—			—			1,372			1,372
Shares issued for stock options exercised and employee benefit plans		39,368			131			520			—			—			651
Cash dividends, $0.39 per share		—			—			—			(2,588	)		—			(2,588	)
Shares repurchased		(48,950	)		(163	)		(830	)		—			—			(993	)
Balance December 31, 2000		6,637,477			5,595			14,292			40,380			21			60,288
Net income		—			—			—			13,542			—			13,542
Change in other comprehensive income, net of tax		—			—			—			—			624			624
Shares issued for stock options exercised and employee benefit plans		54,938			183			557			—			—			740
Cash dividends, $0.45 per share		—			—			—			(2,998	)		—			(2,998	)
Shares repurchased		(20,121	)		(67	)		(445	)		—			—			(512	)
Balance December 31, 2001		6,672,294		$	5,711		$	14,404		$	50,924		$	645		$	71,684

See accompanying notes to consolidated financial statements.

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Consolidated Statements of Comprehensive Income

					Years Ended December 31,
					2001			2000			1999
					(In Thousands)
Net income					$	13,542		$	11,592		$	9,706
Other comprehensive income (loss), net of tax:
	Unrealized gains (losses) on securities available for sale:
		Unrealized holding gains (losses) arising during the period				652			1,448			(1,628	)
		Less reclassification adjustment for gains included in net income				—			—			65
Minimum pension liability adjustment						(28	)		(76	)		(123	)
			Other comprehensive income (loss)			624			1,372			(1,816	)
			Comprehensive income		$	14,166		$	12,964		$	7,890

See accompanying notes to consolidated financial statements.

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Consolidated Statements of Cash Flows

			Years Ended December 31,
			2001			2000			1999
			(In Thousands)
Operating activities
Net income			$	13,542		$	11,592		$	9,706
Adjustments to reconcile net income to net cash provided by operating activities
	Provision for loan losses			4,220			2,840			1,635
	Depreciation, amortization and accretion, net			1,831			1,798			1,493
	Provision for deferred income taxes			(338	)		(987	)		(203	)
	Gains on sales of securities available for sale			—			—			(100	)
	Gains on sales of mortgage loans held for sale			(1,995	)		(1,043	)		(1,511	)
	Loss on the sale of other real estate			28			—			—
	Origination of mortgage loans held for sale			(121,481	)		(50,253	)		(89,097	)
	Proceeds from sales of mortgage loans held for sale			111,843			51,574			97,791
	Income tax benefit of stock options exercised			162			37			394
	Increase in accrued interest receivable and other assets			(301	)		(4,785	)		(487	)
	Increase (decrease) in accrued interest payable and other liabilities			952			(28	)		3,371
Net cash provided by operating activities				8,463			10,745			22,992
Investing activities
Net (increase) decrease in federal funds sold				28,802			(23,020	)		1,000
Purchases of securities available for sale				(33,850	)		(13,654	)		(77,492	)
Proceeds from sales of securities available for sale				—			—			10,618
Proceeds from maturities of securities available for sale				27,809			8,635			75,016
Proceeds from maturities of securities held to maturity				3,023			4,504			6,391
Net increase in loans				(115,296	)		(118,621	)		(99,537	)
Purchases of premises and equipment				(3,619	)		(2,678	)		(2,178	)
Proceeds from sales of other real estate				839			1,401			1,235
Net cash used in investing activities				(92,292	)		(143,433	)		(84,947	)
Financing activities
Net increase in deposits				27,894			155,695			52,350
Net increase (decrease) in securities sold under agreements to repurchase and federal funds purchased				26,755			(1,179	)		14,926
Net increase (decrease) in short-term borrowings				67			(2,141	)		3,095
Repayments of long-term debt				(1,830	)		—			—
Net proceeds from long-term debt — trust preferred securities				18,944			—			—
Issuance of common stock				578			614			349
Common stock repurchases				(512	)		(993	)		(518	)
Cash dividends paid				(2,861	)		(2,524	)		(2,095	)
Net cash provided by financing activities				69,035			149,472			68,107
Net increase (decrease) in cash and cash equivalents				(14,794	)		16,784			6,152
Cash and cash equivalents at beginning of year				44,597			27,813			21,661
Cash and cash equivalents at end of year			$	29,803		$	44,597		$	27,813
Supplemental cash flow information:
	Income tax payments		$	6,588		$	5,500		$	5,915
	Cash paid for interest			30,863			28,989			21,099

See accompanying notes to consolidated financial statements.

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Notes to Consolidated Financial Statements

(1)  Summary of Significant Accounting Policies

Principles of Consolidation and Nature of Operations

        The consolidated financial statements include the accounts of S.Y. Bancorp, Inc. (Bancorp) and its wholly-owned subsidiaries, Stock Yards Bank & Trust Company (the Bank) and S.Y. Bancorp Capital Trust I. Significant intercompany transactions and accounts have been eliminated in consolidation. Certain prior year amounts have been reclassified to conform with the 2001 presentation.

        The Bank is engaged in commercial and retail banking services, trust and investment management services, and mortgage banking services. Bancorp's market area is Louisville, Kentucky and surrounding communities including southern Indiana.

Use of Estimates

        The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of certain assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of related revenues and expenses during the reporting period. Actual results could differ from those estimates.

Statement of Cash Flows

        For purposes of reporting cash flows, cash and cash equivalents include cash on hand and amounts due from banks.

Securities

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

Mortgage Loans Held for Sale

        Mortgage loans held for sale are carried at the lower of aggregate cost or market value. Gains on sales of mortgage loans are recorded at the time of funding by an investor at the difference between the sales proceeds and the loan's carrying value.

Loans

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

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

Allowance for Loan Losses

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

Premises and Equipment

        Premises and equipment are carried at cost, less accumulated depreciation and amortization. Depreciation of premises and equipment is computed using both accelerated and straight-line methods over the estimated useful lives of the assets. Leasehold improvements are amortized on the straight-line method over the terms of the related leases or over the useful lives of the improvements, whichever is shorter.

Other Assets

        Goodwill has been amortized over 15 years on a straight-line basis through December 31, 2001. The amount of goodwill impairment, if any, is measured based on projected discounted future operating cash flows using a discount rate reflecting Bancorp's average cost of funds.

        Other real estate is carried at the lower of cost or fair value minus estimated selling costs. Any write downs to fair value at the date of acquisition are charged to the allowance for loan losses. Expenses incurred in maintaining assets, write downs to reflect subsequent declines in value and realized gains or losses are reflected in operations.

Income Taxes

        Bancorp accounts for income taxes using the asset and liability method. The objective of the asset and liability method is to establish deferred tax assets and liabilities for temporary differences between the financial reporting and the tax bases of Bancorp's assets and liabilities at enacted tax rates expected to be in effect when such amounts are realized or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized on the statement of income in the period that includes the enactment date.

Net Income Per Share

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

Recently Issued Accounting Pronouncements

        In July 2001, the Financial Accounting Standards Board issued Statement No. 141, "Business Combinations" which supersedes Accounting Principles Board (APB) Opinion No. 16, "Business

30

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Combinations." Statement No. 141 eliminates the pooling-of-interests method of accounting for business combinations and modifies the application of the purchase accounting method. The elimination of the pooling-of-interests method is effective for transactions initiated after June 30, 2001. The remaining provisions of Statement No. 141 are effective for transactions accounted for using the purchase method that are completed after June 30, 2001.

        In July 2001, the Financial Accounting Standards Board also issued Statement of Financial Accounting Standards No. 142, "Goodwill and Intangible Assets" which supersedes APB Opinion No. 17, "Intangible Assets." Statement No. 142 eliminates the current requirement to amortize goodwill and intangible assets, addresses the amortization of intangible assets with a defined life and addresses impairment testing and recognition for goodwill and intangible assets. Statement No. 142 will apply to goodwill and intangible assets arising from transactions completed before and after the Statement's effective date. Statement No. 142 is effective January 1, 2002. Management believes the impact of adoption will be immaterial to Bancorp's consolidated financial statements, as current goodwill and intangible amortization is approximately $70,000 per year. At December 31, 2001, unamortized goodwill was $682,000.

        In August 2001, the Financial Accounting Standards Board issued Statement No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets" which addresses financial accounting and reporting for the impairment or disposal of long-lived assets. While Statement No. 144 supercedes Statement No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of," it retains many of the fundamental provisions of that statement. Statement No. 144 also supercedes the accounting and reporting provisions of APB Opinion No. 30, "Reporting the Results of Operations—Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions," for the disposal of a segment of a business. However, it retains the requirement in Opinion No. 30 to report separately discontinued operations and extends that reporting to a component of an entity that either has been disposed of (by sale, abandonment, or in a distribution to owners) or is classified as held for sale. By broadening the presentation of discontinued operations to include more disposal transactions, the Financial Accounting Standards Board has enhanced management's ability to provide information that helps financial statement users to assess the effects of a disposal transaction on the ongoing operations of an entity. Statement No. 144 is effective for fiscal years beginning after December 15, 2001 and interim financial periods within those fiscal years. Management believes that adopting Statement No. 144 will not have an impact on the consolidated financial statements.

(2)  Restrictions on Cash and Due from Banks

        The Bank is required to maintain an average reserve balance in cash or with the Federal Reserve Bank relating to customer deposits. At December 31, 2001, the amount of those required reserve balances was approximately $7,671,000.

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(3)  Securities

        The amortized cost and approximate fair value of securities available for sale follows:

					Unrealized
		Amortized Cost									Approximate Fair Value
					Gains			Losses
		(In Thousands)
December 31, 2001
U.S. Treasury and federal agencies		$	50,711		$	1,168		$	183		$	51,696
Mortgage-backed securities			4,361			28			7			4,382
Obligations of states and political subdivisions			17,951			382			67			18,266
Other			2,540			—			—			2,540
		$	75,563		$	1,578		$	257		$	76,884
December 31, 2000
U.S. Treasury and federal agencies		$	51,454		$	197		$	98		$	51,553
Mortgage-backed securities			1,000			—			4			996
Obligations of states and political subdivisions			14,972			322			84			15,210
Other			2,175			—			—			2,175
		$	69,601		$	519		$	186		$	69,934

        The amortized cost and approximate fair value of securities held to maturity follows:

					Unrealized
		Amortized Cost									Approximate Fair Value
					Gain			Losses
		(In Thousands)
December 31, 2001
Mortgage-backed securities		$	5,720		$	145		$	—		$	5,865
Obligations of states and political subdivisions			8,158			151			—			8,309
		$	13,878		$	296		$	—		$	14,174
December 31, 2000
Mortgage-backed securities		$	7,369		$	50		$	3		$	7,416
Obligations of states and political subdivisions			9,520			71			3			9,588
		$	16,889		$	121		$	6		$	17,004

        A summary of debt securities as of December 31, 2001 based on maturity is presented below. Actual maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations. For mortgage-backed securities, the expected remaining life is reflected rather than contractual maturities.

		Securities Available for Sale						Securities Held to Maturity
		Amortized Cost			Approximate Fair Value			Amortized Cost			Approximate Fair Value
		(In Thousands)
Due within one year		$	4,007		$	4,096		$	2,556		$	2,586
Due after one year through five years			42,775			43,605			2,874			2,959
Due after five years through ten years			12,711			12,889			3,937			4,014
Due after ten years			13,530			13,754			4,511			4,615
		$	73,023		$	74,344		$	13,878		$	14,174

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        Securities with a carrying value of approximately $63,963,000 at December 31, 2001 and $63,264,000 at December 31, 2000 were pledged to secure public deposits and certain borrowings.

(4)  Loans

        The composition of loans follows:

		December 31,
		2001			2000
		(In Thousands)
Commercial and industrial		$	152,049		$	137,086
Construction and development			55,943			51,479
Real estate mortgage			506,081			417,170
Consumer			63,368			58,899
		$	777,441		$	664,634

        The Bank's credit exposure is diversified with secured and unsecured loans to individuals, small businesses and corporations. No specific industry concentration exceeds 10% of loans. While the Bank has a diversified loan portfolio, a customer's ability to honor contracts is dependent upon the economic stability and geographic region and/or industry in which that customer does business. Loans outstanding and related unfunded commitments are primarily concentrated within the Bank's market area that encompasses Louisville, Kentucky and surrounding communities including southern Indiana.

        Information about impaired loans follows:

		December 31,
		2001			2000
		(In Thousands)
Principal balance of impaired loans		$	3,775		$	602
Impaired loans with a Statement No. 114 valuation allowance			1,747			134
Amount of Statement No. 114 valuation allowance			599			114
Impaired loans with no Statement No. 114 valuation allowance			2,028			468
Average balance of impaired loans for year			3,113			2,325

        Interest income on impaired loans (cash basis) was $157,000, $32,000 and $0 in 2001, 2000, and 1999, respectively. Interest income that would have been recorded if nonaccrual loans were on a current basis in accordance with their original terms was $512,000, $271,000 and $175,000 in 2001, 2000 and 1999, respectively.

        Loans to directors and their associates, including loans to companies for which directors are principal owners, and executive officers amounted to approximately $4,994,000 and $4,678,000 at December 31, 2001 and 2000, respectively. These loans were made on substantially the same terms, and interest rates and collateral, as those prevailing at the same time for other customers. During 2001 new loans of $8,804,000 were made to officers and directors and affiliated companies, repayments amounted to $8,431,000. An additional $57,000 in loans was removed due to the retirement of a board member during the year.

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        An analysis of the changes in the allowance for loan losses for the years ended December 31, 2001, 2000, and 1999 follows:

			Years Ended December 31,
			2001			2000			1999
			(In Thousands)
Balance at January 1			$	9,331		$	7,336		$	6,666
Provision for loan losses				4,220			2,840			1,635
Loans charged off				2,789			1,450			1,035
Recoveries				203			605			70
	Net loan charge-offs			2,586			845			965
Balance at December 31			$	10,965		$	9,331		$	7,336

(5)  Premises and Equipment

        A summary of premises and equipment follows:

		December 31,
		2001			2000
		(In Thousands)
Land		$	3,221		$	2,746
Buildings and improvements			15,078			14,124
Furniture and equipment			11,813			10,342
Construction in progress			2			57
			30,114			27,269
Accumulated depreciation and amortization			10,693			9,772
		$	19,421		$	17,497

        Depreciation expense related to premises and equipment was $1,695,000 in 2001, $1,601,000 in 2000 and $1,376,000 in 1999.

(6)  Income Taxes

        Income taxes consist of the following:

				Years Ended December 31,
				2001			2000			1999
				(In Thousands)
Applicable to operations:
	Current			$	6,475		$	6,420		$	4,821
	Deferred				(335	)		(987	)		(203	)
		Total applicable to operations			6,140			5,433			4,618
Charged (credited) to stockholders' equity:
	Unrealized gain (loss) on securities available for sale				345			772			(895	)
	Stock options exercised				(162	)		(37	)		(394	)
	Minimum pension liability adjustment				(15	)		(41	)		(66	)
				$	6,308		$	6,127		$	3,263

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

		Years Ended December 31,
		2001		2000		1999
U.S. Federal income tax rate		35.0	%	35.0	%	35.0	%
Tax exempt interest income		-2.4	%	-2.0	%	-1.9	%
Other, net		-1.4	%	-1.1	%	-0.9	%
		31.2	%	31.9	%	32.2	%

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

			December 31,
			2001			2000
			(In Thousands)
Deferred tax assets
Allowance for loan losses			$	3,838		$	3,266
Deferred compensation				816			626
Other				159			357
	Total deferred tax assets			4,813			4,249
Deferred tax liabilities
Securities				795			396
Property and equipment				354			196
Other				16			14
	Total deferred tax liabilities			1,165			606
	Net deferred tax asset		$	3,648		$	3,643

        No valuation allowance for deferred tax assets was recorded as of December 31, 2001 and 2000 because Bancorp has sufficient prior taxable income to allow for utilization of the deductible temporary differences within the carryback period.

(7)  Deposits

        The composition of interest bearing deposits follows:

		December 31,
		2001			2000
		(In Thousands)
Interest bearing demand		$	186,284		$	140,094
Savings			30,531			26,632
Money market			64,107			80,769
Time deposits greater than $100,000			120,094			102,957
Other time deposits			234,370			272,033
		$	635,386		$	622,485

        Interest expense related to certificates of deposit and other time deposits in denominations of $100,000 or more was $6,492,000, $5,348,000 and $3,737,000, respectively, for the years ended December 31, 2001, 2000 and 1999.

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        At December 31, 2001, the scheduled maturities of time deposits were as follows:

		(In Thousands)
2002		$	217,367
2003			73,678
2004			17,805
2005			36,630
2006 and thereafter			8,984
		$	354,464

(8)  Securities Sold Under Agreements to Repurchase

        Securities sold under agreements to repurchase generally mature within one to four days from the transaction date. Information concerning securities sold under agreements to repurchase is summarized as follows:

		December 31,
		2001			2000
		(Dollars In Thousands)
Average balance during the year		$	48,376		$	40,731
Average interest rate during the year			3.39	%		5.23	%
Maximum month-end balance during the year		$	51,543		$	52,276

(9)  Long-term Debt

        Bancorp has a $6,000,000 line of credit with a correspondent bank. The balance outstanding at December 31, 2001 and 2000 was $0 and $1,800,000, respectively. The interest rate on the line is indexed to either LIBOR or the lending bank's prime rate with payments due quarterly. The terms of the note include a number of financial and general covenants, including capital and return on asset requirements as well as restrictions on additional long-term debt, future mergers and significant dispositions without the consent of the lender. The note is renewable on an annual basis.

        The Bank also has subordinated debentures outstanding amounting to $270,000 at December 31, 2001 and $300,000 at December 31, 2000 that are due in October 2049. Interest due on these debentures is at a variable rate equal to one percent less than the Bank's prime rate adjusted annually on January 1. For 2001, the rate on these debentures was 8.50%. The debentures are subordinated to the claims of creditors and depositors of the Bank and are subject to redemption by the Bank at the principal amount outstanding, upon the earlier of the death of the registered owners, or an event of default by the registered owners with respect to loans from the Bank. The owners may redeem the debentures at any time.

36

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(10) Long-term Debt—Trust Preferred Securities

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

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

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

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

(11) Net Income per Share and Common Stock Dividends

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

		2001			2000			1999
		(In Thousands, Except Per Share Data)
Net income, basic and diluted		$	13,542		$	11,592		$	9,706
Average shares outstanding			6,660			6,634			6,654
Effect of dilutive securities			241			185			217
Average shares outstanding including dilutive securities			6,901			6,819			6,871
Net income per share, basic		$	2.03		$	1.75		$	1.46
Net income per share, diluted		$	1.96		$	1.70		$	1.41

(12) Advances from the Federal Home Loan Bank

        The Bank has an agreement with the Federal Home Loan Bank of Cincinnati (FHLB) that enables the Bank to borrow under terms to be established at the time of the advance. Advances from the FHLB would be collateralized by certain first mortgage loans under a blanket mortgage collateral agreement and FHLB stock. The Bank has not taken any advances under this agreement.

(13) Employee Benefit Plans

        The Bank has the following defined contribution plans: employee stock ownership plan and 401(k) profit sharing plan. Prior to March 2001, the Bank also had a money purchase plan. This plan was eliminated during 2001 and the assets of the plan were combined with the profit sharing plan. The

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plans are available to all employees meeting certain eligibility requirements. Expenses of the plans for 2001, 2000, and 1999 were $824,000, $1,094,000, and $904,000, respectively. Contributions are made in accordance with the terms of the plans. As of December 31, 2001 and 2000, the employee stock ownership plan held 89,489 and 82,723, respectively, shares of Company stock.

        The Bank also sponsors an unfunded, non-qualified, defined benefit retirement plan for certain key officers. At December 31, 2001 and 2000 the accumulated benefit obligations for the plan were $1,769,000 and $1,573,000, respectively. Discount rates of 6.75% in 2001 and 7.00% in 2000 were used in determining the actuarial present value of the projected benefit obligation. Expenses of the plan were $242,000 in 2001, $132,000 in 2000, and $142,000 in 1999.

        Obligations for other post-retirement and post-employment benefits are not significant.

(14) Stock Options

        In 1995, shareholders approved a stock incentive plan. Under this plan there have been a total of 720,000 shares of common stock reserved for issuance of stock options to Bank employees and non-employee directors. As of December 31, 2001, 164,500 shares were available for future grant. Bancorp also has an older stock option plan under which all options have been granted. Options granted which do not vest immediately are subject to a vesting schedule of 20% per year. The options granted in 1984 at an exercise price of $0.861 per share were granted below market value of the Bank's common stock at the grant date and do not expire. All other options were granted at an exercise price equal to the market value of common stock at the time of grant and expire ten years after the grant date.

        Activity with respect to outstanding options follows:

		Shares		Weighted average price per share
		(In Thousands, Except Per Share Data)
Outstanding at December 31, 1998		396,004		$	8.43
Granted		48,900			23.94
Exercised		(51,340	)		1.23
Forfeited		(2,200	)		18.86
Outstanding at December 31, 1999		391,364			11.19
Granted		138,950			20.79
Exercised		(14,724	)		7.52
Forfeited		(13,750	)		21.41
Outstanding at December 31, 2000		501,840			12.43
Granted		81,500			33.53
Exercised		(52,416	)		9.22
Forfeited		(4,200	)		20.70
Outstanding at December 31, 2001		526,724		$	17.14

        The weighted average fair values of options granted in 2001, 2000 and 1999 were $8.72, $5.70 and $6.23, respectively.

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        Options outstanding at December 31, 2001 were as follows:

Option price per share		Expiration		Shares		Options exercisable
$0.861		none		9,184		9,184
6.421		2004		45,320		45,320
7.250		2005		124,400		124,400
8.375		2005		30,400		30,400
14.500		2007		31,000		26,240
20.500		2008		28,400		18,800
23.938		2009		43,340		31,940
24.000		2009		500		200
20.25-21.00		2010		56,230		33,030
20.630		2010		76,450		44,810
23.90-33.60		2011		81,500		—
				526,724		364,324

        Bancorp applies the provisions of APB Opinion No. 25, "Accounting for Stock Issued to Employees" and related interpretations in accounting for its stock option plans. Accordingly, no compensation cost has been recognized for its stock options granted at the market value of common stock at the time of grant. In accordance with SFAS No. 123, "Accounting for Stock-Based Compensation" Bancorp's proforma net income and income per share would have been as follows:

		2001			2000			1999
		(In Thousands, Except Per Share Data)
Net income as reported		$	13,542		$	11,592		$	9,706
Net income proforma			13,229			11,342			9,431
Income per share, basic as reported			2.03			1.75			1.46
Income per share, basic proforma			1.99			1.71			1.42
Income per share, diluted as reported			1.96			1.70			1.41
Income per share, diluted proforma		$	1.92		$	1.66		$	1.37

        The fair value of each option grant is estimated as of the date of grant using the Black-Scholes option pricing model. Assumptions used for grants were dividend yields of 1.54%, 1.54%, and 1.53%; expected volatility of 17.39%, 16.33%, and 16.53% and expected lives of 7 years. Risk free interest rates were 5.02% for the December 2001 grant, 6.60% for the January 2000 grant, 5.04% for the December 2000 grant and 5.15% for 1999.

(15) Dividend Restriction

        Bancorp's principal source of funds is dividends received from the Bank. Under applicable banking laws, bank regulatory authorities must approve the declaration of dividends in any year if such dividends are in an amount in excess of the sum of net income of that year and retained earnings of the preceding two years. At January 1, 2002, the retained earnings of the Bank available for payment of dividends without regulatory approval were approximately $20,370,000.

(16) Commitments and Contingent Liabilities

        As of December 31, 2001, the Bank had various commitments and contingent liabilities outstanding that arose in the normal course of business, such as standby letters of credit and commitments to extend credit, which are properly not reflected in the consolidated financial statements. In management's opinion, commitments to extend credit of $149,447,000, including standby letters of

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credit of $10,835,000, represent normal banking transactions, and no significant losses are anticipated to result therefrom. The Bank's exposure to credit loss in the event of nonperformance by the other party to these commitments is represented by the contractual amount of these instruments. The Bank uses the same credit and collateral policies in making commitments and conditional guarantees as for on-balance sheet instruments.

        Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The Bank evaluates each customer's creditworthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary by the Bank upon extension of credit, is based on management's credit evaluation of the customer. Collateral held varies but may include accounts receivable, inventory, property, plant and equipment, and income-producing commercial properties.

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

        The Bank leases certain facilities, improvements and equipment under non-cancelable operating leases. Future minimum lease commitments for these leases are $676,000 in 2002; $589,000 in 2003; $437,000 in 2004; $441,000 in 2005; $395,000 in 2006 and $1,874,000 in the aggregate thereafter. Rent expense, net of sublease income, was $615,000 in 2001, $655,000 in 2000, and $623,000 in 1999.

        Also, as of December 31, 2001, there were various pending legal actions and proceedings in which claims for damages are asserted. Management, after discussion with legal counsel, believes the ultimate result of these legal actions and proceedings will not have a material adverse effect on the consolidated financial position or results of operations of Bancorp.

(17) Fair Value of Financial Instruments

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

		2001						2000
		Carrying Amount			Fair Value			Carrying Amount			Fair Value
		(In Thousands)
Financial assets
Cash and short-term investments		$	30,021		$	30,021		$	73,617		$	73,617
Mortgage loans held for sale			13,963			13,963			2,330			2,330
Securities			90,762			91,058			86,823			86,938
Loans, net			766,476			773,258			655,303			648,954
Accrued interest receivable			4,616			4,616			5,209			5,209
Financial liabilities
Deposits		$	753,551		$	762,684		$	725,657		$	728,278
Short-term borrowings			80,911			80,911			54,089			54,089
Long-term debt			20,270			19,360			2,100			2,100
Accrued interest payable			546			546			683			683
Off balance sheet financial instruments
Commitments to extend credit			—			—			—			—
Standby letters of credit			—			(163	)		—			(168	)

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        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, 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.

Loans

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

Deposits

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

Long-term Debt

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

Commitments to Extend Credit and Standby Letters of Credit

        The fair values of commitments to extend credit are estimated using fees currently charged to enter into similar agreements and the 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 discrete point in time based on relevant market information and information about the financial instruments. Because no market exists for a significant portion of Bancorp's financial instruments, fair value estimates are based on judgments regarding future expected loss experience, current economic conditions, risk characteristics of various financial instruments, and other factors. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision. Changes in assumptions could significantly affect the estimates.

(18) Regulatory Matters

        Bancorp and the Bank are subject to various capital requirements prescribed by banking regulations and administered by federal banking agencies. Under these requirements, Bancorp and the Bank must meet minimum amounts and percentages of Tier I and total capital, as defined, to risk weighted assets and Tier I capital to average assets. Risk weighted assets are determined by applying certain risk weightings prescribed by the regulations to various categories of assets and off-balance sheet commitments. Capital and risk weighted assets may be further subject to qualitative judgments by

41

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regulators as to components, risk weighting and other factors. Failure to meet the capital requirements can result in certain mandatory, and possibly discretionary, corrective actions prescribed by the regulations or determined to be necessary by the regulators, which could materially affect the consolidated financial statements. Management believes Bancorp and the Bank met all capital requirements to which they were subject as of December 31, 2001.

        As of December 2001 and 2000, the most recent notifications from the Bank's primary regulator categorized the Bank as well capitalized under the regulatory framework. To be categorized as well capitalized, the Bank must maintain a total risk-based capital ratio of at least 10%; a Tier I ratio of at least 6%; and a leverage ratio of at least 5%. All banks are required to have a total capital ratio of at least 8%, a Tier I ratio of at least 4% and a leverage ratio of at least 3%. There are no conditions or events since those notifications that management believes have changed the Bank's categories.

        A summary of Bancorp's and the Bank's capital ratios at December 31, 2001 and 2000 follows:

			2001					2000
			Actual					Actual
			Amount			Ratio		Amount			Ratio
			(Dollars in Thousands)
Total risk-based capital(1)
	Consolidated		$	99,926		13.14	%	$	67,993		10.16	%
	Bank			90,889		11.98	%		68,213		10.21	%
Tier 1 risk-based capital(1)
	Consolidated			90,130		11.85	%		59,317		8.87	%
	Bank			81,119		10.69	%		59,549		8.91	%
Leverage(2)
	Consolidated			90,130		9.69	%		59,317		7.38	%
	Bank			81,119		8.78	%		59,549		7.43	%

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(1)

Ratio is computed in relation to risk-weighted assets.

(2)

Ratio is computed in relation to average assets.

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

Condensed Balance Sheets

		December 31,
		2001			2000
		(In Thousands)
Assets
Cash on deposit with subsidiary bank		$	5,988		$	282
Investment in and receivable from subsidiary bank			85,710			62,853
Other assets			2,091			976
Total assets		$	93,789		$	64,111
Liabilities and stockholders' equity
Other liabilities		$	2,105		$	2,023
Long-term debt			20,000			1,800
Stockholders' equity			71,684			60,288
Total liabilities and stockholders' equity		$	93,789		$	64,111

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Condensed Statements of Income

		Years Ended December 31,
		2001			2000			1999
		(In Thousands)
Income—Dividends from subsidiary bank		$	3,132		$	2,731		$	2,323
Expenses			1,415			278			243
Income before income taxes and equity in undistributed net income of subsidiary			1,717			2,453			2,080
Income tax benefit			496			97			85
Income before equity in undistributed net income of subsidiary			2,213			2,550			2,165
Equity in undistributed net income of subsidiary			11,329			9,042			7,541
Net income		$	13,542		$	11,592		$	9,706

Condensed Statements of Cash Flows

			Years Ended December 31,
			2001			2000			1999
			(In Thousands)
Operating activities
Net income			$	13,542		$	11,592		$	9,706
Adjustments to reconcile net income to net cash provided by operating activities:
	Equity in undistributed net income of subsidiary			(11,329	)		(9,042	)		(7,541	)
	Increase in receivable from subsidiary			(704	)		(506	)		(178	)
	Income tax benefit of stock options exercised			162			37			394
	(Increase) decrease in other assets			(59	)		(115	)		106
	(Decrease) increase in other liabilities			(55	)		405			(135	)
Net cash provided by operating activities				1,557			2,371			2,352
Investing activities
Increase in capital investment in subsidiary				(10,200	)		—			—
Net cash used by investing activities				(10,200	)		—			—
Financing activities
Repayments of long-term debt				(1,800	)		—			—
Net proceeds from long-term debt—trust preferred securities				18,944			—			—
Issuance of common stock				578			614			349
Common stock repurchases				(512	)		(993	)		(518	)
Cash dividends paid				(2,861	)		(2,524	)		(2,095	)
Net cash provided (used) by financing activities				14,349			(2,903	)		(2,264	)
Net increase (decrease) in cash				5,706			(532	)		88
Cash at beginning of year				282			814			726
Cash at end of year			$	5,988		$	282		$	814

(20) Segments

        The Bank's, and thus Bancorp's principal activities include commercial and retail banking, investment management and trust, and mortgage banking. Commercial and retail banking provides a

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full range of loans and deposit products to individual consumers and businesses. Investment management and trust provides wealth management services including brokerage, estate planning and administration, retirement plan management and custodian or trustee services. Mortgage banking originates residential loans and sells them, servicing released, to the secondary market.

        The financial information for each business segment reflects that which is specifically identifiable or allocated based on an internal allocation method. The measurement of the performance of the business segments is based on the management structure of the Bank and is not necessarily comparable with similar information for any other financial institution. The information presented is also not necessarily indicative of the segments' operations if they were independent entities.

        Principally, all of the net assets of S.Y. Bancorp, Inc. are involved in the commercial and retail banking segment.

        Selected financial information by business segment follows:

		Years Ended December 31,
		2001			2000			1999
		(In Thousands)
Net interest income
Commercial and retail banking		$	34,470		$	30,625		$	27,049
Investment management and trust			29			67			87
Mortgage banking			446			462			334
Total		$	34,945		$	31,154		$	27,470
Non-interest income
Commercial and retail banking		$	8,970		$	7,111		$	4,865
Investment management and trust			7,694			6,850			5,685
Mortgage banking			2,599			1,454			2,070
Total		$	19,263		$	15,415		$	12,620
Net income
Commercial and retail banking		$	10,823		$	9,066		$	7,640
Investment management and trust			2,094			2,142			1,759
Mortgage banking			625			384			307
Total		$	13,542		$	11,592		$	9,706

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Independent Auditors' Report

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

        We have audited the accompanying consolidated balance sheets of S.Y. Bancorp, Inc. (Bancorp) and subsidiaries as of December 31, 2001 and 2000, and the related consolidated statements of income, changes in stockholders' equity, comprehensive income, and cash flows for each of the years in the three-year period ended December 31, 2001. These consolidated financial statements are the responsibility of Bancorp's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

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

        In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of S.Y. Bancorp, Inc. and subsidiaries as of December 31, 2001 and 2000, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2001, in conformity with accounting principles generally accepted in the United States of America.

Louisville, Kentucky
January 23, 2002

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Management's Report on Consolidated Financial Statements

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

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

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

        Bancorp's independent auditors, KPMG LLP, have audited the consolidated financial statements. Their audit was conducted in accordance with auditing standards generally accepted in the United States of America, which provide for consideration of Bancorp's internal controls to the extent necessary to determine the nature, timing, and extent of their audit tests.

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

/s/ David H. Brooks David H. Brooks Chairman and Chief Executive Officer
/s/ David P. Heintzman David P. Heintzman President
/s/ Nancy B. Davis Nancy B. Davis Executive Vice President, Secretary, Treasurer and Chief Financial Officer

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

        None

Part III

Item 10.    Directors and Executive Officers of the Registrant

        Information regarding the directors and executive officers of Bancorp is incorporated herein by reference to the discussion under the heading, "PROPOSALS—DIRECTORS' PROPOSAL TO ELECT DIRECTORS," and SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE in Bancorp's Proxy Statement for the 2002 Annual Meeting of Shareholders and the section captioned EXECUTIVE OFFICERS OF THE REGISTRANT in this Form 10-K.

        Information regarding principal occupation of directors of Bancorp follows:

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

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

Jack M. Crowner—Owner, Jack Crowner & Associates;

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

Carl T. Fischer, Jr.—Farmer and horse breeder;

Stanley A. Gall, M.D.—Professor and Chair Emeritus, University of Louisville;

David P. Heintzman—President, S.Y. Bancorp, Inc. and Stock Yards Bank & Trust Company;

Bruce P. Madison—Vice President and Treasurer, Plumbers Supply Company, Inc.;

Jefferson T. McMahon—Retired; private investor;

Nicholas X. Simon—President, Publishers Printing Company, LLC;

Norman Tasman—President, Tasman Industries and Hide Processing;

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

Item 11.    Executive Compensation

        Information regarding the compensation of Bancorp's executive officers and directors is incorporated herein by reference to the discussion under the heading, "CORPORATE GOVERNANCE AND OTHER MATTERS—BOARD OF DIRECTORS' MEETINGS, COMMITTEES AND FEES" in Bancorp's Proxy Statement for the 2002 Annual Meeting of Shareholders.

        Information appearing under the headings "REPORT ON EXECUTIVE COMPENSATION" and "Shareholder Return Performance Graph" in the section entitled "EXECUTIVE COMPENSATION AND OTHER INFORMATION" in Bancorp's Proxy Statement for the 2002 Annual Meeting of Shareholders shall not be deemed to be incorporated by reference in this report, notwithstanding any general statement contained herein incorporating portions of such Proxy Statement by reference.

Item 12.    Security Ownership of Certain Beneficial Owners and Management

        The information required by this item is incorporated herein by reference to the discussion under the headings, "DIRECTORS' PROPOSAL TO ELECT DIRECTORS" and "SECURITY

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OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT," in Bancorp's Proxy Statement for the 2002 Annual Meeting of Shareholders.

Item 13.    Certain Relationships and Related Transactions

        The information required by this item is incorporated herein by reference to the discussion under the heading, "TRANSACTIONS WITH MANAGEMENT AND OTHERS," in Bancorp's Proxy Statement for the 2002 Annual Meeting of Shareholders.

Part IV

Item 14.    Exhibits, Financial Statement Schedules, and Reports on Form 8-K

(a) 1.		The following financial statements are included in this Form 10-K:
		Consolidated Balance Sheets—December 31, 2001 and 2000
		Consolidated Statements of Income—years ended December 31, 2001, 2000 and 1999
		Consolidated Statements of Changes in Stockholders' Equity—years ended December 31, 2001, 2000 and 1999
		Consolidated Statements of Comprehensive Income—years ended December 31, 2001, 2000 and 1999
		Consolidated Statements of Cash Flows—years ended December 31, 2001, 2000 and 1999
		Notes to Consolidated Financial Statements
		Independent Auditors' Report
(a) 2.		List of Financial Statement Schedules
		Schedules to the consolidated financial statements of Bancorp are omitted since they are either not required under the related instructions, are inapplicable, or the required information is shown in the consolidated financial statements or notes thereto.
(a) 3.		List of Exhibits
		3.1		Articles of Incorporation of Bancorp filed with the Secretary of State of Kentucky on January 12, 1988.
		3.2		Articles of Amendment to the Articles of Incorporation of Bancorp filed with the Secretary of State of Kentucky on May 8, 1989.
		3.3		Articles of Amendment to the Articles of Incorporation of Bancorp filed with the Secretary of State of Kentucky on June 30, 1994.
		3.4		Articles of Amendment to the Articles of Incorporation of Bancorp filed with the Secretary of State of Kentucky on April 29, 1998.
		3.5		Bylaws of Bancorp, as amended, currently in effect.
		10.1	*	S.Y. Bancorp, Inc. Stock Option Plan as amended.
		10.2	*	Stock Yards Bank &Trust Company Senior Officers Security Plan adopted December 23, 1980.
		10.3	*	Form of Indemnification agreement between Stock Yards Bank & Trust Company, S.Y. Bancorp, Inc. and each member of the Board of Directors.
		10.4	*	Senior Executive Severance Agreement executed in July, 1994 between Stock Yards Bank & Trust Company and David H. Brooks.

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		10.5	*	Senior Executive Severance Agreement executed in July, 1994 between Stock Yards Bank & Trust Company and David P. Heintzman.
		10.6	*	Senior Executive Severance Agreement executed in July, 1994 between Stock Yards Bank & Trust Company and Kathy C. Thompson.
		10.7	*	S.Y. Bancorp, Inc. 1995 Stock Incentive Plan.
		10.8	*	Amendment Number One to the Senior Executive Severance Agreement executed in February, 1997 between Stock Yards Bank & Trust Company and David H. Brooks.
		10.9	*	Amendment Number One to the Senior Executive Severance Agreement executed in February, 1997 between Stock Yards Bank & Trust Company and David P. Heintzman.
		10.10	*	Amendment Number One to the Senior Executive Severance Agreement executed in February, 1997 between Stock Yards Bank & Trust Company and Kathy C. Thompson.
		10.11	*	Senior Executive Severance Agreement, as amended, executed in February, 1997 between Stock Yards Bank & Trust Company and Nancy B. Davis.
		10.12	*	S.Y. Bancorp, Inc. Amended and Restated 1995 Stock Incentive Plan.
		21		Subsidiaries of the Registrant.
		23		Independent Auditors' Consent.

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*

Indicates matters related to executive compensation.

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

(b)

Reports on Form 8-K

None

(c)

Exhibits

The exhibits listed in response to Item 14(a) 3 are filed as a part of this report.

(d)

Financial Statement Schedules

None

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Signatures

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

March 12, 2002		S.Y. BANCORP, INC.
		By:	/s/  DAVID H. BROOKS       David H. Brooks Chairman and Chief Executive Officer

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

/s/  DAVID H. BROOKS       David H. Brooks		Chairman and Chief Executive Officer and Director (principal executive officer)		March 12, 2002
/s/  DAVID P. HEINTZMAN       David P. Heintzman		President and Director		March 12, 2002
/s/  NANCY B. DAVIS       Nancy B. Davis		Executive Vice President, Secretary, Treasurer and Chief Financial Officer (principal financial and accounting officer)		March 12, 2002
/s/  JAMES E. CARRICO       James E. Carrico		Director		March 12, 2002
/s/  JACK M. CROWNER       Jack M. Crowner		Director		March 12, 2002
/s/  CHARLES R. EDINGER, III       Charles R. Edinger, III		Director		March 12, 2002
/s/  CARL T. FISCHER, JR.       Carl T. Fischer, Jr.		Director		March 12, 2002
/s/  STANLEY A. GALL, M.D.       Stanley A. Gall, M.D.		Director		March 12, 2002
/s/  BRUCE P. MADISON       Bruce P. Madison		Director		March 12, 2002
/s/  JEFFERSON T. MCMAHON       Jefferson T. McMahon		Director		March 12, 2002
/s/  NICHOLAS X. SIMON       Nicholas X. Simon		Director		March 12, 2002
/s/  NORMAN TASMAN       Norman Tasman		Director		March 12, 2002
/s/  KATHY C. THOMPSON       Kathy C. Thompson		Executive Vice President and Director		March 12, 2002

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Index to Exhibits

Exhibit Number
3.1		Articles of Incorporation of Bancorp filed with the Secretary of State of Kentucky on January 12, 1988.
3.2		Articles of Amendment to the Articles of Incorporation of Bancorp filed with the Secretary of State of Kentucky on May 8, 1989.
3.3		Articles of Amendment to the Articles of Incorporation of Bancorp filed with the Secretary of State of Kentucky on June 30, 1994.
3.4		Articles of Amendment to the Articles of Incorporation of Bancorp filed with the Secretary of State of Kentucky on April 29, 1998.
3.5		Bylaws of Bancorp, as amended, currently in effect.
10.1	*	S.Y. Bancorp, Inc. Stock Option Plan as amended.
10.2	*	Stock Yards Bank &Trust Company Senior Officers Security Plan adopted December 23, 1980.
10.3	*	Form of Indemnification agreement between Stock Yards Bank & Trust Company, S.Y. Bancorp, Inc. and each member of the Board of Directors.
10.4	*	Senior Executive Severance Agreement executed in July, 1994 between Stock Yards Bank & Trust Company and David H. Brooks.
10.5	*	Senior Executive Severance Agreement executed in July, 1994 between Stock Yards Bank & Trust Company and David P. Heintzman.
10.6	*	Senior Executive Severance Agreement executed in July, 1994 between Stock Yards Bank & Trust Company and Kathy C. Thompson.
10.7	*	S.Y. Bancorp, Inc. 1995 Stock Incentive Plan.
10.8	*	Amendment Number One to the Senior Executive Severance Agreement executed in February, 1997 between Stock Yards Bank & Trust Company and David H. Brooks.
10.9	*	Amendment Number One to the Senior Executive Severance Agreement executed in February, 1997 between Stock Yards Bank & Trust Company and David P. Heintzman.
10.10	*	Amendment Number One to the Senior Executive Severance Agreement executed in February, 1997 between Stock Yards Bank & Trust Company and Kathy C. Thompson.
10.11	*	Senior Executive Severance Agreement, as amended, executed in February, 1997 between Stock Yards Bank & Trust Company and Nancy B. Davis.
10.12	*	S.Y. Bancorp, Inc. Amended and Restated 1995 Stock Incentive Plan.
21		Subsidiaries of the Registrant.
23		Independent Auditors' Consent.

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*

Indicates matters related to executive compensation.

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QuickLinks

Documents Incorporated by Reference
S.Y. BANCORP, INC. Form 10-K Index
Part I

Item 1. Business
Item 2. Properties
Item 3. Legal Proceedings
Item 4. Submission of Matters to a Vote of Security Holders

Part II

Item 5. Market for Registrant's Common Stock and Related Stockholder Matters
Item 6. Selected Financial Data
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations

Item 7a. Quantitative and Qualitative Disclosures About Market Risk
Item 8. Financial Statements and Supplementary Data

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

Part III

Item 10. Directors and Executive Officers of the Registrant
Item 11. Executive Compensation
Item 12. Security Ownership of Certain Beneficial Owners and Management
Item 13. Certain Relationships and Related Transactions

Part IV

Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K