2 0 1 2 S U M M AR Y A N N U A L R E P OR T 2012 Financial Highlights “For 2012, the Company reported a 9% increase in net income as earnings rose to $25.8 million or $1.85 per diluted share, marking another consecutive year of record earnings per share.” PAGE 1 S.Y. BANCORP, INC. 2012 SUMMARY ANNUAL REPORT FOR THE YEAR Net income Cash dividends declared PER COMMON SHARE Net income per share, basic Net income per share, diluted Cash dividends declared Book value at year end Market price at year end AVERAGES FOR THE YEAR Total assets Loans Deposits Stockholders’ equity AT YEAR END Total assets Loans Deposits Stockholders’ equity RATIOS Return on avg. assets Return on avg. stockholders’ equity Efficiency 2012 2011 Change $ $ $ $ 25,801 10,691 1.86 1.85 0.77 14.74 22.42 2,070,967 1,563,918 1,659,594 197,551 2,148,262 1,584,594 1,781,693 205,075 $ $ $ $ 23,604 9,930 % 9.3 7.7 1.71 1.71 0.72 13.58 20.53 1,959,609 1,529,556 1,549,708 179,638 2,053,097 1,544,845 1,617,739 187,686 % % % 8.8 8.2 6.9 8.5 9.2 5.7 2.2 7.1 10.0 4.6 2.6 10.1 9.3 % 1.25 13.06 57.38 % 1.20 13.14 56.47 bp 5 (8) 91 bp = basis point = 1/100 of a percent $ 115.0 103.5 92.0 80.5 69.0 57.5 46.0 34.5 23.0 11.5 0.0 $ 2,200 1,980 1,760 1,540 1,320 1,100 880 660 440 220 0 TOTAL REVENUE (in millions of dollars) $ 1.85 DILUTED EPS 1.48 1.11 0.74 0.37 0.00 03 04 05 06 07 08 09 10 11 12 03 04 05 06 07 08 09 10 11 12 TOTAL ASSETS (in millions of dollars) $ 0.77 DIVIDENDS PER SHARE 0.62 0.46 0.31 0.15 0.00 03 04 05 06 07 08 09 10 11 12 03 04 05 06 07 08 09 10 11 12 Note: Per share information has been adjusted as necessary for stock splits and stock dividends. To Our Stockholders With 2012 now completed, we have much to tell you about our past year’s efforts and actions at S.Y. Bancorp. Our news for 2012 is quite positive, both in terms of our performance for the year and steps taken to promote continued growth. It was a great year for Stock Yards Bank & Trust and one more reason we continue to rank among the best performing community banks in the nation. 2012 FINANCIAL OVERVIEW For 2012, the Company reported a 9% increase in net income as earnings rose to $25.8 million or $1.85 per diluted share, marking another consecutive year of record earnings per share. This achievement underscores the breadth and depth of our operations and significant contributions from key profit areas like commercial banking, investment management and trust, and our mortgage origination business. These results translated directly into attractive and tangible benefits for our stockholders. Due to our strong capital position and earnings growth, S.Y. Bancorp has never reduced or suspended dividend payments. In 2012, we took a commitment to building stockholder value to an even higher level. Backed by growing earnings, our Board of Directors significantly increased the amount of cash returned to stockholders last year, voting for two dividend increases. On top of an almost 6% increase in the dividend rate in February 2012, the Board voted to increase the rate again in November 2012, adding another 5% to the payout and pushing the annual dividend rate to $0.80 per share. These moves increased our forward dividend yield to 3.6% as of December 31, 2012, and raised our dividend payout to 41% of earnings for the year. The increase in cash dividends during 2012 combined with price appreciation resulted in total stockholder return of 13.0% for the year. We suspect some banks will point with pride to higher price appreciation in the past year, but many will overlook their plummeting stock value in the depth of and following the last recession. If you examine a five-year period, S.Y. Bancorp’s total return performance has increased 9.2% versus a decline of 26.5% for a NASDAQ Bank index compiled by the industry data source, SNL. In our view, consistent and attractive long-term performance is paramount and we are proud that our stock price – and our financial results – have remained stable and resilient through both good times and bad. ACQUISITION NEWS Alongside our proven ability to grow organically, we continue to carefully weigh other expansion opportunities. We seek to expand our footprint sensibly and deploy our strong capital base prudently while minimizing execution risks. Consistent with these objectives, we were pleased to announce in December our planned acquisition of The Bancorp, Inc., the holding company for THE BANK – Oldham County, in a cash-and-stock transaction valued at approximately $20 million. At this writing, the acquisition has received regulatory approval and is awaiting the approval of Bancorp’s stockholders. We expect to complete the acquisition in April 2013. PAGE 2 S.Y. BANCORP, INC. 2012 SUMMARY ANNUAL REPORT David P. Heintzman Chairman and Chief Executive Officer “It was a great year for Stock Yards Bank & Trust and one more reason we continue to rank among the best performing community banks in the nation.” There is much to like about this transaction. Headquartered in industrial lending has led loan growth. As the economy improves Oldham County, adjacent to our home market in Louisville, THE BANK going forward, we expect that customers – cautious to this point – – Oldham County operates four branches on the northeastern edge will increasingly tap into existing credit facilities to support growth of our footprint, virtually in our own backyard. We previously had no and business development. physical locations in Oldham County, so there is a strong geographical fit underscoring this acquisition. With outstanding demographic trends, Oldham County is a very attractive market and THE BANK – Oldham County has earned a significant share of the county’s total deposits, so there also is a strong business fit here. Lastly, THE BANK – Oldham County is customer driven and service oriented just as we are. With an organizational philosophy that meshes well with Stock al fit. Obviously, we are excited about the prospects of our upcoming expansion in Oldham County. When completed, the combination of the two banks is expected to create the largest locally owned community bank in the Louisville MSA in terms of deposits. The acquisition also signals our interest in considering all prudent options to pursue attractive growth opportunities in our existing markets. BANKING In 2012, our assets increased 5% to $2.15 billion while our loan portfolio advanced almost 3% to $1.6 billion. Asset quality during 2012 reflected the economic stress that many borrowers continue to face. Even so, non-performing assets did begin to show improvement, declining 12% in the second half of the year after peaking at June 30. In Indianapolis, we experienced much the same results, with loan growth returning to a solid upward trajectory on the strength of commercial and industrial lending, which reflected in part the addition of more lenders in the fourth quarter of 2011. Also, a third branch was added in the first quarter of 2012, and its performance is on track with our expectations. With these increased capabilities, we expect to grow our Indianapolis business in 2013. As we continue to develop our Cincinnati market, we recently added a division manager to provide greater focus on acquiring full relationships with locally owned businesses. As you know from my past letters, our expansion market business development strategy begins with private banking, which is followed later by other building blocks, like commercial and industrial lending, investment and trust services, and other key products. Cincinnati is well on its way in the application of this approach. OTHER FINANCIAL SERVICES During 2012, fee income from investment management and trust services contributed 16% to our bottom line. This area continued to power our non-banking income, which totaled more than 34% of the Company’s total revenue for the year. This aspect of our business performed well across our markets last year, particularly in Cincinnati Despite record loan production in 2012 of more than $400 million, we where investment management and trust services were ahead of our were somewhat frustrated by our inability to translate this expectations. We hope to continue that momentum during the production into higher portfolio levels. Facing the ongoing low coming year with the expansion of our personnel there. interest rate environment and the related loan alternatives, a sluggish economy, customers’ desires to pay down debt, and numerous other issues, we continued to confront loan run-off. While these pay downs and pay offs certainly affect us currently, in most cases we retained the customers involved and will have future opportunities with them. A portion of our increased investment management and trust services fee income obviously reflected a strengthening stock market in 2012, but it also underscored robust new account activity during the year. In fact, the pace of new account openings in 2012 was a record for us, and we estimate that those new accounts alone will generate annualized revenue of $1.4 million going forward. Another Looking across our markets, we see consistent themes of strength gauge for our optimism for this area is total investments under and opportunity. In Louisville, our largest market, commercial and management, which in January 2013 topped $2 billion for the first time, up from $122 million 20 years ago when Kathy Thompson took great integrity and faith – has been a moral compass for our the helm of this department. Under her leadership, our investment company during heady times in banking. His leadership has aptly management and trust department revenue ranks us in the top 100 prepared us for the interesting and challenging times ahead. We trust companies in the country. certainly will miss him. Another area that contributed greatly to our success in 2012 was CONCLUSION mortgage lending, which doubled its revenue versus 2011 on the We are pleased with the Company’s results for 2012 and the strength of a boom in refinancing activity and resulting gains on the continuation of our record of success. Even though the economy is sale of loans. Importantly, these results also reflected higher improving, the outlook for next year is clearly challenging as we originations of purchase money loans related to home sales, a anticipate ongoing margin compression due to the low interest rate segment of the market severely hit by the housing crisis. To illustrate, environment and highly competitive lending conditions. Also the consider that purchase loans represented only about 20% of the regulatory climate will likely become increasingly complex, loans we originated as 2012 began, but increased to 40% of our restricting our ability to serve our customers. For instance, the production by year’s end. We intentionally concentrate on those that ever-changing interpretations of rules for troubled debt influence the purchase loan pipeline, a slow and painstaking process, restructurings will create new operating uncertainties that will but we believe it will pay off in the future, especially as the level of continue to sap the industry’s ability to assist good customers during refinancing ebbs with the eventuality of higher interest rates. tough times by way of loan modifications. In my view, increasingly Another noteworthy comment on our mortgage lending operations relates to its efficiency. Our people in this area have accomplished so strict interpretations in this area will hurt both consumers and banks in the future – a move not needed in a fragile economy. much with a small expense base. As a result, mortgage lending not Despite challenges, we remain well positioned fundamentally in only produced a healthy revenue gain in 2012, it also generated a three attractive markets that can continue to deliver growth over the better operating margin, which translated into better earnings for long term. Coming off a record year for loan production, we expect to the Company. RECOGNITION While we are pleased with the Company’s performance and confident in its strategies, we must admit it's nice to receive external affirmation of those efforts. As a stockholder, you also should be gratified to know that S.Y. Bancorp has retained its high ranking on the KBW Bank Honor Roll of superior performers, a numerically exclusive list compiled by this leading investment bank that specializes in the financial services sector. Additionally, our company see continued momentum in 2013 and anticipate that more of our production will be retained in our portfolio as the level of refinancing activity subsides. With a strong line-up of products and services, Stock Yards Bank & Trust remains highly differentiated compared with most other community banks. While we remain cautious on the economy next year, we gain confidence from our proven ability to deliver superior long-term performance, which has enabled our continued ranking as one of the top-performing community banks in the country. was recently named to The Bank Director Nifty Fifty List: the 50 best On behalf of the Board of Directors, management and our employees, users of capital, based on profitability and capital strength. thank you for your ongoing support and loyalty. We appreciate your RETIRING DIRECTOR In 2013, effective at our annual meeting in April, we will bid farewell David P. Heintzman to longtime director and former Chairman, David Brooks, who will Chairman and Chief Executive Officer continued interest in our company. retire from our Board at that time. David joined the Bank in 1971, was named to the Board of Directors in 1985, and served as Chairman and Chief Executive Officer of both S.Y. Bancorp and Stock Yards Bank & Trust Company from 1993 until 2004. During his tenure, our company made great strides, laying the strategic foundation for future success and quietly preparing for successful management succession. David, a mentor, friend, and family man – a person of With 2012 now completed, we have much to tell you about our past year’s efforts and actions at S.Y. Bancorp. Our news for 2012 is quite positive, both in terms of our performance for the year and steps taken to promote continued growth. It was a great year for Stock Yards Bank & Trust and one more reason we continue to rank among the best performing community banks in the nation. 2012 FINANCIAL OVERVIEW For 2012, the Company reported a 9% increase in net income as earnings rose to $25.8 million or $1.85 per diluted share, marking another consecutive year of record earnings per share. This achievement underscores the breadth and depth of our operations and significant contributions from key profit areas like commercial banking, investment management and trust, and our mortgage origination business. These results translated directly into attractive and tangible benefits for our stockholders. Due to our strong capital position and earnings growth, S.Y. Bancorp has never reduced or suspended dividend payments. In 2012, we took a commitment to building stockholder value to an even higher level. Backed by growing earnings, our Board of Directors significantly increased the amount of cash returned to stockholders last year, voting for two dividend increases. On top of an almost 6% increase in the dividend rate in February 2012, the Board voted to increase the rate again in November 2012, adding another 5% to the payout and pushing the annual dividend rate to $0.80 per share. These moves increased our forward dividend yield to 3.6% as of December 31, 2012, and raised our dividend payout to 41% of earnings for the year. The increase in cash dividends during 2012 combined with price appreciation resulted in total stockholder return of 13.0% for the year. We suspect some banks will point with pride to higher price appreciation in the past year, but many will overlook their plummeting stock value in the depth of and following the last recession. If you examine a five-year period, S.Y. Bancorp’s total return performance has increased 9.2% versus a decline of 26.5% for a NASDAQ Bank index compiled by the industry data source, SNL. In our view, consistent and attractive long-term performance is paramount and we are proud that our stock price – and our financial results – have remained stable and resilient through both good times and bad. ACQUISITION NEWS Alongside our proven ability to grow organically, we continue to carefully weigh other expansion opportunities. We seek to expand our footprint sensibly and deploy our strong capital base prudently while minimizing execution risks. Consistent with these objectives, we were pleased to announce in December our planned acquisition of The Bancorp, Inc., the holding company for THE BANK – Oldham County, in a cash-and-stock transaction valued at approximately $20 million. At this writing, the acquisition has received regulatory approval and is awaiting the approval of Bancorp’s stockholders. We expect to complete the acquisition in April 2013. “In our view, consistent and attractive long-term performance is paramount and we are proud that our stock price – and our financial results – have remained stable and resilient through good times and bad.” There is much to like about this transaction. Headquartered in Oldham County, adjacent to our home market in Louisville, THE BANK – Oldham County operates four branches on the northeastern edge of our footprint, virtually in our own backyard. We previously had no physical locations in Oldham County, so there is a strong geographical fit underscoring this acquisition. With outstanding demographic trends, Oldham County is a very attractive market and THE BANK – Oldham County has earned a significant share of the county’s total deposits, so there also is a strong business fit here. Lastly, THE BANK – Oldham County is customer driven and service oriented just as we are. With an organizational philosophy that meshes well with Stock al fit. Obviously, we are excited about the prospects of our upcoming expansion in Oldham County. When completed, the combination of the two banks is expected to create the largest locally owned community bank in the Louisville MSA in terms of deposits. The acquisition also signals our interest in considering all prudent options to pursue attractive growth opportunities in our existing markets. BANKING In 2012, our assets increased 5% to $2.15 billion while our loan portfolio advanced almost 3% to $1.6 billion. Asset quality during 2012 reflected the economic stress that many borrowers continue to face. Even so, non-performing assets did begin to show improvement, declining 12% in the second half of the year after peaking at June 30. Despite record loan production in 2012 of more than $400 million, we were somewhat frustrated by our inability to translate this production into higher portfolio levels. Facing the ongoing low interest rate environment and the related loan alternatives, a sluggish economy, customers’ desires to pay down debt, and numerous other issues, we continued to confront loan run-off. While these pay downs and pay offs certainly affect us currently, in most cases we retained the customers involved and will have future opportunities with them. Looking across our markets, we see consistent themes of strength and opportunity. In Louisville, our largest market, commercial and industrial lending has led loan growth. As the economy improves going forward, we expect that customers – cautious to this point – will increasingly tap into existing credit facilities to support growth and business development. In Indianapolis, we experienced much the same results, with loan growth returning to a solid upward trajectory on the strength of commercial and industrial lending, which reflected in part the addition of more lenders in the fourth quarter of 2011. Also, a third branch was added in the first quarter of 2012, and its performance is on track with our expectations. With these increased capabilities, we expect to grow our Indianapolis business in 2013. As we continue to develop our Cincinnati market, we recently added a division manager to provide greater focus on acquiring full relationships with locally owned businesses. As you know from my past letters, our expansion market business development strategy begins with private banking, which is followed later by other building blocks, like commercial and industrial lending, investment and trust services, and other key products. Cincinnati is well on its way in the application of this approach. OTHER FINANCIAL SERVICES During 2012, fee income from investment management and trust services contributed 16% to our bottom line. This area continued to power our non-banking income, which totaled more than 34% of the Company’s total revenue for the year. This aspect of our business performed well across our markets last year, particularly in Cincinnati where investment management and trust services were ahead of our expectations. We hope to continue that momentum during the coming year with the expansion of our personnel there. A portion of our increased investment management and trust services fee income obviously reflected a strengthening stock market in 2012, but it also underscored robust new account activity during the year. In fact, the pace of new account openings in 2012 was a record for us, and we estimate that those new accounts alone will generate annualized revenue of $1.4 million going forward. Another gauge for our optimism for this area is total investments under management, which in January 2013 topped $2 billion for the first PAGE 3 S.Y. BANCORP, INC. 2012 SUMMARY ANNUAL REPORT time, up from $122 million 20 years ago when Kathy Thompson took great integrity and faith – has been a moral compass for our the helm of this department. Under her leadership, our investment company during heady times in banking. His leadership has aptly management and trust department revenue ranks us in the top 100 prepared us for the interesting and challenging times ahead. We trust companies in the country. certainly will miss him. Another area that contributed greatly to our success in 2012 was CONCLUSION mortgage lending, which doubled its revenue versus 2011 on the We are pleased with the Company’s results for 2012 and the strength of a boom in refinancing activity and resulting gains on the continuation of our record of success. Even though the economy is sale of loans. Importantly, these results also reflected higher improving, the outlook for next year is clearly challenging as we originations of purchase money loans related to home sales, a anticipate ongoing margin compression due to the low interest rate segment of the market severely hit by the housing crisis. To illustrate, environment and highly competitive lending conditions. Also the consider that purchase loans represented only about 20% of the regulatory climate will likely become increasingly complex, loans we originated as 2012 began, but increased to 40% of our restricting our ability to serve our customers. For instance, the production by year’s end. We intentionally concentrate on those that ever-changing interpretations of rules for troubled debt influence the purchase loan pipeline, a slow and painstaking process, restructurings will create new operating uncertainties that will but we believe it will pay off in the future, especially as the level of continue to sap the industry’s ability to assist good customers during refinancing ebbs with the eventuality of higher interest rates. tough times by way of loan modifications. In my view, increasingly Another noteworthy comment on our mortgage lending operations relates to its efficiency. Our people in this area have accomplished so strict interpretations in this area will hurt both consumers and banks in the future – a move not needed in a fragile economy. much with a small expense base. As a result, mortgage lending not Despite challenges, we remain well positioned fundamentally in only produced a healthy revenue gain in 2012, it also generated a three attractive markets that can continue to deliver growth over the better operating margin, which translated into better earnings for long term. Coming off a record year for loan production, we expect to the Company. RECOGNITION While we are pleased with the Company’s performance and confident in its strategies, we must admit it's nice to receive external affirmation of those efforts. As a stockholder, you also should be gratified to know that S.Y. Bancorp has retained its high ranking on the KBW Bank Honor Roll of superior performers, a numerically exclusive list compiled by this leading investment bank that specializes in the financial services sector. Additionally, our company see continued momentum in 2013 and anticipate that more of our production will be retained in our portfolio as the level of refinancing activity subsides. With a strong line-up of products and services, Stock Yards Bank & Trust remains highly differentiated compared with most other community banks. While we remain cautious on the economy next year, we gain confidence from our proven ability to deliver superior long-term performance, which has enabled our continued ranking as one of the top-performing community banks in the country. was recently named to The Bank Director Nifty Fifty List: the 50 best On behalf of the Board of Directors, management and our employees, users of capital, based on profitability and capital strength. thank you for your ongoing support and loyalty. We appreciate your RETIRING DIRECTOR In 2013, effective at our annual meeting in April, we will bid farewell David P. Heintzman to longtime director and former Chairman, David Brooks, who will Chairman and Chief Executive Officer continued interest in our company. retire from our Board at that time. David joined the Bank in 1971, was named to the Board of Directors in 1985, and served as Chairman and Chief Executive Officer of both S.Y. Bancorp and Stock Yards Bank & Trust Company from 1993 until 2004. During his tenure, our company made great strides, laying the strategic foundation for future success and quietly preparing for successful management succession. David, a mentor, friend, and family man – a person of With 2012 now completed, we have much to tell you about our past year’s efforts and actions at S.Y. Bancorp. Our news for 2012 is quite positive, both in terms of our performance for the year and steps taken to promote continued growth. It was a great year for Stock Yards Bank & Trust and one more reason we continue to rank among the best performing community banks in the nation. 2012 FINANCIAL OVERVIEW For 2012, the Company reported a 9% increase in net income as earnings rose to $25.8 million or $1.85 per diluted share, marking another consecutive year of record earnings per share. This achievement underscores the breadth and depth of our operations and significant contributions from key profit areas like commercial banking, investment management and trust, and our mortgage origination business. These results translated directly into attractive and tangible benefits for our stockholders. Due to our strong capital position and earnings growth, S.Y. Bancorp has never reduced or suspended dividend payments. In 2012, we took a commitment to building stockholder value to an even higher level. Backed by growing earnings, our Board of Directors significantly increased the amount of cash returned to stockholders last year, voting for two dividend increases. On top of an almost 6% increase in the dividend rate in February 2012, the Board voted to increase the rate again in November 2012, adding another 5% to the payout and pushing the annual dividend rate to $0.80 per share. These moves increased our forward dividend yield to 3.6% as of December 31, 2012, and raised our dividend payout to 41% of earnings for the year. The increase in cash dividends during 2012 combined with price appreciation resulted in total stockholder return of 13.0% for the year. We suspect some banks will point with pride to higher price appreciation in the past year, but many will overlook their plummeting stock value in the depth of and following the last recession. If you examine a five-year period, S.Y. Bancorp’s total return performance has increased 9.2% versus a decline of 26.5% for a NASDAQ Bank index compiled by the industry data source, SNL. In our view, consistent and attractive long-term performance is paramount and we are proud that our stock price – and our financial results – have remained stable and resilient through both good times and bad. ACQUISITION NEWS Alongside our proven ability to grow organically, we continue to carefully weigh other expansion opportunities. We seek to expand our footprint sensibly and deploy our strong capital base prudently while minimizing execution risks. Consistent with these objectives, we were pleased to announce in December our planned acquisition of The Bancorp, Inc., the holding company for THE BANK – Oldham County, in a cash-and-stock transaction valued at approximately $20 million. At this writing, the acquisition has received regulatory approval and is awaiting the approval of Bancorp’s stockholders. We expect to complete the acquisition in April 2013. There is much to like about this transaction. Headquartered in industrial lending has led loan growth. As the economy improves Oldham County, adjacent to our home market in Louisville, THE BANK going forward, we expect that customers – cautious to this point – – Oldham County operates four branches on the northeastern edge will increasingly tap into existing credit facilities to support growth of our footprint, virtually in our own backyard. We previously had no and business development. physical locations in Oldham County, so there is a strong geographical fit underscoring this acquisition. With outstanding demographic trends, Oldham County is a very attractive market and THE BANK – Oldham County has earned a significant share of the county’s total deposits, so there also is a strong business fit here. Lastly, THE BANK – Oldham County is customer driven and service oriented just as we are. With an organizational philosophy that meshes well with Stock al fit. Obviously, we are excited about the prospects of our upcoming expansion in Oldham County. When completed, the combination of the two banks is expected to create the largest locally owned community bank in the Louisville MSA in terms of deposits. The acquisition also signals our interest in considering all prudent options to pursue attractive growth opportunities in our existing markets. BANKING In 2012, our assets increased 5% to $2.15 billion while our loan portfolio advanced almost 3% to $1.6 billion. Asset quality during 2012 reflected the economic stress that many borrowers continue to face. Even so, non-performing assets did begin to show improvement, declining 12% in the second half of the year after peaking at June 30. In Indianapolis, we experienced much the same results, with loan growth returning to a solid upward trajectory on the strength of commercial and industrial lending, which reflected in part the addition of more lenders in the fourth quarter of 2011. Also, a third branch was added in the first quarter of 2012, and its performance is on track with our expectations. With these increased capabilities, we expect to grow our Indianapolis business in 2013. As we continue to develop our Cincinnati market, we recently added a division manager to provide greater focus on acquiring full relationships with locally owned businesses. As you know from my past letters, our expansion market business development strategy begins with private banking, which is followed later by other building blocks, like commercial and industrial lending, investment and trust services, and other key products. Cincinnati is well on its way in the application of this approach. OTHER FINANCIAL SERVICES During 2012, fee income from investment management and trust services contributed 16% to our bottom line. This area continued to power our non-banking income, which totaled more than 34% of the Company’s total revenue for the year. This aspect of our business performed well across our markets last year, particularly in Cincinnati Despite record loan production in 2012 of more than $400 million, we where investment management and trust services were ahead of our were somewhat frustrated by our inability to translate this expectations. We hope to continue that momentum during the production into higher portfolio levels. Facing the ongoing low coming year with the expansion of our personnel there. interest rate environment and the related loan alternatives, a sluggish economy, customers’ desires to pay down debt, and numerous other issues, we continued to confront loan run-off. While these pay downs and pay offs certainly affect us currently, in most cases we retained the customers involved and will have future opportunities with them. A portion of our increased investment management and trust services fee income obviously reflected a strengthening stock market in 2012, but it also underscored robust new account activity during the year. In fact, the pace of new account openings in 2012 was a record for us, and we estimate that those new accounts alone will generate annualized revenue of $1.4 million going forward. Another Looking across our markets, we see consistent themes of strength gauge for our optimism for this area is total investments under and opportunity. In Louisville, our largest market, commercial and management, which in January 2013 topped $2 billion for the first time, up from $122 million 20 years ago when Kathy Thompson took the helm of this department. Under her leadership, our investment management and trust department revenue ranks us in the top 100 trust companies in the country. great integrity and faith – has been a moral compass for our company during heady times in banking. His leadership has aptly prepared us for the interesting and challenging times ahead. We certainly will miss him. Another area that contributed greatly to our success in 2012 was mortgage lending, which doubled its revenue versus 2011 on the strength of a boom in refinancing activity and resulting gains on the sale of loans. Importantly, these results also reflected higher originations of purchase money loans related to home sales, a segment of the market severely hit by the housing crisis. To illustrate, consider that purchase loans represented only about 20% of the loans we originated as 2012 began, but increased to 40% of our production by year’s end. We intentionally concentrate on those that influence the purchase loan pipeline, a slow and painstaking process, but we believe it will pay off in the future, especially as the level of refinancing ebbs with the eventuality of higher interest rates. Another noteworthy comment on our mortgage lending operations relates to its efficiency. Our people in this area have accomplished so much with a small expense base. As a result, mortgage lending not only produced a healthy revenue gain in 2012, it also generated a better operating margin, which translated into better earnings for the Company. RECOGNITION While we are pleased with the Company’s performance and confident in its strategies, we must admit it's nice to receive external affirmation of those efforts. As a stockholder, you also should be gratified to know that S.Y. Bancorp has retained its high ranking on the KBW Bank Honor Roll of superior performers, a numerically exclusive list compiled by this leading investment bank that specializes in the financial services sector. Additionally, our company was recently named to The Bank Director Nifty Fifty List: the 50 best users of capital, based on profitability and capital strength. RETIRING DIRECTOR In 2013, effective at our annual meeting in April, we will bid farewell to longtime director and former Chairman, David Brooks, who will retire from our Board at that time. David joined the Bank in 1971, was named to the Board of Directors in 1985, and served as Chairman and Chief Executive Officer of both S.Y. Bancorp and Stock Yards Bank & Trust Company from 1993 until 2004. During his tenure, our company made great strides, laying the strategic foundation for future success and quietly preparing for successful management succession. David, a mentor, friend, and family man – a person of CONCLUSION We are pleased with the Company’s results for 2012 and the continuation of our record of success. Even though the economy is improving, the outlook for next year is clearly challenging as we anticipate ongoing margin compression due to the low interest rate environment and highly competitive lending conditions. Also the regulatory climate will likely become increasingly complex, restricting our ability to serve our customers. For instance, the ever-changing interpretations of rules for troubled debt restructurings will create new operating uncertainties that will continue to sap the industry’s ability to assist good customers during tough times by way of loan modifications. In my view, increasingly strict interpretations in this area will hurt both consumers and banks in the future – a move not needed in a fragile economy. Despite challenges, we remain well positioned fundamentally in three attractive markets that can continue to deliver growth over the long term. Coming off a record year for loan production, we expect to see continued momentum in 2013 and anticipate that more of our production will be retained in our portfolio as the level of refinancing activity subsides. With a strong line-up of products and services, Stock Yards Bank & Trust remains highly differentiated compared with most other community banks. While we remain cautious on the economy next year, we gain confidence from our proven ability to deliver superior long-term performance, which has enabled our continued ranking as one of the top-performing community banks in the country. On behalf of the Board of Directors, management and our employees, thank you for your ongoing support and loyalty. We appreciate your continued interest in our company. David P. Heintzman Chairman and Chief Executive Officer “We are pleased with the Company’s results for 2012 and the continuation of our record of success.” PAGE 4 S.Y. BANCORP, INC. 2012 SUMMARY ANNUAL REPORT S.Y. BANCORP, INC. Selected Consolidated Financial Data (Dollars in thousands, except per share data) 2012 2011 2010 2009 2008 As of and for the year ended December 31, INCOME STATEMENT Net interest income Provision for Loan Loses Non-interest income Non-interest expenses Net income PER SHARE Basic EPS Diluted EPS Cash dividends declared Book value Market value BALANCE SHEET Total loans Allowance for loan losses Total assets Total deposits Stockholders’ equity AVERAGE BALANCE SHEET Total loans Total assets Total deposits Stockholders’ equity EARNINGS PERFORMANCE Return on average assets Return on average equity Net interest margin, full tax equivalent KEY RATIOS Non-performing loans to total loans Non-performing assets to total assets Net loan charge-offs to total assets Allowance for loan losses to avg. loans Avg. stockholders’ equity to avg. assets Tier 1 risk-based capital Total risk-based capital Leverage $ $ $ $ 73,950 11,500 38,457 65,472 25,801 1.86 1.85 0.77 14.74 22.42 1,584,594 31,881 2,148,262 1,781,693 205,075 1,563,918 2,070,967 1,659,594 197,551 $ $ $ $ 70,732 12,600 33,244 59,581 23,604 1.71 1.71 0.72 13.58 20.53 1,544,845 29,745 2,053,097 1,617,739 187,686 1,529,556 1,959,609 1,549,708 179,638 $ $ $ $ 66,879 11,469 33,739 57,131 22,953 1.68 1.67 0.69 12.37 24.55 1,508,425 25,543 1,902,945 1,493,468 169,861 1,469,116 1,847,452 1,454,239 163,572 $ $ $ $ 58,675 12,775 30,036 52,695 16,308 1.20 1.19 0.68 11.29 21.35 1,435,462 20,000 1,791,479 1,418,184 153,614 1,391,644 1,717,474 1,331,936 150,721 $ $ $ $ 56,858 4,050 28,243 49,319 21,676 1.61 1.59 0.68 10.72 27.50 1,349,637 15,381 1,628,763 1,270,925 144,500 1,295,711 1,567,967 1,216,833 136,112 % 1.25 13.06 3.94 % 1.90 1.74 0.60 2.04 9.54 13.17 14.42 10.79 % 1.20 13.14 3.99 % 1.51 1.51 0.55 1.94 9.17 12.77 14.63 10.53 % 1.24 14.03 3.99 % 1.28 1.30 0.40 1.74 8.85 12.06 13.93 10.31 % 0.95 10.82 3.74 % 0.84 0.77 0.59 1.44 8.78 11.66 13.55 10.16 % 1.38 15.93 3.99 % 0.35 0.39 0.16 1.19 8.68 11.90 13.67 10.62 PAGE 5 S.Y. BANCORP, INC. 2012 SUMMARY ANNUAL REPORT DIRECTORS David H. Brooks Retired; Former Chairman and Chief Executive Officer, S.Y. Bancorp, Inc. and Stock Yards Bank & Trust Company Charles R. Edinger, III President, J. Edinger & Son, Inc. David P. Heintzman Chairman and Chief Executive Officer, S.Y. Bancorp, Inc. and Stock Yards Bank & Trust Company Carl G. Herde Vice President of Finance and Chief Financial Officer, Baptist Healthcare System, Inc. James A. Hillebrand President, S.Y. Bancorp, Inc. and Stock Yards Bank & Trust Company Richard A. Lechleiter Executive Vice President and Chief Financial Officer, Kindred Healthcare, Inc. EXECUTIVE OFFICERS David P. Heintzman Chairman and Chief Executive Officer James A. Hillebrand President Kathy C. Thompson Senior Executive Vice President Wealth Management Group Nancy B. Davis Executive Vice President Chief Financial Officer William M. Dishman, III Executive Vice President Chief Risk Officer Gregory A. Hoeck Executive Vice President Retail Banking Group Philip S. Poindexter Executive Vice President Chief Credit Officer T. Clay Stinnett Executive Vice President Chief Strategic Officer Bruce P. Madison Chief Executive Officer, Plumbers Supply Company, Inc. Richard Northern Partner, Wyatt, Tarrant & Combs LLP Nicholas X. Simon President and Chief Executive Officer, Publishers Printing Company Stephen M. Priebe President, Hall Contracting of Kentucky Norman Tasman President, Tasman Industries, Inc. and Tasman Hide Processing, Inc. Kathy C. Thompson Senior Executive Vice President, S.Y. Bancorp, Inc. and Stock Yards Bank & Trust Company LOUISVILLE - Corporate Center 1048 East Main Street Louisville, Kentucky 40206 (502) 582-2571 INDIANAPOLIS - Regional Center 136 East Market Street Indianapolis, Indiana 46204 (317) 238-2800 CINCINNATI - Regional Center 101 West Fourth Street Cincinnati, Ohio 45202 (513) 824-6100 PAGE 6 S.Y. BANCORP, INC. 2012 SUMMARY ANNUAL REPORT STOCKHOLDER INFORMATION Common Stock S.Y. Bancorp, Inc.’s common stock trades on the NASDAQ Global Select Market under the symbol SYBT. Trust Preferred Securities S.Y. Bancorp, Inc.’s trust preferred securities trade on the NASDAQ Global Select Market under the symbol SYBT.P. Forms 10-K And 10-Q S.Y. Bancorp, Inc.’s annual report on Form 10-K and quarterly reports on Form 10-Q, as filed with the Securities and Exchange Commission, can be found at www.syb.com (see “Investor Relations”) or by writing or calling Nancy B. Davis, Executive Vice President, S.Y. Bancorp, Inc., nancy.davis@syb.com, (502) 625-9176. Transfer Agent The transfer agent for the common stock of S.Y. Bancorp, Inc. is: Registrar and Transfer Company 10 Commerce Drive Cranford, NJ 07016-3572 (800) 368-5948 Automatic Dividend Reinvestment Service The Company’s automatic dividend reinvestment service enables stockholders to reinvest cash dividends in additional shares of S.Y. Bancorp, Inc. stock. For additional information, contact the Transfer Agent. Mailing And Street Addresses The mailing address for S.Y. Bancorp, Inc. is: P.O. Box 32890, Louisville, Kentucky 40232-2890. The street address is: 1040 E. Main Street, Louisville, Kentucky 40206. Internet Address The Internet address for S.Y. Bancorp, Inc. is www.syb.com. Stockholders can find share prices, trading volume, insider trading information, and other pertinent information (see “Investor Relations”). This unique piece of bank history has been a permanent fixture in our Main Office lobby for over 98 years. “Spot”, our Great Dane statue, was made by G.C.J. Mattei Co. in 1913 and was commissioned by Mr. Lytle H. Hudson, Sr., the first president of Stock Yards Bank, to honor a beloved family pet. We believe this great symbol represents many admirable qualities like strength and loyalty, and it was the inspiration for our motto: