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S.Y. Bancorp Announces Higher Third Quarter Earnings as Net Income Per Diluted Share Increases 11% to $0.41.

LOUISVILLE, Ky. -- S.Y. Bancorp, Inc. (NASDAQ: SYBT), parent company of Stock Yards Bank & Trust Company, with offices in the Louisville metropolitan area, Indianapolis and Cincinnati, today reported results for the third quarter and nine months ended September 30, 2007. Highlights of the third quarter included higher earnings, largely driven by ongoing growth in non-interest income, particularly with respect to the Company's investment management and trust services, and the continuation of strong credit quality characteristics in the loan portfolio, which have helped counter increasing competitive pressures affecting loan growth and interest margins. A summary of results for the third quarter and year-to-date period follows:

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Commenting on the announcement, David Heintzman, Chairman and Chief Executive Officer, said, "Against the backdrop of an intensely competitive operating environment, which has affected our loan growth and pressured our net interest margin, the Company continued to produce solid earnings performance and high returns for our stockholders. Our success despite difficult industry conditions demonstrates the importance we have placed on expanding our revenue base, with one key factor in those efforts being the growth of our investment management and trust operations. These services continue to complement and provide synergy for our banking activities. This department has developed a sound and growing reputation supported by solid, consistent investment performance for our clients. We were gratified to see revenue growth of 12% in the third quarter from our investment management and trust operations, clearly the largest source of non-interest income, as total assets under management increased 13.3% to $1.7 billion over the past year primarily due to market appreciation.

"It is noteworthy that the Company has produced consistent earnings even as we have ramped up our expansion activities, adding to our presence in Indianapolis and entering the Cincinnati market," Heintzman continued. "The Indianapolis market has been instrumental to our overall loan growth over the past year, and we expect that the upcoming opening of our second office there will add further momentum to our efforts to reach new customers. In Cincinnati, we recently selected a prominent downtown location for our flagship office and are well underway in building a team of experienced lenders to lead our expansion there."

Concluding, Heintzman added, "Looking ahead to the final quarter of the year, we remain concerned about general market forces, including a highly competitive marketplace, the effect of declining interest rates, and overall conditions in the economy. Competition will continue to restrain loan growth and will place additional pressure on net interest margin. Taking a longer-term view, however, we remain excited about the prospects of expanding our reach to new markets and the growth opportunities created by that expansion."

Net interest income, the Company's largest source of revenue, declined $66,000, or less than 1%, in the third quarter of 2007 compared with the year-earlier period. Net interest income increased $504,000 or 1% in the first nine months of 2007 compared with the same period last year. The third quarter decline in net interest income reflected modest growth in the Company's loan portfolio, which was more than offset by net interest margin compression. Net interest margin for the third quarter, at 4.18%, declined eight basis points from 4.26% in the second quarter of 2007 and was 21 basis points lower than the 4.39% reported in the year-earlier period. This ongoing margin pressure, which began in the third quarter last year, reflects the persistence of a relatively flat yield curve coupled with the impact of higher interest expense associated with local competition for deposits. The Company expects pressure on net interest margins to continue in the near term, and further reductions in short-term rates by the Federal Reserve could add more pressure.

Non-performing loans for the third quarter declined 11% on a linked-quarter basis to $4,244,000 from $4,769,000 in the second quarter of 2007, and were 37% below non-performing loans of $6,765,000 in the third quarter of 2006. The ratio of non-performing loans to total loans was 0.37% in the third quarter of 2007, down from 0.41% in the second quarter of 2007 and 0.61% in the third quarter last year. Net charge-offs totaled 0.03% of average loans in the third quarter of 2007 compared with 0.04% in same period last year. However, in view of near-term concerns about the economy in general, the Company increased its provision for loan losses to $850,000 in the third quarter from $450,000 in the third quarter of 2006. For the first nine months of 2007, the loan loss provision totaled $2,090,000 versus $1,400,000 in the year-earlier period. The Company's allowance for loan losses was 1.08% of total loans at September 30, 2007, compared with 1.04% of total loans at June 30, 2007, and 1.11% at September 30, 2006. Management noted that the Company has no sub-prime loans in its portfolio.

Non-interest income increased $557,000 or 8% in the third quarter compared with the same quarter last year, primarily due to higher investment management and trust income, which rose $345,000 or 12% during the quarter. This, along with higher bankcard transaction revenue, service charges on deposit accounts, brokerage fees and commissions, and other non-interest income offset lower gains on sales of mortgage loans for the quarter. Non-interest income increased $1,295,000 or 6% in the first nine months of 2007 compared with the year-earlier period, again driven primarily by higher investment management and trust income.

Non-interest expense declined $386,000 or 3% in the third quarter of 2007 versus the same period last year. The decline for the third quarter primarily reflected the non-recurring impact in the year-earlier quarter of the write-off of $879,000 of unamortized issuance costs associated with the Company's trust preferred securities that were redeemed on July 1, 2006. Also, as a result of revised standard costs applied to the loan production process and an increase in loan volume, the Company's deferred salaries associated with loan originations in the third quarter of 2007 exceeded those amounts in the same period last year. These factors helped offset a rise in salaries and employee benefits expense related in part to the addition of staff associated with the development of a second office in the Indianapolis market and the Company's recent entry into the Cincinnati market. Non-interest expense declined $584,000 or 2% in the first nine months of 2007 compared with the year-earlier period, again primarily due to the write-off of unamortized issuance costs on the Company's trust preferred securities in the year-earlier period and the impact of deferred salary expense in 2007. These factors, along with a first quarter 2007 reduction in state bank taxes, resulting from tax credits purchased in the quarter, helped offset higher salaries and employee benefits, data processing and net occupancy expenses for the first nine months of 2007. The Company's third quarter efficiency ratio was to 53.95% compared with 53.22% in the second quarter of 2007 and 57.07% in the third quarter last year.

S.Y. Bancorp's total assets for the third quarter increased 4% to $1.410 billion from $1.354 billion at September 30, 2006. The Company's loan portfolio also increased 4% to $1.157 billion from $1.117 billion for the year-earlier period, primarily due to steady loan growth throughout the year. Deposits of $1.067 billion at September 30, 2007, were level with the year-earlier period.

In July, the Company's Board of Directors expanded the Company's stock repurchase plan by 550,000 shares, or approximately 4% of the Company's total common shares outstanding, increasing the remaining authorization at that time to 567,500 shares. In August, as a part of this stock repurchase program, the Company established a Rule 10b5-1 stock trading plan. During the third quarter, the Company repurchased approximately 316,000 shares, or about 2% of its shares outstanding. As of September 30, 2007, the Company had remaining authorization to repurchase approximately 251,500 shares. In August, the Board of Directors declared a regular quarterly cash dividend of $0.16 per share, which was distributed on October 1, 2007, to stockholders of record as of September 14, 2007.

Louisville, Kentucky-based S.Y. Bancorp, Inc., with $1.410 billion in assets, was incorporated in 1988 as a bank holding company. It is the parent company of Stock Yards Bank & Trust Company, which was established in 1904.

This report contains forward-looking statements under the Private Securities Litigation Reform Act that involve risks and uncertainties. Although the Company's management believes the assumptions underlying the forward-looking statements contained herein are reasonable, any of these assumptions could be inaccurate. Therefore, there can be no assurance the forward-looking statements included herein will prove to be accurate. Factors that could cause actual results to differ from those discussed in forward-looking statements include, but are not limited to: economic conditions both generally and more specifically in the markets in which the Company and its subsidiaries operate; competition for the Company's customers from other providers of financial services; government legislation and regulation, which change from time to time and over which the Company has no control; changes in interest rates; material unforeseen changes in liquidity, results of operations, or financial condition of the Company's customers; and other risks detailed in the Company's filings with the Securities and Exchange Commission, all of which are difficult to predict and many of which are beyond the control of the Company.
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Unaudited supplemental financial information for the third quarter and nine months ended September 30, 2007 and 2006, appears on the following pages.
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Date:Oct 17, 2007
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