Stock Yards Bancorp(US:SYBT)2021-05-07 16:21Credit Loss Allowance and Methodologies - Bancorp recorded a net reduction of retained earnings of $8.8 million upon the adoption of ASC 326, with an increase in the ACL on loans of $8.2 million and an increase in the ACL on off-balance sheet credit exposures of $3.5 million[46]. - The total allowance for credit losses on loans increased from $26.8 million to $36.6 million due to the adoption of ASC 326, reflecting an increase of $9.9 million[49]. - The ACL on loans is estimated based on the net amount expected to be collected over the life of the loans, considering factors such as creditworthiness and expected future cash flows[26]. - Bancorp's methodologies for estimating the ACL on loans include relevant information about past events, current conditions, and reasonable forecasts[27]. - Bancorp estimates the Allowance for Credit Losses (ACL) on loans based on the amortized cost basis of underlying assets, adjusting for collection of payment and charge-offs[51]. - Expected credit losses are reflected in the ACL through a charge to provision, with uncollectible financial assets written off and the ACL reduced accordingly[52]. - Bancorp's methodologies for estimating the ACL consider historical loss information, current conditions, and reasonable forecasts, reverting to historical loss information when necessary[53]. - The company stratifies its loan portfolio into homogeneous groups to estimate credit losses, ensuring a comprehensive assessment of risk[27]. - The total allowance for credit losses on off-balance sheet exposures was $3.85 million, reflecting a significant increase of $3.5 million due to the adoption of ASC 326[49]. Loan Portfolio and Performance - Total loans increased to $3.635 billion as of March 31, 2021, up from $3.532 billion at December 31, 2020, representing a growth of 2.9%[115]. - The allowance for credit losses (ACL) on loans decreased by $1.2 million, or 2%, from December 31, 2020, attributed to improved unemployment forecasts and other factors[119]. - Loans to directors and related interests rose to $52 million as of March 31, 2021, compared to $43 million at December 31, 2020, indicating a 20.9% increase[117]. - The total commercial real estate loans reached $1.404 billion as of March 31, 2021, an increase from $1.342 billion at December 31, 2020, reflecting a growth of 4.6%[115]. - The total commercial and industrial loans amounted to $1.383 billion, slightly up from $1.353 billion, marking a 2.2% increase[115]. - The total residential real estate loans increased to $398.9 million as of March 31, 2021, from $380.1 million at December 31, 2020, representing a growth of 4.9%[115]. - The total amount of outstanding loan deferrals as of March 31, 2021, was $14,000,000, compared to $37,000,000 as of December 31, 2020[128]. - The total loans categorized as substandard non-performing amounted to $5,994,000 as of March 31, 2021[127]. - The total net loan recoveries for the three months ended March 31, 2021, were $50.714 million, down from $51.920 million in the previous period[120]. Financial Performance and Income - Net income for the three months ended March 31, 2021, was $22,710,000, compared to $13,232,000 for the same period in 2020, representing a year-over-year increase of 71%[191]. - Basic net income per share increased to $1.00 for Q1 2021 from $0.59 in Q1 2020, while diluted net income per share rose to $0.99 from $0.58[191]. - Net interest income for the commercial banking segment increased to $37,742,000 in Q1 2021 from $32,361,000 in Q1 2020, representing a growth of 16.7%[219]. - Total non-interest income rose to $13,844,000 in Q1 2021, up from $12,536,000 in Q1 2020, reflecting an increase of 10.5%[220]. - The provision for credit losses decreased significantly to $(1,475,000) in Q1 2021 compared to $5,925,000 in Q1 2020, indicating improved credit quality[219]. Capital and Regulatory Compliance - As of March 31, 2021, Bancorp's total risk-based capital was $483,547 thousand, representing a ratio of 13.39%, exceeding the minimum requirement of 8.00% for adequately capitalized institutions[212]. - The Common Equity Tier 1 Risk-Based Capital ratio for Bancorp was 12.32% as of March 31, 2021, above the minimum requirement of 4.50%[212]. - Bancorp's leverage ratio was 9.46% as of March 31, 2021, above the minimum requirement of 4.00%[212]. - Bancorp continues to exceed all regulatory capital requirements and intends to maintain a capital position that meets or exceeds the "well-capitalized" standards[211]. Legal and Regulatory Matters - A lawsuit was filed by a purported shareholder challenging the proposed merger with Kentucky Bancshares, alleging breaches of fiduciary duties and misleading information dissemination[172]. - The company believes that the pending legal actions will not have a material adverse effect on its consolidated financial position or results of operations[175]. - The claims asserted in the lawsuits are believed to be without merit by the company and its board of directors[174]. Other Financial Metrics - The effective tax rate for Q1 2021 was 19.4%, compared to 14.5% in Q1 2020, reflecting an increase of 4.9 percentage points[157]. - Current income tax expense for Q1 2021 was $4,015 thousand, up from $1,973 thousand in Q1 2020, indicating a year-over-year increase of 103%[157]. - Total deposits grew from $3,988,634 thousand at December 31, 2020 to $4,199,962 thousand at March 31, 2021, representing an increase of 5.3%[160]. - The average outstanding balance of Securities Sold Under Agreements to Repurchase (SSUAR) increased from $33,413 thousand in Q1 2020 to $46,937 thousand in Q1 2021, a growth of 40.5%[162].