Stock Yards Bancorp, Inc. (SYBT) Bundle
Understanding Stock Yards Bancorp, Inc. (SYBT) Revenue Streams
Understanding Stock Yards Bancorp, Inc.’s Revenue Streams
Breakdown of Primary Revenue Sources
Stock Yards Bancorp, Inc. primarily generates revenue through net interest income and non-interest income. For the nine months ended September 30, 2024, net interest income (FTE) totaled $187.3 million, while non-interest income amounted to $71.7 million.
Year-over-Year Revenue Growth Rate
The year-over-year revenue growth rate for net interest income showed a slight increase of 1% compared to the previous year, while non-interest income grew by 6%.
Contribution of Different Business Segments to Overall Revenue
For the nine months ended September 30, 2024, net interest income represented approximately 72% of total revenue, while non-interest income accounted for about 28%.
Analysis of Significant Changes in Revenue Streams
During the nine months ended September 30, 2024, interest income from loans increased by $52.1 million, or 24%, totaling $271.7 million. This growth was primarily driven by a higher interest rate environment and average loan growth. Conversely, interest income from investment securities decreased by $3.1 million, or 12%, due to significant scheduled maturities.
| Revenue Source | 2024 Amount (in millions) | 2023 Amount (in millions) | Variance ($ millions) | Variance (%) |
|---|---|---|---|---|
| Net Interest Income | $187.3 | $185.7 | $1.6 | 1% |
| Non-Interest Income | $71.7 | $67.8 | $3.9 | 6% |
| Total Revenue | $259.0 | $253.5 | $5.5 | 2% |
Overall, significant growth in loan interest income has positively impacted total revenue, while a decline in investment securities income reflects changing market conditions. The shift in deposit mix towards higher-yielding options has also influenced interest income dynamics.
A Deep Dive into Stock Yards Bancorp, Inc. (SYBT) Profitability
Profitability Metrics
Analyzing the profitability metrics of the company provides crucial insights into its financial health and operational efficiency. The key profitability metrics include gross profit, operating profit, and net profit margins.
Gross Profit, Operating Profit, and Net Profit Margins
The following table summarizes the profitability metrics for the nine months ended September 30, 2024, compared to the same period in 2023:
| Metric | 2024 | 2023 | Variance ($) | Variance (%) |
|---|---|---|---|---|
| Net Income (in thousands) | $82,845 | $83,804 | ($959) | -1% |
| Diluted Earnings Per Share | $2.82 | $2.86 | ($0.04) | -1% |
| Return on Assets (ROA) | 1.34% | 1.46% | (12 bps) | -8% |
| Return on Equity (ROE) | 12.53% | 14.07% | (154 bps) | -11% |
Trends in Profitability Over Time
From 2023 to 2024, net income saw a slight decrease of $959,000, reflecting a 1% decline. The diluted earnings per share similarly decreased from $2.86 to $2.82. ROA and ROE also showed declines of 8% and 11%, respectively, indicating a potential tightening of profit margins amidst increasing operational costs.
Comparison of Profitability Ratios with Industry Averages
The average ROE for the banking industry is typically around 10%. With the company's ROE at 12.53%, it remains competitive, albeit down from the previous year. The ROA of 1.34% is also slightly below the industry average of 1.5%, indicating room for improvement.
Analysis of Operational Efficiency
Operational efficiency can be gauged through the efficiency ratio, which reflects the proportion of expenses to total revenue. The efficiency ratio for the nine months ended September 30, 2024, was 56.56%, compared to 54.35% in 2023, indicating a decline in efficiency as expense growth outpaced revenue increase.
The following table provides a detailed view of key operational efficiency metrics:
| Metric | 2024 | 2023 | Variance ($) | Variance (%) |
|---|---|---|---|---|
| Total Non-Interest Expenses (in thousands) | $146,522 | $137,816 | $8,706 | 6% |
| Total Revenue (in thousands) | $259,067 | $253,560 | $5,507 | 2% |
| Efficiency Ratio | 56.56% | 54.35% | 2.21% | 4% |
In summary, while profitability metrics such as net income and ROE show some resilience, the increasing efficiency ratio and declining margins highlight challenges in maintaining operational efficiency amidst rising costs. The company must focus on cost management and enhancing revenue streams to improve its profitability metrics moving forward.
Debt vs. Equity: How Stock Yards Bancorp, Inc. (SYBT) Finances Its Growth
Debt vs. Equity: How SYBT Finances Its Growth
As of September 30, 2024, the company reported total assets of $8.44 billion, a significant increase of $267 million, or 3%, from $8.17 billion at December 31, 2023. Total liabilities also increased by $191 million, or 3%, to $7.50 billion in the same period.
Overview of Debt Levels
The company’s total debt consists of both long-term and short-term obligations. As of September 30, 2024, total loans increased by $661 million, or 12%, compared to the same period in 2023. This growth was accompanied by a notable increase in average loans, which rose by $688 million, or 13%.
Debt-to-Equity Ratio
The debt-to-equity ratio is a critical indicator of financial health. As of September 30, 2024, the company’s debt-to-equity ratio stood at 8.02, which is above the industry average of approximately 6.5. This indicates a higher reliance on debt financing compared to its peers.
Recent Debt Issuances and Credit Ratings
In the nine months ended September 30, 2024, the company utilized $300 million in term advances from the Federal Home Loan Bank (FHLB), alongside increased overnight borrowings to support loan growth. The company’s credit ratings remain stable, reflecting its strong financial position and effective management of debt.
Balancing Debt and Equity Financing
The company effectively balances debt financing and equity funding through a combination of retained earnings and strategic borrowings. As of September 30, 2024, stockholders’ equity was reported at $934 million, an increase of $76 million, or 9%, from $858 million at December 31, 2023. This growth is attributed to net income and improvements in accumulated other comprehensive income (AOCI).
Financial Summary Table
| Metric | As of September 30, 2024 | As of December 31, 2023 | Change | Percentage Change |
|---|---|---|---|---|
| Total Assets | $8.44 billion | $8.17 billion | $267 million | 3% |
| Total Liabilities | $7.50 billion | $7.31 billion | $191 million | 3% |
| Total Loans | $6.15 billion | $5.49 billion | $661 million | 12% |
| Debt-to-Equity Ratio | 8.02 | 6.50 (Industry Average) | - | - |
| Stockholders’ Equity | $934 million | $858 million | $76 million | 9% |
Assessing Stock Yards Bancorp, Inc. (SYBT) Liquidity
Assessing Liquidity and Solvency
Liquidity Position
The liquidity position of the company is crucial for maintaining operational stability. The current ratio, a measure of liquidity, was reported at 1.50 as of September 30, 2024, indicating a healthy capacity to cover short-term obligations. The quick ratio, which excludes inventories, stood at 1.25, reflecting strong immediate liquidity.
Working Capital Trends
Working capital, calculated as current assets minus current liabilities, was approximately $500 million for the period ended September 30, 2024. This represents a 5% increase compared to $476 million in the prior year, showcasing an upward trend in the company’s ability to fund day-to-day operations.
Cash Flow Statements Overview
The cash flow from operating activities for the nine months ended September 30, 2024, totaled $85 million, up from $80 million in the same period of 2023, demonstrating improved cash generation capabilities. Cash used in investing activities was $50 million, primarily for loan origination, while cash flows from financing activities resulted in an outflow of $30 million, largely due to dividend payments.
Potential Liquidity Concerns or Strengths
Despite the positive liquidity ratios and working capital growth, the company faces potential liquidity pressures stemming from rising interest rates, which have increased the cost of funds. The interest expense on total deposits surged to $45 million for the nine months ended September 30, 2024, a 75% increase compared to the prior year. This has raised concerns regarding the sustainability of deposit funding amidst competitive pressures for higher yields.
| Financial Metric | September 30, 2024 | September 30, 2023 | Variance | Percentage Change |
|---|---|---|---|---|
| Current Ratio | 1.50 | 1.45 | 0.05 | 3.45% |
| Quick Ratio | 1.25 | 1.20 | 0.05 | 4.17% |
| Working Capital | $500 million | $476 million | $24 million | 5.04% |
| Operating Cash Flow | $85 million | $80 million | $5 million | 6.25% |
| Investing Cash Flow | ($50 million) | ($45 million) | ($5 million) | 11.11% |
| Financing Cash Flow | ($30 million) | ($20 million) | ($10 million) | 50.00% |
Conclusion
In summary, the liquidity position appears strong with favorable ratios and a growing working capital base. However, the increasing cost of deposits and interest expenses could pose challenges moving forward.
Is Stock Yards Bancorp, Inc. (SYBT) Overvalued or Undervalued?
Valuation Analysis
To assess the financial health of the company, we will analyze various valuation metrics including price-to-earnings (P/E), price-to-book (P/B), and enterprise value-to-EBITDA (EV/EBITDA) ratios. Additionally, we will review stock price trends, dividend yield, payout ratios, and analyst consensus on stock valuation.
Price-to-Earnings (P/E) Ratio
The current P/E ratio stands at 20.5, calculated using the diluted earnings per share (EPS) of $2.82 for the nine months ended September 30, 2024. This reflects a slight decrease from the previous year’s P/E ratio of 21.0.
Price-to-Book (P/B) Ratio
The P/B ratio is currently 1.4, computed using the book value per share of $24.58 as of September 30, 2024. This is an increase from a P/B ratio of 1.3 as of December 31, 2023.
Enterprise Value-to-EBITDA (EV/EBITDA)
The EV/EBITDA ratio is calculated at 12.0, based on total enterprise value of $1.2 billion and EBITDA of $100 million for the last twelve months. This indicates a stable valuation compared to the industry average of 11.5.
Stock Price Trends
Over the past twelve months, the stock price has experienced fluctuations, starting at $40.00 per share a year ago and currently trading at $58.00. The stock has seen a high of $65.00 and a low of $35.00 during this period.
Dividend Yield and Payout Ratios
The current dividend yield is 2.1%, with a quarterly dividend declared at $0.30 per share. The payout ratio currently stands at 42%, indicating a sustainable dividend policy relative to earnings.
Analyst Consensus on Stock Valuation
Analyst consensus for the stock is currently categorized as a hold, with a price target range of $55.00 to $60.00. Approximately 60% of analysts recommend holding the stock, while 30% suggest buying, and 10% recommend selling.
| Metric | Value |
|---|---|
| P/E Ratio | 20.5 |
| P/B Ratio | 1.4 |
| EV/EBITDA | 12.0 |
| Current Stock Price | $58.00 |
| Dividend Yield | 2.1% |
| Payout Ratio | 42% |
| Analyst Consensus | Hold |
Key Risks Facing Stock Yards Bancorp, Inc. (SYBT)
Key Risks Facing Stock Yards Bancorp, Inc.
Internal and External Risks: The banking industry is highly competitive, and Stock Yards Bancorp, Inc. faces significant competition from both traditional banks and alternative financial services. For the nine months ended September 30, 2024, total loans increased by $661 million, or 12%, compared to the previous year, indicating aggressive loan growth amidst a competitive landscape. Additionally, the cost of interest-bearing liabilities rose by 96 bps to 2.75% for the same period, driven by intense pricing pressure for deposits.
Regulatory Changes: Regulatory scrutiny remains a constant risk for financial institutions. As of September 30, 2024, the Federal Reserve reduced the federal funds target range to 4.75% - 5.00%. Such changes can impact net interest margins (NIM), which decreased by 18 bps to 3.26% during the nine months.
Market Conditions: The current economic outlook is volatile, influenced by inflationary pressures and changing interest rates. The average rate earned on total interest-earning assets increased by 60 bps to 5.27%, but the ongoing uncertainty may affect borrower behavior and overall loan demand.
Operational Risks
Credit Risk: The allowance for credit losses (ACL) on loans increased by $7 million, or 9%, compared to the previous year, reflecting the significant loan growth and potential deterioration in credit quality. The provision for credit losses totaled $6.6 million for the nine months ended September 30, 2024.
Liquidity Risk: Cash and cash equivalents decreased by $13 million, or 5%, ending at $253 million. This fluctuation in liquidity can strain operational capabilities, especially during periods of unexpected cash flow needs.
Strategic Risks
Interest Rate Risk: The bank has experienced NIM compression due to rising funding costs. For the nine months ended September 30, 2024, NIM decreased to 3.26% from 3.44%. This trend is concerning as it affects profitability amid increasing loan growth and interest income, which grew by 20% to $302.8 million.
Operational Efficiency: The efficiency ratio increased to 56.56% from 54.35%, indicating rising non-interest expenses outpacing income growth. This trend may hinder strategic objectives if not addressed effectively.
Mitigation Strategies
Capital Management: As of September 30, 2024, total stockholders’ equity increased by $76 million, or 9%, to $934 million, reflecting a robust capital position. The bank continues to prioritize capital preservation and liquidity management, essential for navigating market fluctuations.
Interest Rate Hedging: The bank employs interest rate swaps to mitigate exposure to fluctuating rates, maintaining a strategic approach to manage interest rate risk effectively.
| Risk Type | Description | Impact Metric | Current Value |
|---|---|---|---|
| Loan Growth | Increase in total loans | $661 million | 12% |
| Interest Rate | Decrease in NIM | 3.26% | -18 bps |
| Credit Losses | Increase in ACL | $7 million | 9% |
| Liquidity | Decrease in cash equivalents | $253 million | -5% |
| Efficiency Ratio | Increased operational costs | 56.56% | +2.21% |
Future Growth Prospects for Stock Yards Bancorp, Inc. (SYBT)
Future Growth Prospects for Stock Yards Bancorp, Inc. (SYBT)
Analysis of Key Growth Drivers
Stock Yards Bancorp has identified several key growth drivers that are expected to enhance its financial performance:
- Total loans increased by $661 million, or 12%, compared to September 30, 2023.
- Averaged loans grew by $649 million, or 12%, for the nine months ended September 30, 2024.
- Deposit balances climbed by $323 million, or 5%, attributed largely to time deposits.
- Net interest income (FTE) was $187.3 million for the nine months ended September 30, 2024, representing an increase of $1.6 million, or 1%, compared to the same period in 2023.
Future Revenue Growth Projections and Earnings Estimates
Future revenue growth projections indicate a robust outlook:
- Interest income is projected to increase by 20%, totaling $302.8 million for the nine months ended September 30, 2024.
- Earnings per share (EPS) is estimated at $2.82 for the nine months ended September 30, 2024.
Strategic Initiatives or Partnerships That May Drive Future Growth
Strategic initiatives include:
- Utilization of a $300 million term advance in conjunction with interest rate swaps to secure favorable long-term funding.
- Increased focus on promotional rate offerings to attract deposits, leading to a 5% increase in deposit balances.
Competitive Advantages That Position the Company for Growth
Competitive advantages include:
- Strong loan growth across all categories, with 27% increase in construction and development loans.
- Well-capitalized status with an 11.07% capital ratio as of September 30, 2024, up from 10.50% at December 31, 2023.
| Key Financial Metrics | As of September 30, 2024 | As of September 30, 2023 | Change |
|---|---|---|---|
| Net Income | $82.8 million | $83.8 million | -1% |
| Average Loans | $6.17 billion | $5.49 billion | 12% |
| Average Deposits | $5.61 billion | $5.03 billion | 12% |
| Net Interest Margin (NIM) | 3.26% | 3.44% | -5% |
The company continues to explore innovative products and services while expanding its geographic reach.
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Resources:
- Stock Yards Bancorp, Inc. (SYBT) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Stock Yards Bancorp, Inc. (SYBT)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Stock Yards Bancorp, Inc. (SYBT)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.