SEC Company Response from Stock Yards Bancorp, Inc. (SYBT) (CIK 0000835324) (SYBT) — Jan 24, 2017
Stock Yards Bancorp, Inc. (SYBT) (CIK 0000835324)
Date: Jan. 24, 2017 · CIK: 0000835324 · Accession: 0001437749-17-001014
AI Filing Summary & Sentiment
Reasoning
File numbers found in text: 001-13661
Referenced dates: December 13, 2016
Letter
Office of Financial Services Division of Corporation Finance United States Securities and Exchange Commission Form 10-K for the Fiscal Year Ended December 31, 2015 Filed March 4, 2016 File No. 001-13661
Re: Stock Yards Bancorp, Inc.
Dear Ms. Sullivan:
We are replying to inquiries and comments in your letter dated December 13, 2016 with regard to Stock Yards Bancorp, Inc. and the above named file number. To facilitate your review, we have included your references, comments and questions.
Form 10-K for the Fiscal Year Ended December 31, 2015
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations, page 15
Provision for Loan Losses, page 22
1.
We note that per page 31, non-performing loans includes troubled debt restructurings (TDRs), including accruing TDRs. On page 22 you state that the decrease in non-performing loans during 2015 was due to a decrease in loans classified as TDRs. On page 22, you state that TDRs, which are currently accruing interest, decreased from $6.4 million at December 31, 2014 to $1.1 million at December 31, 2015, reflecting the migration of one lending relationship to performing status. Lastly, we note your disclosure on page 49, that if a loan is restructured at a market rate for a new loan with comparable risk, no principal forgiveness has been granted, and the loan is not impaired based on the terms specified by the restructuring agreement, it shall be removed from restructured status generally after six months of performance. Please respond to the following:
Ms. Stephanie L. Sullivan
Senior Assistant Chief Accountant
Office of Financial Services
Division of Corporation Finance
United States Securities and Exchange Commission
Washington, DC 20549
Page 2
●
Quantify all loans that have been removed from TDR designation for the years ended December 31, 2015, 2014, 2013 and the nine months ended September 30, 2016.
For the years ended December 31, 2015, 2014 and 2013, as well as for the nine months ended September 30, 2016, we provided a list of the individual loans removed from TDR designation in Attachment I. There were a total of three loans for $3.4 million removed from TDR designation in 2013, no loans were removed in 2014, two loans for $5.2 million were removed in 2015, and no loans were removed in the nine months ended September 30, 2016.
●
Describe the factors leading to the removal of the TDR designation for these loans during the applicable periods.
Of the five loans removed from TDR status from January 1, 2013 through September 30, 2016, two were fully charged off, one was fully paid off, and one was returned to performing status because the restructured loan was made at market rate, there has been no principal forgiveness, and the loan had paid per restructured terms for at least six months and over a calendar year end and, in accordance with our accounting policy, was removed from TDR designation (Loan D in Attachment I). The fifth loan, for $0.4 million, was removed from the TDR accruing category through a downgrade to non-accrual (Loan E in Attachment I). It was still included in our non-performing loan totals, accounted for as an impaired loan and included in our impaired loan totals, although we no longer disclosed it as a TDR. This loan was subsequently fully charged off in 2016.
●
Tell us how much of the decrease in non-performing loans during 2015 was due to removal of the TDR designation, versus pay-off or charge-off of the TDR loan.
As noted above, two loans were removed from TDR status in 2015. One loan for $4.8 million (Loan D) was removed from TDR designation and considered a performing loan as it met all criteria in our accounting policy for removal from TDR designation. The other loan for $0.4 million (Loan E) was removed from the TDR accruing category through a downgrade to non-accrual. From December 31, 2014 to December 31, 2015, TDRs declined $5.3 million. The above explanation accounts for $5.2 of the decline. The remaining $0.1 million of the decline was due to loan payments received during 2015 on TDR loans. During the year ended December 31, 2015, none of the decrease was attributable to a pay-off or a charge-off of a TDR loan.
Ms. Stephanie L. Sullivan
Senior Assistant Chief Accountant
Office of Financial Services
Division of Corporation Finance
United States Securities and Exchange Commission
Washington, DC 20549
Page 3
●
Explain in further detail why the return of TDRs that were accruing interest to performing status reduces the level of non-performing loans in your portfolio.
TDRs in accruing status are included in non-performing loans in our MD&A disclosures and impaired loans in the footnotes to the financial statements. When loans are removed from TDR designation per our accounting policy described above, and returned to performing status, they are no longer included in the non-performing or impaired loan totals, reducing the level of non-performing loans in our portfolio. As previously noted, there was only one such TDR loan from January 1, 2013 through September 30, 2016 that was removed from TDR designation and returned to performing status.
●
Clarify if all of your TDRs are accruing interest for all periods presented. In this regard, we note that the disclosed amount of TDRs accruing interest as of December 31, 2015 and 2014 agrees to the total amount of TDRs included in non-performing loans for those periods.
Referring to the table on the bottom of page 31 of our 10-K, all loans included in the “Troubled debt restructuring” line are on accrual status for all periods presented. In this table, if a TDR loan moves to non-accrual status, it is then reported within the “Non-accrual loans” line rather than in the “Troubled debt restructuring” line. In future filings, we will provide a footnote to the “Non-accrual loans” line of the table indicating the amount, if any, of non-accrual TDR loans that were previously accruing TDRs. As of December 31, 2015 that amount was $0.4 million (Loan E). As of December 31, 2014 and 2013 the amount was $0. As of December 31, 2012 and 2011 the amounts were $2.5 million and $1.7 million, respectively.
Non-Interest Income and Non-Interest Expenses, page 23
2.
We note that most recurring fees, which generally comprise over 95% of your investment management and trust (“IM&T”) revenue, and nearly 14% of your total revenue, are earned for managing accounts based on a percentage of market value on a monthly basis. Please address the following:
●
Disclose, if true, in future filings that these recurring fees are based upon the value of your assets under management (AUM).
Yes, these recurring fees are based upon market value of assets under management. We will disclose the following in future filings: “Recurring fees are based upon market value of assets under management.”
●
Tell us if you have the right under any of your contracts to earn performance fees on your AUM. If so, revise future filings to disaggregate these fees from your investment management fees and disclose your policy for recognizing revenue from performance fees.
Ms. Stephanie L. Sullivan
Senior Assistant Chief Accountant
Office of Financial Services
Division of Corporation Finance
United States Securities and Exchange Commission
Washington, DC 20549
Page 4
We do not have the right under any of our contracts to earn performance fees on AUM. We will disclose the following in future filings: “We do not have the right under any of our contracts to earn performance fees on AUM.”
●
Provide a roll-forward of your AUM by investment strategy (i.e. equities, fixed income, cash and other assets) that separately presents gross client inflows, gross client outflows, market appreciation/(depreciation), and foreign currency translation adjustments (if applicable).
In a telephone conversation with Yolanda Trotter of the Commission Staff, we explained that our investment management and trust area is not a mutual fund company or registered investment advisor (RIA) and, as such, we do not track AUM by investment strategy like a mutual fund company or RIA. However, we have provided below similar information showing:
•
AUM by account type and whether managed/ non-managed as of December 31, 2015 and 2014,
•
Managed assets by class of investment as of December 31, 2015 and 2014, and
•
Fiduciary and related services income by account type for the years ended December 31, 2015 and 2014.
Below is a draft of what we will include in future filings.
The Assets under Management by Account Type table below demonstrates that:
•
More than 80% of our AUM are actively managed,
•
Non-managed employee benefit plan accounts consist primarily of participant-directed assets,
•
The amount of custody and safekeeping accounts is insignificant, and
•
The majority of our managed assets are in personal trusts, agency accounts and investment management accounts.
Ms. Stephanie L. Sullivan
Senior Assistant Chief Accountant
Office of Financial Services
Division of Corporation Finance
United States Securities and Exchange Commission
Washington, DC 20549
Page 5
Assets Under Management by Account Type
As of December 31, 2015
As of December 31, 2014
(in thousands)
Assets
Assets
Managed
Non-managed
Managed
Non-managed
Personal trusts and agency accounts
555,649
2,093
605,999
16,035
Employee benefit and retirement related accounts
Defined contribution
36,837
304,112
36,985
306,361
Defined benefit
14,053
15,625
IRAs
290,251
9,349
285,629
18,303
Corporate trust and agency accounts
Investment management and investment advisor agency accounts
770,194
736,758
Foundation and endowment trust and agency accounts
216,174
4,320
206,224
4,340
Total fiduciary accounts
1,883,158
319,874
1,887,220
345,039
Custody and safekeeping accounts
34,637
39,096
Totals
1,883,158
354,511
1,887,220
384,135
Total managed and non-managed
2,237,669
2,271,355
The Managed Assets by Class of Investment table below demonstrates that:
•
Managed assets are invested in instruments for which market values can be readily determined,
•
The majority of these instruments are sensitive to market fluctuations,
•
The composition of our managed assets is divided approximately 60% in equities and 40% in fixed income, and the composition is relatively consistent from year to year, and
•
No Stock Yards Bank propriety mutual funds exist, and therefore no such investment options are available to our clients.
Ms. Stephanie L. Sullivan
Senior Assistant Chief Accountant
Office of Financial Services
Division of Corporation Finance
United States Securities and Exchange Commission
Washington, DC 20549
Page 6
Managed Assets by Class of Investment
(in thousands)
As of
12.31.2015
12.31.2014
Non-interest bearing deposits
1,186
Interest bearing deposits
118,692
102,246
US Treasury and Government agency obligations
56,457
77,650
State, county and municipal obligations
133,887
143,077
Money market mutual funds
41,921
38,805
Equity mutual funds
416,646
418,351
Other mutual funds - fixed, balanced and municipal
280,903
270,511
Other notes and bonds
77,584
65,608
Common and preferred stocks
654,208
665,751
Real estate mortgages
Real estate
45,297
45,118
Other miscellaneous assets (1)
56,769
58,401
Total
1,883,158
1,887,220
(1) Includes rights, warrants, annuities, insurance policies, UITs and oil and gas rights.
●
Disclose the fee arrangement (e.g. 1% of AUM) earned for managing accounts separately by type of investment strategy.
The table below demonstrates that our fee revenue is earned most significantly from personal trusts, agency and investment management accounts. As noted above, fees earned are not performance based nor are they based on investment strategy or transactions. Rather, fees are based on AUM and tailored for individual accounts and/or relationships. We use a fee structure that considers and tailors based on type of account, size of the account, investment strategy, expected effort required to service the account, and other factors. For example, fee structures are in place for investment management accounts, irrevocable trusts, revocable trusts, IRA accounts, and accounts holding only fixed income securities. There are is also a fee structure for estate settlements which are non-recurring, and retirement plan services which typically consist of a one-time conversion fee with recurring AUM fees to follow. All fees are based on the market value of each account and are tiered based on account size, with larger relationships paying a lower percentage in fees. Fees are agreed upon at the time the account is opened, and these and any subsequent revisions are communicated in writing to the customer.
Ms. Stephanie L. Sullivan
Senior Assistant Chief Accountant
Office of Financial Services
Division of Corporation Finance
United States Securities and Exchange Commission
Washington, DC 20549
Page 7
Fiduciary and Related Services Income
For the year ended
(in thousands)
12.31.2015
12.31.2014
Personal trusts and agency accounts
6,825
7,499
Employee benefit and retirement related trust accounts
Defined contribution
1,367
1,284
Defined benefit
IRAs
2,847
2,579
Corporate trust and agency accounts
Investment management and investment advisor agency accounts
6,087
5,639
Foundation and endowment trust and agency accounts
Custody and safekeeping accounts
Brokerage and insurance
Other
Total
18,026
18,212
Allowance for Loan Losses, page 32
3.
We note during the second quarter of 2015, you extended the historical period used to capture Bancorp’s historical loss ratios from 12 quarters to 24 quarters. Please address the following:
●
Tell us, and discuss in future filings, the specific portfolio segments and classes of loans which were impacted by this change.
This change applied/applies to all classes and segments of our loan portfolio. Loans deemed to be impaired are evaluated individually for impairment and receive an allowance using specific allocations. All loans not deemed to be impaired are evaluated collectively and receive an allowance which incorporates historical loss ratios derived over the past 24 quarters.
Ms. Stephanie L. Sullivan
Senior Assistant Chief Accountant
Office of Financial Services
Division of Corporation Finance
United States Securities and Exchange Commission
Washington, DC 20549
Page 8
In future filings, we will add the following sentence where we discuss the extension of the historical period from 12 to 24 quarters: “This extension of the historical period used to capture Bancorp’s historical loss ratios was applied to all classes and segments of our loan portfolio.”
We will update this wording as appropriate as we evaluate the historical period used as a part of our normal, ongoing evaluation process.
●
Tell us how you adjusted the qualitative factors discussed on page 49 as a result of your change in the historical look-back period.
The expansion of the look-back period for the quantitative historical loss rate caused us to review the overall methodology for the qualitative factors to ensure we were appropriately capturing the risk not addressed in the quantitative historical loss rate. We had previously maintained additional qualitative allowance to address credit risk not captured by the 12 quarter look-back period; however when we extended the look-back period to 24 quarters the incremental risk not captured in the quantitative historical loss rate decreased. This decrease was a result of the expansion of the underlying data analyzed for a 24 quarter look-back period as compared to a 12 quarter look-back period whic
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CORRESP 1 filename1.htm January 13, 2017 Ms. Stephanie L. Sullivan Senior Assistant Chief Accountant Office of Financial Services Division of Corporation Finance United States Securities and Exchange Commission Washington, DC 20549 Re: Stock Yards Bancorp, Inc. Form 10-K for the Fiscal Year Ended December 31, 2015 Filed March 4, 2016 File No. 001-13661 Dear Ms. Sullivan: We are replying to inquiries and comments in your letter dated December 13, 2016 with regard to Stock Yards Bancorp, Inc. and the above named file number. To facilitate your review, we have included your references, comments and questions. Form 10-K for the Fiscal Year Ended December 31, 2015 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations, page 15 Provision for Loan Losses, page 22 1. We note that per page 31, non-performing loans includes troubled debt restructurings (TDRs), including accruing TDRs. On page 22 you state that the decrease in non-performing loans during 2015 was due to a decrease in loans classified as TDRs. On page 22, you state that TDRs, which are currently accruing interest, decreased from $6.4 million at December 31, 2014 to $1.1 million at December 31, 2015, reflecting the migration of one lending relationship to performing status. Lastly, we note your disclosure on page 49, that if a loan is restructured at a market rate for a new loan with comparable risk, no principal forgiveness has been granted, and the loan is not impaired based on the terms specified by the restructuring agreement, it shall be removed from restructured status generally after six months of performance. Please respond to the following: Ms. Stephanie L. Sullivan Senior Assistant Chief Accountant Office of Financial Services Division of Corporation Finance United States Securities and Exchange Commission Washington, DC 20549 Page 2 ● Quantify all loans that have been removed from TDR designation for the years ended December 31, 2015, 2014, 2013 and the nine months ended September 30, 2016. For the years ended December 31, 2015, 2014 and 2013, as well as for the nine months ended September 30, 2016, we provided a list of the individual loans removed from TDR designation in Attachment I. There were a total of three loans for $3.4 million removed from TDR designation in 2013, no loans were removed in 2014, two loans for $5.2 million were removed in 2015, and no loans were removed in the nine months ended September 30, 2016. ● Describe the factors leading to the removal of the TDR designation for these loans during the applicable periods. Of the five loans removed from TDR status from January 1, 2013 through September 30, 2016, two were fully charged off, one was fully paid off, and one was returned to performing status because the restructured loan was made at market rate, there has been no principal forgiveness, and the loan had paid per restructured terms for at least six months and over a calendar year end and, in accordance with our accounting policy, was removed from TDR designation (Loan D in Attachment I). The fifth loan, for $0.4 million, was removed from the TDR accruing category through a downgrade to non-accrual (Loan E in Attachment I). It was still included in our non-performing loan totals, accounted for as an impaired loan and included in our impaired loan totals, although we no longer disclosed it as a TDR. This loan was subsequently fully charged off in 2016. ● Tell us how much of the decrease in non-performing loans during 2015 was due to removal of the TDR designation, versus pay-off or charge-off of the TDR loan. As noted above, two loans were removed from TDR status in 2015. One loan for $4.8 million (Loan D) was removed from TDR designation and considered a performing loan as it met all criteria in our accounting policy for removal from TDR designation. The other loan for $0.4 million (Loan E) was removed from the TDR accruing category through a downgrade to non-accrual. From December 31, 2014 to December 31, 2015, TDRs declined $5.3 million. The above explanation accounts for $5.2 of the decline. The remaining $0.1 million of the decline was due to loan payments received during 2015 on TDR loans. During the year ended December 31, 2015, none of the decrease was attributable to a pay-off or a charge-off of a TDR loan. Ms. Stephanie L. Sullivan Senior Assistant Chief Accountant Office of Financial Services Division of Corporation Finance United States Securities and Exchange Commission Washington, DC 20549 Page 3 ● Explain in further detail why the return of TDRs that were accruing interest to performing status reduces the level of non-performing loans in your portfolio. TDRs in accruing status are included in non-performing loans in our MD&A disclosures and impaired loans in the footnotes to the financial statements. When loans are removed from TDR designation per our accounting policy described above, and returned to performing status, they are no longer included in the non-performing or impaired loan totals, reducing the level of non-performing loans in our portfolio. As previously noted, there was only one such TDR loan from January 1, 2013 through September 30, 2016 that was removed from TDR designation and returned to performing status. ● Clarify if all of your TDRs are accruing interest for all periods presented. In this regard, we note that the disclosed amount of TDRs accruing interest as of December 31, 2015 and 2014 agrees to the total amount of TDRs included in non-performing loans for those periods. Referring to the table on the bottom of page 31 of our 10-K, all loans included in the “Troubled debt restructuring” line are on accrual status for all periods presented. In this table, if a TDR loan moves to non-accrual status, it is then reported within the “Non-accrual loans” line rather than in the “Troubled debt restructuring” line. In future filings, we will provide a footnote to the “Non-accrual loans” line of the table indicating the amount, if any, of non-accrual TDR loans that were previously accruing TDRs. As of December 31, 2015 that amount was $0.4 million (Loan E). As of December 31, 2014 and 2013 the amount was $0. As of December 31, 2012 and 2011 the amounts were $2.5 million and $1.7 million, respectively. Non-Interest Income and Non-Interest Expenses, page 23 2. We note that most recurring fees, which generally comprise over 95% of your investment management and trust (“IM&T”) revenue, and nearly 14% of your total revenue, are earned for managing accounts based on a percentage of market value on a monthly basis. Please address the following: ● Disclose, if true, in future filings that these recurring fees are based upon the value of your assets under management (AUM). Yes, these recurring fees are based upon market value of assets under management. We will disclose the following in future filings: “Recurring fees are based upon market value of assets under management.” ● Tell us if you have the right under any of your contracts to earn performance fees on your AUM. If so, revise future filings to disaggregate these fees from your investment management fees and disclose your policy for recognizing revenue from performance fees. Ms. Stephanie L. Sullivan Senior Assistant Chief Accountant Office of Financial Services Division of Corporation Finance United States Securities and Exchange Commission Washington, DC 20549 Page 4 We do not have the right under any of our contracts to earn performance fees on AUM. We will disclose the following in future filings: “We do not have the right under any of our contracts to earn performance fees on AUM.” ● Provide a roll-forward of your AUM by investment strategy (i.e. equities, fixed income, cash and other assets) that separately presents gross client inflows, gross client outflows, market appreciation/(depreciation), and foreign currency translation adjustments (if applicable). In a telephone conversation with Yolanda Trotter of the Commission Staff, we explained that our investment management and trust area is not a mutual fund company or registered investment advisor (RIA) and, as such, we do not track AUM by investment strategy like a mutual fund company or RIA. However, we have provided below similar information showing: • AUM by account type and whether managed/ non-managed as of December 31, 2015 and 2014, • Managed assets by class of investment as of December 31, 2015 and 2014, and • Fiduciary and related services income by account type for the years ended December 31, 2015 and 2014. Below is a draft of what we will include in future filings. The Assets under Management by Account Type table below demonstrates that: • More than 80% of our AUM are actively managed, • Non-managed employee benefit plan accounts consist primarily of participant-directed assets, • The amount of custody and safekeeping accounts is insignificant, and • The majority of our managed assets are in personal trusts, agency accounts and investment management accounts. Ms. Stephanie L. Sullivan Senior Assistant Chief Accountant Office of Financial Services Division of Corporation Finance United States Securities and Exchange Commission Washington, DC 20549 Page 5 Assets Under Management by Account Type As of December 31, 2015 As of December 31, 2014 (in thousands) Assets Assets Managed Non-managed Managed Non-managed Personal trusts and agency accounts 555,649 2,093 605,999 16,035 Employee benefit and retirement related accounts Defined contribution 36,837 304,112 36,985 306,361 Defined benefit 14,053 0 15,625 0 IRAs 290,251 9,349 285,629 18,303 Corporate trust and agency accounts 0 0 0 0 Investment management and investment advisor agency accounts 770,194 0 736,758 0 Foundation and endowment trust and agency accounts 216,174 4,320 206,224 4,340 Total fiduciary accounts 1,883,158 319,874 1,887,220 345,039 Custody and safekeeping accounts 0 34,637 0 39,096 Totals 1,883,158 354,511 1,887,220 384,135 Total managed and non-managed 2,237,669 2,271,355 The Managed Assets by Class of Investment table below demonstrates that: • Managed assets are invested in instruments for which market values can be readily determined, • The majority of these instruments are sensitive to market fluctuations, • The composition of our managed assets is divided approximately 60% in equities and 40% in fixed income, and the composition is relatively consistent from year to year, and • No Stock Yards Bank propriety mutual funds exist, and therefore no such investment options are available to our clients. Ms. Stephanie L. Sullivan Senior Assistant Chief Accountant Office of Financial Services Division of Corporation Finance United States Securities and Exchange Commission Washington, DC 20549 Page 6 Managed Assets by Class of Investment (in thousands) As of 12.31.2015 12.31.2014 Non-interest bearing deposits 357 1,186 Interest bearing deposits 118,692 102,246 US Treasury and Government agency obligations 56,457 77,650 State, county and municipal obligations 133,887 143,077 Money market mutual funds 41,921 38,805 Equity mutual funds 416,646 418,351 Other mutual funds - fixed, balanced and municipal 280,903 270,511 Other notes and bonds 77,584 65,608 Common and preferred stocks 654,208 665,751 Real estate mortgages 437 516 Real estate 45,297 45,118 Other miscellaneous assets (1) 56,769 58,401 Total 1,883,158 1,887,220 (1) Includes rights, warrants, annuities, insurance policies, UITs and oil and gas rights. ● Disclose the fee arrangement (e.g. 1% of AUM) earned for managing accounts separately by type of investment strategy. The table below demonstrates that our fee revenue is earned most significantly from personal trusts, agency and investment management accounts. As noted above, fees earned are not performance based nor are they based on investment strategy or transactions. Rather, fees are based on AUM and tailored for individual accounts and/or relationships. We use a fee structure that considers and tailors based on type of account, size of the account, investment strategy, expected effort required to service the account, and other factors. For example, fee structures are in place for investment management accounts, irrevocable trusts, revocable trusts, IRA accounts, and accounts holding only fixed income securities. There are is also a fee structure for estate settlements which are non-recurring, and retirement plan services which typically consist of a one-time conversion fee with recurring AUM fees to follow. All fees are based on the market value of each account and are tiered based on account size, with larger relationships paying a lower percentage in fees. Fees are agreed upon at the time the account is opened, and these and any subsequent revisions are communicated in writing to the customer. Ms. Stephanie L. Sullivan Senior Assistant Chief Accountant Office of Financial Services Division of Corporation Finance United States Securities and Exchange Commission Washington, DC 20549 Page 7 Fiduciary and Related Services Income For the year ended (in thousands) 12.31.2015 12.31.2014 Personal trusts and agency accounts 6,825 7,499 Employee benefit and retirement related trust accounts Defined contribution 1,367 1,284 Defined benefit 125 119 IRAs 2,847 2,579 Corporate trust and agency accounts 3 3 Investment management and investment advisor agency accounts 6,087 5,639 Foundation and endowment trust and agency accounts 433 535 Custody and safekeeping accounts 90 87 Brokerage and insurance 132 202 Other 117 265 Total 18,026 18,212 Allowance for Loan Losses, page 32 3. We note during the second quarter of 2015, you extended the historical period used to capture Bancorp’s historical loss ratios from 12 quarters to 24 quarters. Please address the following: ● Tell us, and discuss in future filings, the specific portfolio segments and classes of loans which were impacted by this change. This change applied/applies to all classes and segments of our loan portfolio. Loans deemed to be impaired are evaluated individually for impairment and receive an allowance using specific allocations. All loans not deemed to be impaired are evaluated collectively and receive an allowance which incorporates historical loss ratios derived over the past 24 quarters. Ms. Stephanie L. Sullivan Senior Assistant Chief Accountant Office of Financial Services Division of Corporation Finance United States Securities and Exchange Commission Washington, DC 20549 Page 8 In future filings, we will add the following sentence where we discuss the extension of the historical period from 12 to 24 quarters: “This extension of the historical period used to capture Bancorp’s historical loss ratios was applied to all classes and segments of our loan portfolio.” We will update this wording as appropriate as we evaluate the historical period used as a part of our normal, ongoing evaluation process. ● Tell us how you adjusted the qualitative factors discussed on page 49 as a result of your change in the historical look-back period. The expansion of the look-back period for the quantitative historical loss rate caused us to review the overall methodology for the qualitative factors to ensure we were appropriately capturing the risk not addressed in the quantitative historical loss rate. We had previously maintained additional qualitative allowance to address credit risk not captured by the 12 quarter look-back period; however when we extended the look-back period to 24 quarters the incremental risk not captured in the quantitative historical loss rate decreased. This decrease was a result of the expansion of the underlying data analyzed for a 24 quarter look-back period as compared to a 12 quarter look-back period whic