S&T Bancorp Q1 2025 Earnings Report

S&T Bancorp EPS Results

• Actual EPS: $0.87
• Consensus EPS: $0.74
• Beat/Miss: Beat by +$0.13
• One Year Ago EPS: N/A

S&T Bancorp Revenue Results

• Actual Revenue: $93.75 million
• Expected Revenue: $96.40 million
• Beat/Miss: Missed by -$2.65 million
• YoY Revenue Growth: N/A

S&T Bancorp Announcement Details

• Quarter: Q1 2025
• Date: 4/24/2025
• Time: Before Market Opens
• Conference Call Date: Thursday, April 24, 2025
• Conference Call Time: 1:00PM ET

S&T Bancorp (NASDAQ:STBA) is a bank holding company, which engages in the provision of consumer, commercial, and small business banking services. It operates through the following segments: Commercial Real Estate, Commercial and Industrial, Commercial Construction, Business Banking, Consumer Real Estate, and Other Consumer. The Commercial Real Estate segment includes both owner-occupied properties and investment properties for various purposes such as hotels, retail, multifamily and health care. The Commercial and Industrial segment focuses on the companies or manufacturers for the purpose of production, operating capacity, accounts receivable, inventory or equipment financing. The Commercial Construction segment refers to the finance construction of buildings or other structures, as well as to finance the acquisition and development of raw land for various purposes. The Business Banking segment is made to small businesses that are standard, non-complex products evaluated through a streamlined credit approval process that has been designed to maximize efficiency while maintaining high credit quality standards. The Consumer Real Estate segment offers first and second liens such as 1-4 family residential mortgages, home equity loans and home equity lines of credit. The Other Consumer segment consists of individuals that may be secured by assets other than 1-4 family residences, as well as unsecured loans. The company was founded on March 17, 1983 and is headquartered in Indiana, PA.

S&T Bancorp Q1 2025 Earnings Call Transcript

Key Takeaways

• Strong first-quarter results with EPS of $0.87 and net income of $33 million, exceeding Q4 ’24, Q1 ’24, and consensus estimates, alongside 7% annualized deposit growth for the seventh consecutive quarter.
• Loan portfolio grew $93 million (4.89% annualized) led by $74 million in commercial real estate and $27 million in commercial construction, while consumer loans rose $12 million in residential mortgage and home equity.
• Asset quality improved with the allowance for credit losses falling to 1.26% of total loans, stable criticized/classified balances, and an enhanced credit-monitoring program focusing on international trade exposures.
• Net interest margin expanded by four basis points to 3.81%, supported by lower funding costs, a $450 million fixed-receive swap ladder, and ongoing bond portfolio restructurings boosting 2025 net interest income by ~$5 million.
• Core noninterest income remains flat at ~$12.7 million per quarter, noninterest expenses run near $55.5–$57 million, and the tangible common equity ratio increased 34 basis points, underpinning capacity for both organic and inorganic growth.

Presentation

[Operator]

Welcome to the S and T Bancorp First Quarter twenty twenty five Conference Call. After the management's remarks, there will be a question and answer session. Now, I would like to turn the call over to Chief Financial Officer, Mark Kuchibar. Please go ahead.

[Mark Kochvar, CFO at S&T Bancorp]

Thank you, and good afternoon, everybody. Thanks for participating in today's earnings call. Before beginning the presentation, I want to take time to refer you to our statement about forward looking statements and risk factors. This statement provides the cautionary language required by the Securities and Exchange Commission for forward looking statements that may be included in this presentation. A copy of the first quarter twenty twenty five earnings release as well as this earnings supplement slide deck can be obtained by clicking on the materials button in the lower right section of your screen.

[Mark Kochvar, CFO at S&T Bancorp]

This will open up a panel on the right where you can download these items. You can also obtain a copy of these materials by visiting our Investor Relations website at stbancorp.com. With me today are Chris McCamish, S and T's CEO and Dave Antulik, S and T's President. I'd now like to turn the program over to Chris. Chris?

[Christopher McComish, CEO at S&T Bancorp]

Great. Mark, thank you. And I'm going to begin my comments on Page three.

[Christopher McComish, CEO at S&T Bancorp]

Mark, appreciate kicking us off. And I want to welcome everybody to the call. I certainly appreciate our analysts being with us, and we look forward to your questions. I also want to thank our employees and shareholders and others listening on to the call. To our leadership team and employees, thank you for all you do.

[Christopher McComish, CEO at S&T Bancorp]

As we've discussed before, these results are yours, and you should be very proud. Before we discuss the numbers, I do want to touch on a couple of highlights that made Q1 so energizing and important for us. A few weeks ago, we wrapped up our third annual road trip with our executive team, met in small groups with all twelve seventy five of our employees in sessions focused on our shared future. From Central Ohio to Eastern Pennsylvania, the energy commitment and engagement of our employees for us showed and proved that S and T's People Forward purpose really set the tone for all that we're doing in 2025. And we believe this engagement is a direct connection to the results that we're going to discuss with you today.

[Christopher McComish, CEO at S&T Bancorp]

It further reinforces our commitment to our performance drivers of focusing on our talent and engagement, building and enhancing our deposit franchise, maintaining top quartile for profitability and a focus on top tier asset quality. Additionally, in the quarter, we received external recognition from organizations like Forbes, S and P and USA Today for strong financial performance and superior employee engagement. Obviously, that makes us very proud. All of this combined with the strong results we will discuss for Q1 gives our leadership team great confidence in our ability to move S and T forward in spite of some of the market uncertainty we are currently seeing. As I turn to the quarter on Page three, it was strong across the board.

[Christopher McComish, CEO at S&T Bancorp]

EPS of $0.87 and net income of $33,000,000 were both ahead of Q4 twenty twenty four and Q1 twenty twenty four and meaningfully above consensus estimates. Our return metrics were also strong, while balance sheet growth was solid both on the loan and customer deposit fronts. Customer deposit growth was over 7% annualized, the seventh straight quarter of customer deposit growth. We also saw a NIM expansion of four basis points as funding costs decreased and the positioning of our balance sheet to a more neutral stance delivered results. We had another strong asset quality quarter, which allowed us to put additional dollars towards our bond portfolio restructure program.

[Christopher McComish, CEO at S&T Bancorp]

Mark will provide more color on this later. Turning to our balance sheet. Customer deposit growth, as I said, was very strong. Wholesale borrowings and deposits were reduced and loan growth led by Commercial Banking was solid. I'm going to turn it over to Dave Antolek, our President.

[Christopher McComish, CEO at S&T Bancorp]

And I don't want to steal his thunder, but he's going to discuss further our balance sheet activities, customer activities and the external environment as well as asset quality.

[Dave Antolik, President & Director at S&T Bancorp]

Thank you, Chris, and good morning, everyone or good afternoon, everyone. If I could direct your attention to Page four, you'll see the positive growth trends that Chris just talked about. Customer deposit growth of $135,000,000 or 7.23% annualized, which as Chris mentioned was the seventh consecutive quarter of customer deposit growth. You also see the total loan growth of $93,000,000 or 4.89% annualized, which is consistent with our previous guidance. Focusing on for a moment on deposits, the majority of our growth came from our consumer activities, which is driven by our bankers using a proprietary customer relationship sales process that we introduced in early twenty twenty four that has matured to the point where it's having meaningful impact on our results.

[Dave Antolik, President & Director at S&T Bancorp]

We also continue to leverage our deposit exception pricing platform, which aligns frontline staff and our treasury function in a customer and deposit cost friendly way. From a product perspective, the overwhelming majority of our deposit growth was in money market and included a mix of consumer, private banking and municipal customer activities. We also saw a shift from CD and checking balances into the money market this quarter. Digging into loan activity, we saw consumer loan growth of $12,000,000 which was driven by residential mortgage and home equity. As anticipated, our residential pipeline has tapered over the past few quarters and has now stabilized.

[Dave Antolik, President & Director at S&T Bancorp]

Meanwhile, our home equity pipeline has grown since year end. And as mentioned last quarter, we expect balanced growth between these two categories for the remainder of the year. Turning to our commercial activities. Total loan growth of over $81,000,000 was driven by increases in our commercial real estate and commercial construction segments of $74,000,000 and $27,000,000 respectively. Underlying categories of growth include flex mixed use, multifamily and retail space.

[Dave Antolik, President & Director at S&T Bancorp]

C and I balances declined by $20,000,000 during the quarter, reflecting reduced automobile floor plan borrowings and reductions in our owner occupied real estate category. Overall, pipelines are up nearly 40% since year end, primarily in our Commercial and Consumer segments. We are closely monitoring macroeconomic impacts on our pull through rates and continue to feel confident in our short term mid single digit loan growth guidance, increasing the high mid single digit growth in the back half of twenty twenty five. It's important to note that much of the second half growth is expected to be driven by newly hired bankers as they build their pipelines in the first half of the year. Turning to asset quality on Page five, we continued to see improvement in Q1.

[Dave Antolik, President & Director at S&T Bancorp]

Our allowance for credit losses declined by approximately $2,500,000 and ended the quarter at 1.26% of total loans. This was primarily the result of the release of a specific reserve related to one workout credit. In addition, criticized and classified loans remained stable for the quarter. We see loan growth and economic uncertainty as the primary factors impacting our provision expense in coming quarters. Finally, I'd like to take a moment to discuss our portfolio management and monitoring activities as they relate to macroeconomic and more particularly international trade factors.

[Dave Antolik, President & Director at S&T Bancorp]

First, from an information gathering and data analysis perspective, our C and I portfolio includes a group of loans that require at a minimum monthly reporting of all accounts receivable and accounts payable. This group represents approximately $750,000,000 of exposure and loan balances of $490,000,000 or 28% of our total C and I commitments and 32% of C and I balances. From this information, we've been able to extract international exposure to better understand our credit risk and inform customer conversations about their plans moving forward. Second, and in a more general sense, we've added additional underwriting focus on foreign trade exposure and potential impacts to our commercial loan portfolio, including impacts on construction costs, construction contingencies, inventory levels and raw material sourcing just to name a few. At its core, our approach to managing credit risk relies upon a combination of data collection and a deep understanding by our bankers and credit teams of each individual customer circumstance.

[Dave Antolik, President & Director at S&T Bancorp]

I'll now turn it over to Mark for further commentary.

[Mark Kochvar, CFO at S&T Bancorp]

Great. Thanks, Dave. The first quarter net interest margin rate increased four basis points to 3.81% with flat net interest income despite two fewer days in the quarter. The earning asset yield decline of eight basis points was more than offset by a decline in the cost of funds of 12 basis points. Our balance sheet interest rate risk position close to neutral and we believe that we can maintain a relatively stable margin over the next several quarters even if Fed gets more aggressive on rate cuts.

[Mark Kochvar, CFO at S&T Bancorp]

Support for the net interest margin stability comes from favorable fixed and ARM loan and securities repricing opportunities, our $450,000,000 receipt fixed swap ladder that is starting to roll off, a short duration $1,800,000,000 CDE portfolio and our ability to implement non maturity rate cuts and manage deposit exceptions if needed. A more stable net interest margin combined with our growth outlook should translate into net interest income improvement going forward. Next, non interest income declined in the first quarter by $700,000 primarily due to seasonally lower customer activity in debit and NSF. We have been able to take advantage of strong earnings and asset quality improvements over the last four quarters with a series of bond restructurings that cumulatively now totals $193,600,000 and will increase 2025 net interest income by about $5,000,000 Our core non interest income run rate ex security losses is flat year over year at about $12,700,000 12 point 8 million dollars Our expectations for fees going forward remains at approximately 13,000,000 to $14,000,000 a quarter. Non interest expenses were down slightly in the first quarter compared to fourth quarter.

[Mark Kochvar, CFO at S&T Bancorp]

Salaries and benefits are the main driver due to lower medical, which is typical in the first quarter. The quarterly variances in other taxes and the other category offset and are related to Pennsylvania shares tax credit programs. We expect quarterly run rate of approximately 55,500,000.0 to $57,000,000 for the remainder of the year as we continue to invest in production capacity and the customer experience. Capital, the TCE ratio increased by 34 basis points this quarter with AOCI improvement contributing a little over half of that at 18 basis points. Our TCE and regulatory capital level positions us well for the environment and will enable us to take advantage of organic or inorganic growth opportunities.

[Mark Kochvar, CFO at S&T Bancorp]

Thanks. At this time, I'd like to turn it back over to the operator to provide instructions for asking questions.

[Operator]

And our first question comes from the line of Tyler Cacciatore with Stephens. Please go ahead.

[Tyler Cacciatori, Associate at Stephens Inc]

Good afternoon. This is Tyler on for Ambrise.

[Mark Kochvar, CFO at S&T Bancorp]

Hi, I

[Tyler Cacciatori, Associate at Stephens Inc]

just wanted to start on your thoughts on deals in this environment and the timing on crossing $10,000,000,000 without a deal.

[Christopher McComish, CEO at S&T Bancorp]

You're talking about M and A?

[Tyler Cacciatori, Associate at Stephens Inc]

Yes.

[Christopher McComish, CEO at S&T Bancorp]

Okay. Just wanted to make sure the deal has a lot of meaning behind it. I think our response would be in line with what you're seeing publicly in the market as a whole. There still remains many conversations in the marketplace. Stock prices being what they are, valuations look different.

[Christopher McComish, CEO at S&T Bancorp]

We continue to have conversations and are actively engaged with planning for the future, be it focused on both inorganic as well organic growth. Crossing over $10,000,000,000 we would anticipate as Dave talked about given our loan pipelines and our activity levels and growth in kind of that high mid single digit range that would put us sometime in the second half of the year crossing over $10,000,000,000 As we've talked about on this call before, we're fully prepared for it. We've done a ton of work internally to make sure that any additional requirements from a regulatory standpoint happen, we will be prepared.

[Tyler Cacciatori, Associate at Stephens Inc]

Okay, great. And then if I could ask one more. I was wondering what you guys were seeing in terms of spreads on C and I and CRE and competitive it is right there?

[Dave Antolik, President & Director at S&T Bancorp]

Yes. Spreads in the C and I space haven't expanded or necessarily contracted in q one. And what we've seen is kind of hesitancy, and that's what I referred to, you know, in my commentary, you know, the lack of growth in c and I is just folks waiting for more certainty in the economic outlook. These conversations that we're having with customers about particularly around raw material sourcing, inventory sourcing, and and finished goods, you know, maybe drop ship to customers, etcetera, understanding what that looks like. Got a lot of folks kind of trying to better understand, you know, without guessing necessarily, but position themselves to take advantage of certain trade situations, you know, tariffs particularly by reducing inventory or depending on how they feel about the direction of tariffs, moving inventory in different directions between different countries. So there's just a lot of uncertainty that's driven the kind of the lack of growth in the C and I space in Q1. On CRE side, we have seen some of the more regional banks, some of the larger banks get a little more aggressive in terms of their participation in commercial real estate.

[Dave Antolik, President & Director at S&T Bancorp]

That's where we've seen some pressure on spreads in Q1.

[Tyler Cacciatori, Associate at Stephens Inc]

Okay, great. That was helpful. That'll be all for me. Thanks for taking my questions.

[Dave Antolik, President & Director at S&T Bancorp]

Thank you. Thanks Tyler.

[Operator]

And your next question comes from the line of Daniel Tamayo with Raymond James. Please go ahead.

[Daniel Tamayo, Vice President at Raymond James Financial]

Hey guys, good afternoon.

[Dave Antolik, President & Director at S&T Bancorp]

Hey. Hey, Hi.

[Daniel Tamayo, Vice President at Raymond James Financial]

So I jumped on a few minutes late. I apologize if you guys covered this already, but just curious, kind of if you've been able to wrap your hands around, the impact of tariffs on your borrower base from a credit perspective, if there's anywhere that you're looking at as potentially most at risk or kind of zeroing in on focusing on over the next few quarters. And then kind of more broadly, credit trends have been improving over the last few quarters. We've seen that in reserves coming down and early stage loans improving. Just curious where you guys think you are in that story.

[Daniel Tamayo, Vice President at Raymond James Financial]

I know in the last quarter you talked about you thought you were pretty close to normalizing there, but just curious about updated thoughts.

[Dave Antolik, President & Director at S&T Bancorp]

Yes. I think some of that normalization hit this quarter as I mentioned C and C, the criticized and classified loans remain stable from last quarter. In terms of how we're managing risk at the customer level, I mentioned earlier in the call that we have this group of loans. It's about $750,000,000 These tend to be our largest loans and as such have more significant reporting requirements.

[Dave Antolik, President & Director at S&T Bancorp]

On a monthly basis, in a minimum, we get accounts receivable and accounts payable. From that information, we can extract international exposure. That informs conversations that we have with these customers. We can break it down by country. So it's really a combination of data gathering and having deep conversations at the individual customer level.

[Dave Antolik, President & Director at S&T Bancorp]

And we have seen things like in the floor plan space, we had pay downs in Q1 because that was driven by consumer activity in anticipation of prices going up as a result of tariffs impacting the ultimate retail price of cars. So we it's really information gathering and reacting as quickly as possible. We feel really good about our ability to management given the risk management, credit risk management practice that we have in place and the data that we gather.

[Daniel Tamayo, Vice President at Raymond James Financial]

Okay, great. And in terms of reserves, I it's a real I mean, it's I know a point in time always is appropriate, but given the trend down over the last several quarters, you feel like you're there now absent any kind of recession or that could still come down more from here?

[Mark Kochvar, CFO at S&T Bancorp]

There might be a little bit of room, but it would depend it would be contingent on a little bit better outlook than we have today. Just to remind us, the decrease in the reserve that we saw quarter over quarter was really related to the release of a specific reserve that we had. Had it not been for that, we would have been up about $1,000,000 of reserve. So we think we're probably closer to the bottom of that given the current environment.

[Christopher McComish, CEO at S&T Bancorp]

As well as our loan growth expectations.

[Mark Kochvar, CFO at S&T Bancorp]

Ex that. But that would keep the rate relatively constant.

[Daniel Tamayo, Vice President at Raymond James Financial]

Got it. Okay. And then I did catch the commentary on the margin mark. But maybe if you have some detail on loan yields, new loan yields in the first quarter relative to what was coming off and any commentary on securities cash flows, what expectations are for investment there relative to what you're seeing on the funding side where I expect you're close to a terminal beta if not there?

[Mark Kochvar, CFO at S&T Bancorp]

Yes. We made on the deposit side, we continue to make some changes, but they were mostly done by the at the close of last year. So we still benefited from those in Q1, but haven't made any significant changes. We still benefit from the CD repricing that's still left to go in the first half into the summer. On the loan side, we're seeing overall new yield in the like in the $6.75 range in there, beating the paid level by about 25 basis points.

[Mark Kochvar, CFO at S&T Bancorp]

We're still seeing some kind of net a little bit of net improvement on loan book. So that's helping to provide some support to the margin. And securities, we typically are seeing anywhere from 50,000,000 to $75,000,000 mature every quarter or so. And we're still picking up at least 100 basis 150 basis points there. That will continue for several more quarters.

[Mark Kochvar, CFO at S&T Bancorp]

And then we also have a received swap book where we have about $50,000,000 a quarter coming off and there the pickup is in the 2% range. So those things will continue to benefit us and we think for the remainder of $25 So that helps gives us the confidence that the margin can be relatively stable throughout this year because we kind of have those support areas even

[Mark Kochvar, Senior EVP & CFO at S&T Bancorp]

if the

[Mark Kochvar, CFO at S&T Bancorp]

Fed were to move down.

[Daniel Tamayo, Vice President at Raymond James Financial]

Is that yes, guess that was my next question is just the is that kind of the offset because underlying sensitivity, you said you're mostly neutral to rates, but underlying sensitivity, you're still asset sensitive, right, with variable rate loans there? I mean, if this were once we get past, I guess, the swap the pickup from swaps, if we had a rate cut, you would expect that to be at least somewhat dilutive to the margin?

[Mark Kochvar, CFO at S&T Bancorp]

Yes. We're positioned now. So I mean, if I fast forward maybe a year from now, once we get through a lot of that repricing, if we don't take any action, we'll return to some level of asset sensitivity. But we're monitoring that closely and depending on the environment, there's some things we can do relative like on swap side to counteract that and continue to have

[Mark Kochvar, Senior EVP & CFO at S&T Bancorp]

a more neutral

[Mark Kochvar, CFO at S&T Bancorp]

IRR position. So for now, we can rely on what's already in place on the balance sheet, but we'll have to be more active as that burns off over the course of this year.

[Daniel Tamayo, Vice President at Raymond James Financial]

Got it. And if we don't get the cuts then this year, would you expect margin expansion then given the kind of the fundamental tailwinds that you've got the rest of the year?

[Mark Kochvar, CFO at S&T Bancorp]

Yes. So to a limited degree, think there might be a few basis points there as well. So that would be a prior positive for us if that were to be on hold the rest of the year.

[Daniel Tamayo, Vice President at Raymond James Financial]

Got it. Okay.

[Daniel Tamayo, Vice President at Raymond James Financial]

All right. Thanks for all that color. Appreciate it guys.

[Mark Kochvar, CFO at S&T Bancorp]

You bet. Thank you.

[Operator]

Your next question comes from the line of Manuel Navas with D. A. Davidson. Please go ahead.

[Sharanjit Cheema, Equity Research Associate at D.A. Davidson]

This is Shanjee on for Manuel. You guys talked about pipeline being up 40% from year end and kind of that growth acceleration expectation throughout the year with, like, the new higher pipelines building in first half for that secondhand growth. And then what are your hiring expectations for this year compared to maybe 2024? And do you see any additional opportunity to add teams or pick up potential producers from here?

[Dave Antolik, President & Director at S&T Bancorp]

Yeah. We we're currently in the process of recruiting c and I bankers particularly. The and these would be adds to staff. So last quarter, we talked about a 15% increase in calling officers and that that we've achieved and it'll be more onesie twosie kind of fill ins this year. And that is really what is supporting the pipeline expansion.

[Dave Antolik, President & Director at S&T Bancorp]

Based on the pipelines that we have, the addition of these bankers, again, we're comfortable with the guidance that we've given in the first half of the year and expanding growth in the second half of the year. All that being said, until we have a better view on these macroeconomic issues, there may be an impact on the pull through rates that we're watching from the pipeline that end up becoming customers and those balances being booked on to our balance sheet. So there's a lot of moving factors, but we're certainly focusing in on organic growth by adding two staff, making sure the staff has the appropriate tools that they need in order to support growth.

[Sharanjit Cheema, Equity Research Associate at D.A. Davidson]

That's great. Thank you.

[Operator]

And I'm showing no further questions at this time. I would like to turn the call over to the Chief Executive Officer, Chris McClomish, for closing remarks.

[Christopher McComish, CEO at S&T Bancorp]

Okay. Thanks everybody for joining us this afternoon. As I said, we're very proud of the performance across the board in Q1 and we're optimistic for the rest of the year. We certainly appreciate your time and interest in our company and have a great rest of the day. Thank you.

[Operator]

And this concludes today's conference call. Thank you for joining. You may now disconnect.

Participants

Executives

• Mark Kochvar, CFO
• Christopher McComish, CEO
• Dave Antolik, President & Director
• Mark Kochvar, Senior EVP & CFO

Analysts

• Tyler Cacciatori, Associate at Stephens Inc
• Daniel Tamayo, Vice President at Raymond James Financial
• Sharanjit Cheema, Equity Research Associate at D.A. Davidson