S&T Bancorp Q3 Earnings Call Highlights

Key Points

• Record third-quarter results: S&T Bancorp reported record EPS of $1.09 and revenue of nearly $108 million, supported by a 7-basis-point expansion in net interest margin to 4.06%, higher average loans and lower expenses.
• Disciplined growth outlook: Management expects flat to low-single-digit loan growth in the fourth quarter as it prioritizes pricing, profitability and underwriting standards amid pressure on commercial loan spreads and deposit competition.
• Solid balance-sheet position: Asset quality remained favorable, with net charge-offs at 10 basis points and nonperforming assets at 0.45%; the bank also eliminated brokered deposits, preserved capital and is considering resuming share repurchases.

S&T Bancorp NASDAQ: STBA reported record third-quarter earnings and revenue, supported by net interest margin expansion, higher average loan balances and controlled expenses, while executives said they remain focused on balancing growth with profitability and credit discipline.

Chairman and Chief Executive Officer Chris McComish said earnings per share reached a record $1.09, up nearly 20% from a year earlier and almost 7% from the second quarter. Quarterly revenue was nearly $108 million, also a record.

The company reported a return on assets of 1.55%, return on equity of just under 11%, and return on average tangible shareholders’ equity of 14.81%. Pre-provision net revenue increased 12 basis points from the preceding quarter to 2.01%.

“Our results demonstrated the strength and consistency of our core earnings engine, producing higher profitability and stronger returns,” McComish said.

Margin Expansion and Expense Control

Net interest margin expanded 7 basis points sequentially to 4.06%, aided by higher loan yields and an improved funding mix. Third-quarter net interest income increased $2.7 million, or about 3%, driven by an additional day in the quarter, higher average loan balances and improved yields on loans and securities. The cost of funds rose just 1 basis point during the period, according to management.

The company said the September Federal Reserve rate increase had little effect on third-quarter results but is expected to add a couple of basis points to margin in the fourth quarter as floating-rate loans reprice faster than deposits. Based on expectations for two to three additional rate increases, management said it expects net interest margin to remain above 4% into 2027, although competitive pricing for loans and deposits could affect that outlook.

Noninterest income was essentially unchanged from the prior quarter, declining about $200,000, largely because of one-time items recorded in the second quarter. S&T expects quarterly fee income of approximately $14 million to $15 million as it closes 2026 and enters 2027.

Noninterest expense declined $1.1 million from the second quarter. Management cited lower marketing costs following elevated promotional efforts in the prior quarter, along with tax-related contributions included in other expenses. The company expects to limit its year-over-year increase in 2027 noninterest expense to about 3%, implying a quarterly run rate approaching $59 million to $60 million during the year.

For the first nine months of 2026, revenue growth outpaced expense growth, improving the efficiency ratio to 54.65% from 56.35% in the first nine months of 2025.

Loan Growth Held Back by Pricing Discipline

Period-end loan balances were slightly lower during the third quarter, though average loan balances increased $61 million. McComish said the company made deliberate choices to weigh loan volume against profitability and margin preservation, while lower line utilization also affected balances.

President Dave Antolik said commercial real estate balances grew $65 million, primarily because fully funded construction projects moved into the commercial real estate category. The company expects construction funding and commercial real estate growth to remain relatively consistent through the fourth quarter and first quarter.

However, commercial and industrial balances declined about $50 million. Antolik attributed the decrease to lower revolving credit utilization, decisions to exit several credits because of credit deterioration, and lower-than-anticipated originations. S&T expects flat to low-single-digit loan growth in the fourth quarter.

Management said commercial loan spreads have faced pressure, particularly in commercial real estate, while deposit competition has intensified. Antolik said rising cap rates are already affecting appraisal values, and the company has maintained underwriting discipline by requiring additional borrower capital where necessary rather than reducing loan rates to make transactions work.

S&T is continuing to add commercial and business bankers, although executives said many recent hires are subject to non-solicitation restrictions and will need time to build pipelines. The total loan pipeline entering the fourth quarter was similar to its level at the start of the third quarter, management said.

Deposits, Capital and Asset Quality

Deposits declined modestly on a period-end basis, reflecting seasonal trends, but average deposits increased by more than $56 million from the second quarter. Average demand deposit account balances rose $24 million. Demand deposits represented 28% of total deposits at quarter-end.

The company reduced brokered deposits by more than $180 million year to date and had no brokered deposits on its balance sheet at the end of the quarter. Antolik said S&T completed an online banking platform upgrade during the third quarter and plans a mobile banking upgrade in the fourth quarter as part of its investment in the deposit franchise.

Management said competition for deposits has increased, particularly for certificates of deposit and money market accounts. The company said incremental funding costs were generally in the low-4% range, though some pricing has moved higher.

Asset quality remained favorable. Net charge-offs were $2.1 million, or 10 basis points of total loans, while nonperforming assets declined $3.7 million to just over $36 million, or 0.45% of total loans plus other real estate owned. The allowance for credit losses remained 1.16% of gross loans.

Criticized and classified assets increased about 7%, but Antolik said the increase was concentrated in criticized loans, while classified loans were stable. He said the company expects resolution or rehabilitation efforts to bring criticized and classified balances closer to second-quarter levels.

Tangible book value increased $0.10 per share to $29.28, despite a $0.66-per-share reduction from higher accumulated other comprehensive income tied to rising interest rates and the bond portfolio. The tangible common equity ratio rose 10 basis points during the quarter.

Buybacks and Growth Strategy

S&T paused share repurchases during the third quarter following strong stock performance in late June and July. The company retains a $100 million repurchase authorization and said it is evaluating whether to resume activity in the fourth quarter while seeking to maintain current capital levels.

Management also said it does not expect to exceed $10 billion in assets before year-end, delaying the expected impact of the Durbin amendment until at least mid-2028. McComish said the company is not managing toward remaining below that threshold over the longer term and believes S&T should be able to achieve low- to mid-single-digit asset growth.

On acquisitions, McComish said S&T continues to view inorganic growth as a priority when the right partner, structure and timing align. He cited valuation, timing, culture, leadership succession, interest rates and accumulated other comprehensive income as factors that can affect potential transactions.

About S&T Bancorp (NASDAQ:STBA)

S&T Bancorp, Inc is the financial holding company for S&T Bank, a community bank headquartered in Indiana, Pennsylvania. Founded in 1902, S&T Bank serves consumers, businesses, and institutions through a network of banking offices and digital channels.

The bank provides a range of financial products and services, including checking and savings accounts, certificates of deposit, residential mortgages, consumer loans, commercial real estate financing, and business loans. It also offers treasury and cash-management services designed to support business customers.

S&T Bank serves communities primarily across western Pennsylvania and eastern Ohio.

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