STBA - Earnings call transcript Q1 2018

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Operator

Greetings and welcome to the S&T Bancorp Inc.

First Quarter 2018 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. pleasure for your S&T my Chief Mark now Officer Financial Bancorp. is to host, introduce Kochvar, It Thank you, Mr. Kochvar.

You may begin.

Mark Kochvar

Thanks thank very call. you and for participating much. in today’s Good afternoon conference

presentation. included refer want on and required statements link factors, by earnings visiting this overview of by cautionary screen Exchange you. which in who screen A introduce and take I This at first about can the risk release presentation, Commission to Brice, on results. the quarter S&T’s statements by like website front Todd copy of CEO the our statement the will the Securities S&T’s beginning time Before www.stbancorp.com. that for language to provide be obtained in you now is and I statement our or to on forward-looking an clicking the maybe to Investor Relations release forward-looking would press your of provides President

Todd Brice

Well, thank you Mark everyone. and good afternoon

rate expenses, to XX%. positively tax federal efficiency by in taxes by of to return declined declined results was income revenues, a in XX% a pleased an the from record by reduction $X.XX impacted XX.XX%, ROA very is the the cost, quarter XX% first X.X%; strong which decrease the were are net over of ‘XX XX.XX%. credit metrics ratio on $XX.X equity of X.XX%, versus increased controlled and this with were million XXXX million Performance first common of and of or per XX.XX% Net income of due per or and increase to on X%; report also We equity corporate of quarter for $X.XX share share. return an $XX.X XX%; which tangible which improved up

muted both commercial than were we portfolios. experienced Market and payoffs For in in as the in somewhat and loans portfolios. our again normal balance as experienced growth declines higher conditions deposit our we challenging was sheet quarter, QX consumer

seeing growth are a in nice our our and however for overall underwriting year. objectives lift pipelines meet We the expect to

protecting We letting deposits some focus through margin increased loan on costing continue interest runoff. to our spreads originations new on and higher net

basis the As margin even continues throughout first the expenses Insurance the a a year, our to last tax were a discipline negative the million. lower X.XX% by focus in quarter sale in down the Evergreen in with and FTE expenses large X was result, to net rate. of were last majority to included division year. numbers Controlled impact $XXX,XXX Compared adjustment did These $X.X a point expand to branch. college interest Evergreen interest from our on due organization. Pre-tax, first part quarter statutory of be state expense gain

very the total were However, $XXX,XXX. strong. loans gain or metrics $XXX,XXX. delinquency approximately and after-tax to for stand the also net had for $X.X we X.XX% Overall, loans. by quarter X.XX% $XX.X million or now credit at XX.X% quarter net Non-performing of million and declined recoveries of Total the declined was the

to two attributed Our that PA. for locations York, is $X.X branch properties main in did OREO by originally but increase the were million, category driver purchased

the regulations an cash a and did our We some we but this to We and And now in the want during bring experience issue disclosed categories are do flows. have not internally OREO. on to in made a loans, build material I marketing our controls the XX-K your in validating sub-loan the end relates that We properties March had year of financial audit. where a in new special course for performing they borrowers management risk performing that on X. market position that weakness issue financial currently and we are in as locations our filed to how did our decision occurred instances, result, to disclosed was mention into we ratings and attention the sale. move necessitate deteriorating

internal statements efficiency review financial these not restatements Our relied support loan guarantor rating. And stress including financial to want performing. that statements. interim department any controlled did I The loan result the in on mitigants, are to to do support and credit our loans again, all risk

are special an with XX% closely. and very mention monitoring substandard our We perform at of analysis of classifications the XX% did and rates financial We performance penetration in-depth in review accounts.

we assessments with remediate activities our to to and steps current engage expect evaluate immediate taking review have third-party resolved risk are to do we the and matter QX. in we rating independent an would the addition, our In issue related earnings to and last filing loan increase share over approved a does has share. to forward dividend per XX.X% increase or And Board our moving in $X.XX of year. in confidence this levels represent dividend per And increased period of the quarterly XX% $X.XX the same our Directors

over And program I now David So turn like again, your Bancorp. continued the S&T to would support we to Antolik. appreciate in

David Antolik

full year. were afternoon Todd you, good than quarterly run the experienced regarding adding the start higher Todd’s through approximately Thank some quarter everyone. XX% higher would like in comments third first I payoffs we than to In quarter. to details by and rate of the total, last that payoffs

stable of was to including of result balance rates C&I QX factors As four contributed million in and utilization QX. the were the And in net treasury – million. number anticipated tax total C&I adding operating our an growth decision payoff assets. loans our revenue businesses management households. the rates customer that the $XX free of several the to decline reduction $XX to margin in of on protect business the reductions balances Also remained sale on on and of these directed based continued see to were solid versus we interest drive XX% reform tax and the at impact C&I revenue

by growth million. construction million we experienced in The $XX while modest declined $XX increased During in commercial million our estate balances portfolio. net portfolio permanent quarter, growth $XX real the some CRE resulting by our of

projects we from quarter, transferred construction saw permanent of that During category. million and completed construction were the the to the category $XX first

payoff We this that Consumer that indicating property increased primarily forward. and commitments unfunded It’s large than declined noting declines. stable portfolio to also is our the construction year higher levels. quarter worth historical balances the in by a over more balances loan first due construction quarter in moving million experienced that several sales the resulted equity home $XX during

are mortgage residential to From continued will loan grown we we a Our grow a pipeline to our XX% regional help markets construction LPOs very perform consumer that last loan and approximately newer believe perspective, has the over and by quarter promotion launching balances. well.

activity York, $XX have million $X Western and team. North a in New from saw Central Ohio, increased. the levels our of Shore $X During million million quarter in In we growth in Pennsylvania C&I million loan Pittsburgh conclusion, $XX

Our recruit objectives. pipelines attract continued bankers motivated highly meet to and we and in order expanded long-term growth our to

improved full growth our the And we remains additional single-digits you details with activity will anticipate origination year loan of Our mid remainder results. the year. on some and of for forecast for now Mark provide

Mark Kochvar

adjustments. bank that payoffs in Okay, interest had rate from improvement home Dave. of loan our great. The portfolio and resulted increase some some quarter to from Thanks X margin an net accounting compared help dividend Federal basis the non-recurring favorable loan the purchase acquired in point fourth

assets. basis activity earning income the we offset in first December of the down versus interest Fed with decline less over We in favorable XX in two positive impact new primarily also quarter. better a points difference and quarter and average at from I a paid Net to days March described benefited as the increases rate in was experienced net loan just

hikes Looking for We gain included our pause. expect of in there branch in the will $X.X $X Fed majority compression continue. two experience last Non-interest the the should modest fourth some million. ahead, of Fed one-time we the light of do income the this with the rate to on gain insurance million catch continued NIM the and the be to quarter likely sale some our ‘XX quarters, in in increases betas, on in rate the relatively NIM the interest items stable be deposit sale increases should up so quarter

had as $XX income expense fee forward, our Going million financials. quarter. the Non-interest per in This down approximately exerted benefits Other and approximately this degree most fourth XX the without from business control be quarter. to are to expected in quarter sales is insurance expect business a Pennsylvania this employees. State quarter taxes a of audit. as Overall noticeable tax assessments expenses we to again insurance are elevated lesser the intelligent due ‘XX

of is the interest business. in continue $XX expect rate effective sale reform, in mid-XX% some one-time discrete items the In expense area. levels first for quarters, million effective year. related to of we higher subsequent was We remainder expect quarter the the to mid-XX% the tax With our in $XX area. tax XXXX the quarterly It of returns to insurance our in in majority the in due expected rates the mostly range million to

Our capital points ratios balance relatively to accompanied flat XX sheet. XX a or more as by strong improved basis earnings

exceeded ratio X% first since XXXX. time for the TCE Our

At year to also Our the asking very provide position board for I’d depending us some capital the operator time, of to will questions. it $XX this buyback manage instructions much. like that in program and to March Thanks a our this over growth give authorized of flexibility stock. million the back turn on to performance

Operator

Thank you.

Breese Jaffray. the conducting line Please with comes question-and-answer Piper be a question. from session. [Operator proceed Our now will Instructions] your We first Matthew question of with

Matthew Breese

everybody. Good morning,

Todd Brice

Afternoon. Matt. Hi,

Matthew Breese

care am I do appreciate guidance, alluded XX-K comments I actions on on occurrences in one and expense in any include the the sorry. the to corrective follow-up the take expenses, afternoon. all of good fee that just but Yes, the color that income to? you necessary some of does

Todd Brice

Yes, it does.

Matthew Breese

see Okay, And up? show will okay. that where

Todd Brice

anything, would there end the you in consulting see up So, it line. would

Matthew Breese

Okay.

Todd Brice

the call think press services, Professional it I we release. in

Matthew Breese

it. Got

will think considering I that’s still single-digit as growth feel that profitably Okay. dividend And the area well. the then overall of back mid and loan like for grow year if getting capital increased to levels with about kind I

management what the considering think that the we options remainder of and capital So you ‘XX, are are extent throughout until what you the of as some other to mentioned? that buyback the year about

Todd Brice

did of are us place do our stock so there, buybacks. price Well, what Right. to we flexibility we sense at buyback put to level evaluating that provide in the makes some

to expectations. still actively And then some are also well. our the We side were as use capital if that well tend should and opportunities beyond interested they as M&A to those arise growth pickup on in

Matthew Breese

developed on how conversations some increase it. conversation developed? the have from in was any been Got has M&A enacted, you the tax reform of there relationships levels And meaningful the since front,

Todd Brice

any, our look being was for accretive stay that disciplined we enhancing check to they really to and at Matt. boxes again, we want the that haven’t look going noticed our if sure and base. we I existing value to make are pretty you And franchise history too shareholder

Matthew Breese

guys. Okay. That’s had much. Thank I very all you

Todd Brice

Matt. Thanks,

Operator

with Schultheis with & Matt Our of Scattergood. Please question. Boenning proceed next from question comes the line your

Matt Schultheis

afternoon. Good

Todd Brice

Hi, Matt.

Matt Schultheis

with this or the at strategic a to decision build regard view branches not your we branch should these view more particular a commentary – network on to larger So as of look market? this your

Todd Brice

I in, that we think bulk the Central it’s little probably, of three Pennsylvania Matt, other and counties and Dauphin, bit both. our the Cumberland. in franchise I a mean of operate Lancaster in

York We construction branch over have we branch in throughout and new slow one the gone on footprint. have

millionish If them. XX and so to you branches look on while develop at payback branches to it’s takes per again, it expensive our deposits a overall and

I of options probably Columbus, made a different something are smaller like are had. have estate but looks are resources. is need couple we costly far investments they footprint two the scale, the So, and less do where these that branches think and in you by particular be to may model, that they evaluating going real don’t whole It the we thinking a we on

Matt Schultheis

you. thank Okay,

Todd Brice

Thanks, Matt.

Operator

Gilbert KBW. Our next comes line your of question. proceed with Collyn question with Please from the

Collyn Gilbert

Thanks. afternoon, Good guys.

Todd Brice

Collyn. Hi,

Collyn Gilbert

looks categories? the Mark, had within so just if thinking this was more of guys a motion think and guys deposit in quarter what’s little running there on there big you you growth was of like going curious jump just bit about market get money that those a then some or are trends how just kind a pricing deposit and the to side, wanted I on color

Mark Kochvar

at most to competitive market product at rate, XXX. funds, Fed the our so market, of the commonly would Collyn money is it runs funds With tied XX% Fed out accounts that’s price our money it

certain extent so to is pockets is even the have we I where that’s businesses also X% years. we X% some when well We where on low and some rates of in are it the frankly in the mid it the to also CD to larger side that have of seen goes. out in seeing some competitors in have growth, have liquidity. also And that where kind funds X CD some any you think and we – with And public the – get and disintermediation that’s we seen like especially

across competition the So the has Board. been

We with recently have side. been – market competing mostly the on with money

Todd Brice

started in seasonality monies Mark that some banking of the group public some that side it’s has already and funds would fund on some we retail to as on And account money side. commercial to back of said. the there some declines flow that the alluded experience come the side banking commercial to is the did predominately some that Right. to see expect as We well. on Collyn, and see growth and we public Mark And in as in our in market

Collyn Gilbert

a maybe mortgage comment the if overlays the Mark curious outlook gave your Thank CEs, strategy in helpful, banking, on million mortgage how Dave mortgage you about the thinking banking that’s XX% pipeline, how outlook? bit and on know, I about also that you Okay, talk mortgage for quarterly kind Mark fits but and just overall but just into then the of that’s and $XX and mortgage with general run-rate for good. outlook are your up you, this over just you. quarter, little last And just

David Antolik

Yes. did some hire folks. Well, new we

He We to the there. that some new have area. do balances order remain flat. a We help relatively manager expect volume to in in building is staff drive

Collyn Gilbert

on banking, go then the And Okay. ahead? mortgage sorry

Todd Brice

going expectation of where say last with I levels the year to consistent was just probably is kind where Collyn our is. were

David Antolik

side. portfolio was in decline origination mostly the Actually we this on saw quarter the that

we expect sheet. So perspective, we balance even mortgages from income wouldn’t fee if show fee don’t if up line back I think large up increases expect volumes on where the on pick I the a for

Collyn Gilbert

within few a of then bit something to have I of quarter fair last running the tied that what assessments the quarters, for the to led kind built different the at been sort was Okay. or that the more identification think And this reserve that that? risk than is guys

Todd Brice

ultimately it Collyn, through some shift was back some flow we provision in expense. into still and so provision had That that classifications, our

Collyn Gilbert

Okay.

that So you not kind one-time should was of – kind expect we build? of do that

Todd Brice

our yes. That’s expectation,

Collyn Gilbert

all Thank Okay, I that’s had. you.

Operator

question comes with of Raymond Cardenas James. your with proceed Please question. line Our from Daniel next

Daniel Cardenas

Good afternoon guys.

Todd Brice

Hi Dan.

Daniel Cardenas

think tangible to how So just ratio with it the you to take long mean number? do kind I back to capital at would where equity quickly ideally of to jumping would kind you and TCE that like X%, see common you ideal an

Mark Kochvar

at top end of That’s we see where to probably where the be. like we at to closer and would to it least think we need

Todd Brice

that, X% We upper in its on are said yes to going end. in like then like about range talk low to X% staying to and Mark stay that the Dan

on do buybacks the we of we M&A whether forward, something front. alluded road past. just we will the payout a down you going Mark ratio the So kind more where jump that of that with And as consistent some to forward are dividend the on had options quarter this did the like or in dividend we with recently all at authorized or to be move look on we to

So, you evaluating different capital. could the we levers are on pull all

Daniel Cardenas

Right. on Got commercial side and quarter? this the how line then quarter is what were front lending that it, compared the looking utilizations And to the okay. last on last quarter like

Mark Kochvar

of part Yes. the or was bit They to little point XX% two from fourth down percentage XXXX. earlier the at a equal a which were quarter, flat

of Now, it and first quarters, strong. were if March quarter, you January February a look was was two of at tale kind the pretty slow, so

combined. in So, what have in February January done originations equaled we and our March

And as in some carry comments, into pipeline our stated think my well. that increase I second we will have quarter. we as the So, seen in momentum

Todd Brice

we commercial the drive I is sake. side to conscious to a on made as and growth’s have focus decision The for regarding mention just the volume margin to growth want opposed getting thing other bigger

just been there So, on have standpoint. elected to have some participate we transactions, spreads from not a where

last loans were, showing really I and the…. points pushing XX new basis in it’s comfort spreads think bankers that our we originating out up I level think our have and increased about are a higher than some now quarter,

Mark Kochvar

Fourth quarter.

Todd Brice

XX off. loans we basis than that points paying are higher

impact the net margin. a make So, that’s on overall to interest starting meaningful

Daniel Cardenas

And on I side? additional quarter, the was had incorrectly, it mentioned understood you the maybe lending sounded like you hires correct in some but guys that

Todd Brice

added well to we bankers few one our we We C&I staff net banker recruiting are Yes. a business build growth commercial added as and constantly drive better area. primarily and that to in

Mark Kochvar

But those we feel we have it for of those whatever where growth can and too to some some our we some just prospects. move resources is left and we areas, reallocating have folks that move take that dollars have some maybe reasons higher attention had

Daniel Cardenas

of of many terms do lending in have remainder Alright. more you as And a I add XXXX to year how mind about in the in side? like on mean outlook the would you folks the then to for the number how

Mark Kochvar

of in ability is by it what Our to recruit availability bankers determined the market is.

at So, looking necessarily where we greater single-digit we from but there have area. area is know recruit out a the opportunity. and grow have another, constantly resources a put can there, whether We there one in mind, again and to opportunity we goal are the loans moving our in in market mid we to is number don’t

an it. to where are to need meet more we going opportunity is we area that if goal, do resources fair to there So, to dedicate

Daniel Cardenas

of color had were you Okay, question And in mentioned the construction just product little maybe great. launching? last you then that terms a bit loan that of

Mark Kochvar

rate essentially. a that’s special Yes,

Daniel Cardenas

got Okay, it.

I Thanks perfect. Great. Okay, guys. will step back.

Todd Brice

Dan. Thanks,

Operator

further the management questions to call back queue. comments. in for no hand over the are to like There I’d closing

Todd Brice

at our good conference I you in to a Dave day. have results look next Mark, opportunity all and and Hope quarter’s this conference discuss hearing call. you for you today’s thank call. again appreciate to the Well, forward from participating

S&T Bancorp (STBA) 19 Apr 182018 Q1 Earnings call transcript