STBA - Earnings call transcript Q2 2018

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Operator

Greetings and welcome to the S&T Bancorp Second 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 President your and my Senior Mark now Vice Executive Chief is to host, introduce Kochvar, It Financial Officer. Mr. you, Thank Kochvar, begin. may you

Mark Kochvar

in Great. thanks Good much. today’s participating Thanks conference afternoon call. very for and

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

Todd Brice

thank net share Well, performance of have or versus per good and million we’re second Overall, the year. million million quarter this core in everyone. announced with $XX.X afternoon, our first XXXX, share quarter of $X.XX pleased and the per operating $XX.X $X.XX or $X.XX share Mark, quarter $XX.X or in income you, and per of this

EPS to big $X.XX and XX.XX%, primarily million equity commercial The impact return was due per fraudulent performance and a return $X.X on in and this Our approximately the respectively. common that a asset, loss tangible were share. for on return activity single by to X.XX% metrics equity X.XX%, net credit was impacted on on quarter variance income

the just annualized, loans business. fed experiencing $XX.X recent new million we’re under to moves our in the quarter, also increased portfolio higher and on by due For rates X% portfolio higher yields and or

expenses was second in margin declined to And our efficiency our strategic also result, XXXX. controlling ratio net interest versus of first quarter. evident basis from increased the our XX.XX% to focus quarter compared five the as on a by – As points XX.XX%

areas from and do of continue by We of delinquency to in we we’re which net location PA, branch. organization disclosed million Total million large attributed also the million, York, and associated filing. note portion our Credit quarter to but point is, for the that the the of the a to flat in $X.X $X.X the one with maintain loans deposits closing is was declined control of again, of non-performing of total X.XX% One expect essentially X.XX% represent to X.XX% evaluate X-K to the the quarter $XX.X our for item in were basis portfolio. mixed all fraud of expenses. charge-offs for QX previously quarter for were with metrics opportunities

forward want the and filing conjunction stages with I will report the to as as our receive risk-rating July Any We completed completed review third firm remediate also our the new final by addressed of will end recommendations And final to and be independent to of for the with been work weakness the conclusions. in-depth of selecting our of decision to examination in has the an in been on support are our quarter. of that by efforts of we engaged XX-K. a mention encompasses applied external An the third end procedures Phase I file moving anticipate August. material and the August the the of This review Xst. in the of of disclosed that processes judgments XX-Q our completed. X-K we’re announcing end has well policies, rest was party We the audit a and by and an be

to over per Officer, August also call the Directors dividend which David share to Antolik, $X.XX XX, of that payable turn our I year. last same a declared want our is a before I Chief Board the increase over period on mention Lending So XX%

I’d David So Antolik. over like program turn to to the now,

David Antolik

Well, and good Todd, everyone. thank you, afternoon,

to loan growth line report for second expectations our the pleased We’re in with quarter.

experience from our We our diversify efforts and continue portfolio to commercial to book. grow positive our C&I results loan

During solid in to $XX acquisitions by the an quarter, by XX% customer with increase C&I driven XX%. from balances million, increased utilization new along

quarter, experienced resources order bankers dedicate to to in C&I our during we to this second continue two and expand segment We the teams. added

to positive XX% originations. year-over-year from results business a where saw continue very also see We we in increase our banking segment,

added are division. we optimal staffing quarter, and levels the business two now this at bankers experienced During in

increase our CRE activities, reminder, With increase the our a manage category. a as loan up to $XX newer portfolio saw relationships $XX a business a Ohio, from million. balances by that commercial quarter, primarily million during regards by million in reduction solid, bankers offset Central markets in our partially of $X.X Ohio. As in modestly Activity growth million permanent balances result was where we the grew in $XX to in construction particularly the loan remain

forward are in growing with regulatory suburb rapidly our construction our We soon. begin Columbus very submission to application move for a to with plans Hilliard, excited very and location full-service branch

allow by will Ohio, an Cleveland the We in also to our plan which serve Ohio LPO Independence, expand to presence us establishing better market. Northeast in

have payoff to originations new elevated in We CRE have increased. this levels, as used rates our an margin anticipate improve portfolio, but on and as continue experience activity loan to opportunity particularly

in as anticipate loan pricing digits, to in disciplined growth low Moving our and forward, we mid-single remain structural lending. we the

with will Before additional call the I details our turn on and Mark – you sorry, I’m now, results. financial provide

Mark Kochvar

the activity in over with first We curve. points difference with the basis better paid second net asset rate year. new quarter the rate moves combined a to of of Thanks, five interest compared improvement interest The sensitivity with this great. resulted margin first front experienced points the our Fed end favorable loan of quarters another from XX basis Dave. both on Okay, quarter and versus

pricing loan funds. sheet continues net to outpaced aggressive customers, interest-bearing rate second average by betas extra they quarter. be for Although strong exception Deposit in specials Net pricing income competitive very money and CD were margin sectors accelerated, including with deposit consumers million and the quarter most public betas. in the by $X.X and large the to earning day improved in in interest increase for assets off an rate one a expansion, due interest market

do beyond. declined by the Fed to to be million. we quarter to move betas income there gain $X.X net we June. ahead, should our expect Looking deposit majority the likely as quarter increase or primarily lag, catch-up on so was in the think last in the will due NIM improve and in modestly into third rate quarter likely second We $X.X some will in due be – million, interest margin business compression pause quarter and for of the that insurance a the sale fourth Noninterest interest Fed

to year be from fees and improved exhibited mortgage the first improved seasonally compared expense, this Noninterest contributor approximately we per same ratio quarter control banking to card for declines quarter. overall strength good efficiencies. to about $XX essentially forward, X% as XX% our and period quarter. efficiency continually a with is slow income us this a expenses going Attention fee million quarter. focus big to to again, Also we last Our flat. expenses a for just look It’s expect

adjusted as expect lower items, in to we effective the quarters, remainder expense rate the area. of a expect low sale tax some reform, quarter and our to quarterly our XXXX due of expected It is in XX% quarter’s full-year We for year. of to Subsequent effective this in With million higher discrete we to the the was bit mostly related rate second return in higher-than-expected levels the the approximately the low tax mid-XX% the areas. to first $XX quarter to due business one-time expectations insurance provision.

capital We the basis Thanks in Our accompanied it to remain only XX over XX ratios basis our operator earnings instructions points regulatory I’d points risk-weighted questions. as very At capital to like improved provide comfortable for our to with time, increases by by modest asking much. turn back to levels. this were assets.

Operator

Instructions]. [Operator you. Thank

proceed with of your question. Piper first from Our Bhandari with Varun line question Jaffray. the comes Please

Varun Bhandari

everyone. afternoon Good

Todd Brice

morning. Good

Varun Bhandari

give bit color you you the competition seeing? can on of little So, guys are a guys a deposit

Mark Kochvar

in lot our markets. especially the money And game, off of we a to of public then current the CD of also, continue get remarks, I’ve lot prepared and the rate area; say other the lure I’d there banks years customers. a away retain see We under, is sheet state-related on to in off customers specials a lot side. customers some mentioned fund from the to and in What anecdotally, competition on be as of both of I quotes back to said their kind organizations two are – that

off activity So rate the a sheets. of lot

Varun Bhandari

that of seeing there? then And Or you’re that rates, any higher are are all Thanks. kind your across areas the pickup you just geographies? of there a seeing one of are little bit particular utilization – Okay.

Mark Kochvar

I think quarter. look a utilization the too pickup rates. – Utilization We’ve in new the second onboarded have if rates historically, it’s some that kind lot higher of of you relationships seasonal.

Varun Bhandari

has or same in increase levels? stayed in then been And kind there of any discussions Okay. months M&A recent the

Todd Brice

in quiet of now. kind It’s various our markets right

someone to to open pretty keep have quiet think end now, right our to if do continue dialogue across folks doors should We I But our on the so. footprint. just with it’s choose

Varun Bhandari

I’ll get back. Thank you. Okay.

Operator

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

Collyn Gilbert

afternoon, Good Thanks. guys.

Todd Brice

Hi, Collyn.

Collyn Gilbert

the on follow-up deposit a Just question.

choosing last the little of the your decline. quarters, in you’re about looks of not of those a of some maybe So guys you’re six balances savings Mark, dynamic seeing you’re that describing, bit Or have buckets? I a for, what you to of pricing function like, some competitive environment Is the – maybe like, and some seen just a in deposit of kind it compete talk guess, just on those? that

Mark Kochvar

from the is it’s side, liquid don’t of I just promotion deposits customer, market money difference to money subscribe whether is there a consumer savings that lot whether threatening now main or think the a market. on it our Yeah. is – product. for side the right And having that’s in a that, a the mean for I

we back savings maybe out the promoted best rate the in just market more which previous money previous So is. we’ve products the seen cycle product, where had liquid the money in – our of our rate-sensitive to – moving some is that

what’s shift. that really that’s behind So

Collyn Gilbert

the remainder And branch helpful. that presume right? of construction, the OpEx Mark, at That’s guidance, opening new of that this or the I least $XX those the it on for new okay. that Okay, I you so. and know kind is in year, LPO just, Is other million targets. gave your then

Mark Kochvar

Yes.

Collyn Gilbert

may controlled. Okay. of And do longer good need expenses to have do do start of very Or been job think keeping guys really of beyond? maybe it Or putting – that you term? about still of of you investments to – kind get you I kind well that make? done, sort point, to thinking you you kept you have to you your trajectory mean, and where a Do done that you are maybe year off how a can expenses next point

Todd Brice

No, And areas bit maybe more some Collyn, and basis look we promote to the we efficiency growth. investments a for we’ll think areas, up run ways little we you appropriate on just reallocate to can to certain continue an those pick made dollars ongoing we other efficient. – in if into

think a going situation, where move. good I the is example Ohio to we’re

The be incremental already exiting significant be will bit there. cost, amount. so a are a but there in of not we’ll increase a So lease, little an people

we low-XXs and is going the kind it’s ratio trade-off. consistent a are. try efficiency manage to to But keep So where in we’re with that

Mark Kochvar

And branch also compared in the closure you to the the the Right. mentioned closure LPO opening have York Ohio. of the of forthcoming – –

So similar. it’s expenses resources, be really the reallocation will of

Collyn Gilbert

a Or saw quarter. then loan good on elevated Okay, And quarter. the you that how you just of had, had the kind okay. of first did in C&I I Did bit? this see to Would just start seeing subside rate guys the – side, paydowns growth you you helpful. That’s the trending? paydowns are – – know little

Mark Kochvar

did we see as well. this elevated Unfortunately, payoffs past quarter

Collyn Gilbert

Okay.

Mark Kochvar

payoffs historical above last their levels. quarters, The we’ve three seen

Collyn Gilbert

they Or level? loan for include payoffs that And that you okay. outlook think down? growth, stay the come of at this then sort do your elevated Okay, does

Mark Kochvar

the Correct. some third We quarter better and softness the Yeah. in quarter. in fourth see activity

Collyn Gilbert

there? pattern on that’s or Okay, on I’m you on or be the on any in okay. consumer or segment seeing markets deleveraging what side? either And just resi side, you the might home then behavior equity – going consumer the just happening the what within are mortgage consumer curious are your guys

Mark Kochvar

has On refi. the mortgage side, I been a there mean, away the with from been has pretty moves, there significant shift the rate

refi in suppression volume, So the the business first especially without more. has that most been money the quarters of where our purchase the and has through seasonality business some on comes

or improve quarter expect the into half to have second at the pipeline We and move quarter be back the better. seen as least you third the

Todd Brice

point, that the over on too. have we to thing some people people production sales over on other the The added is Mark, some side, – mortgage

So QX. we expect pipeline the as well start in to QX hit that to and

Collyn Gilbert

Okay.

Mark Kochvar

the consumer lending. have some we side, On home equity seen softer

whether into production biggest a that, from their tax situation seen rates But a still the decrease looking then we’ve standpoint, related that’s being people We’re that’s volume, is to or higher. from new – new from home equity. just reassessing

Collyn Gilbert

transactions might okay. That’s Okay, of the a Would you on on terms do? Todd, And And guys ones greater there? then a the of out kind curious, what likelihood you do just small the versus see comment, types of deal be just, helpful. would you M&A larger in opportunities? how small place of

Todd Brice

thoughts a the – bit, end. Collyn, up are in that the think going little range bottom kind I on probably our $XXX chain of food we’ve million

You a fit. interest it the end, $X $XXX so $XXX $XXX in up that the us. $XXX the range. small And if just to on million really strategic probably range million, then probably million, in the good something to or billion at million might not look of upper franchises But are had

Collyn Gilbert

okay. there. I’ll leave Thank Okay, it you.

Todd Brice

Okay.

Operator

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

Daniel Cardenas

good afternoon Hey, guys.

Todd Brice

Dan. Hi,

Mark Kochvar

Hi, Dan.

Daniel Cardenas

margin quarter? Thanks help question quarter’s and the second degree, for the any, a margin. to the I But this penalties So, look quarter, the prepayment on what at guidance. quick if as margin, this the did in color

Mark Kochvar

were us. for elements essentially kind flat there, Quarter-over-quarter of other those

was it loan quarter. rate rate, and rate-driven deposit this really So

Daniel Cardenas

you question Okay. quick Good. of CECL about it right terms where are on And thinking kind guys in and just maybe, just are what of a then – you now? preparation you how

Mark Kochvar

Dan, implementation the on committees have we side, internal formed.

relationship and of and we’ve years been the software of developing We that CECL that they working engaged stages a CECL our vendor them plan we’ve have and approach have a model had to couple on the for for a that. with we’ve to product our do have with now prior to working been several good months earlier and

feel a to to track. be like XXXX feel get ground we We on parallel when most the we’re running So implementation. we’ll XXXX of hit and anticipate ready for running like we

Daniel Cardenas

Okay, of mean, a Or is the good. last can to the And mirror loan then I in growth in you just terms of be half deposit challenge? you back my going kind do question year? of growth, think that

Mark Kochvar

challenge. The environment I remains still think a competitive. it will very be

So, be it I we’ll get think our share, but will a battle.

Daniel Cardenas

right Great. All Thanks right. now. That’s guys. all I have

Todd Brice

Dan. Thanks,

Operator

Gilbert. question. We have Collyn a Please follow-up line question proceed with your from the of

Collyn Gilbert

Hi.

auditor? more. Sorry, all where things on to an a just one the new – as hiring you, new on the stand Mark, have of Do update at

Todd Brice

Right.

we We time that expect the make do to the same announcement XX-Q. about

Collyn Gilbert

perfect. you. Okay, Thank All right.

Operator

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

Todd Brice

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

Operator

this you your today’s Ladies Thank for conclude and does teleconference. participation. gentlemen,

lines may your have disconnect wonderful a at day. and time You this

S&T Bancorp (STBA) 19 Jul 182018 Q2 Earnings call transcript