STBA - Earnings call transcript Q3 2019

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Operator

Good day, everyone and thank you all for joining us. This is S&T Bancorp’s Third Quarter 2019 Earnings Conference Call. [Operator Instructions] And now to get us started, I am happy to turn the floor over to CFO, Mark Kochvar. Please go ahead, Mark.

Mark Kochvar

Good afternoon. participating conference for all you in call. today’s Thank

link can presentation. the want time on website about This to beginning be the the statements the Securities third you statement of take I presentation, Commission forward-looking on that statements should copy required which statement Before by provides refer cautionary on of by or to to for risk screen factors, at clicking maybe in earnings your language screen front A and the be you. forward-looking and release visiting Exchange press Relations by release included in this Investor obtained quarter our stbancorp.com. our

Todd? Todd S&T’s to would will like I results. CEO Brice, now provide introduce who S&T’s an overview

Todd Brice

and everybody. you, afternoon thank Well, Mark good

$XX.X XXXX to $X.XX share. $X.XX $XX.X $XX.X million per We announce or versus quarter and of share results of per income net third results million second pleased quarter of or of share per or are million $X.XX

you equity in the return have If very an X.XX%, share related of quarter year last Performance for $X.XX quarter tangible to of on and the ROA a benefit that of equity with metrics recall, return XX.XX%. were one-time pension third of per contribution. tax XX.XX% strong did a on of we common

nice million our the $XXX.X see continue the loan very strong annualized I X.X% Both increased annualized and demand this X-market activity or were million fourth sheet second going by quarter. or footprint we loans quarter the big total XX.X% $XXX highlight deposits growth deposit think was the across into compared to as balance and quarter. and to increased

the was the by and average moments. our the quarter. net also is in positively as cost. over short-term increased FDIC income decrease Mark ratio by increase $XXX,XXX was to And quarter-over-quarter, X Non-interest balances in going interest impact basis revenue increased incurred quarter-over-quarter some helped in $XXX,XXX $XXX,XXX quarter by few net which we margin, this impacted efficiency it decline reduced provide a offset by Total and was cost our a also rates. color XX.XX%, in point in interest loan to increased income for $XXX,XXX as by merger-related comments his in

Our that included million. to a And now track the very this also high-growth date market. at becomes merger with progressing asset with credit that we’ve we of systems per mention want to our anticipate our or dividend to also the and results for our just mention period I well point growth. the it’s February, loan scheduled the million, substandard Conversion quickly. are revenue how serve $X.XX which and We over charge-offs increased it did a streams which by year transition. as second can ramp our customers I $XX.X experience the This year change that dividend. and uptick same which existing to approved November and annual over net $X.X and for fairly or up share, we we be excited mention X.X% been and charge-offs charge-offs Board on signs is so our capacity, is NPAs more things Directors increased the driven was entering that and XX, that expense slight by of I want more set product in lending this has to S&T quarter. Today, the nicely of evaluation that We about total his cultures is higher strong want million net pleasure of and our quarterly driven X.XX%. finally, experienced very in $X.X quarter at very compared last IT we’re close similar, our effective Bank. pending And million, a to stands Hieb ratio to DNB a credit think Provision adjustments. the are Financial. we the was we’re as $X.X working and team on will Bill we to smooth about of $X.XX anticipate NPA seventh with increase into consecutive apparent a

to support this I’d to President program over your for S&T to I Lending continued So would like point, And Dave Officer, of Chief thank our you and like at turn now Bancorp. Antolik. just the

Dave Antolik

thank Well, you, everyone. afternoon Todd good and

the very we third in with quarter, pleased asset $XXX grew Todd million. growth loans nearly As where are by total mentioned,

For consumer $XX million million, the growth $XX $XX of million, and increases residential quarter, $XX construction by led C&I and the experienced commercial of estate loans, of real commercial commercial growth in mortgage million. in of both

and in you and Pennsylvania, and Central a New Ohio our deposit commercial, quarter, each in we Pennsylvania, in As business business mortgage operate the know, distinct upstate markets, And loan and each X lines. banking, we saw Western market Ohio, growth Northeast Central for retail of positive York. consumer

these I we proud a the beginning at implemented our about accomplishment, market-based testament XXXX. of spoke to results We growth and and very this are of are platform that

quarter, total in During the driven in primarily acquisition million we customer a the commitments. new C&I increase revolving resulted saw $XX with that increase rates XX% balance from growth to utilization XX% by quarter, revolving second over being

million to addition increase commercial category. previously this balance we commitments growth, unfunded mentioned $XX the million $XX in In for construction by saw

increased of balance primarily mortgage residential was growth driven year-over-year. production by XX% Our

QX elevated growth payoffs in XXXX, versus We will the the particularly QX. of see exceptionally balance estate real expect competitive commercial temper to that through in space

in growth anticipate expectations. do our growth we loan achieve mid-single-digit QX full to year us allow that will However,

and over continues than and larger retail at has point pipeline year, to approximately increased solid last our XX% this and pipeline be XX% commercial consumer mortgage is Our year-over-year. by

the swaps, income demand rate strong million to loan quarter. environment, commercial current third Finally, as in result $X.X are of we a of for leading experiencing fee the

details. additional Mark over I for to Now, will it turn

Mark Kochvar

interest quarter third million and versus in about $XXX period the related rates. of balance $XXX lower ending day loan interest additional the to the loan X quarter, Thanks, to higher of good decline while in lower third points basis X improved was the X remaining income points margin net X margin prepayment momentum have average Net fourth due primarily the Dave. related into going balances $XXX,XXX basis to We quarter higher than in despite by second with do million short-term loans average. fees the the quarter the pressure

liabilities do also the basis next re-prices cut customer a margin have point net see funding basis very and did adjusting estimated points rate second of proactive of quarter-over-quarter approximately billion $X.X total interest-bearing rate we X other interest almost rate a in X the basis quickly in another We in Assuming that decline in the deposit fourth result in in the XX will the in funds basis cost Fed compared point decline week, decline We an in quarter. and been have deposit decline to the costs quarter X and point third rates. quarter.

were increased saw $XXX in is $XXX programs. we by interest-bearing then deposit margin in our stabilize when of million only As lag stop. quarter, was third broker was should rate deposit included funds. At million $X and pricing there interest-bearing quarter, of and a is in growth of improve change rates end in market $XXX Total the Included cuts in end in million of But that increasing, the the only $XXX interest second million of rate once net $XX by was third replace. in was and are quarter was million not CDs demand. lending of money year-to-date. maturity million deposit brokered of distorted deposit million a did customer $XXX up and out, Netting market, at demand. mix about annualized money about demand the that deposit The $XXX brokered XX.X% growth million $XXX we the in one the million or brokered interest-bearing market

increased market by about interest-bearing So about million $XXX without $X shift, this the and the money grew demand million. category

income was $XXX,XXX line expenses. the Non-interest of included back-to-back that Non-interest Dave and strong $X.XX the per with mentioned. in expense about merger-related swaps or second commercial activity continued quarter in share

the third assessment The the FDIC net the is expenses quarter-over-quarter $XX.X quarter, and merger were also million, We in the expectations. from about credits small from the a both This FDIC. in this from know expenses We a represents third credit which and net $X.X of quarter expense FDIC accrual second benefited bank in credit our quarter unwound our resulting million. almost variance of in with quarter. the line

in at the accounting revenue closing CDI the of an merger and quarter of the interest net The onetime DNB month have of the various will November, and approximately DNB the expense close X significant expected in adjustments expenses. income along also million. net we result with purchase $XX in items of end and fourth With will

month X be that net to quarter However, significant we in EPS. of expect don’t the the activity fourth to impact of

was combined we year quarter expected tax range. growth capital to little loan Our have the third some buybacks. rate commitment to And about to XX.X% XXXX that estimate a XX with strong by XX% the ratios over the basis risk-based than finally, revised our and points declined was full due in our as stock and growth

asking to this At the much. for turn any to instructions it questions. back very to the over Thanks I provide operator time, would like

Operator

ahead. for from Please Excellent, D.A. we to And And today. Russell take question thank with thank their you. Gunther our go our comments presenters first you Instructions] all will [Operator Davidson.

Your line is open.

Russell Gunther

Hey, good afternoon guys.

Todd Brice

Hi, Russell.

Russell Gunther

very some to helpful. loan growth wanted just which to I of Hey, commentary was back the circle

growth As to but so perspective? looking class we you the as XXXX, from out got are an you what XXXX, on in fourth the do have asset loan look you pay-downs be quarter, into headwinds the the both understand and I expect geographic to drivers out

Dave Antolik

Yes.

I into help. the will think DNB geographically entering markets

starting Central Pennsylvania have as of Western seen Ohio. growth out well. good growth see to in we’re better And We

and we pipeline pressure. activities. perm rebuilding some seeing seeing our really market are from of activity estate is The where We’re real decent some construction commercial payoff

we as activity Central growth, that space number added bankers in what’s as item consistently And C&I providing well. of pretty line seeing the in have that’s really strong fair some and a are Our also Pennsylvania growth well. in we C&I

Todd Brice

the the to up continues as his loans. resonate And record as well. And pipeline small is channel also in business indicated Dave comments, mortgage

Dave Antolik

Yes.

from is particularly dividends added officers, lines then mortgage that’s number a business retail integrating well. to at the and markets on And areas. as perspective nice business things us, have some loan and our consumer driving for loan small market a mortgage the and officers The of paying of really the We into growth. looking strategy ranks

Todd Brice

Right.

we management some sets few weeks will markets So our good organic and some really a lot that is we people are filling in, some see and XXXX. like tangible start growth, that to we out we’ve came a that we will that hit position so growth expect footprint in and kind – the added people sessions we to those there product in in organic more some But are about. and we drive across would markets lot in of be opportunities talked the our of we with core to of to have just that be just targets with our will results continue ago planning to

Russell Gunther

Mark, And the close margin. guys. the thoughts color purchase help then great a gears you I I may the what That’s quarter. of reported accounting that, the if appreciate deal how to Could from going just your factor switching anything, us upcoming that and forward? appreciate then margin that. into from upcoming quarter perspective, contemplates, the on

Mark Kochvar

Right.

has than anticipated That’ll be lower a points margin purchase much maybe XX XX accounting So DNB the with pretty basis or adjustments. by have. offset we –

offset going out So each back we kind think should forward, two other but approximately. level we those of

Russell Gunther

Okay.

So enough points margin two laid for trends to continue rate begin believe about easy you cuts could of that to we sake about core cut, it’s Fed compression deposits ability or the really to out, think the just you basis something forward mitigate kind incremental for you do cuts? of extrapolate for lower from and X to us just any as should going inflect have the simplicity’s

Mark Kochvar

after each basis think next pricing. at cuts initial next deposit expect back one the after that the The stop go additional for they around the we least they would cut. compression only Fed the in time week, points I I lag with in X No, if come bounce several still expect beyond would

Russell Gunther

you you last the Is then restaurant you yellow as on me some is could And how outlook your guys but what for one give you general? flashing great. charge-offs strokes I Are any issues just this appreciate and the for Okay, see how concerned asset energy comments broad the those there asset quality about hot and just me quality feeling environment? and about button example in related portfolios for some about curious exposure front, higher is to are signs? quarter,

Todd Brice

mean you I had classes with Yes, in us, anything it’s Pat, just different – we I are don’t the think systemic. Russell. too. markets, were asset different charges too.

in... want may You

Patrick Haberfield

Yes. sure now there everyone our least red is I we is are flags. of carefully watch Russell, is footprints, pointing in watching if a an I overbuilding at Hospitality we Pat. this anything where am if area lot and not right in to is that’s obviously markets. think certain carefully

can simple looking and not we you industry, ago, that that are a any be extremely lot overbuilding And type trucking, things seemed whether so energy our to a of right on pop would certain that going what’s exposures all just those few of substantial. each hospitality relate at in of a to up Some of diverse happened that are And economic the situations that the years red in look is industries at. close now of flags but take others you boom or kind that footprints back across nature.

Russell Gunther

thank for my Well, appreciate questions. I you help. the taking all you Great.

Todd Brice

Russell. Thanks,

Mark Kochvar

Russell. Thanks,

Operator

[Operator Instructions] Gilbert to line We KBW. the move with will next Collyn of

Collyn Gilbert

afternoon Thanks. Good guys.

also inquire Just you bit your or more guide, And side? good coming are sort little within of your about into assumptions seeing sort wanted then on making talk in? could cost if you deposit growth to Mark, of deposit you the how NIM your deposit pricing maybe guys positioned, a are are where you strategy,

Mark Kochvar

probably have CD last – this course rates little on on little for bit year lot aggressive year, promotions a new to mid less So this CD were prior better over market and some we of we money our pretty the bit a and been of customers. with strict the year, pricing side our strategy more a

with a We exiting of are lot seeing that.

So, generate we DDA we a tide the or market year commercial that the lined but on side and and DDA helped stem C&I so a that have good also our both helped The lot up on CD side, has the of helped growth to the growth. that money on seen has and past CD push over lot balances.

with bit are side wholesale has we has the made big maybe more side, wholesale mix have – we from to deposits, us that So deposits customer react a that quickly the in than of asset funding some would our buildup tiny so been. don’t as the shifted which as probably away sensitive

also later this of So to with a little a year a offerings resetting either look next kind want with year where and – promotions. those we the of probably or any of moving are our product idea are after DNB are we and and where some something really see things early Fed – and approach we we with how of taking hiatus of we then get a deposit back the reevaluating taking market better down, kind in come bit settle

Todd Brice

rates off And so some can time roll hit of then... start December, we – promotional those start starts the to to of some those December in and in

Mark Kochvar

Right.

year, for a – this earlier as tough seen was little been bit example. some have competitively. comp We as It it hasn’t easier

little think kind rates. a the of with wholesale market more the line or in I the been competition bit has

little So did money bit as the in after a next a Todd put XX that to we And course starts months probably the that. competitive this have we environment. amount December of less off fair market roll seen promotional on over with mentioned,

Collyn Gilbert

off? roll you is set Do blended promotional rate market what of that money happen to slug that’s kind Okay. on to have the

Mark Kochvar

of it it It’s about priced another currently at about X.X, at at – maybe X.XX. priced one-third probably is most of and two-third X.X

Collyn Gilbert

you and compares seeing legacy you’re DNB how Okay, deposit in also market then Ohio? okay. in to your the And sense PA a do have markets pricing of the what

Mark Kochvar

in and especially think little bit we market similar, up the more to is have Ohio tends to a DNB Ohio. PA. seen be think, I I Western competitive, more Central Northeast From what

think appear lot haven’t than yet in we significantly different it larger have there DNB there. of we – We what is seen players as that a or is though But pricing There Western different our in I market. different of are – markets. Central are some more the institutions – doesn’t and some in that haven’t there

Collyn Gilbert

comments, I Okay, thinking in buyback this a that are hopping just And apologize you on, helpful. a how at buyback if little kind about opening you was okay. and the this but your of capital point? sort of I addressed That’s management late or

Mark Kochvar

– authorization implementation Right on get through merger, ‘XX. depends did a with of March with lot, do $XX the for going now, million a did we do are CECL. We things goes another lot it watching, we – of of the is that we on have there

so And take on cautious depend will the and market. we price look, the but a will it

will continue So that. to we evaluate

Todd Brice

quarter utilize helped as of well. to this And some loan some capital growth the

Collyn Gilbert

Okay. CECL, Did you guidance on give preliminary Mark?

Mark Kochvar

No.

– making in. models and progress fully we but place good are validation are coming model we We And tested. have have been and independent in haven’t still an we our they

going all any are we until firmer we that. on hold So to providing guidance through off get

So the we until numbers firm don’t anticipate providing release. fourth any quarter

Collyn Gilbert

Okay.

leave there. good. That’s Okay. will Thanks, I guys. it

Mark Kochvar

Collyn. Thanks,

Todd Brice

Thanks, Collyn.

Operator

And at we group. no [Operator this signals gentlemen, our Instructions] from have time

Mark Kochvar

came do in want that over question have to we Jim, address. that the e-mail one I

Todd Brice

was it I about And quarter, just in accruing let so the Pat. TDRs increase this will asking

Patrick Haberfield

Yes, secured sure. estate. customer, new was We company have a long-term TDR, is It Pat. an a is This a did real TDR. by operating which a

early current adversely rated. experienced issues, cash in – had have so the values. short-term credit had We XXXX we The restructured credit. We this and some had downgraded flow had previously I borrower think and

always continued status. them risk TDR been restructuring So therefore, into It’s and to to caused problem the it continues the rating, the But in of payments. the make It’s current. accrue. because fall to

Todd Brice

good. So

you quarter in questions I to thank today’s there January if look to want everybody for further in with for and call results. participating fourth no our are just talking So forward we

a day. have all good You

Operator

for and you this gentlemen, conclude release all participation. earnings we thank your and does Ladies today’s

the day. your that of and lines now disconnect enjoy You your you hope rest we may

S&T Bancorp (STBA) 26 Oct 192019 Q3 Earnings call transcript