STBA - Earnings call transcript Q4 2019

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Operator

Ladies and gentlemen, good day and thank you all for joining us for this S&T Fourth Quarter 2019 Earnings Call. [Operator Instructions] And now to get us started with opening remarks and introductions, I am pleased to turn the floor over to our host, Mr. Mark Kochvar. Welcome, Mark.

Mark Kochvar

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

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

Brice, provide who I Chief S&T’s would now an of Executive will like results. S&T’s Todd introduce overview Officer, to

Todd Brice

thank our capped Well, announce a XXXX. to everybody. Mark, strong afternoon, and were good you, very successful off I pleased am and fourth very results quarter that

million income For the million per quarter, $XX.X of share. expenses includes or we per net $X.XX $XX.X are of which merger-related share, or reporting $X.XX

$X.XX of expenses, of share, $X.XX merger-related share and last was third fourth $X.XX per in EPS core to year which compares quarter the in per XXXX. per share Excluding quarter favorably the

solid, Our XX.XX% return XX.XX%. on on common and tangible with core equity a were performance asset metrics very of equity of return a of X.XX%, return on

respectively. ROE $XX.X were merger-related net XXXX. year, recorded XX.XX% of versus we and ROA, per $XX.X includes in per $X.XX million which of XX.XX% XXXX X.XX%, share the year, And income full the For ROTCE full and Core million $X.XX EPS were core $X.XX share, for expenses. for or

favorable growth, big our ratio made XX. demographics The we in on was consummation XX XXXX full position for which very the was of growth for our efficiency throughout year maintaining ourselves opportunities. while in markets news We and investments $X.X billion assets in with November DNB a footprint year. Eastern all approximately merger closed the with busy to our and added at XX.XX% significant Financial PA as significant future branches

still promising the of very are is business overall integration retention While all ongoing, client results lines remain positive. in our as

banking commercial relationships we wealth treasury capabilities. able products limits, additional swap and management customer to through also lending expand and and our In been division, insurance have

when extremely are complete Western extending at organization are We has our banking brand our retail nicely markets. S&T XX the and activity will also pipeline systems excited conversion as is seeing almost business about we picked post-conversion. February look signage average our is forward we that up the markets prospects up these double and division what new size of and in as is the mortgage loan PA to in one on go S&T the growing

improve is and products of our to introduced leadership our based The each are XXXX individual we beginning client specific will the our lines structure five market drive together we to market able at and Presidents, very nicely business and across seeing Under of enhanced growth the of experience. are services collaboration market throughout to continue tailor to that coming footprint.

our have We meet to capabilities and our needs division commercial in asset-based have also and client expand banking and platform products services broaden investments lending our recently to made our two to international lending on-boarded asset-based customers. banking first

Cuyahoga as developing and consumer year are markets expanded well. deposits respectively. $XX $XX Falls, banking new Columbus, retail in which with offices business The banking, million footprint in million now last opportunities the and mortgage division have nice Ohio and These

investments team. the activities. welcomed Commercial made of members new banking And production their also course loan in two talent. Buffalo business XXXX, opened have County Berks in and also on offices, commercial and to one one that in focus five over been We will production banking

business by banking the Our mortgage four officers officers. banking division group added loan increased and five mortgage

bring a management and of extensive that recruited proven And our track record In our in marketing to area to are enhance time, sales another as extend is Expanding wealth in he an on our brand digital investment space. to that a new we has advisor who well. period short platform customer his we a team director and able division, our experience. investing seasoned was

QX. We be important website stbank.com and investments in then rolled in end to improve this out process and of have made at talent in will our capabilities advisors and is the space redesign of

maintaining summary, ratio, us. in while for the our that position made very to company investments low been do we XXXX So able about to is we we efficiency which growth have in pleased are to our future it very and important

are about shareholders. our and for our franchise and prospects forward our XXXX rewarding expanding look We excited to

am I now Antolik. to program our Dave the going President, over to So turn

Dave Antolik

Todd Thanks, everyone. afternoon, and good

XX% by saw ahead. in complete production have banking more of opportunities my business we in under year I first year as loan about be full where well increases originations progress Bank, resulted and we made As increased S&T and as XXXX years market-based record cannot saw commercial a payoffs we increase in lie the XX% consumer respectively. full President XX% and X%. enthusiastic experienced mortgage for growth robust This platform the total retail as I that banking where growth and activity of offset our

this We growth and geography. both pleased the of with by are very diversification category

retail in growth banking, year, XX%; was mortgage, the X.X%. organic commercial X.X%; business consumer, banking and X%; For

and is believe saw our our five opportunities. and of Pennsylvania Additionally, York. provides each of of Northeast positive higher operating in our Eastern growth the This New advantages percentage expansion. loan Central the similar value growth illustrated that loan by model market We demonstrating further markets Ohio Upstate Ohio,

remaining highest with the loan the million organic for QX in mortgage over payoffs primarily lending by XXXX. $XX.X growth banking annualized. growth increased was nearly challenged by of X.X% retail over quarters For $XXX loan million. commercial XXX% payoffs Total driven quarter flat. the total, QX consumer by QX the business exceeded was In was quarterly banking, by and four or activities experienced and each quarter, growth in previous

rates in utilization XX% to XX% slightly decreased C&I from QX. Revolving

However, increase balance of resulted acquisition increase utilization in total million. new offset activity decline this the in $X customer a and resulting commitments and

pipelines our remained both retail of commercial XX%. banking XX% showing and forward, by year-over-year business mortgage growth Looking up and with solid

also in pointing second have a increase an construction construction of of XXXX. outstandings during year-over-year total, quarter commercial the anticipate growth in for steady unfunded after towards in growth million commitments seen we loan $XXX We XXXX XXXX. In mid single-digit bottoming

the was for DNB $XXX growth X.X% XXXX Deposit million merger. strong or excluding at

all income growth year, markets and experience gathering our overwhelming For demand money market. the organic remaining was by deposit exceeded Improvement $XXX,XXX was loans, swap quarter result and the of the million. of driven positive commercial for to year, the higher commercial $XXX growth. in the exceeded the growth majority mainly loan a deposit Similar loan fees balance $X.X million deposit for with saw total swap non-interest fees of

And additional financial now, with our provide on details results. Mark will you

Mark Kochvar

Thanks, Dave.

we This margin by expectations had million declines. the the merger, about balance expenses Fed rate merger interest basis the our a with effective on November XX, that margin we impact activity compared quarter X The growth, points. the $X.X the Todd related compression of net primarily DNB to was offset of of that rate discussed. in $XXX.X numbers, was was closing of almost the income third to merger improvement in excluding as of average the net quarter-over-quarter With quarter million lower have fourth interest X line with was month two one-time along the as

in in of or the Included quarter about is net interest DNB for X approximately points accounting fourth the income basis accretion $XXX,XXX purchase transaction.

purchase no area, the stable basis XXXX prepayment depending assuming to further rate which X.XX% accounting, could in the on in be benefit course We includes from about fluctuate activity. X of of relatively NIM changes. This expect quarter-to-quarter points

as areas million Fee strong through is to likely curve The we the talked about. per bringing Todd swap in shape from about normalization of the merger-related result move acquisition on swap will to expenses conversion quarter opportunities ‘XX. fourth the the our this the the quarter. of of XXXX $XX.X run-rate is first here particularly and quarter that million systems Non-interest income in in the driven of moderate some offset was income This some other last will and of $XX.X to worked in on fees, are the us books. a we commercial yield into mentioned loans in refi as already or by activity Dave fees growth in as

We We million. expect $X really bit expense the second should less the see in a than starting synergies little quarter.

all adjustment fourth to to quarter million us the fourth totaled Factoring in third million XXXX, million of quarter, we out in that our including $XX a about that, ‘XX here also items $X.X the $XX state that per in and XXXX. net run-rate in expense million range be of expect FDIC some unusual sales the helped $X.X quarter in credits of tax and

in higher, XXXX the of to XX% we credits. in expect was some that a expiration around We than the little be tax to pre-tax higher rate bit tax due experienced income and XXXX

capital improved Our the third growth compared modest quarter asset point neutral point S&T ratios capital merger. to legacy relatively to of all and due the impact to

stages the of of review and validation final We are in CECL.

million. an the acquired loans our reserve We to Net loan The to loss about portfolio carry quarter. legacy of and $X.X X additional DNB for reserve The the fourth Day the from Day in to XX%. XX% X no S&T of merger expect portfolio the the X% impact million the between million expected $X acquired on accounts to XX/XX/XX. that’s be in quarter $X.X third to from million, add $XX X.XX% dropping impact is as

to put expected ratios economic complete should of we are between $XX book The about to as see XX% see ability on will in This impact or X when $XX results the the between X.XX%. per basis than putting million, the will our Tier value increase outlook to and reduction X/XX/XXXX. capital muted capital. and dilution ranges report accounting $X.XX phase-in change and TCE So of reserve These We the to and QX loan revision and to a the reserve our XX on XX purchase is we X.XX% between less in final points. we XX%. as reserve ratio ratings work combined, risk regulatory include X.XX% that’s X% and subject is by X-year ratio and of and will balances, by to share reviews $X.XX million tangible up the

will provide time, much. thanks questions. for back very turn So instructions asking operator I things the who would over At to like this to

Operator

[Operator Russell Instructions] Thank sir. from We’ll Gunther our first Davidson. take with you, D.A. question

Russell Gunther

good guys. afternoon, Hi,

Mark Kochvar

Russell. Hi,

Todd Brice

Hi, Russell.

Russell Gunther

outlook geographic well newer the how with and to markets the growth with some of that contributions loan are mix commentary interested track would I would on a be, as was parse hoping just I single-digits. and appreciate get at out the your and are XXXX for bit sense to looking what that a guide for in mid comments on DNB particularly of budgeted the growth drivers as you kind XXXX? be

Dave Antolik

Yes.

geographically, we the have So, markets the Southeastern to PA mortgage retail Pennsylvania looking outsized to Russell, and and particularly are growth, Central categories. banking in business

us to commitments, also We expect have in help outstandings. ABL been has new that payoffs. volumes. in see But Pennsylvania, increase which and growth stability continue category. the although we do incremental in as C&I help will anticipate significant provide CRE to mentioned, grow growth growth the our muted Western XXXX I markets some We pretty newer we platform higher year-over-year by a construction to and should less continue drive in

Russell Gunther

range towards or want Dave. how for Thanks, we I the then start trend, would kind how glide to you on the year of millionish anticipate the up higher just to your guide, end should good. you And in for that get earlier $XX sense Mark, a the conversion expect mean, scheduled and do expense Very given then following path?

Mark Kochvar

Yes.

start also QX. lot QX but one-time, higher little until be the of bit because won’t So, of synergies a the a will

Todd Brice

After conversion.

Mark Kochvar

mid-February. that until we things increases conversion Yes, our that the Offsetting in start the the do second don’t after like of salary typically though, and quarter.

to the more helps quarter keep that first inline. So

relatively expenses, course be one-time over year. consistent the it So, the of excluding the actually should

Todd Brice

have But maintain that is to XXs our the low as goal ratio still the in in efficiency we past.

Russell Gunther

some via question My regard closed That’s the excess and to would to putting be thoughts great. with That’s last and the with capital Mark. now work thanks, Thanks, guys very deal Todd helpful. buyback? on

Mark Kochvar

Right.

authorization we So from a the It board. $XX until have million expire XXXX. still doesn’t

We pricing So depending trigger. in may market that space. that thoughts on own may and the active outlook get on our growth, and we pull

Russell Gunther

Very thanks Alright. Guys it much. good. me. for That’s so

Dave Antolik

you. Thank

Mark Kochvar

Thanks, Russell.

Operator

to of We’ll Gunther. move Mr. Collyn the you, Thank Gilbert line KBW. Instructions] next with [Operator

Collyn Gilbert

afternoon, sorry. morning, long a or Good guys week. It’s Thanks. been

the about in first said Mark quickly you would more follow-up question, buyback comment question What Just that pull active on buyback? would a to to trigger. be Russell’s circumstance you you and that to a on may be cause

Mark Kochvar

our what we did. prices good as it’d performance, long our as think I about felt be

So if to market we us cause active. or specific was price was probably that driven that be to saw more think we some us decline of our would broadly stock the warranted in didn’t

Collyn Gilbert

Okay, opening the competitively markets? in in on you okay. and those two LPOs strategy what sort are to just the you or And that’s Buffalo Berks question Todd setup of of seeing into guys then an in economic just would standpoint that LPOs a to from hear or are those love you County. markets causing either what went each

Todd Brice

C&I an Rochester, Collyn LPO Yes, had we over land to and good good some and experience in we able and activity those we in have bankers operation, were an with they decent of pretty Buffalo markets. we were ‘XX there over have the since had serving pretty that some market some kind

they So, on came board.

again, earlier that probably the in spring. then And Buffalo place of from that again, put our – I just been And the kind to year, also Pennsylvania market a up to in Eastern think We Berks one extension did able and in business good we in a Pennsylvania in and people. it’s we comes banker and having down was markets. opened it Central attract

over have folks we And there. some so

about activities. and know top I that we probably are Buffalo quite we in of outstandings banker it’s again, again, mortgage Berks in not I the $XX so – also banking my am of out Berks, I business out have a what and But the office or of million We sure head. is off we mortgage-related seeing market. have know

to just lines have be consider And certainly investments production we across so that’s up, market. a it. saying, need we opportunistic will more last where rather business if the talent than comes in It’s we hey, right the year. we are And the in different made

with we continue that think – have to carry those growth. we So drive drive into made will some to investments XXXX

Collyn Gilbert

the growing one, maybe just how on of – of either helpful. kind to Okay, could of Dave, your sort expect just ABL talk near it you outlook that initiative or of of And a kind then, you the a the big or how in about just component that’s bit? be frame and if overall Todd sort business see and long-term strategic you of there

Dave Antolik

Yes.

as were have at kind we opportunity we clients Dave. we the Collyn, internal we So, When and our looked the in needed it’s of that potential who the didn’t grew running C&I situation and book, expertise. service

and We able came past. who market. to the the startup recruit team had ABL a bankers a done to went in we So were of to us

spot struggling extending So, treasury it’s all incremental to us it it’s services attracting from might new some growth services also opportunities our about closer a and that monitoring clients in need in potentially be full a to banking to offer that clients difficult economy, risk gives a but with do for and soft we who we landing think provide and come be addition – services, going just credit. additional perspective, the

Collyn Gilbert

little to then reserve bit in what was then, And walk a of the give fact on despite can helpful. and going quarter, kind just a Mark, that in color also Thank the through just more there sort you. pickup going That’s the the credits, just the what’s Okay. in you NPLs or the on provision methodology those us to uptick lower on? just was just there understand there of as

Patrick Haberfield

is Collyn, Pat. Hey, this

is certain would on the there and active and all everything obviously our on our in and movement tell have in and in management. was the provision the inflows addressed in – portfolio outflows, NPL customer based from pretty fluid quarter, that our So, reflected the reserve. and out, movement, items been throughout NPL movement I events you

taking And with considerably, these that tell practices. a of consistent past as situation obviously involved. charge-offs had I we maybe our each portion think can decrease which just continue on with net pretty to also – addressing that is are parties are in I work large all constantly were really too our you down our the C&C well. but we portfolio our We

there for things fluid moving are quarter. can see how you through So, the

Collyn Gilbert

Okay.

the So reduction higher that than rolled of was off whatever maybe what in a a on? just was reserve function the carrying coming was reserve

Patrick Haberfield

Yes.

Collyn Gilbert

Okay.

Mark Kochvar

separate actually excess, up because the you and them. potentially they reserving the less end for of of valuation, go Some

Collyn Gilbert

there you or outlook Okay. areas think credit, like it And good. quarter see on just is mean, the you that are I question that broadly anything horizon everything then every cautious get you on? and seems in guys asked for I the still really seems the

So, I am probably would curious answer, asking your there? thoughts as but it you the again to and give same just

Mark Kochvar

talked we are have big a – workforce. to did of some right down grow – constraint having seem be markets. Pat little million don’t lot a out finding Collyn, were would at to trends and nice I customers which of as Yes. in or meeting of or care are like had downward when the have we optimistic still bit in, is discussions what we in their indicators. with be business and all our usually are today, base. earlier The some now say guys in people I challenge clients classified X to or They a you your indicated, their you able criticized I mean, client our about The impact industry existing and leading And I serve see $XX they think buckets, qualified but December. in

Collyn Gilbert

there. will Alright. Okay. I Thanks, everyone. leave it

Todd Brice

Thanks, Collyn.

Mark Kochvar

Thanks, Collyn.

Operator

[Operator Instructions]

Mark Kochvar

online an question Hey, Jim, to would we that did take. I like get

Operator

Sure. go Please, ahead.

Mark Kochvar

would what So the it We number. quarter to count probably it’s be to at the Go will million of about so be were first period, in a be end would the there share calculation the what would good ahead. Thanks, outstanding question expect for good the EPS. right Jim. the shares that ‘XX of in a diluted was around use range $XX.X

Operator

audience. turn And have it that for our leadership I the insight. team any will time, additional back Thank remarks. signals no at this for or closing to Excellent. from we you

Todd Brice

participating the this you next to and results call. thank Jim. forward appreciate hearing everybody discuss today’s Well, conference Mark, just I And opportunity to thank to quarter’s look want Dave in for you I our in from call. and

you good have a day. hope all So

S&T Bancorp (STBA) 30 Jan 202019 Q4 Earnings call transcript