STBA - Earnings call transcript Q1 2020

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Operator

Good day, ladies and gentlemen, and welcome to the S&T Bancorp First Quarter 2020 Earnings Conference Call. [Operator Instructions]. At this time and it is my pleasure to turn the floor over to your host for today, Mr. Mark Kochvar, Chief Financial Officer. Sir, the floor is yours.

Mark Kochvar

right. All much, everyone. very good and you afternoon, Thank Thank participating in call. today's conference you for

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

reviewing be earnings will deck an presentation. as slide We this supplement part of

slides those begin who on XXXX introduce XXXX like of copy Todd our First under Earnings now S&T's and the a Officer, obtain Conference Supplement. Chief can Earnings will First Events Quarter to today's Brice, click presentation. Presentations call, on Quarter would website I You Executive

Todd Brice

thank COVID-XX Well, and unprecedented ways. good these hope I and through healthy staying everybody. times. you're afternoon, all impacted economies that in safe operations our unprecedented Mark, has you, and

as expanded assistance loan to on quarter So portfolio presentation our programs of provide granularity as some our we've that this we've well some customer the implemented.

reporting DNB share year. the merger-related with of expenses For we million or quarter of $X.XX per were $X.X that we're income associated the $X.XX quarter, included consummated $XX.X in net or per share, million which transaction that last the

return X.XX% on share, point on a basis earnings So return equity, which $X.XX quarter return X.XX% translates assets, for core into equity. per the were tangible average XX on

to be continue expenses a strategic focus. Managing

around forward. compared in CECL XX.XX% quarter the and and million QX focus quarter. be continue the the COVID-XX January X, to as to adopt resulted for in uncertainty $X.X $XX elect in fourth provision a did a will ratio expense efficiency We to of was Our moving million

or of the our million regional DNB nice then versus in last at nice of for of losses X all X.XX% conversion were allowance across So now X.XX% credit Pennsylvania. quarter. extremely lines of Pre-COVID, business stands experiencing activity The $XX.X we're went all Southeastern well, and our seeing in markets. our we loans growth

For the annualized X.X% estate, commercial and million and loans distributed increased $XXX.X construction portfolio quarter, or real was categories. C&I across

slide, Next Mark.

X So the focused and business COVID-XX was customers, customers the of our our customers and our concern. protecting response of then communities, was employees, First on and the all stakeholders: and initial finally well-being employees health and

from office, try for between working coming our number people some and pay and initiatives into employees did to and a other were So sure drive make really childcare through safe just were home, multiple staffs schedules, rotating only our healthy. facilities, operational of that we bonus the splitting picking that up expenses,

a which focused contributions program finally, solution on provider. and we extended next, through communities, so our use businesses, So done And and are supporting for solutions. encouraging medical and needs-based customer center hours loan consumers have food regional SBA entail of payment deferrals, and assistance to to mobile lending, banks online committed we the PPP

Before I exciting share I David our turn news. to Antolik, over President want to some very

have and and have trust the reflection Bank. in truly to our Power Bank placed It Best is recognized J.D. a S&T region. this an receive the confidence The We of in been as Mid-Atlantic Retail designation, honor really by that it customers is

clients help XXX economic pandemic. serving times, national communities good our same commitment challenging navigate we downturns for to And through our today, been years COVID-XX through bring that and have disasters. We times,

in $XX.X share average did mid-March. spread, shares total COVID-XX repurchase the XXXX totaling of suspend pandemic million an repurchased we XXX,XXX a Common per of $XX.XX the impact of during the at as activity were first and quarter of cost or

Directors of per support on approved compared of I an for And was increase share of our is X, period on for $X.XX June finally, shareholders dividend payable of your the in same share you This to I'm pleased year. a want X.X% last record XX, S&T thank XXXX. to the $X.XX Bancorp. to Board that declared May per of announce dividend continued

Now I'd the President, over program to like our to David turn Antolik.

David Antolik

discussion you, credit everyone. loan an Todd. we and Okay. overview be Thank the COVID-XX risk entire category your frame hardship If Good it I to portfolio Slide direct order can to to provide by would thought of X, today afternoon, our regarding attention assistance. in helpful

categories been impacted most the those have on that Focusing by crisis.

of and The provided the approximate form payment totaled months. and As principal you modifications principal payment ratio length deferrals have generally can we forbearance X, in payment forbearance loans assistance deferral XX-XX, these X of of is X between on and is the that for billion. see Slide $X.XXX versus

for state are online Segments also continued customers we located for entire modified the Pennsylvania, to operations. where selling dealers the prohibited only as dealers essentially last just curtailment these with who when as of the long-standing sales include percentages week largest allow book bulk not floorplans And customers did overwhelming various the our allowed for automobile until where payments stay are at orders from were in waived home cars restart. the

impact to close ask an as Other retail and is limit severely our This who categories retailers tenants mall been include concessions. and or high-impact have rent restaurants on strip borrowers operations. for CRE having forced

approximately provided leisure-focused hotels. detailed we these properties mid-tier category Page solid important primarily and information portfolio flags our that that note more carry It's On on was travel most rather business our have XX% impacted comprised of of hotel than to X, locations. negatively locations

to totaled and oil the that amount our with convenience of the of million continue that $XX at $XX well well-yield concentrated million in store brands perform several note time. and also gas approximately quarter at end outstandings this would I

Page X. Turning to

our hardship have We total modified of have balance. X% the or where most of loans we recent million results of assistance $XX consumer worth programs, the

assessing and need these the both we forward. rapidly have programs, we programs consumer and for relief are For the commercial new for as requests reduce assistance hardship seen move

the results in participation the Program. will you Paycheck our of X, Protection Page On see

these proud very are ability access helping to We program. refocus in towards our resources of our customers this results

that approach exceptional in thoughtful customer results. a our our We very these represented believe providing and to participation and is service of have disciplined mission taken

On a Slide activity here utilization line see XX, of not line COVID-XX. did result as experience. The see bottom significant that is our can you we

we Finally, return are as weeks. usual activities preparing for our coming to the in business

where As that place multi-phase as you various economy X know, a Pennsylvania of at state of have the they reopening into the divides will has announced plan described Commonwealth of take reopening regions times. cautious segments varying that the

and on will to We closely we accordingly. our adjust monitor guidance, the operations will continue

Kochvar, Financial over Officer. presentation our I'd Chief now like to Mark turn the to

Mark Kochvar

shows of for allowance the original from million, by losses XX million DNB under incurred The loan Slide Dave. progression to which the no portfolio, COVID-XX carried as the XX/XX/XX thanks, CECL, the of the X/XX/XX. impacted day reserve. Well, accounting, to is credit at acquired $X.X which, S&P $XX.X was X legacy book loan related the for the prior and million impact $XX.X methodology

X in been mainly disclosed. reserve of finally, that which day million the primarily in the X additional had was due the a of the but changes quarter. to had specific approximately we $XX.X for the was loan to net the we the quarter, loan influenced adjustment majority filing end charge-off in after $X.X prior since build, not which made pandemic relates was the That to And timing charge-off million. in economic XX-K, first appropriate, included adjustment first added relates charge-offs previously reserve the $XX.X the learned when The that of QX, up that to day the million of forecast the

quarter. Our This allowance million at stands and reserve at of the just for not under the does the QX. include at loans the of which unfunded at commitments, of $XX million first end stood X.XX% end $X.X

just was interest related closed net of as The basis of to on we compression points With million. the deposit The to compared margin quarter in repriced X XX, of our QX lag was $XXX LIBOR. combined net first interest a by November DNB decrease which increased primarily million benefited and in aggressively average income costs results, full from XXXX. improvement we the quarter-over-quarter $X.X merger, balances loan

for in down seen more NIM expect XX. due Slide we in to of our QX, April, as decreased our points additional with on balance quarter that prior As has basis compression every asset-sensitive LIBOR experience approximately sheet X come consistent point

borrowing interest first in of margin net We relief liability at money and declining accretion. side market core the CDs, accounting approximately purchase ultimately the net over price the next points the X the will through on range. get rate income X.XX% some Included in is basis quarter implies This X.XX% to months. XX to interest

deferred stock the The decrease decline next the were amount income significantly the own dependent by SBA be a first value mark-to-market in of Noninterest stocks market the quarter, resulted Swap the couple impacted other in with the up fees banking PPP the heavy of refi income. combined $X.X in a plan impacted benefit the program mortgage again the by nonqualified activity. forgiven. on bank and a first and in as some million of pace in with was quarters we quarter will in picked strong

rate of to moving that some included a remain of these favorably of benefit was of in the million with the $XX.X million the expect decreased $XX.X from salaries weakness We lower We million along valuation run in expense other impacted a and about second with with side the $X.X consumer per two is income. Noninterest fees $X.X comfortable deferred P&L into merger-related The by other expense quarter. in plan million net benefits volume transaction quarter, items, slowdown of swaps. neutral. nonqualified

elsewhere, T&E expenses and being pandemic, And additional are reductions although experiencing slower are by we they as related the such some hiring. offset now for to

$XX per run expect to in million range quarter. the continue $XX We to to rate our expense be million

to We XX% pressure to originally rate somewhat XX%. range of expect to lower than XXXX income be pretax tax anticipated in our on in the due

remained absorb that completed. based our well-capitalized tests levels both with comfortable stress Slide Capital that have ability and excess we XX finally, off sheet. in Slide we to shows internal levels. have XX of on on strong And and on We're liquidity, regulatory balance ample losses

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

Operator

to go Davidson. [Operator Gunther We'll at first D.A. Instructions]. Russell

Russell Gunther

around I detail of deck look portfolio? terms I'm guys, within rank slide a reside pockets the I wondering, usually appreciate But if mean, in X, where increased as get loan we within exposure. we you, It's granularity in would your than the weakness map even kind heat deck. hotel of can potential serve the you how the S&T Slide the the robust hotels, may all concern well this the at as as portfolio? more of beyond initial from Or staff almost

David Antolik

Yes.

risk. most and highest the the percentage I have at Russell, of loan look think where have modifications balance we have where areas look where the would COVID at if the we modified categories indicate X, Slide we you that the

Now, the in what is on due is there operations COVID these of to short-term determining is, long-term process risk or underlying we're a various of impact it the businesses.

Russell Gunther

you of framework those And max there of sticking it's are within Okay. of the Got characteristics reminder some coverage? it. LTV buckets at-risk general kind or a any or underwriting minimum sort share whether sort could just it's that, of debt current then LTVs of with a more whether service

David Antolik

Yes.

So in XX% typically Russell, to portfolio, write we hotel loan-to-value. the

that haven't We category. been in booking new assets

Those loans on XX% service are the under portfolio, underwritten ratios asset that of XXX X completed on our pre-COVID to And hotels. depending class. speaking, being we're generally underwriting have on are But coverage standards. are XXX We strong of based XX% that traditionally The asset kind to that debt in construction remainder loan-to-value. XX% classes were markets. to were the

and So geography each and industry a understanding including of as are individual and COVID. deal we're is how analysis of underwriting impacted part discussion and looking each our at thorough by

It's industry COVID a guideline. beyond underwriting kind impact on the of and of geography. goes into have it really each So broad what deeper will

Russell Gunther

have Okay. were those and Do that Slide consider remaining would of the looking and way on look of then at path today take loans the reserve. Great. guys XXX just the much in the reserve at to that credit kind if higher? marks -- And glide XX that you we acquired of

Mark Kochvar

then in other commitment in reserves million the We $X we This acquisitions. about about unfunded And still is from have million also Mark. reserve. have $X

Russell Gunther

Okay. And the for Great. last then one me.

you hadn't mentioned seen guys You much.

in pickup think yes, a usage. it I Slide in significant was, XX terms of line

kind your any could if demand? Just organic appreciated. commentary be it for Is non-PPP just And there a just reflective for of down pent-up Just is of for in there rest pay comment, expectations? of deceleration year. growth, curious outlook you a the of the would kind

David Antolik

going very little opened Yes, be back finally, still project, to were Russell, into that I think open mean, up, restrictive, chains. going I states, is supply be to to other everything the it's unknown. were up Pennsylvania able to bit tomorrow, a they're like businesses able ramp behind construction

So we're I how their and businesses -- now, to top doing will the I they us, to of of something to lobbying are going for anticipate, through we weigh there on does of a think be what they're our to continue with stay it but or work try do trying lot still clients they kind right mean, going that to doesn't to customers states, view when but and we'll we're and so. we need think

Operator

Instructions]. go Collyn next [Operator to We'll at KBW. Gilbert

Collyn Gilbert

into you now. the And could even went your of -- with that the if of us good just what many guys economic Mark, certainly assumptions we some reserve of that? again, did were methodology? just -- sort built than forecast Can was into reserve of you dig just what on more peers yes, probably to your you kind assumptions, see. share That so

Mark Kochvar

did Well, CECL. adopt we

so our model in rate. is unemployment biggest factor the And the

the some is there. volatility there So just estimates in

So have were not analysis limited us. the unemployment, other in major doing those. still this ramp judgment we're well. we what the going as of We're early some unplanned that forecast be. drives when into the some April. as that we up put in still some the stages early -- did thing the evaluating We're there's can could we general for We were estimates we and for that did just then unemployment factors with management that, the to And bring is rate exercise that but we more to

Collyn Gilbert

were using forecast? just you for Moody's of what unemployment? mean I the following were And you one

Mark Kochvar

forecast. We using Moody's. the Fed's are actually just not We're using

So they new are a one. a little behind on producing

-- and So rate. management use higher that we of unemployment piece imply used to our override that and essentially

Collyn Gilbert

Okay.

some there's just in of That's but that with at to at but you looking so on, out guidance, like are of NIM, just your markets the the just helpful. DNB coming I'm Okay. trying assuming XXX thinking some the you then, and just And seems looking a that of play at at CDs has costs. funding of, here CD at had you -- -- to come of lot or those next kind on Mark, lot pricing, of money How there -- seeing the do more given that in kind reduce funding XXX, looking a side? it can quarter because

Mark Kochvar

much to has of of see Well, right quarter's numbers that the at I the think a lot of -- in happened activity the the it's so because hard end quarter.

lot. than QX. So I QX think will you'll see that in we did more show did in do It it a up

our we Again, rates on deposit with of then basis to only the is that The QX. yield going same XXX the a basis the cut XX With for bigger the side, lag, will And out so first other thing changed it another quarter. to lateness timing thing. really on offset the go. points of which points when in quarter, the asset maybe of side there's the to because LIBOR worked basis we're drop -- XXX see points be it's asset the in

Collyn Gilbert

Okay.

what's does New happening, And you're expectation guys look like? Okay, then you're what Pennsylvania pointed Todd, looks least it's what like up, know of for New but the I And of feel is York. good. just just you like ahead growth? Jersey loan in you lastly, at going As well behind, kind I think, open to your loan and pipeline out,

borrowers kind to your of to So react half up again? are demand -- once the some loan but outlook things kind And move start of how the open we of year? anticipating as what's for of back into your

David Antolik

Collyn, it's Dave.

where just getting commercial -- XX%, pipelines they PPP XX% forgiveness most business focusing but coming on and year, used the are were -- looking off the through and banking So are folks from getting into at sectors, XX% in proceeds efforts. the

are -- revenue off storm. conversations how find the process the in people, think needs, starting we have right about lining able balancing of is this be but working So we opportunities demand time, capital recasting and as we're and for so, they clearly and don't we be but people silver this a where in guidance hear might reforecasting we're at looking to weighing to might

I that of is we sort see retail that been mortgage will pipeline speak has good demand continue of remain other to to at low. our and levels for The which as us, pipeline, kind rates

banking will our interest think I So next have clarity mortgage activities for this strong remain we'll low through period, but some rate better you quarter.

Operator

go to Wallace We'll at William Raymond James. next

William Wallace

that loans deck, PPP first both of million your $XXX the is highlighted across in and the round? On you second spread that

David Antolik

Yes.

William Wallace

us average Could the then you of and sense out separate fees? give also those a

David Antolik

under average I shade X%. it's The a -- fee think

William Wallace

spread fundings both rounds? the of Okay. -- are And those of the kind between of as loans evenly

Todd Brice

No. No.

The the significant bunch we've the number, but was where sole-proprietors probably round over had April program XX. $XXX able but started And been of businesses to right million. we're they we those until days. comfortable small a X. first couple that under last And on are, a couldn't apply and The not of were April through chew pretty pretty only we

in jammed funded the is average got $XXX,XXX. as the loan up loan -- But range they book So so low We as round one. $XXX.

probably So round to say, maybe, maybe million is few. finalizing the still range, we're last working because $XX I'm in million -- this. still the numbers two range we're in $XX through It's going

William Wallace

Okay.

any So margin these X.XX% that Or impact of of from core on to top that guidance guide? does the would include loans? X.XX%, that be

David Antolik

it's on of to if lot forgiveness, the pretty timing throw in is get significantly. margin of be little calculations, that a in margin to of say wrench going The would pop going this. That to -- top it's going QX, a do we

So that guidance is ex-SDX.

William Wallace

little a or variations the around of bit those loan board? Or across Okay. types all -- interest-only you Are what XX-day mods, confusing. gave? there mods modifications offered was On they are it your are

David Antolik

various space, there commercial modifications. are the In Yes.

XX as XX, We following that were are XX, using guide. TER those guidance as the of some some as days, XXX So a and long days.

are on of yes, ability Some XX days. of deferrals, them I the deferrals some just on the think businesses the environment. are And to -- principal consumer depending P&I during this operate

Todd Brice

paying they're of We are those suspend if of consumer interest-only. still interest some those principal And some can loans. on

William Wallace

million helpful. are those earlier from I still loans. Is there's rate marks. a -- said Okay, great. interest to question wanted follow-up marks you $X purchased are Those on marks And where That's then correct? that in

David Antolik

will over they they're basically just interest those accreted as Well, credit, where now down. those operate get but and differently pay --

William Wallace

Right.

-- so they tied marks else. you used be somewhere loans loans, trying cannot are support correct? they're to So that those people -- think say specific Is are double those to counting? couldn't -- it's to credit some I

David Antolik

view is those as those they really just margin paid. timing I matter view get mean, to as I what. not going -- they're The run -- through I Yes. no whenever

Operator

And back to or I'll with questions comments. the turn other conference management any no for holding, additional closing

Todd Brice

I Well, this the in all thank next call participating Mark, appreciate quarter's conference QX. of you and to for you safe look end I stay results healthy. Dave forward And to hope hearing conference the opportunity call. and and today's from our you discuss at on

Operator

gentlemen, thank that conclude for you We today's call. will and Ladies your participation.

You may day. this a have disconnect at and great time,

S&T Bancorp (STBA) 2 May 202020 Q1 Earnings call transcript