Earnings call transcript Q2 2023

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Operator

Welcome to the S&T Bancorp Second Quarter 2023 Conference Call. After the management's remarks, there will be a question-and-answer session.

Now I'd like to turn the call over to Chief Financial Officer, Mark Kochvar. Please go ahead.

Mark Kochvar

Great. you. Thank everyone. afternoon, Good participating conference for in you call. today's Thank

the of Page the can screen. button follow by portion with along your of the You presentation slide clicking the bottom at Advanced on

in I beginning statement for the on presentation. Securities required our statements this Page want Before This forward-looking be statements presentation, to time that the you about which to factors, risk Commission by provides and forward-looking take may and X. Exchange to refer is included language the cautionary

A supplement be earnings materials these items. the clicking where copy open right quarter as release will a XXXX the This lower up of the right slide you second panel section can well as screen. the of button on obtained download earnings in the can your deck by on

obtain a today With stbancorp.com. of Dave Antolik, copy website by S&T’s S&T's and these me Relations Investor visiting CEO; can President. You also our at are McComish, Chris materials

to like to now I'd Chris? turn program over Chris? the

Chris McComish

and you, Thank Mark. good Great, everybody. afternoon,

results. have all you the to we're want of call. here look with to my and listening you these of of following in engagement all employees It's to and them us, to on proud I part being share and our your appreciate we to take and welcome And second shareholders this thank also drives I that with the a to questions. all the Page our begin and others them and I'm employee call. commitment remarks certainly analysts on going this forward X, for afternoon. call Just along, you

are us our emphasize purpose and This to the top-tier how to I drive our loyalty, our of engagement numbers, the efforts is forward financial and cornerstone about the want our and defined making good and keys customer achieving goals. we our is employee actions the behaviors purpose. driving what as we've around feel I forward people moving into further to company progress get I Before do

we to consecutive quarter, further received people purpose this defined coming our the second in-state During by customers. best forward as we as Forbes, saw life award of evidence from our

Page to X. turning Now

lot You'll see on feel – this feel numbers. good good there's lot we in about slide, these a that that we a

earned a that under share quarter, was environment, basis just in actually X $X.XX PPNR improvement of the a really to points two QX. million the factors. in all rate we changes up $XX by driven the interest For in spite everything is of That compared

up ended net a the margin. we interest One, quarter XXX at

Mark million did talk that is during XX the X, compared of QX, interest this net basis balance income. going to work the that's power manage of at really that While we points is more to to revenue-generating of the $XX our time. but down drove And about evidence sheet that we right organization. Page on

very intensity the at hard for all incredible working certainly margins. growth our sheet have a There's maintaining while taken same balance marketplace. have, that and deposits to protect customer We've with to proactive and relationship focused what in balancing we work, grow time, the we this

to down equally, able point work basis a feel to through. looked declines about on XX starting X.XX not good of -- X.XX, been at we've be should a very So what decline we all pouring are and

good we with we're which the the teams in in speaks to did our good an we're about feel The of doing we're it moving disciplined provide ended doing. driver have PPNR those our good work something have customers, feel the million expense optimistic factors the we're to of in $XX is that two Again, environment details they again, engagement that XX.X% quarter. that. in in, we're about forward. in and with Net We that quarter, the But We our work about for earnings business. that that running other control. ratio the Certainly, charge-offs was up Dave about. the is efficiency with going the resulting and And we're of and more the way

to time and him it on Dave to allow sheet. So spend some balance with that, the turn I'll over

Dave Antolik

strategy loans Residential mortgage you, to I If the could current Great. of by direct our purchase result million, segments. quarter. balance by Chris. X.X% the changes balance slide to Thank sheet activity depicts This grew sheet driven is Loans and environment. primarily steady X. attention booking a your of increased million that or $XX.X remained and for rate balances in activity residential This has slide CRE $XX these by our given mortgage annualized. our

year, We've segment bankers in this then to and also we production. somewhat QX in to look QX. current expect reduce pipelines, given mortgage And to added for, boost for similar QX this seven who to helped growth

categories. growth completion from was warehouse moved to that several of CRE by million driven $XX construction factors; second, first, two multifamily projects construction the new activity our of in and CRE;

our follow-up presented exposure remained unchanged quarter, to a information office QX. that we the last As in relatively

our services wholesale our In I'm book, by $XX and segments. -- sorry, balances million C&I in or warehouse focused declined manufacturing

some in quarter. year. anticipate pipelines, current of line single-digit we balance we saw revolving on addition, low C&I softening for the growth Based In the utilization the during

quarter. that, we the Shifting CDs million $XXX brokered and deposits. were will Balances relatively booked to I unchanged, of during note

into FDIC We coverage. interest-bearing products offer that accounts experience insurance shift expanded balances a and continue to in into

have The $XXX our Chris intense. entire developed to re-price as same an having the customer retain pressures our the in approximately for competition NIM, and without to our remains efficient deposits and balances us We've book. our respond to to active mentioned. million believe bankers and and market approach process book to retained proactively managing our has protect time, customers at We deposits allowed for deposit deposit

in by of Examples our Treasury At support business treasury enhanced adding the hiring our offerings fund people and year are product in non-sufficient management Management by and deposit of sales we roles investing also to of support support time, Products. same franchise. and depositors. April numerous in the of this We've Director products Consumer fees our eliminating Director our include and

and credit slide charge-off an level reserve a quarter, of at risk loan a current balance to The we given bridge losses the reserve and partially related quarter, a the previously an to points our by short discussed quantitative we begin as environment. specific basis asset end at the last ACL have for $X.X to is in which allowance offset decrease of reserve total a changes. largely quarter. growth The due of adequate quality overview between I'll believe is X of which results. of loans X.XX% percentage million The X, ACL rating QX. for the down the total is with stands that we established QX a review Turning the of was higher

two net During the C&I we which second had credits. quarter, of were comprised $XX of million, charge-offs

The quarter resolution credit mentioned specific through million that liquidation. to during is last quarter. first brought I we that $X.X was the reserve This full a established credit

was a manufacturer, C&I two significant credit contracts. second The specialized lost who

We the process loan realizable are with the million estimated value. down we $X.X working a through resolution to and by this customer charged

We resolve this quarter -- this to third expect or the credit during quarter.

nonperforming total OREO. points at Our of only million basis or XX $XX remain loans in low asset levels

in charge-off $XXX,XXX million I that nonperforming prior quarter. commercial assets During the earlier. resulted decreased to The a successfully $X.X mentioned the million recovery. decline loan from that the remaining a resolved real We quarter, million $X.X C&I related nonperforming estate second our $X.X

to over turn the Mark. now program I'll

Mark Kochvar

Dave. net freight margin beginning of before Slide cycle. X income Thanks, interest and interest since net the shows this

moving Before X.XX%. margin rates interest was of net was and quarter rate our the back started interest higher $XX.X fourth XXXX, quarterly in million, income net

improvement be some continue to While quarters. been sheet there the over balance asset-sensitive our pressure significant will revenue and provided has funding six costs, past on has

net million per the quarter beginning compared During of we additional revenue XX% is margin quarter to of second points the $XX interest and XXX the XXXX, higher, rate almost or generating of are cycle. the basis

and down keep margin improvement liabilities. quarter points basis as rate of basis quarter point earning yield Second pace the first increase of XX in points basis X.XX%, from the with costing XX that XX asset

representing and The points to XX to-date of increased quarterly cycle beta including the beta to by basis total cost of a XX%. deposits, X.XX% DDA, bringing XX%

they when our compared rates had XX% balances declines of DDA compared deposit XX% seen to DDA last remains in XXXX, deposits in the cycle of end we mix While cycle, we today. just the improved much as have up in to described

experienced rate stands increase Fed customer the interest and of market quarter rates seeking an of level of be high that July of to level flow. high deposit loans are higher will additional in Possibility in supportive due a is at XX% in We our very third NIM competitive. the

XXXX. we is basis pressure continue, per cost interest half margin funding expected quarter back and of in in XX the the expect range compression to the However, points of net

to the portfolio, OREO on the almost the flat card that compared the items. quarter to On first noninterest of second contributing grow is up income was primarily did the Debit in the shows related continues by activity the show all we and to which banking compared loan X, a some in category. had other $X to essentially to gain slide our million first. This $XXX,XXX, growth line in Mortgage improvement in increased quarter Wealth quarter. as of production

the $XX.X Our outlook million forward for fee quarterly the million going to $XX in range. is

controlled, the quarter, $XX benefits people so first well the to expenses have in our have to compared came $XX moderated to decrease quarter million as XX%. plans per just in normalize as million in million for salaries $X were incentive the in and quarterly down expectations expense quarter an ratio and reset. infrastructure. we These remain expenses, and The of investments X, primarily page make with On third in range year continue expectations will the efficiency

basis that point despite due remains of last a combined small stable share relatively securities Slide also TCE quarterly strong portfolio. very higher. TCE and at $XX X in rates AOCI decline an XX a challenges with these shows to repurchases year higher and was earnings million

our available securities as sale. are All of for classified

environment capital ratios excess strong the with well-positioned Our for regulatory ample capital are and levels.

repurchase share the of the second stock. quarter. remaining the We'll outlook Thank for after activity remaining and performance depending conditions, financial authorization deploy the economic you. look cautiously to authorization, and on $X.X in price million our opportunities Our is

At for operator like over some this the to time, provide instructions questions. call I'd asking the to turn to

Operator

is questions. line from your James. Daniel floor of open Raymond [Operator for The Our go first Tamayo Please the comes Instructions] now ahead. question from

Daniel Tamayo

taking my afternoon question. the good for margin cost. the and first funding everybody. on Hi, on Maybe specifically Thanks

there in than to hung and your expectations. So percentage the peers I of interest-bearing whole balances pods lot a and a better overall of really think as

for you're you thinking about forward? moving guidance that are Just curious how how balances those the you within thinking gave about contraction,

Mark Kochvar

expect front, appears spend, to to both both -- and and be there on as continue to then the Well, some some there also is bank we continued side. migration DDA the to the in the business be normalization consumer increasing out of some interest-bearing do on some there's continued and

shift that by a of saw So driven other out compression the expect lot ships. margin we in moderation DDA, of we is a

In money we movement a saw CDs slowed down of the quarter, that first considerably. lot has from market into

We lower expect a pace. but it continue to at

is by So a of that we're seeing. that it DDA migration lot driven

Daniel Tamayo

Okay.

Chris McComish

Chris. period for processes driven to in that we're order think it's customers. that a that been it of our seems be customer we exceptions as we for And be conversations want add and banker changes over made, the point just this proactive I that time. us to the to have for our so we a doing, said, loyalty far, efficient with tracking have order customers. to respond, to we've so advantage I working. an customer and competitive process retain Daniel, our you make is feel that experience the long and a those It from and that reflective engagement that And is good, able customer very to good balances and the that's of Dave that's in to we're relationship with need built, utilizing rate about

Daniel Tamayo

I Understood. of on compression a couple guess, over of the guidance, basis the XX And then, quarter next points the quarters.

July got benefit quarter. rate for third built basis where side in that fourth you'll into XX hike the quarter So on the and get point the flat variable the you've the then

the assets is rate reacts, fixed fixed we reacts me, slowing how assuming to stopped about in -- some the sheet help the just on – think hike quarter, get balance me are the there's the -- fourth beyond the funding basically? balance that there is excuse sheet rate rate as about cost or how will migration continue So on as your once hikes, you you help think essentially

Mark Kochvar

fixed repricing up be bit is the of a in the the on there's anticipate both mean, begin One slowing of I relatively some. Yes. of DDA but that so. exactly that, -- is will compression. will of to seen, the that that moderate -- some pace on things we that slow the remains from migration We'll that's just do securities a little pick to couple -- book, the

mostly and of more sizable five a start portfolio. We We'll and year three It's also do resets. that. benefit see ARM fairly XXXX That's have beyond. some to year in

The to reprice that going year. had is thing quarter us we started significantly portfolio. the last helps into had other fourth Those pretty of short a we that this, CD in

So saw recently. practically from reprice even X% we those X% to more nothing and

turn, here reset rates prior. than will starting quarter, be lot a were As those their in they fourth less

So we'll degradation to because less it a from CD margin see less have the the the repricing market. of in travel distance will to book

Daniel Tamayo

And Okay. on again, guess, I great. then, the finally, That's just margin.

expecting to got you about quarter. XX points X basis quarter. basis I We quarter, this think last compression talked of XX points

said would But could kind kind which Fed funds the Xs about don't you You're curious, down see or Is down take or around materially? rest margin which more quarter of where just about rate as of that the the range cuts, XX X%. of into the jives rate and close where end us year, still, get up. you think we the to NIM what And settling saying last well is it drifts with assuming where now for it you the X% kind if at? of

Mark Kochvar

Yes.

begins it's I go little and probably bit there's see to resets. some project. slowing we lot think steady of mean, a significant for rate we'll savings And there migrating that from the CD security think a difficult get more a because I ARM hopefully, other factors slows a of more to demand to after like stream DDA and consumer down repricing but compression quarter, these book fourth considerably. should I stabilize, more

bit get and So can probably that. QX in guidance. progresses we'll to four, we but as below time hopefully know below think not But little more a meaningful here before XXXX I

Daniel Tamayo

color. difficult all know for into it's difficult Thanks that I a a Terrific. dive question.

I So it. appreciate

Chris McComish

questions. your for Thanks No.

Operator

Michael question Please Perito the Our of go line from comes next from ahead. KBW.

Chris McComish

Michael. Hey,

Michael Perito

to Hey, for I mean, good guys. like and on was of I to my know sound of a the one last on from taking afternoon it of catalysts just this the carryover guys that kind start just would quarter, side. from concerns permeate the the portfolio C&I brought really I guess two of like some generally, there's really Thanks I what kind doesn't questions. broad credits these But just of that to point. based specific credit rest listening these any to kind wanted detail credits. the to you described us of

I we much about just talking mean, I there another are are then kind getting consumers quarters? are over that borrower guys you're credits their couple seeing about mentioned deposits reading seeing every too one. the we two you're the the run -- businesses larger weaker more getting to with the of about think the was lower. into in a small like that how two cycle as that's mean, these here you losing last for seeing And kind of and point particular credit quarter just of cash you something where of passes, comment or customers you is that kind just events

Dave Antolik

Yes, Mike, there it's the within latter I indications book your of the are think that thoughts.

in our the monitoring environments in significantly. suspect We for rate hasn't we're the CRE the which companies good has We around office changes obviously bit their information anything higher negative feel So quarter and disclosed last leverage, quite particularly because more really changed to book, book are operating that these environment. of a about C&I book.

not think saw we're like ultimately, that So level. analysis would we declines presented quarter adequately that as presented. there's we the ACL utilization this crunch the in I customer rates liquidity a things And at reserved indicate I in think -- like

Chris McComish

weeks businesses I'll Yes. opportunities from feel there. revenue And middle throughout We Mike, it's of Chris. you a to out with it's a of And spent lot there's those -- -- time about just good lot few still growth talk in add future. that. I've customers there's our past market the the footprint. that hear out

consumer While related to we some work closely Dave and down of about, say, revenue that those see nothing be standpoint. had instances couple would concentration that's at through. But dramatic. may some to customer really either some talked as from a the slowing things same to I -- may some more there oriented time, a these that

Michael Perito

for and year. That's really just growth And additional -- can we're through appetite kind the halfway spend internal helpful. Thank the you. an minute for on at this this then just here you Is point point? just maybe outlook growth at loan net the of it

of think credit were good here were manageable a ago. the some more more the when have little today guys days sense is XX of bit I where liquidity they and pipeline uncertain a and concerns, than appear You they

qualitative So just either can if maybe broad like curious the just you thoughts?

Chris McComish

again, a time our is teams, our this hearing are qualitative of this an deposit real. Yes, that for with anecdotal is industry And spending me focus in and good amount our out we customers. with

about, hearing of for to lot relationships of want world opportunities want real particularly our spend you it's lot And allocate banks a so looking like that discussion the are there's commercial we in -- And that you're do a and of a and it. lot the capital. growth, our loan-only saying, if where it marketplace it's feels competitor in estate

But judicious a our as meaningful others about we're at to very what industry it's away are in looking clear is marketplace So, smart staying are going relationships and be transactions. in and building we similar way. on we deep the very and do, focused from things

Dave Antolik

emphasis successful. driver of going lend what's add That's Yes. make of right? ours we our money us lend franchise, and deposit to money key that, We in of to key support a our to a And depositors. to

Michael Perito

two stands C&I lastly, reasonable, be the seems then to have great level. everything risk reserve these a just mostly management credit I terms have I But today. a of fairly I don't at the there's today And credits, guys still standpoint from know that it. healthy rectified clarity in you Got mean, outlook. guess,

remain from kind the So industry mean trough your here if of or valuation softer continue for do the I buybacks of kind S&T? perspective

Mark Kochvar

I and don't live, mean anticipate we'll of can core million have $XX under this a I at, good just do think something to supportive that. earnings and We it's still that have we authorization. are be look on left it's

behaves, it the market as Board how see don't think the So as rest get how limit our you. how forward with going and the probably the about with and we'll management We for to quarter, year. revisiting be it then the goes we'll through we price – of

Michael Perito

Thank you, guys.

Mark Kochvar

Okay, thanks.

Chris McComish

See you, Mike.

Operator

Our final ahead. question Navas Manuel comes Davidson. the from D.A. go from of Please line

Manuel Navas

there? Do the guide of you of any progress afternoon. consider in that growth you in good year? the mix you Hey, there how loan single-digits, should that in What trends change demand of back the are do low the kind see half seeing or

Dave Antolik

Yes.

the growth, predictable. we'll year, based So the think similar of by residential the pipeline, driven on mix our half I there see pipeline is pretty primarily back in mortgage

any rates. in pressure We payoff book, haven't with kind that obviously, of seen elevated

I The growth. consistent year. commercial maybe similar, growth in the of X.X% the back see be should So range to half you're think going in X%, that

Manuel Navas

really Okay. helpful. That's

think I have my you answered. much. a Thank questions been very of lot

Chris McComish

you. Thank Okay.

Operator

of one the Please Montgomery Daniel more It go question do appears from we Cardenas Janney Scott. line ahead. have from

Daniel Cardenas

Good guys. afternoon,

Chris McComish

Hey, Dan.

Daniel Cardenas

loan Maybe the production new a yield color bit the little you're on on portfolio? terms of now that just right seeing in of

Mark Kochvar

which I'm sorry, portfolio? on Dan,

Daniel Cardenas

overall the loan Just portfolio.

Mark Kochvar

production seeing the average. low weighted kind on we're new Overall, Xs of in

Daniel Cardenas

weeks utilization few the a third quarter, you line are pickup in in any into then here seeing rates? And Okay.

Dave Antolik

going to Line third level. looks quarter, rates the it normalized return some here of early like kind in they're to utilization

we the what think was in quarter I second more seasonal. saw

Daniel Cardenas

for What should just kind kind back in then for assume the And tax half guys year? of quick Good. a you model. I question the of of rate Okay. my

Mark Kochvar

full is kind of Our like number mid-XXs. year

Daniel Cardenas

then here. Okay. quickly just Great. one on And question deposit trends

or started were of third QX? shift, at kind you of here kind slowdown seen is that the seeing any have we've you As quarter, in the in it pace continuing migration

Mark Kochvar

overall, just mean early pretty been I numbers Yeah. deposit have flat.

month for outsized acceleration and the end month, noticed far. haven't there's could so go sure, the there's some activity way. within that any we towards sometimes been either it's -- But So the of slow

hard a answer any give or we so full acceleration. haven't far, it's it's to month So good a hard picture. seen to without full quarter But

Daniel Cardenas

you. Got you. Thank

kind me, kind thinking of protect Okay. for And that are last out your flatten sheet, of of steps balance sensitive margin? asset taking just like what guys to I do question here you once guess, given rates

Mark Kochvar

$XXX that have some. cushion we do to it's CDs and our taken We and books. are reprice of about non-maturity we've million swaps that have rates received to done, the primarily down short some those. ability either on or repricing Well, relatively fixed deposit provides The

we've stable mortgage is preferences have, bit and the production little on fixed to rate As -- for a all our fixed. the other example, we're things customers seen side really thing more migration doing a is loan on they

down the To there that that on expect wouldn't a provide short that we be to support move some Those a situation. wouldn't in end up movement portfolio on is more rates the of tick mortgage on extent we down that the rate which stable. much down if of would prepay out see and rates in should the curve, short drop be as curve, numbers the

those the we But continue out opportunities that and And model to we should need that benefit and with to do. provide or floating so the for outlook other to to that we'll potential rate. that look things or some offsets keep margin might margin also some changes

Daniel Cardenas

Okay. more Good. just I And one question. guess

it a to growth adjustables, to your in you're loan the Residential what's that books? your seeing of adding the that you're kind that fixed, is On type is XX-year or primarily of portfolio, that --

Mark Kochvar

standard It's XX. but some mostly there, XX mostly mostly just fixed in XX,

Daniel Cardenas

I'll Okay. Thanks right. guys. Great. back. step All

Mark Kochvar

Okay. Thanks, Dan.

Chris McComish

Dan. Thanks,

Mark Kochvar

those over We did quickly. we receive couple other I'll e-mail that just a today. of very through got go questions

to from whether expect other that any The the first fraud recoveries customer had. we we would see was

in to are of reminder, this a At pursuing we about $X recovery first As quarter avenues various the point, a we million. still recoveries. had

work certain. something, is this that that's at some We continue talk have will nothing have nothing on to potentially but but anticipation can that for for sure point, we'll have about we and something that

Thorough for not window question second the we the been the we or program, home borrowed, there Reserve with from primarily have We to not, borrowings has -- gone the have our loan discount borrowings? bank. is, any either have BCLF are The new

was question our I devalued? bonds been mentioned, for whether available bonds, All by SNCF Another as long-term of are held sale.

on impact an So but balance with we bonds sheet. AOCI the held-to-maturity is those, There do have they're market to not all. any marked at

then down was end since change back I'll of we've the final you questions -- the two year, quarters about finally, to got were put that XXXX online. million or had And what the $XX it all together, deposit the beginning that if the about turn comments. Chris That's the sorry? of X.X% XXXX, for we over since

Chris McComish

wrap And everybody and our the I'll customers. In these again, thank good with your look work go and just focus again on on forward up. being we the from interest to -- about to going you back days we're XX in company will Yeah, and meantime, being back to And call our questions. for it now.

you. a thank So Have great day.

Operator

call. conclude you does you, for your ladies This Thank gentlemen. and today's Thank participation.

You may now disconnect.

S&T Bancorp (STBA) 20 Jul 232023 Q2 Earnings call transcript