STBA - Earnings call 3 2023 | S&T Bancorp, Inc.

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Operator

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

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

Mark Kochvar

Great. you. Thank and participating everyone, call. today's you thank afternoon, in for earnings Good

risk provides beginning on to be open the the that screen. as quarter statement button be this as earnings to and these obtained want presentation, Securities of XXXX about by A copy included right deck This time statements Before for I may you slide and This take Exchange panel items. third low clicking the the the download the forward-looking required well can materials cautionary the your language in you right to Commission up earnings refer supplement of can forward-looking in where on release factors. by section presentation. statement a statements our this will

obtain to the also today With stbancorp.com. visiting Dave Antolik, I'd of website these S&T's S&T's and copy to me Relations Investor a CEO; turn materials President. our call like can over by Chris. at are McComish, Chris You now

Christopher McComish

employees employee want proud drives shareholders on our and It's Mark, welcome them certainly with our share in to to to results, also this call. your afternoon, and I We being commitment analysts look our thank everybody, with afternoon. here questions. and thank the all the I forward that appreciate engagement all call. and to listening these we're good you, you. and us .

propelled focus growth emphasize health in three to This quality; our for and making as both we values our performance engagement Before in as in enhancing what of serve good our today. I it's that underpinned this have of to is that credit four, drivers, by a one, the delivering guided solid who talent. we'll communities all around and work get forward profitability; evidenced purpose. further core translates feel the by all how on forward S&T is best-in-class of we and a key results about our This people company into want we efforts employee is and I further progress two, franchise; our move and purpose and discuss numbers, are I deposit by differentiated customers the by our shape the team we're the that way, our of and defined

You'll range. the the with share see though a third interest our $XX net high we or million straight happy $X.XX continued net of decline on at the that in fourth just We're over page That's did very income. margin highlighted it for quarter-to-quarter. income quarter, net by in X top million delivered quartile our quarter [indiscernible] X.XX%, driven quarter, interest

certainly our again levels quartile with X% that strong, our top at metrics capital PPNR well are ], for the very X.XX us return is future. just [ combined Our under at and and also position

Net charge-offs further to bit we within basis well in our quarter, talk range that, where XX We'll little efficiency be. the remained XX.XX%, expected over were QX. points ratio still up it and at but about our

at the loan -- mix with Moving customer of mix you see deposit our flat over can side the showed the sheet. talk We for the balance $XX million $XX I a deposits company about forward, deposits stabilized it into between balance Dave turn shifts from to growth the balances within our quarter. to before bit savings about about sheet, basically customer to of shifting DDA million little and and CD split $XX our CDs of was of million new

questions in it I Dave look side the relationships. expanding balance opportunities, hard customer your on over and work our loan I'll little about our said, and to protecting cost I to have continue margin a what relationships, to bit. turn sheet. proactively those growth balancing we as of while We deposit and forward focusing, talk to on

Dave Antolik

XX% Well, continuing growth of $XXX increased loan or review thank balance growth we estate real was almost see our of driven and mortgage commercial our did million in QX you, This Chris. increases both categories. annualized. in residential And this sheet, by

mortgage construction anticipate and for this continue in Regarding growth we products to to quarters. see of activities, demand and solid residential this to pace coming our the demand and the continue -- purchase-related

are benefit that provides favorable these activity of for closely balance We believe S&T. most this our sheet monitoring and economic the the products pricing for keeping on

as production estate storage, new Our in during multifamily, commercial a result real industrial segments. our primarily the grew balances retail quarter and of

few reminder, we a a our portfolio. office As quarters back, on provided details

segment. loans. the that a comfortable of remain approximately office to with exposure continue reminder, X% our represents as We And total to our

seen not flat that since disclosure that have changes remained segment quarter-over-quarter. in balances We and

our care-related mentioning believe that health and remains with remain we well. also worth that as exposure we exposure quarter-over-quarter, flat that It's comfortable

metrics C&I In we did changes significant in core we that utilization our including and of book, not measure, see collateral any advance rates. like the things

our interest growth the primarily both increased CRE mortgage to loan payoff reduced pipeline books And in RESI current We our these seen based rates. range have coming for we the and and related levels total anticipate in on mid-single-digit reduced payoff levels, quarters.

our points in total quarter ACL described quality. Turning primarily the result when a to and dig of declined during a $XX.X the total by earlier, deeper. assets $X.X now million $X.X compared at to to to loan Mark quarter loans for remained $X.X QX. I'll and grew or over factors XX charge-offs million million growth Nonperforming to loans. were it our of the as basis and turn million X.XX% by I model, Net little that in qualitative of asset

Mark Kochvar

Great. Thanks, Dave.

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

cycle. beginning asset-sensitive XX past continue be net and is third costs, $XX sheet on to XXXX, improvements to . the revenue higher, generating some pressure funding over has and compared basis balance there provided XX% we're of or quarter While revenue additional of million the quarter points almost our X has interest the margin of per significant the In been will quarters. the

and margin XX a including net yield DDA, as interest is X.XX% quarter down increase pace with quarter bringing in the [indiscernible] points basis to points of not to XX asset basis cycle keep The third points increased by of of deposits, rate basis to liabilities. cost total the basis XX X.XX% from second costing The point improvement XX earning XX%.

has Customers deposit compared when since higher mix DDA than last began. this cycle XX% in second the the to cycle Our but of almost XXXX in lowest million DDA $XX That's the quarter. the and remains had declines improved the rate $XXX deposits XX% decline million compared end the rates, the less to in just decline seek of much pace rate were in far moderated. up today. third continue to quarter we

compression We continue the of XX expect basis XX. the points an in interest first approximately with to quarter funding margin to XX of and into fourth cost pressure quarter the

to and we interest Assuming compression midyear margin stabilize to moderate expect the net changes, no fed 'XX.

back-to-back in and due variance decreased compared is this million its customer our LIBOR valuation is related changes the by impact $X to in quarter from to adjustments. program. swap income of This the Noninterest a the other Most primarily $X.X of over million SOFR little third to the category. to on the transition half second. of A in

and changes the in is related the is of neutral. adjustment benefit to that is deferred a the value P&L plan While remainder in expenses valuation of offset

OREO in and had In of $XXX,XXX addition line we a activity category no second third fee fairly quarter. on in gain to items the consistent quarter the were quarter-over-quarter. that, Remaining

outlook fee $XX quarterly million Our range. is in to million $XX the

second in pace. more of primarily increase and salaries full expectations Expenses efficiency was a an in we quarter, normal and incentive expenses continue year came with In back ratio and our to this we're the be accruals XX.XX%, have well in changed, lowered line controlled quarter, expectations. with benefits on as our

of expense back the quarter $XX single lower expense to expect as million $XX that remain we we expectations the quarterly look in growth Our reduce will digits. to XXXX, million to And ahead range. per pace

ratio declined the has a higher been earnings quite over basis TCE this to TCE relatively remains due to strong small AOCI. growth stable year The and points last portfolio. and securities loan and quarter due XX good

are our available classified for all of reminder, sale. a So as securities

capital Our environment opportunities. take for or inorganic and of growth the positions to organic well us advantage

not Our to on conditions, like price and of deploy this asking back economic we time, we the authorization the the remaining with $XX much. stock. for Thanks [indiscernible] I'd along share to under did performance outlook, repurchase call remaining depending of authorization million, operator questions. financial At our the the just turn to provide execute very over instructions

Operator

[Operator Instructions].

James Your Daniel of . the line Tamayo Raumond comes first question from of

Daniel Tamayo

the afternoon, you guys. on the gave. Maybe that guidance just margin. I starting Good appreciate

yields the had the you you or quarter, the curious kind of entered deposit margin kind of Just at about or could of third quarter. talk kind end loan that you costs where of if

Mark Kochvar

trending Again, slightly. it's down

a number. basis quarter full the couple exited So we the below points quarter of

Daniel Tamayo

a -- I And little here. bit about talk then just credit Okay. guess can we

if And the of thoughts Just curious have on then credits participations and/or you there. in your are have how levels shared you things loans books? that or leverage national trending

Dave Antolik

generally in that the into reflected and that calculation. that mean, is factors I the what's saw speaking, in Yes. of increase the some you enter ACL qualitative

So be our conditions customers. that impact headwinds may we terms will are some anticipating that there in macroeconomic of

Christopher McComish

to little shared national relates all. exposure we basically very have credit, And it at

Daniel Tamayo

question. valuation Great. MSR Okay. have in just quarter? And Do lastly, the cleanup you third a then actual adjustment the

Mark Kochvar

you're didn't referring that any we have what impairment or like -- the anything You that. Is to?

Daniel Tamayo

number million change. I valuation just Sorry, was? what adjustment, you actual the $X.X was had the the curious

Mark Kochvar

MSR That related program. was related. wasn't That swap back-to-back the to

have a rate rates We [indiscernible] rate the like and customer the with the X counterparties. difference between between

that was adjustment million. that $X.X So around $XXX,XXX of

market. defined The was trust rest stock in of that that's the benefit

get has market when creates it those and changes. So offset the expenses, an component fees both it liability and value between and asset but stock variances

Daniel Tamayo

Okay.

that just $X.X kind we quarter. million. the Is as right? $X.X volatile of The is [indiscernible] from change that or amount the is So view second non-core the the should

Mark Kochvar

quarter-over-quarter, [indiscernible] you plan. depending how this benefit is the So change defined view on

is a in negative. sometimes favor positive, Sometimes that goes our

measure. one's that So hard to

The other with was in the the quarter-over-quarter just that quarter. second piece OREO gain that on

Daniel Tamayo

that Yes, that no. OREO No, sense. guys. game appreciate got All right. . I makes the I

Operator

Breese line Your next of from Matthew the Stephens. comes question of

Matthew Breese

all, on touch deposits. First I to of wanted

interest have that surprising a X for not probably a of the at XXXX? point, sense of sight kind you better very your all "bottom" really lot we noninterest-bearing about projecting of there's way, kind of you rate I the all as pretty can So bottom hold held than feels want get a did north you -- things this a where of cycle whether into deposits And line noninterest-bearing to in deposits are you like and good or how up it is good where peers. this is. XX% think get for at

Mark Kochvar

support of are are -- that have will business -- developing the think you're some lot segment, I I small very feel right. that. We've especially that. activities with our programs, mean, pleased put the and come management with like into work we a we treasury there's for

But So multiple -- modeling, we're even experiment trying other very will above where lose least active at we do the relationships think is cultivate doing we that we're expect might and in in do scenarios. stay we to cycle, general with as we were . I whether try stay above last XX%. we very additions that though area We otherwise. deposits, internal can we bottoms. to new maintain mean we well

Christopher McComish

you Mark some around of Matt, that some this define and on. the rates focused because actually what of these relationship. which it's of franchise, how our all before been of up know started what Chris. rates on cycle customer we programs number got that health is a just To We've initiatives -- a further deposit speak we've define to we as touched

within space. we've Treasury . about quarters So in focused talented the more people talked previous Management

relationships. as addition some our teams including that mechanisms, very customer measure high that what that, focused managing of we've and inside our words. as enhanced are We've these we words strong Those inside and growing Those proactively product loyalty our very relationship set are as are customer things. In customers on customer engagement. well these our define the delivery got to not would very for those

day-to-day on operating in gives of trusting that relationships important the these business. the customer to opportunity part to way proactive be account and build and that And a operating so the most conversations us the be having

us, you a provide direct to never other, the And our where but allocating so as drive and part that's versus focus. big important can we're And that's know a we of it's to resources. complete X critically

Matthew Breese

out? the rate And you of these deposit total beta this Understood. for lines, maybe terminal you do peak cost expect of have kind to cycle, along interest do a deposits Or where estimate?

Mark Kochvar

at how look a better much We as guidance, out. we we'll because Well, we panned that last do than bit cycle little have the just better think a mix.

we cycle, at around last We're So were XX% XX%. now.

XX%, to kind is of best so when and done. there, guess middle my about of kind the it's So closer said all

Matthew Breese

the XX, I the that it be in stabilize? sounds and you down Is fourth near-term for range. XX the should points Okay. that the And NIM, in XXXX. quarter of know the quarter of like then and NIM estimate of middle mentioned . a basis had Should stabilization a for where fair outlook then [indiscernible] first the kind

Mark Kochvar

Yes.

Christopher McComish

You're good.

You're still on .

Matthew Breese

there. what as we've to past . and be something got what billion sheet looks. the feel kind [indiscernible] discussed I Obviously, like the $X.X will it as not know [ wanted question Balance impact it's there get or of, that close a is you realistically the that could two, $XX I one, just being last billion. threshold? sense billion $XX point -- I a of as crossing that ] at reminder do threshold. in is you this is

Christopher McComish

at it's we're that made look this We've working we to million our capabilities day through. and guidance enhanced I is going impact move team, planning compliance mean million, prepare significantly $XX-some under for know $X and way financial a building risk that $XX of there. for we're $X threshold Durbin the and for quantified billion the quarter. -- all And itself foundation a management million to is growth. threshold kind things is We're of the that we growth. in it, range. number, we our every That The to

years some something the We upon as calendar growth. going there, in organically, celebrate looking we're and we to believe get is depending X this we're that next at time

Matthew Breese

it. Got

it leave there. I'll Great. Okay.

Operator

question the from Your Manuel line of D.A. Navas Davidson. of comes next

Manuel Navas

points get you around do the of stage residual but bit? of Or does about a to parts, a there up of is kind to guys there's basis Once -- lot pressure? ? moving ? It's down? point, basis stabilization you of maybe What Or drift just that are that probably NIM points it up, of NIM couple kind kind initial couple expect little thoughts still a of thoughts a kind some of turn

Mark Kochvar

Yes.

I So been example, higher. up, we're than of a Like ton down rates especially now much mean, rates that there's for right. you're about mean, I parts. moving more concerned rates are historically

put them on in those $X.X a billion landed fixed come over worth over And swaps. come received period they we 'XX. starting like X-year of off out, So off we

some be what have renewing those because And depend reevaluate relief so as the those margin, to will time we'll that come at to going off, that of that those provide impact whether shape on to will and of the are . positions the the curve.

have 'XX now. a should we some well. beyond positive more out right, headwinds a us moving further So you're years that parts There's from now that of couple complicated. very 'XX lot help out between and it's into as like But of

Manuel Navas

deposit pipeline? Do those opportunity or that. growth possibly talent, term new deposit And just appreciate initiatives, Is near the me added the some quantifiable I of new general? talk year-end frame way side, you've on about and deposit kind you've -- you added to in products. have technology, give a you to

Christopher McComish

pipeline a the don't so the measure portfolio that standpoint, to and simply because accounts. in pure customers' that we is change it's a little and dollar in Yes. balances the control harder upon dependent From pipeline things

that, around. $X we say management is going revenue $X by of It's with treasury to we of to from So know relationship harder of translate the management the in these is number depth numbers pipeline things about a number today measuring treasury customers enhanced to standpoint the of really exactly or of Manuel balances. from pipeline products, the we're numbers a itself, that that. We example, the times like for way associated know activities of products, know those, we've and the really perspective more

So levels, very which gives in on we're us time, a opportunities, of focused at point this for numbers activity proxy growth.

capability The have to deposits. are some of that the flow introduced other that tools we thing understand give us

was know I'm the came [ from earlier that $XX company. So we that actually deposits of that gave And a I there million million [indiscernible] was ]million you was stat within other that $XX in growth, the $XX X you that saw new into then to a mix that sorry, $XX our balance bucket growth there million of CD shift, sheet. the

factors So we're we what portfolio, the on trying would to look call at deposit X diminishment.

fewer how existing [indiscernible] X increases just two, full that's and there's company, we're measuring new relationship, in dollars; of then So and it. relationships; to all

whole Obviously, it's know, put a to industry about because X%. there growth tough a balance from year-over-year and bogey down on the standpoint you sheet look you as is

realistic be the big got we've well. we're to how pie is after So into going as that

Dave Antolik

opportunity a there focused customer lot we deposit up base. know a that measuring terms We that within is our shaping what talk primacy we're of about lot latent developing and in those relationships. opportunity is own And on. And opportunity of

developed with and to lists So those the they don't with tools in customers but us, we who efforts. where primacy account, have -- just achieve that's like order are products we've and us, calling focusing primary their and our business do we

Manuel Navas

are ones look you numbers Or you of anything feel across all do others? you across -- giving them outperforming without happy those do away or I initiatives, which are that, feel some them? feel As do internal of like

Christopher McComish

our treasury well, start example, in all time, same and a them that talked our would customers. our year were Some And bankers develop expertise. make in bankers to numbers we enhanced business to has for it opportunities, the banking define efficient this for new build of that an what significant of opportunities business more to easier latent correct? in our capabilities small -- was put Dave place was fulfill opportunities about, job initiative as in branches that an -- and earlier with resulted and those So management teams as they at we in business way didn't our or

puts customers. an more efficiently. compete conversations move teams made standpoint, and added and our from management for payables we're for we An for customers treasury information business introduction the progress there We customer what we there. is ability ability is to largest banking par XX doing just the road. product That more today lead with us the these to talent. pleased on the very with business against with added commercial And a we're integrated that days we are past the books -- between banks put having of the within effectively an the will to our that the biggest the that announcement down So closer

these phased are time. some things of over in So

Manuel Navas

there color to can kind that That near-term is XXX% given towards they now, help great. loan-to-deposit Is maybe this way are approach it. you like that's different a a move target of just -- kind of

Mark Kochvar

Yes.

of that, I for have reduce improvement. because certain we goals don't we to growth opportunity those looking there funding over are is to also some of in Right back be argument to -- want think by the we're of there's to an deposits some the as specific time. to deposit do able that the kind to as quality some opportunity that borrowings embedded wholesale have replacing replace we're borrowings. improve we with margin able adding that wholesale we margin that's and But now, dates

goals at don't So point. loan being lot of there's have this able to frame we value a deposit do that in think we by time specific

Manuel Navas

Thank you color. I you. it. for the Thank appreciate

Operator

Scott. next Janney comes question Daniel the of of Montgomery Cardenas Your from line

Daniel Cardenas

QX portfolio in you securities Or expectations in much to reinvest of some to that going portfolio? how reprice or you color work to and to can loan give scheduled your as are quickly, the securities? our put in mature to is Just me

Mark Kochvar

relatively securities small we [indiscernible] securities on a have portfolio. the

maintain just that So we're level liquidity sheet of with. the of maintain we're size comfortable that on-balance looking to to a

and quarter. million $XX typically in between we off cash from rolling flow any million maturities given So to $XX have anywhere

book maintain look So approximately to the where we in reinvest would securities is that balance at it to now.

Daniel Cardenas

And the quality maybe your your like All this if does look look then quarter? right. quarter? trends additional some compared credit me could are [indiscernible] assets Great. what give And last of level to classified you on watch How the at list color side.

Dave Antolik

changes reduction. terms a that's has the the what as starting and quarter-over-quarter. would rating ACL. ultimately NPLs, remained Yes. loans the relatively we level the you And stack reflected rate saw in credits as the mean of I of stable. we The of ACL be . Any in can in C&C -- stable see, ultimately in with remaining watch a see percentage risk

Daniel Cardenas

the of it past what this those take of Good. deposits rate in? $XX deposits on kind average were won then get new to it million And get did of in terms quarter, did those to new that take

Mark Kochvar

Well, for was that specifically $XX CDs. million

And so those. -- probably to mid-Xs secure between to our Xs range low those

Daniel Cardenas

terms your competitors Okay. does you guys the middle put higher of the that kind in pack, And of end where of of pack?

Mark Kochvar

we above probably middle mean pricing exception program. say just Let's have an overall. maybe active I

with as that the we relationship help view we and So a build customers. to way enhance have that

is. on sheet rate customer may the on what rate the and relationship the the exactly gets is the what not depending So the that opportunity be

Daniel Cardenas

Got it.

Okay. your was quarter? the then AOCI end what of And level at the

Mark Kochvar

It by about XXX, [indiscernible] $XX million think, million about, did . pick around over up $XXX I

Daniel Cardenas

Okay. questions I'll back. have other asked. My step been

Operator

from the comes of Michael next Perito KBW. of question Your line

Michael Perito

or A are into but asked And think any early rate about expenses and NIM couple but just for probably wanted clarify. sounds not one, to you budget it's I a guys been part to persist and more 'XX. commentary just next too it specific, just lot if like the pressure next get Number of of things sure around year. year curious will high-level willing just of you're to Obviously, the starting investment. I'm answered,

impact that around making and kind about growth planning the of rate or just does of 'XX. line the you any as of of were investments your in expense So kind we think time scheduling on

us. Just kind commentary would be guys curious if for any you of high-level that have helpful

Mark Kochvar

of we've on It was added competitive, expense mean side, early a this expense higher driven. have the people. also those. we market We've year. lot the of labor in very address growth And I'll was the -- A improve. especially some that that did couple Yes. I year. seen

level staff have going in. we a So higher

We're range somewhat. the big at growth this monitoring in that X% more year. driver looking versus X% So the is expense

we be down bit. quite expect that would So a to

those a things. have things are has we on it think on we've very important move and we the influence . don't and that timing ahead I had decided because things to work to big imperatives Do going of they're want

Christopher McComish

addition -- a move to really capital into and balance are we and conversations come And of mean efficient we that's company sheet. forward we come levels top marketplace. strength I that as very have in there We PPNR margins gives and Yes. of in the is the us opportunity disruption And the strong. this with this into Mike, and we've we we attractive situation our to believe bankers, marketplace contracting. believe a is significant an have with of the that, build On bankers that the teams model opportunity and to 'XX that to an the we're move for to only as not going dependent future number we're but upon strategically right ability we operating to continue to and deliver be going the into be customers, people. got that's opportunistic out, thing and going and business for employees, opportunities to look and the this of to build to into build out, an

Michael Perito

initial environment, but that's now, Obviously, maybe it cut rates there's in I the margin? just right curious seen obviously, bizarre have and analysis, a And historically longer Got to period rapidness to of kind not honing unusual terms analysis the question what feels saw which And the week, short of just I so rate rate for then gone That's right? but is of increases. static in relative helpful. Mark. the what kind this it. do rapidly but would think uncertain, consensus guys around if have there's cycle, in right, you in how uncertain -- like up. which thoughts mean like any higher a the in for on environment's probably an of the this we we've just realistic time like the then And it

have thought any about that you Just you you're at offer? curious willing all to if context have do and guys

Mark Kochvar

I that few 'XX, as scenario at the kind our much I'll baseline, a out going longer. we exposure though about all least comments doesn't time. we through That so are said, guess the we're mean think our asset-sensitive scenario. us where a of that make compression. not Fed some to we have I because the that, curve the at we are of the just just But do a for the kind front-end still is for that given that, of goes uses margin of higher to that Yes, down better have on here, hedged with rate from of is I all away. front kind some bank, is than Even of our

with we have rate So or than we're XXX a still they cut better the higher side, margin off the on to on environment more XXX were keeping points, were pace front if end we difficulty basis would that. with

than a challenge for a baseline better for scenario. Fed is higher So compression down us a longer, even though still or on it represents

Michael Perito

guys. All helpful. right, it. Appreciate Very

Operator

to call I closing remarks. Officer, would the for Chief Chris like to turn McComish over Executive

Christopher McComish

appreciate and Okay. moving of to the XXXX. strong there's productive the Well, forward a a And year again, We lot on the engagement thank the proud quarter. you. look to the questions. finishing analyst We of community really feel and to in

us Have So . of week. rest for to afternoon. the joining thanks this everybody good a

Operator

concludes conference This today's call.

may now You disconnect.

S&T Bancorp (STBA) 19 Oct 232023 Q3 Earnings call transcript