STBA - Earnings call 4 2023 | S&T Bancorp, Inc.

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Operator

Welcome to the S&T Bancorp Fourth Quarter 2023 Conference Call. [Operator Instructions] Now I would like to turn the call over to Chief Financial Officer, Mark Kochvar. Please go ahead.

Mark Kochvar

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

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

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

Christopher McComish

team I and minute customers to the on also very call, employees, was historic our and everyone. are Mark, leadership ways. -- year and S&T we results with listening is that want be thank take being results afternoon, also us in forward certainly employees, you, to shareholders, here and thank questions. I our to these the them. XXXX call. To appreciate your look these these engagement are good commitment analysts to yours should in many you what proud the of drives very, and financial for your a a

produced a we in second record income for As year per row, and net the earnings share.

almost feel good results. very company that certainly is about For years XXX we old, a these

the on company. franchise, health be progress our that by good values the deposit growth that and also purpose and values I the we as and guided but the where are to core deliver best-in-class not term. I'm deposit credit about any our of our the express franchise core shareholders, of on This S&T's we drivers progress in who solid into these on to define we forward of XXXX of of the profitability, all just drivers of our I how performance, to 'XX, purpose aspire remarks for to year, our to on numbers numbers, saw connected X. my going quarter get are a performance. and quality fourth we people Before over or great we've made, And and long end focused quarter centered begin the Page one in feel want in

just above metrics, record our $X.XX. under For again, X.XX% the XX with XX%, ROTCE a respectively. and of $XXX an efficiency was profitability with EPS an metrics, in year, and return of excellent achieved net EPS, PPNR including income million, We top-tier

for I above as interest net X% said, excellent delivered an XX%. the margin Our efficiency of and we remained over just ratio, year,

share $X.XX Page made linked basis. million, up or was QX a to for than which we and quarter, $X.XX from X the on up a quarter more Turning and $XX XX%

return Our with a for ROTCE, X.XX% excellent, at relatively very remained QX. strong PPNR again, XX% flat, while our metrics a were again

NIM Our some see did contraction.

some provide above remains interest Mark strong. flat, to at quite basis were income charge XX $XX remained efficiency points quarter, million our the is color did additional However, and our for going still but ratio here. Net rise, net offs while

our X. of X% loan Page of saw over annualized, consumer both to We solid lines Moving contributing. growth with and business commercial

X.X% deposit we quarter. customer about in feel deposit growth under number a good which of our very growth produced side, the On just is annualized, $XXX million the

the DDA on during that. quarter. we shift slowing the mix lot the Mark while is decline of the NIM details provide also of continued, stabilization a going to balances, While rate see a do again in more

income come talk remarks. to more in certainly about statement then and a the to further. I credit And it over and turn about Next, the capital I'm will look their Dave you. following about forward quality. to questions, to your book over to loan Dave, Mark bit little and also talk going

Dave Antolik

Further good reviewing sheet, was was and mortgage our real during estate in afternoon, saw storage the driven we Chris, X.XX% multifamily primarily you, This our by Thank and of $XXX loans balance commercial QX. residential growth everyone. increased and million CRE facility activities. Growth balances. increase or book result by

continue We economic these manage in to declines health has our the hotel, as impacted and office balances, through segments. changing that experience we care landscape

focused and well pipelines annualized continue current our the XXXX. for as management are will be coming adjustments managing future support our in our key as in our or we digits mortgage to -- that collateral experience rates, loan relative segment didn't well our and in commercial performance small approach to half on confident in activity. progress there we've exposure made franchise, quarters. In with back C&I total serve deposit any changes the indicators, majority We book, and to of overall utilization of advance for enhance the we Also, that of anticipate our exception mortgage us meaningful in purchase of of we around mention see both in XX% our in reduced balance past is residential growth expect the to $XX million. A resulted the construction-related an mid-single that Based year. book in business and also as years, to to be would commercial theme to C&I will XX% construction-related further residential some some and book, our strategy to growth floor to seasonality I'd continuing for this of from on growth, plan lending. utilization, borrowings products the portfolio our our that demand low which growth in And and demand exposure books. Conversely, increased we in CRE the with growth growth

quality next page. asset the on to Turning

basis increased at now points X.XX% of charges XX rating we call Mark. is ACL NPAs $XX manageable remained turn or believe year-end. I'll accommodating remain million at the very gross at $X.X saw annualized, loans, and the in we and that stable to million to X.XX% some the over moderate relatively what $X.X a Our the in and million quarter. Net reflecting were loan growth improvement stack

Mark Kochvar

Great. X, Thanks, interest net on Dave. now We're Slide income.

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

and points pace, points there with of X on from sheet XX shift the interest increase quarter net net X.XX% XX in not points of to our basis of the been be improvements interest beginning asset X generating liability. The past as continue or revenue quarter, XX to quarter funding rate While over higher, keep the compared $XXX basis costs, beta some rate the million are provided balance quarter of margin brokered to revenue basis has XX to cycle. The margin asset-sensitive X.XX%, including down basis basis deposits, bringing and has of points fourth earning cost is will quarters. In pressure costing significant total third $XX.X per yield we remained DDA, of wholesale cycle-to-date a XX%. We the by XX.X% did the fourth to this borrowings XXXX, to deposits. of million about increased improvement points additional

XX While increase deposit XX net of cost did no basis and cost. these the point the same about about the at were the total points had interest for it impact basis account in margin, on

end XX% pace continue has to the XX% but in we Our compared to XXXX, mix deposits the higher to just rate just in deposit seek rates, when of much today. Customers the moderated. compared up of had improved remains last DDA cycle under

X.XXs. continue range All of net first in quarter. year, cost interest the expect ] more in [ pressure the We funding were low the bottoming fourth half monthly margin with consistent three saw margins midyear. We net the out interest to a the in the X.XX% by months fairly individual stable in

quarter XXXX, though, a from first of we, funding perspective, many along cost CDs. amount repricing a competitors, have with be of The as challenging will other higher-than-normal

million the million third. an Most The was a fourth quarter income. of the increase gain. OREO impact We Next, of in the compared the in from largest $X.X other $X.X noninterest saw variances category. to

about noncash of its of We in a adjustment changes for swap The transition $X.X million. a is from favorable of accounted on plan, SOFR of additional back-to-back fairly of this about the our in impact and had valuation and also P&L-neutral. Remaining related the $XXX,XXX variance. are A and adjustments adjustment over line That benefit half fee to deferred positive the million quarter-over-quarter. is negative is category higher quarter-over-quarter QX little quarter program. We which the adjustment an third of LIBOR to valuation $X favorable of $X.X a variance value favorable to million. expenses resulting is items as due of customer $XXX,XXX, in from the benefited in remainder offset consistent

Our is quarter. approximately recurring outlook XXXX $XX going million per fee into

and plan than expenses, do quarter, expenses salaries is third fourth the which elevated came about in operate in up expenses third quarter, quarter. the increase million in The the million higher to benefits. We in the in and $X.X self-funded quarter. $X slide a somewhere medical primarily Next compared fourth were stock

of the some While deductibles, activity. of timing we did participants claim to experience unusually is higher reaching that seasonal due their

Incentives all finally, the quarter. And us mentioned for the of deferred quarter expected, $XXX,XXX aren't million rate items at the that, nearly per I $XX higher $XX to the with the we increase. After accounted of change same offset run better $X and the another million fourth likely full strong levels, first year 'XX, value expenses a to plan million in by than normalize were given performance to levels leaving also activity expect about three as in in the of the in earnings benefit these the range. repeat in quarter to fees

this The capital. AOCI. that XX increase basis increased points to TCE was points is quarter, by due ratio basis lower of XX slide Next up

a Our TCE to portfolio. and earnings remains securities strong relatively quite small due good

AFS. of as securities All our are classified

Board advantage or opportunities Our for environment $XX of our the capital to program organic lastly, inorganic the levels us way. And will Directors share come may repurchase take of million. position authorized that growth enable us and new well a of

look the back I'd of and repurchases much. performance to economic financial very cautiously outlook At time, for some this on to instructions asking for turn Thanks. will over stock. Thanks call and to the conditions, questions. provide We our depending like the our operator opportunities for the price

Operator

open from Daniel Raymond Your question [Operator floor line The for James. now the Instructions] questions. from first is of comes Tamayo

Daniel Tamayo

outlook. Maybe we NIM and NII the start on just

to So appreciate basis that X.XX% outlook outlook margin color rate to you gave to expect the on the bottom XX point cut you have how in What into the expected NIM I And or you react rate that? mid-year. curious baked each the the just is the cut? then rate range

Mark Kochvar

our impact basis, we that, decreases, our [indiscernible] about from still front We basis net X% end in X.X%. us at lot look it, We of -- we exposure were the to increase some to that as annualized an negatively. have by curve. in will will a income XXX on don't points impact every that the interest have So of

of with timing we if Fed impact. But rate the with the I sensitivity So on sorry XX Fed X.XX% uncertainty some is don't do pace point basis that the to see the to the any that just a down, -- outlook have increases increase, there. we that progression midyear depending pre and due have

Daniel Tamayo

Okay. gradual? of baked And the is an that point kind basis XXX into Or immediate what's impact assumption? or that impact,

Mark Kochvar

but an like immediate be annualized. would That

you the down take So for -- the example, average if would basis XX that for go the recent XXX past, points. of year, us like points, by one basis

about of expect on margin would X.X% the calendar for half we income -- for net impact or that the year. interest So

Daniel Tamayo

Okay.

the would regulatory digging you that keep Is were you But you situation do that disclosures might mean sheet something managing I think the actual is of Or occur. to here. what that don't scenario? be for just account differently in to in is some Sorry balance realistic? curious,

Mark Kochvar

What regulatory disclosures? you mean do by

Daniel Tamayo

disclosures in point are that down regulatory XXX the give basis Just filings that the sensitivity scenarios.

Mark Kochvar

expense. actual those. to be is do dependent mean of reflective would are giving outcome assumptions I able kind you be pass on our the I -- mean customers of those the interest form on declines rate going we to how We in of I'm the to

be We -- we'll able do also built that's And that are sensitivity have analysis. assumptions built that. in to how betas those in in with well

at end sure your perform getting of if So not on those at the the against we I'm assumptions. depend I'm how question. well day, will it

Daniel Tamayo

it. appreciate think No, good it's I a I Yes. answer.

on just side. asset the Secondly,

low the, think, substantially out? I mid-single-digit that growing are forecast portfolio to you're here assuming loan bottomed, on I -- be with you appreciate loan growth So the is growth going securities from to

Mark Kochvar

Right. be It modest. will

mentioned, Dave low. assumptions growth loan are As pretty our

the size So we securities securities not the a would change of book. on of expect -- lot

Daniel Tamayo

the greater any $XX I the thinking I What guess would million. the you're thoughts But within just established, that appreciate in color have what you would if normalized that on -- buyback drive maybe a Great. the of Okay. $XX you there. of about or million. lastly, use using terms either utilization, a what on that? on

Mark Kochvar

Yes. I mean our think we in we're position. using capital, preference for good a

work We a from. have position robust capital to -- we very have I think

preference for organic Our and is inorganic.

it that. we has our term. But be kind choice would for ] we comes when really buybacks look don't the that price long third the worned think So over action of to [

higher So event given the significant the I capital given go mean to caused a be that we'd probably that oil down, to about recession protect potential in buybacks, equity, need we would a of would probably market repurchase. for prices be cautious felt that, and if a where scenario. But dislocation, of was that we loss short jump opportunities look at the to just place in it

Daniel Tamayo

Understood.

Operator

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

Michael Perito

couple -- or of guidance clarification a Just some the questions around around of commentary. comments rather

consideration competitive pipeline, just into guys get kind level provided you're a three? of you you context. based increased layer growth, take low all costs, deeper, just loan the On of Just to little kind digits. you what on that if taking the wonder how today? that could the single seeing funding a response Is do I

Dave Antolik

Yes, at and where primarily enhance franchise. that complements looking the making And we sure right? the it we're point, pipeline also to this deposit desire mortgage residential to space in at the our participate want

sense make So we're looking for they those activities it's and not and growth at that they're growth. sure profitable make of just hard that sake the and

the be We've is focus commercial, got business got place. our that going teams are on growth. So building. to really in We've pipelines small

commercial feel the comes that's there. But activity seen can of our confident you've the from. pretty year, growth as So generally half we I that and to get come where the tends in back historically,

Christopher McComish

Yes, some marketplace. economy analyzed the remaining relative the but good quarter seasonality slower a in that's guide certainly sheet. our And Mike, don't the the good typically, the And in marketplace, see balance the the bit we is seeing there's to we've we're the unreasonable, and rates way to in growth growth to what first and in real general little than activity to we opportunities want something quarters.

lower loan the the of growth and of range part about sense. We that we've a So in lot past makes mid-side of lot kind now. that's and the that couple sense quarters, growth quarter the good makes of of a of feel really right that the past had

Michael Perito

and like Got like -- NIM Helpful. And in that far it. guys on or the to of then grow how mean is midpoint that side deposits on Like still out deposit the looking on along kind you where are kind much bottoming year, that the I are cost edges, trying at of the things? you to reprice versus customers legacy coming guys and in to higher of cycle? how

Christopher McComish

if efficient approach through say really Mike, doing for all when that able at to performance, -- process feel very We that a same as margin. could through while everything the customer built to our pricing way picked quarter. We competitive with closely got rates year that would I retain X manage Yes. [ deposits our the and look through to handle manage be very marketplace the beneficial that be working the significant to to being intensity We you to we we're proactively and good to surveys in the our took the is sense. Fed how as funds and customers, very was about the of ] seeing third experience the time, grow and it up, make we customers XXXX, that. in of they be

that's couple as a it everyday in the while, distribution would customer in business a to that's is work management in within well base we've the -- particularly activity. there. and capabilities our quarter have been We million treasury things. One, as customer notch just of we've and -- networks deposit well expansion as new some of focused the had still deposit it's of But of a will there. There's a continue representative $XXX best of some lower the -- out say the and day-to-day, outreach. treasury development increase may earlier of around as two, commercial products products doing that retention lot helped year, been customer wallet stay it's on growth worth customers I than and of intensity

Michael Perito

lastly And Great. just then for me.

like it page here? the least to turning cycle stands maybe there's mean -- of still guys group activity? a -- I guys market M&A currency market for performance bit what here. even where mean pretty close Any today a You feels the the you Would I and to actually... at some have relative thoughts, love Chris, updated kind side. bank decent smaller were on little you're tougher hear seeing

Christopher McComish

Yes, I that seem a talking where earlier it, I it about, would you people described year, about in to I've weren't words tell different I about than bit the would characterize they as talking little But using you're way would. talking it. the be -- it,

on we of functions foundation and other X And we've consolidation that's and and And to to of so that for -- growth. That's a the to done. Mark almost lead solid and here build those the in opportunities. we've participate and about growth absolutely be we going able are years yes, foundational that it's work, expect the areas as years, talked I've to work desire bit now had been attractive little the we to the great be of the just expense and forward from able X.X been and and also think that's and been company more I are the 'XX. be to talent but to a both move infrastructure, we line, opportunities standpoint, into a of management lot 'XX feel where company, front risk within in growth of support adding built

Michael Perito

appreciate I it.

Operator

of question Navas the D.A. from line comes next Your from Instructions] Davidson. [Operator Manuel

Manuel Navas

Have little a talked, bit what last added the are rate the bit on added kind kind more NIM of thinking -- little closer about you've how What a can swaps? talked some on perform the some you with down? we NIM since happening. more of more to way past, you cuts In time protection,

Mark Kochvar

We on reduce at something haven't down. us you of And we've depending had it, look some continued deposits, that loan fixed add the are way to how to gives our any in non-CD, more exposure. but cost swaps, the unfortunately, especially rate on those increase

in to last the sensitivity last So cycle, half. to reduced the cycle about our rates by from we've now,

the swaps though it is have the I of due a that previous about the mix before, in of still float from cycles to due we was talked that things -- mix about and have to to even loan fixed standpoint. the half what So exposure deposits we better and better that

Manuel Navas

that. appreciate I

Chris -- talk some ratio where Is on core doing. like -- Do side? it volume improving? it the is? you're about the you excited kind deposit was can talked X.X% a Is keeping loan-to-deposit Your the and about you -- about the that growth. bit deposit up you little trends that to that all tied initiatives of Just of see

Christopher McComish

Yes.

not, So had absence we it is level certain ratio believe the of their a for it's -- been focus we've the at firmly to or relationship a while. whether stops and starts that relationship. It's keep customer loan-to-deposit a with that the deposit

we've of of our customers, that's data And We've lot talent. work we've product. customer and standpoint done within outreach more us allowing to and more our we And a And a company. which company of a lot believe, be from thing spending have positive a those so the added for proactive lot is a from built analytics opportunities. targeted with standpoint, customer time

really relationships, we strong Scores If the that of you from standpoint, we've and and got Promoter us have some an gives expansion Net our customer a look things experience opportunity. at

backing or their we've factor of on to up, continue the seeing, of and us you're -- deposit team the trends. things the have, set, that all into goal we those growth those is that So and our is skill their capability data got information product that that some that focus,

Manuel Navas

down? appetite loan [ last appreciate rates I is do of growth understand you speed. for improve pace kind your like seasonality, loan My they your Like to -- some kind I there's come that. -- but that of rates how rates do on impact ]? question need if

Christopher McComish

in argument I'll and worked where you most for looking add that really slowdown through them. have to there's for our want environment. They're tell growth to fast, to customers. able are it's the of to the really but rate which a being in the in loan don't for slowdown part, might we focused. I do economy, to the a entire -- ask down deliver of lot have at right be Dave, team and cycle, rates they've certainly could know, I demand one that's But don't the add? with David the and attuned be And if in, for and Dave more a to rate the you company go time conversations jump being the companies stay work industry. I might this that talent done right with

Dave Antolik

Yes. refinance in a being reduction changes dramatic I don't some significantly might rates, cause term see is in unless impacted the which activity. growth by rates, there

I think know understand where We headed. our customers. they're we

And what to Our team the job is out that help goals. adding is rounding them we're to the achieve relationships then their making on we're focused focused sure and on.

loan wouldn't I relative X, to and reduction rates. in and growth and get X X put together a So

Manuel Navas

Perfect.

Operator

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

Matthew Breese

Just follow-ups me. a for few

of deposits is first immediately? The just proportion portfolio reprice of what the and what loan one proportion

Mark Kochvar

kind side, reprice the On it's low XXs that immediately. of would loan

isn't -- on going to at product really on we funds, that one isn't very point, -- or was this -- into changed cycle. suspended all. We there the side, but that immediate side, there deposit at that On had Fed the a much the most tied we

we've done some exception pricing. to, So a we lot have, made Dave -- of as alluded had

through of it's go So reprice we'll go are work a a more that rates book. down -- through lot we on basis but and like one-by-one feel as those, will down, that

Matthew Breese

Got it.

Okay.

Mark Kochvar

brokered And down $XXX pretty of there's though. borrowings, of Most a that do immediately those, a our all fair of much deposits. all of reprice million of abilities going our are that, be -- we have to amount will

Matthew Breese

broker, core betas Okay. rates And for as expectations are decline? excluding the what then deposit

Mark Kochvar

decline? rates As

Matthew Breese

way the on Yes, down.

Mark Kochvar

Yes. I haven't mean we fully out. that modeled

of going were pull of push there's little yet. and were little probably bit bit not not and to all from to be a where Even if move of they we to -- I ever a have have rates certainly think ways our a still higher customers gotten rates down, go.

on So I net from that think the rate side initial down. we'll be deposit -- the response

first The of not I high very cuts expect. probably beta, couple would a will have down

Matthew Breese

one And curious then Every right. threshold. we is Got $XX in was billion And All budget that quarter, I me. to it. for -- a closer last get it little your incremental to cross all this And $XX remind necessary and in billion of year terms organically then to a or just expenses, us the whether cross planned or through kind XXXX? you of details Durbin deal?

Christopher McComish

a just has growth, Well, the of expected would out map could past, people within calculated out in see be you certainly could standpoint approximately. I but our that could been for Durbin that the $X asset a we've -- XXXX. that and the the that. it done lot the say the end expense has infrastructure to you $X expectation side XXXX, million, work number of of on just million would build from by we've the Mark

from got are additional the do cross So I place. work, risk tell go then standpoint, oversight, in in and of those management three an do we're We've you that defense, that there. would things got We've the teams infrastructure you you you, there. place. don't And essentially regulatory the to prepare all lines

weekly, that's on big the of from run needed how is So daily, going a dramatically. to there's no investment change basis place standpoint we monthly the

growth, for organic relates prepare focused, we doing to or inorganic everything the opportunities. time, over lot organically while to control and it where have can we're inorganic, that's As same we at the a more

Matthew Breese

Got it.

Okay. all it That's had I there.

Operator

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

Daniel Cardenas

generated Can to fund the securities expected you be to Or remind me into growth? to are that loan securities much going portfolio? flow put cash that going from quarter portfolio, each is you how and your use back is

Mark Kochvar

Probably and of we're we'll keep level, depending to We do lower. On securities the have at range that flow think asset keep we'll probably in I on we growth, quarterly portfolio. million $XX to to where maintain don't portfolio, But $XX going add a the bit least basis, our just it's we that bond little might into that liquidity levels. quarter see relatively portfolio, that million at -- coming small asset so kind securities a as I if a said, back. the reinvest of any per cash --

Daniel Cardenas

that remain outside back M&A I where in would then it and opportunistic, maybe Pennsylvania? the going Would of focus state? guys you Okay. are And be? to go had question know you the Geographically, -- just you the and earlier. Would but

Christopher McComish

talked We've our and Dan, core contiguous No. our, about markets.

we the love we're very the Pennsylvania of So that and is inclusive know one geography Ohio, which and well. is we in, marketplace State the that of

And here so headquarters focused. where to our and of be that relative kind geography we're general that's would

Daniel Cardenas

And would this for for like institution? a you be more deposit Will place? be deposit-heavy looking

Christopher McComish

again, their defines base you already geography or it's up. starts typically, or by that place they their do deposit most side power for enterprise of represents But our opportunities share the quality of infill where geography and know whether It customer lot where Yes, with area to earnings an a to in greater deposit deposit need may and the long-term an understand would start company. well. understanding the stops sense. And as things acquisition, nature would of presence. I think expansion potential be you're want start have with that franchise that obviously, -- well. franchise -- that a customer the we that's additional deposits, go into be picking We on quality into the heavy, then a in the of and to of the make a it, organization, our just additive would things Those strategic fit asset a the driver like greater the good because, relationship thereof that quality if or would deposit this the that

Daniel Cardenas

Got it.

my other Okay. back. I'll been questions Good. answered. step All asked and have

Christopher McComish

Okay.

Operator

closing There further for over time. to the turn Executive questions Chris like are this call I would Chief remarks. McComish to no Officer, at

Christopher McComish

X everybody's Well, to we and thanks. and if at really, dialogue we're Okay. certainly of attention follow-up head XXXX 'XX That's and we're further. Again, really about in this everything And those performance record that years to we're a and as want really optimistic your engagement. quite earnings and in earnings and appreciate We thoughtful deliver. proud we all share. and available questions been any and listen, has got are you've achieved execute on into per row that record doing

So your and I a thank everybody you rest of the time. for has great hope day,

Operator

concludes for you your This Thank conference today's participation. call.

disconnect. now may You

S&T Bancorp (STBA) 25 Jan 242023 Q4 Earnings call transcript