STBA - Earnings call transcript Q1 2024

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Operator

Welcome to the S&T Bancorp First Quarter 2024 Conference Call. [Operator Instructions] Now I would like to turn the call over to Chief Financial Officer, Mark Kochvar. Please go ahead.

Mark Kochvar

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

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

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

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

Christopher McComish

and the to your to We employees, Mark, this with us thank the to and thank you, call. afternoon, look and afternoon. welcome call good analysts listening also others want being and shareholders I certainly everybody, we forward appreciate the our afternoon, this questions. to

S&T's about we progress to express the that this purpose feel to our shareholders into that's for the customers, continue and Before good we that and I communities centered strategic numbers, want how we've purpose focus on get I people serve. on made our forward the how is delivering

that road and these executive almost The inspiring to A groups. our me team. where our few and in face of weeks in X,XXX meetings to X-week were leadership commitment trip all employees able energy, displayed truly ago, an up entire speak both engagement with wrapped we was to face we they small

core quality, to of we core and purpose health shareholders. forward level of engagement talent for of credit and our our Our connected the deliver our where are teams deposit profitability best-in-class focused underpinned people the solid franchise, by performance, to our and growth drivers or

America's recognized go we'll X America's in banks through further X our that we saw numbers and of of just all and in and the loyalty at employee to mid-sized broader services the Forbes for and employee second financial evidence companies from QX, row engagement. this loyalty performance were award looks than United X, year of on employers addition perspective, is In the best by Page for this in a as we is financial as a best recognition. progress States, The

Page on quarter X. our to Turning

income a consensus which You'll million. $XX see ahead that $X.XX over earned about we is that with share, $X.XX net of estimates

excellent remains ROTCE, almost were return our XX% metrics a and $XXX. PPNR with Our strong at

net interest margin strong. is Our though very contraction, did some still X.XX% at see

for points of last of of is also color quarter. million provide of what income bit was year. things less further saw little remained in the interest above X contraction The -- $XX And few will looking we Mark credit there QX movement. perspective, in a here than would a net I from our a basis half minutes. at

here of in a manageable few is dive deeply a exits. Dave to primarily very it's However, going to couple minutes. more and related strategic

in time to also Page provided have CRE a that into you added where would This more previous I portfolio. to spend insight minutes. color we've in in and information we on with call again, few X, quarters additional out the exposure. line our is relative And we'll multifamily office that

us. growth quarter quarter see deposit for for loan that muted, Page meaningful the is typically we a was lower growth to X, saw loan Historically, you'll QX Moving growth. however,

about. feel On deposit a the than growth more was is deposit customer we very growth producing $XX million, over annualized which side, X% good number

of see the balances remaining XX% balances total overall with did of shift in deposit further rate mix strong DDA continued, the at slowing in While balances. DDA decline we

talk borrowings to in interest reduce now it to our Additionally, over the had I'm turn on our positive forward about to your remarks. which margin. obviously quarter, to loan income more Mark $XXX capital. and to net color million the allowed you. a Dave more the their customer look to going We on growth and questions statement after us by book impact quality, Dave, will provide and over deposit credit

Dave Antolik

Yes. Thank you, Chris.

of the to of reflects to result results that reduction current this X. like first direct improving teams being and the is credit our risk I'd in Turning and some and environment. quality asset book on amount economic the in by The time asset quality, done Page work presented the slide ACL loan credit to commercial significant discussing manage bankers spend is particularly for quarter. our reduce

Western workout progression Pennsylvania a $XX the NPA We sorry, of as ratings million The from exit, during $XX commercial charges estate book. the strategic in level manageable some of with improvement or points. the our the via company remain this in to stack Chris quarter X for those combination our Western operating XX to remaining assets the but Net $X.X relationship account improvement process. related have to CRE seen in were coupled million company very the basis for was of and of exits, modest of quarter operating a X through of related Pennsylvania increased which mentioned, loans at majority a strategic real million

actively engaged defined strategy. and that we're this execution in We have of the exit a credit, strategy for

of value loan included with granular of most and Starting this based the we've on available. size mentioned, additional portfolios. multifamily presentation office see with XX% Chris details our on office, segment Page Page appraisal $X.X on an recent loan the and nature to of X million As this average regarding you'll X average and of X

district and that geographic to to important also assets exposure of note our these limited It's business central distribution properties $XX totaled million. that

and and group segment, of of loans largest million located Looking Pittsburgh, at $X $XX loan the in Columbus and MSAs. Buffalo dollars million being majority million that that the it comprised XX averaging totaling the $X.X those is in

information to primarily made within your is adjacent category loans the chart of year. the limited exposures in Digging is XX clarify this attention detail This on Pennsylvania. page X maturities exceeding call Also to the large the concentration and included that represented year. reflects page in this our Pennsylvania defined the million. $X like that other states and individual on into and to up are market this by of pie I'd maturity are next any

X the nonowner-occupied These exposure and note insignificant. our loans And totaling of in over $XX include service that debt there in of loans. million, a X million is segment over ratio properties, coverage average service these X.X% entirety I'll well debt office the is $XX also ratio construction coverage loans whole, X.X. over for the

X. Page to Turning

statistics portfolio. multifamily to see relating our similar You'll

we XX largest you exposure average over X.X displaying evidenced loans an X an granular equally $X office, very with million distribution. see an ratio average coverage average debt this by have and $X service with reflect As million will of In geographic X.X. ratio an as size segment, that exceeding debt the of service of diverse coverage

at very that These the have debt and have concern service million stabilization phase. limit these assumptions we are this coverage properties we construction ratios We and underwriting exposure projects time. in versus our $XX capital. experience X appropriate monitor lease-up exclude their stabilization representing top-tier in still make this who approximately that lease-up borrowers no number And and the and with to of loans

quarter. outstandings have $XXX of In end of addition, the we million million construction at $XXX multifamily with commitments the totaling

of Ohio deal these Maryland as well contiguous construction in loans the of are Delaware. All Pennsylvania, and as states within X

this We us. continue a to a and performed for very outlook multifamily for these portfolio have positive properties has that's been well

deeper. categorized and portfolios office and limited multifamily both Mark NPL to over it classified a have Finally, little loans. dig criticized, now turn our I'll to

Mark Kochvar

On Thanks, X, interest Slide income. have Great. Dave. net we

as an deposit last first moderates. net pace as of quarters The is line improvement points over with the which the X.XX%. shift mix mentioned, our several exception in interest quarter about terms represent Chris basis That's and decline. margin expectations X is quarter. does last the from of It pricing rate, in down

and points see in this about basis also X that's in funds up XX up slowing XX page. prior of Cost funds increase It We points shown of bottom of basis is in XX was the the the quarter. cost first this the left at quarters. the

at allowing reduce customer emphasis to on aided franchise the mix keep to in wholesale us deposit the and more expensive growth returned net that strong XX% DDA funding. Our deposit us has helping has

between on about of million graph That balance CDs $XXX and brokered market was the money of shift neutral. cost

the third We continue with to expect mid-X.XX% net bottoming funding sensitive of margin curve. out We're front the quarter. range moderate and in the interest asset quarter on pressure cost to the the second still in

to rates of cuts. X decide XX expect basis we points move lower, first the for should each margin additional would point basis compression few Fed of to the So X

included quarter did items over in of seasonality We a have experience we card levels well after On gain normal service adjustments as in OREO all fourth unusual quarter. million the the valuation Those in which QX. first some debit $X noninterest those Slide categories. in as in other returned income, in to X, are charges $X.X million noncash some and more the

QX were $XX quarter. The per with million in outlook of recurring results our line fee approximately

benefits to $X.X the high our side, where decline returned line fourth, and fourth expense first more to down expenses with was more expense unusually the medical salaries compared were On the an levels in million after in normal in expectations. quarter largest quarter. The

expectation is Our rate expenses. quarter for $XX per million run approximately

strong of a overcoming XX, X greater impact. this TCE from Slide capital remains quarter, ratio earnings portfolio. quite increased AOCI XX relatively a to due good and small on lastly, by TCE And basis points points basis drag securities

or for as to of our us organic levels position AFS. well enable inorganic are and the of All very securities opportunities. growth take Capital us advantage will classified environment

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

Operator

first line question James. the Daniel of Raymond Tamayo [Operator Your Instructions] from of comes

Daniel Tamayo

go seemed on to the through we high-level really, uncertainty. estate color for from just through charge-offs credit you might enter office mean we the and provided like of were credit. I credit single what But and a provide is a period was you like of you get a nonperformers can bump in net the your multifamily and think you the you as Obviously, just commentary side, all whatever portfolios. for year time appreciate easier? go here? related NCOs look on I it it or the the as costs lot and where provision, commercial thought increase on real But

Dave Antolik

Yes.

ACL, I think improvement. showed when start the with you some that

charges. quarter, some this obviously, evidence Now

and these know throughout are we're we -- think asset for portfolios, mean we there's continue that those still we're risk think and the year. quality, improving expect I we adequately our reserved we So we risks. to in

Daniel Tamayo

of does number quarter little quarter before guess, I I that bouncing basis first of the seem run a reasonable rate point XX for a they're Or XX around a I you the guys don't how but what I with a mean, a better higher. should run going be mean, a it numbers want it we mean, reasonable do forward? some number, that XX other credit rate, you a is to Is call -- or in rate net to terms like points run I charge-offs points? bit is basis where costs? about think closer is thinking basis

Mark Kochvar

Mark. that is I changes -- quarter thinking the term. at near our this think least and Yes, don't the for first the medium experientially for

been charges had several of terms in sort we expecting So of the average. next over in someplace quarters on the XXs

Daniel Tamayo

Okay. secondly, And just growth is you're apologize what balance but outlook the loan curious now, thing, important I and then I All the loan this, right. missed most the on if growth I adding is. current but sheet obviously, deposits most and not right getting guess,

Dave Antolik

Yes.

significant QX, budget we throughout look we're but if of we the relatively growth. balances higher QX average beginning normal balance numbers Those single-digit pipelines of So were QX. is QX, at at into relatively balance grown not the the into still low loan saw carried than any growth would you low year, expecting for. They've what

Christopher McComish

we've Dan, looking. that where X% kind consistent is of been that we've about pretty in range been

Operator

KBW. Comes from from the line of Kelly

Unknown Analyst

carrying growth on, before. question that loan on from just Maybe

Just pipelines point credit low, demand cycle? relatively wondering still muted where this understanding opportunities in where seeing from more that for the at are your versus you're is borrowers

Dave Antolik

where many middle market competitors a banking often from We of of that's spent as the with out building can well space. as opportunities our lot Sure. drive ourselves deposit come differentiate we some C&I We Lower think business our and time growth. well. Sure. Those teams.

relationships us terms strategy. important needs building a from to forward as perspective people as to loan our So customers supporting those with approach deposit these well customers in is our of with

Christopher McComish

the not rate are commercial real you'd is news the things as as robust space. deep anything. got given expect, as real The in The is Jill, area, this good Yes. we've caution customer relationships right, estate in as commercial estate environment, the very much

them. with proactive be to able we're So

believe we lower really It's So missing don't we're demand. opportunities.

has space and both business deposit that Small side, loan focus. it's right. X positive exactly the area is to an been real us, that's Dave for think we'll I continue and been a on

Unknown Analyst

the absence continues to helpful. of super growth nicely. stronger And kind build That's capital in if of quite

return you what as ahead, are your priorities Just wondering, here? look for capital

Christopher McComish

and Yes. in We relative in come to with that, seeing size previous for a $XX we're regulatory we've the oversight. that past we've growth nice and where and of done we question And foundation as job we today. there the quarters this get couple are feel regulatory lot, really about of compliance talked building that for years, like relative responsibilities to billion a

in the growth. the company, believe things We capital a be give that somebody about hard long-term the experience believe opportunities looking road, that we a for And be relationships levels also build. got we that all larger organization. may employee to be great of customer company, that of continue good those of good regard. become are down we're and us working partner we've recognition part a able a organic those tell to our that's potentially think have, you there highly engagement, of interested efficiency story in foundation to the to We When to to the are

in in interested in that states today in geography. both Ohio and the we're very So Pennsylvania this

Unknown Analyst

Got last helpful. from That's question it. me. Maybe

a the ahead? is that charges side, there little the we we the year think as were both were about should seasonality? fee made that of other How kind that changes card of service much and cognizant was of any revenues be On just Or weaker.

Mark Kochvar

was driven. some of think activity and was NSF it charges, seasonality. service that's seasonal I primarily primarily as it's spending cards, was debit And it then It in in card the tax slow. the often returns most primarily

some see make of typically did we changes. some in quarter from ends the NSS change ago, So slower years. we year first A

more charges service fourth on by comparison seasonality. year-over-year but the that's that, quarter from So impacted first,

Operator

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

Unknown Analyst

you This wondering assume sorry, scenario. bases -- was is a would what Sharon deposit on I rate-down for Manuel in Navas. for

Mark Kochvar

Yes.

that lower it mean if at I of in to pace. with we rates So the gets increase would just little is our anticipate a of deposits but stages still some, because cost tricky to a -- Fed were early move, the

little So of a trickier. the quantification that beta gets

So points the the Fed have be, way me X absence been lower than will about for it would about easiest think that in it to our been has cuts. basis again, the of to margin X rate

the are we the kind second compression time of So to kind third a of quarter mid-XXs quarter, in expecting frame.

from the were expect for So to I least next if would we to September, continue see to to go that Fed move, say, margin several were the on Fed the low at and keep in of if would mid-X.XX going kind X.XXs that cuts. experience

Operator

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

Daniel Cardenas

AOCI the Mark, can this me quarter? you give impact

Mark Kochvar

like was X points. change The basis

Daniel Cardenas

And at this amount go Where what were dollar was last to quarter, did that the in quarter? you $XX.X million.

Mark Kochvar

About $XX million.

Daniel Cardenas

bit they the issues industry of but Excellent. just list some mean the then a little with. sound Excellent. that. company trends And some that had you can were industry quality as credit more color that on us to right. pretty just give bit guys the you All a they front, I then overall maybe maybe in on little and color watch as good, What thoughts to operating

Dave Antolik

with is Yes, didn't to work it that active out. work regard out, the an credit Dan, X

we our disrupt some ability to mentioned anything And regard So comments, rating a might exits. I seen to prepared I of strategic that improvement. to in want as is combination have disclose the it With the overall don't stack, some collect.

tell the seen on forward. story us as have be stack remainder help of well C&C additional some the actively making rates, credit and a sure have execution as move because to higher those allow monitoring to in to momentum combined we like build current ratings continue top all improvement. that making where costs, to that And than those or of the to environment, And continue better continue to we've them. that, we'd following we're then of things, us we're sure to the as there meaning underwriting assets got we things they reducing where will

Daniel Cardenas

credit what then quarter losses And happened Or much pretty is those it. have with that do do with associated that? additional you'll losses. cover this Got will you're working any think you think out, Okay. X that you

Dave Antolik

Yes.

we're shape the future matter of think timing of in It's losses. final just good I with to a relative customer. this really resolution

Daniel Cardenas

right. All mean, growth -- I of XXXX the what Okay. And you growth, guys in we sustainable the the despite overall right deposits. throughout know think I on QX, but feel core a it's then the for front, deposit how that's about rest saw on good for deposit here do everybody year? for you now do

Christopher McComish

Chris. and and be through that originating we've the we relationships. feel emphasis very all -- yes, our treasury of additional on business from done, the deposits it channels the team feel Dan, the side I good avenues we're it's deepening management, and about commercial work customer and which

The focus within of industry. that rise rates. in and been pulled plans. centers, those the as We changed how many our said, significant put hand-to-hand incentive teams of long the this levers. none a journey either contact And happen has started year in combat our we've before or branches in interest this we've And couple we're that you overnight, on things

as company, driver So about feel around made of good we very our the this we've franchise. -- a the focus progress deposit on

deposit And million a $XXX this in row quarter, quarter. so million growth, last we $XX quarters of -- is meaningful this X

solid. a total of remains percentages DDA Our

rate environment be as to bit, we helps as to So actually be. a us to little I proactive need think of going stability continue the the we're and

Daniel Cardenas

It tax your higher rate in a last right. that we last good like kind thinking on me. of a versus then a question to run is And forward? And hear. QX rate for XX%-ish should bit going was basis? year? about it go-forward Good looks be All little How

Mark Kochvar

Yes, effective. right expect around we it XX%

Operator

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

Matthew Breese

the wanted the are do X go I Or quick how updates? any for us, about is process? average just to go there back Matt, of LTVs, book. the disclosures are kind on at One to confirm those you you Or origination? office could that

Dave Antolik

Yes, it the be would available. appraisal most recent

in some at origination. we where to update have the would that a we number, cases, use otherwise reason So appraisal, that

Matthew Breese

of Is or that is old? weighted sort Or most average way part, the years it, years X time-wise X frame any of there old? to X, for X

Dave Antolik

I book operating this because that And that property. at look ultimately look of debt value on determines the we way income coverage the is, focus and right? the service the way Look, we that at value

we So testing, spend that what the what rent -- roll that's service coverage making we into our most stressing looking at is of focus on. in time up that so goes

Matthew Breese

And coverage updated? those are often how ratios debt service

Dave Antolik

At a minimum annually. Yes.

I numbers are of the done would most annual come recent review So back and today in have all the the of that most referenced the those half out year. of

debt to pretty that are those relative I So current coverage. service numbers referenced

Matthew Breese

as maintain lines, have already some or level they reacted? if kind north along maturing what at million limited it's So from been or you I'm service come those even sample those and matured of XXXX. you I'm seen. $XX curious of year, debt of look if maturity a a of renewed set, of have have I And have have renewal, kind ratios those just up to gone the coverage X able for how in X.Xx as kind the by elsewhere. assuming

Dave Antolik

are of forward. question, just numbers moving these part First the

or either rate have that current things others. them would rewritten been we to deterioration they already interest taken and matured, haven't resetting the environment. are have any QX relative So out They've reset by we've have the And in seen in reset.

usually does is multifamily, longer I question occupancy pay rental the a tenants time. number -- limited those for Unlike Randy period of has here and look think office for tenants CRE to a the Bank like the biggest fixed what is of rate that

office So a service to annually. have typically the the multifamily on mentioned frequent ratios in I lag ability rates adjust more -- because CRE multifamily the as tend basis, coverage call, the debt rental to landlords

Matthew Breese

loans, sort How any $XX some $XX makes the loans of Okay. stuff. to loans, That into go multifamily larger biggest issues bucket north. Just are Could or biggest there? the sense. on color those and past million the office sort you million just broader dues Any performing? the similar of the big

Dave Antolik

Yes.

an and those million space, coverage covenant significantly a largest review of biggest the is for than that we have multifamily. in that coverage for are those loans. on the higher what terms think $XX multifamily I test debtor the particularly stronger coverage in would to ratios office of both loans most above ratios debt annual And place we risk have debt these service takeaway in service

the part. And diverse they're for geographically most

a dive into that not outsized. I in significantly is really number are for is but that larger sizes a type But largest not of and $XX As loan million by The dollar average dispersed. million they're pretty other our they're just we well would Pittsburgh, category deeper Obviously, said, the larger than $XXX geography. have. the concentration loan. It's

Matthew Breese

criticized of any are these not or then And classified, loans considered past?

Dave Antolik

There's top office the -- X criticized of what... the is top space to referring -- you're the XX loan in here that's

Matthew Breese

damage when tend get a... The Yes. biggest to the do most go to sideways. just I wanted they ones

Dave Antolik

There's There's X nothing loan. that is million the office office in There's in -- X multifamily. pool. of those the loan criticized a larger that's the and a pool in $X loan

Matthew Breese

for all curious, of And cuts, this the to good loan we NIM, yield basis rate proxy yield appreciate I rate and range of of expansion of kind had in there's The should pace just of X just expect the to my taking I in what I was loan kind X a near-term this The absence last point also until questions. slowed. X a is Is regards cuts? has increase?

Mark Kochvar

Yes.

to X% there, around X% that what in the next in that's expect least. we right quarters think for several at I

Operator

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

Christopher McComish

and this time Look appreciate forward Anything free where soon. your and follow about your to all thoughtful you interest. feel out. good to real talking the to feel you Again, to certainly up, year. we growth and Bye-bye. particularly Thank deposit the reach stand, Yes. engagement the things start we for questions. and the of

Operator

you for Ladies concludes today's that Thank call. gentlemen, and joining. all

You may disconnect. now

Christopher McComish

your to We certainly soon. Look appreciate your to Bye-bye. you time and forward talking interest.

S&T Bancorp (STBA) 18 Apr 242024 Q1 Earnings call transcript