STBA - Earnings call transcript Q2 2024

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Operator

Welcome to the S&T Bancorp Second 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

Thank you, and good afternoon, everyone. Thanks 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 and this presentation. This by statements cautionary the may Exchange Securities that in statement forward-looking Commission included language be for provides the required slide second the supplement materials of the right can of button this the as your as by section XXXX in quarter Copy be screen. release obtained earnings well earnings deck on clicking lower these download panel right where This will open can up a you items.

obtain also these by can of You a at materials visiting copy website Relations stbancorp.com. our Investor

With Dave to me like Chris. I today to are S&T's now Chris McComish, S&T's CEO; would over Chris? Antolik, and turn program the President.

Christopher McComish

everybody, to thank with being of welcome here all the your and the Mark, afternoon, you look we questions. analysts and us, you, forward and call. good to We appreciate

my employee, do, I minute I'm on going I to and take employees, the our to shareholders are yours drives thank going very on others to results team do These To begin But leadership that Page discuss. you in call. to your and should financial a X. before our commitment results proud. remarks these want be and is we're what engagement and our listening

progress continued serve. is purpose focus on on and communities we Our delivering shareholders the quarter reflects this for specifically, how performance this our S&T's forward purpose more people centered and our our customers,

our values we on before discussed how this call, are this define we've and who our As defines work. purpose do we

of this the shareholders. engagement quality, our best-in-class This our and we All consistent, credit franchise, of profitability, is deposit of for what's and of of focus all our delivering focused, core drivers our performance, this connected delivering growth level these the talent health X are is teams. to by is the solid where and underpinned core customer

up, see they've the drivers it deck. and X you in we results that will our great on all shown progress produced made as of this sum strong progress, To performance they

quarter. the to Turning

income equated share, up net from in million QX. to per $X.XX $XX Our $X.XX

at Our ], [ return the ROTCE, ratio XX% strong efficiency [ $X.XX with PPNR remained $XX.XX. XX excellent metrics and below were a to ] while our was

versus is Our net result is This funds. direct provide mix was QX, solid of as NIM and moderating which at both deposits, deposit a here. very very NII of X.XX in [ margin will a cost strong. ], shift led which growth and interest improved Mark more detail our to our customer

detail we'll is deeply credit we're Our few on Dave loan minutes. going stable and in on CRE our exposure, office provided and more additional pipelines. multifamily here improving, quality remains dive in He the a to and our have seeing pickup also to touch will also

Page Moving X. to

with growth. loan deposit While while in guidance, growth previous was we meaningful line saw

$XX and the This the after X.X% QX, deposit side, growth over was million in was On of more in growth. quarter. annualized produced growth $XXX customer than deposit million

a to While The mix $XX strong performance in allowed strong net margin. impact and growth and interest which growth us overall deposit balances. shift total customer has deposits remained on continues $XX million million, balances positive XX% resulted of in at reduce by DDA obviously borrowings DDA wholesale balance our

Mark to stop to and and over statement capital. he your it income bit on on the questions. time little the there right look going I'm quality, spend loan can and to a Dave, credit and more then I color provide forward turn book more will

Dave Antolik

If everyone. walk Slide Chris, Well, to afternoon, I to asset direct quality results in attention for good your can QX. order through and our thanks, you X

$X.X the by million grew losses credit in increase loans. of which total a for allowance represents quarter, X.XX% to our modest from presented, As X.XX%

factors of number A outcome. influenced this

during that I quarter, a credit for X QX. Pennsylvania exit specific relationship strategy our $X.X and have the Western million of reserve on executing actively are we last that established mentioned First, with

stack through year-over-year. rating $XXX Second, assets. in we equates and reduction That continue down C&C our million quarter-over-quarter declined to reductions to criticized the XX% are and Those in XX% by classified in X our quarters. a assets improvement see past

Finally, recovery QX. a $XXX,XXX we during net experienced of

remain total a points loans very NPLs basis manageable OREO. of In XX plus at addition,

modest this our growth, continue financial During on fundamental our asset focused performance. be improving as of loan period driver of efforts quality a to

expect QX Looking by loan mortgage forward, we low to and growth driven the be in digits, retail consumer primarily for single activities.

point pipelines banking for business that, increased will commercial expect and that in towards As grow, do we QX. growth our

this office and included a We've the updates saw multifamily office, category small to include exposure. X portfolio of Starting diverse $XX amortize Pages and CBD concentrations in in limited geography, number Turning and size, our this total million, payoffs loans loans portfolios. CRE and quarter-over-quarter relative maturity and we continue X. average to loan Highlights reduction to in as with balances of occur. manageable

Moving we markets that CRE have multifamily to continue this we the to serve. outlook positive for segment where a in

of expectations. reminder, our a continues of Delaware, these and performance As that meet contiguous includes and to Pennsylvania and the Ohio, assets Maryland states

portfolio the by this $XX in result million, outstandings QX, of permanent primarily increased to converting loans construction During approximately loans.

these million. addition, to that including to loans credit added XXX In balances, that continue on options these rates. current new completion construction amortization of amortizations to these We stabilization interest-only important financing financing standards, and commitments favorable are and in ratios and excess of construction, to XX% and at XX% permanent interest debt to XX-year put terms, as new using for include coverage XX% construction LTV [indiscernible] loans It's we downward XX-year below extended service including available $XX periods. current pressure equity, note and cycle underwritten anticipate are

to over turn Mark. now I'll the Mark? program

Mark Kochvar

Thanks, Dave.

several the the of interest net in from income to increased the quarter first the an interest X wholesale quarter. point net last X of second continue and an the declines. in X.XX% of represents as left deposit allowed [indiscernible] slowing DDA is cost in well, improvement and This basis from quarters which the customer borrowings. Mix shown the brokered the with slide, both margin paydowns points moderate increase point on average. second quarter, changes time in in just for quarter, increase the up to funds basis and of rate resulted Strong next of bottom On growth

cost funding pressure to now, increases. close moderate Fed interest to margin with expect any at net not or We factoring bottom continue to

still the decide asset the cuts. margin interest of for point of on are expect should to rates couple each X first sensitive and Fed XX of we lower, would of move points net We curve, front the to basis basis X compression the

$X.X the Moving some X it on Visa category in million noninterest took We credit to debit primarily opportunity picking income. due fees. basis other Class here. lower-yielding a to back B saw up gain securities, related but card an seasonal improvement to own. to here, recognize shares was XXX We million X did changes and sell $XX the with about of we in points years. over that is just earn of That about We

line $X.X the the that's here interest second to in related. Most on in of declined compared Now expenses our favorable variances million quarter first, with expectations. [indiscernible] are timing

We year, this second self-funded are a experiencing in as expense plan. especially higher-than-normal medical quarter the

We higher claims. have seen some

run expect ahead. though continue We the million to quarter rate $XX our on be per expense to approximately moving side

portfolio. to TCE basis ratio increased and capital, small remains the securities earnings strong this quarter. points good XX TCE on quite due relatively by Lastly,

into opportunities of to of to environment, for enable of our we the will position us move latter securities the as this and Capital as inorganic well us look advantage organic All year. AFS. forward are growth part take levels classified or

those add on would in and to that floating sheet I this the loans have came loans. balance to like It amount call. the pure a yield that the was to question on we prior of related rate currently

So tied right now, our an loan balance the loans fixed. side, additional prime are to or SOFR, XX% sheet are about arms XX% the have are we our on and of XX% remaining

of In $XXX addition to do about that, we have million swaps.

that in, book That kind would side The those exposure floating to is on is yield the swaps. fixed are the floating net that X of ARMs received you are ]. X [ bring XX% XX of if at about in. [ those X% loan factor you fixed XX that of kind on the and basis. The rate right down at blended factor ] about a on If

the I'll for questions that, to call to over with operator be to the turn So asked. other allow

Operator

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

Daniel Tamayo

Yes.

of I talked NIM the about apologize, missed to rate NIM you cuts. repeat what I here? expect your most think where Mark you before especially go the on So the but side, just Can you you guidance, about I heard from I said

Mark Kochvar

Yes. to I NIM, pretty do -- the pressure, here. expect we get the of but cost really we we're bottom the fund think close

but couple basis than be of minus way, stabilized either of think thought. points bit So sooner a it that's we little we kind a had plus might or

Daniel Tamayo

Okay.

it and lower driven to like So funding and quarter, I see deposits bit good and FHLB. able performance the side, on to it margin a of were was the lowered the you in expand was surprise guess the by that a -- broker seems

the end? And deposits what So reduce or I are where then quarter as first, to abilities at well the in think those second, do FHLB opportunities your guess, of you forward? going as broker terms balances

Mark Kochvar

Yes.

a of still couple an bit as in the to would So a that had BTFP rate $XXX and rate. before million at and we that we pay make a of take had sense additional [ to has January, it of favorable doesn't another about $XXX one end, -- mature have brokered, -- program. quarter we million That sub-X a cuts ] until little off it

quarter. how the deposit at loan The go -- brokers the look on and will over depending books

maturing. have some We

$XXX be I think that should in million maturing able to over we QX reduce.

how sheet also CDs are depending time. money on that balance we or at markets. look. the It's brokers floating Those not some We of rest the any have reduce that rate just could

Daniel Tamayo

those then then have that the sold And Perfect. lastly, and take quarter. in already? repositioning used When what balance was purchased and funds was place, Okay. second sheet did what the

Mark Kochvar

Yes.

latter so quarter. the in of June, in done the was it So part late

assets XXX that a or and backed the lot basis sold and a primarily points CMOs, treasuries kind mortgages impact of CMBS-related have of So me, and level out of have. about margin. few whole agency on $XX we duration that a X excuse there's couple CMOs up we curve, X, repurchased We of that -- in that the farther similar million, picked not mortgage-backed the commercial We've trade.

Daniel Tamayo

XXX basis points.

great. Okay,

Operator

Your with from next KBW. question Motta of comes Kelly line the

Kelly Motta

I was hoping, quarter. about Great pipeline commentary the strengthening. the commercial the loan thanks for pipeline,

you region us strengthening, loan you're attributing what with come rate Is what qualitative are any if with more on by activity? color of and starting area or pipeline type, you borrowers that any the would particular where that economic is Is around cuts? Just either it color could demand, wondering expectation give impacting Is there additional seeing excellent. to? that be to back the Just that?

Dave Antolik

Yes. activity, throughout of It's our a it's and regions. mix

rates demand think moving I downward. some pent-up is relative there to

our amongst they're anticipation projects rates. down, visibility think now refinancing at I customers the forward there's to moving of So possibility relative with looking folks with of rates some that are, that or better

Christopher McComish

Kelly, And more we throughout I over comments. the a quarter. I'll with the with base grow. Dave, have I add a just team CRE, last across C&I -- standpoint agree geography a the as commercial of our from out just a more seeing marketplace part almost lot more bit leaders CRE, as marketplace. of given pipeline sense were I've the it. is of This state had Chris. activity and of team Dave's the And a they're little think Dave, number obviously, in there's customer probably I that to leaders business conversations to board, end in would banking the our feel, the into a than is little optimism it's heading banking the continues

Kelly Motta

credit, Got it. how you I Any It be on hoping. excellent than keep in optimistic actually bit the more That's seems watching commercial not just also here, helpful. pockets sights are this of net had that appreciate on on I'd and last you we recoveries side, here? What real I'm And our it closely? like but But super that are feeling? weakness was tone then a still quarter, growth should you the quarter. estate

Dave Antolik

arm, at if financing maybe we conditions issues. The you're So that you of looks see re-underwrite in current risk to the that X something what those a like customers of options, potential we years current is way the flow to in, have to midst those results for look what manage X-year that to get that's cash and right? relative look like ahead

our that of performance testing to has relative good. stress kind And been

need room of give relative have assets little that to So ourselves stuck underwriting a a relative comments, I why in plan value. And these happy to as reposition have a these always my to in to the to standards results. sale prepared be assets. in to space the or to we're And refinancing like mentioned things the an multifamily XX-year moved conservative loan event of our B we've of we more the amortizations with That's kind asset. we

the developers' really cash ability space these decent costs flows The projects challenge a to borrowers' and in that CRE produce. the get return, construction and is can the given cash-on-cash and assets

way So we'll like to additional find the will ones that's continue see. and construction done because our we return, described with we're to the good get project we to a what a equity seeing And I get the movement a them portfolio. in relative results that support and multifamily

Operator

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

Matthew Breese

Mark, higher. good points XXX on interesting are I Yes, new portfolios the the what XXX appreciate X% loan my there low those low the question first I'm exposure are fixed how yields. XXX a assuming in the one. and books? that's -- the was for yields rate is, guess basis and they're to the there range. color the rate first floating one, was What the ARM I

Mark Kochvar

Yes.

yields, probably X also just ] on -- there. new side, around around X. the the right ARM under [ yes, the And of on about So -- there mortgage books, they're other XX kind X,

Matthew Breese

XXXX, Okay. X resetting low XXs, the rates into this be rate as Would about we you we as on next cycle into the think dynamic is later NIM cycle? outlook loan date, beta cutting about about high helping the knocking is to to that rate kind cuts and mean, that of XX%. better expect year And that head think into your we as the of I

Mark Kochvar

Yes.

repricing before fixed to see book expect generally side the see of to type benefit get basis loan we rate that's X the around X kind just and to continue and natural repricing on ARM -- those to of points And you we're cuts. any of resets. the So of

The first laddered swaps, a 'XX. quarter, the quarter starting other in to in first help those million thing pretty end of are that at have 'XX, of the that us starting in much the $XXX that will we out million is $XX begin quarter

so repricing those XXX negative points. anywhere position will are a or us. kind a have Those And in a basis to XXX opportunity maturity of by for from

reset So starting we'll to have late opportunity QX. in those an

Matthew Breese

Great. helpful. Very

that really net will nice with And here? you the could of half color X the reserve quarter you level One some the provision the recoveries. with the you was you that directly, back I the of the shake provision provide things year? XX can't on if this was feel for think at hoping [ overall comfortable how was out answer how ]

Mark Kochvar

Dave quite with overall, to seeing, X I What loan. have are think I to mean to we're, as years, a criticized classified, by $XXX a has ACL amount relative higher-than-peer a bit, [ comfortable the forced That that Dave alluded with Those been working special of higher that, over mention much definition, XX year-to-date. several substandard we've us this and essentially we is are improving ]. peer mentioned, level. million over and past

begins moderate. need to to moves pipeline, that for reserve the as So that

kind need we're us continue lower the our to of do a reserve. model the on unexpected that directing expect macro part anything level front. is quantitative to So seeing where of barring that of We the already

support So standpoint. that will provide from just ACL an continued need

about On but we're have pretty asset good Dave -- anything one that, our time, sites this the we're that standpoint, at not at change don't charge-off can other significant on any again, credit feeling than junction. mentioned. we But the quality

Matthew Breese

or Is I with billion. One M&A? Okay. I in preference appreciate a the provided impact. detail that. is quarters, you it Just cross. balance the organically guys $X.X preference on some Durbin do through love Great. just color past there how know you to of there. on then plenty I was And on sheet curious the have thing of

Christopher McComish

we are is all plans which Yes, to growth. -- our focus control on organic that, our of matter which direct have over,

between this the And growth. we're over a $XXX so take think And had our would assets as right? now preparing year, to of us approximately we organic and that of next cross million quarter time result you

been that building so standards and -- focused level the of X past move the required. with years, we've are the the have to our that we we've regs infrastructure over so in been compliance all company, and And we're firmly on rules through additional -- building foundation that

we're -- general many discussions relative geography. to key player more we component to we being marketplace more markets that's of in opportunities, That growth believe -- is said, our our bigger desire the future this and more becoming a a and inorganic in the and serve be that

organic event the the for for By we're growth wait going So to in that for -- not -- could future. token, in the happen that down it's should preparing slow an same happen We're the us. to down something it [indiscernible].

Matthew Breese

then and look -- to tied of is to terms your M&A. one that with? banks partner you deals just geography for or last It's And my of what in Okay. just types preference

Christopher McComish

Yes.

on So kind that we're in geography of very the states. kind focused we're in, of contiguous

or could you Pennsylvania Pennsylvania Virginia markets and there. area. in the obviously, West Maryland, East that here in Ohio look and Virginia, then we're in expand into so here south And the into to far of looking in,

Operator

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

Manuel Navas

you a bit in deposit seems deposit Can there? flows. some talk costs, bit nice It about pipelines you then and but competition like might increase the getting still you're have little more a

just If bit? that you a talk could through

Christopher McComish

It's it's been starting few just that the so that ours our in it capabilities past years, rise the customer the to this where and the a dividends. customer Yes. pay over have start loyalty themselves and we core to was we of believe believe jump define have bank as a because to experience, Dave customers I'll rates, strategic have, from that dramatic they focus then with before and need. long -- to with deposit in interest it's as company, we -- enough we're what big along their and relationship product we --

we've products. So developed

You not people treasury been big That's with for the a also I side, some more talked we've may and our the have -- ours. just business about That's customers. work but of capability. banking on mean of both we've focus management commercial done customers product

proactive been very disruption, customer focused during on of dividends tremendous customer for have also and we've a existing pays We got relationships, loyalty. our And great time our that us. recognizing outreach

of getting focus what customers is our with customer customers, consumer expansion banking alignment loyalty. our to those as And the greater a with of share as we've retail company, relationships and due all our so well relationships our the business seen customers throughout commercial wallet

I activity that. think pipelines Dave and can talk and things about like levels

Dave Antolik

Yes.

add to Just to The the really management was widespread comments, commercial, the our that of Chris' as at business banking QX, you treasury look supports commercial and if well consumers. divisions. as across growth all

has to be existing the been the customer base. So with will and continue share wallet focus growing

said, the the business are I'll in new clients That Those attracting seeing being well. for activity last it, tend be opportunities. to months. been, we That of call also X consistent rate more opportunities. new We're has as competitive

So still to us from that the forward. is a service believe the And product building to existing the base base, customer we feel to we continue customer out needle propel move to there's capabilities deposits. focus grow continuing opportunity existing and going perspective and within on ample

Christopher McComish

of of as rates environment not like. I of were And part it it's was think quickly. kind sensitive. pitch question, customers look up other competitive are at very a to rate and your The a related kind moving fevered as still while what's the were But

And the a a chance a doing and we stability have our makes winning ability to therefore, at us sense. versus in it better in market. losing have the fee rate more of I to proactive give outreach, that -- that think through conversations structure there's

Manuel Navas

color. That's really great

of NIM rate in of and that and that could kind In card? maybe your deposit borrowings, bottoming a paydown NIM? any where on stability Do growth you of before be there or kind the that terms with could excess of deposit the cuts, where little pays down upside wild have of NII down here that broker borrowing bit a guidance offer that is is kind paid some flows,

Mark Kochvar

$X.X around kind those of mean some several higher-cost little headed a wholesale funds. so is Perhaps of is next where into to replace we're somewhat still it have there's quarters. bit. That built levels billion, still over I built we opportunity the --

Manuel Navas

there's it if be would access, Okay. could that option. Great. where some be And extreme potentially

Mark Kochvar

that Had [indiscernible].

Manuel Navas

next Has have this and it this some believe we're going could some year? your Has that some have NIM? higher previously? -- are where it I -- We expectations little think changed maybe bottom to than be Where this do going to your bottom, of a changed better you evaluation bit rate at could cuts. could point

Mark Kochvar

Yes.

bottom mean, maybe higher I than -- around XX we landed overall, think think at we I anticipated. that's basis a points I had

aren't a So on expectations kind our impact the -- cut changed. of per for basis the

like they So depending on equal, are. would it be many for I all else XX think, cuts higher, how --

Manuel Navas

of you great. That's give you you color on -- Do is recovery? last transformative. That's a This the my -- little question. have just can kind can

Mark Kochvar

it of the I charges typically more Yes, all our the level but about on, significant certain quarter. small there was think that we that a assets any there I folks in at no working charges. are weren't is special fact recoveries have mean that

Manuel Navas

that. Appreciate Perfect.

Operator

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

Daniel Cardenas

trying on quarter that me? to as Mark, for the just levels I your last of you get missed repeat I'm classified to and Can I'm just at levels end quarter. were sense where the the a of maybe you earlier. sorry. made criticized versus those kind comments those

Mark Kochvar

Yes.

we're XX% and year-over-year. XX% So down quarter-over-quarter

the the there $XXX and for the well. for for think quarter I -- And as year-over-year. XX. about to amount about we the was room still think XX some Yes, improve quarter dollar million there's was It

Christopher McComish

we're us don't we're for And are profile of of so we're those out. moving headed really number That's fit our goes that that -- and we long on those speak opportunities talked and credit it, necessarily relationships X where enhance proactively drivers, X the that working far. entire to for build about is right quality. those results themselves is kind and asset long-term that represent And to back focused And and the the team term. that -- are are

Daniel Cardenas

you. Got

backing the the kind so the Okay. income on half is of that side, security this rate for here number out the offset build the and good the then back 'XX? securities, Perfect. core quarter, a saw run of side, off transaction on to of we the Visa And fee that

Mark Kochvar

Yes.

around quarter level. million that expect $XX a We

Daniel Cardenas

was Okay. for Perfect. And your then AOCI quarter? what this number

Mark Kochvar

$XX million.

Daniel Cardenas

Okay. All right. Perfect. Perfect.

comments of think maybe we're low -- looking are single-digit trend then so carry kind So driven? that was to for into it growth QX, much Dave's do going I more you not maybe that in of does commercially given QX, mortgage kind

Dave Antolik

Yes.

think accurate, I that's Dan.

Christopher McComish

talked we There's relative to and what better and what seeing. about That's the growth there's in the to we're seasonality activities. it pipeline

Daniel Cardenas

Okay. my have. questions all Great. All been I have right. answered. That's All other and asked

Operator

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

Christopher McComish

the Okay. again, the group the your dialogue appreciate Really great engagement on with Well, to and phone, questions. us.

our reach importantly free this we're that for of teams, they and engagement have trends proud Mark other me out. feel and quarter customers. We're got follow-up, darn level to the that and the commitment You've and it's most Dave seeing, the of to our everybody, continued

positivity a in represents lot and we our for that us, of All interest of company. your appreciate

have great of day. the a So rest

Operator

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

disconnect. now may You

S&T Bancorp (STBA) 18 Jul 242024 Q2 Earnings call transcript