S&T BANCORP, INC. ANNOUNCES THIRD QUARTER 2023 NET INCOME

INDIANA, Pa., Oct. 19, 2023 /PRNewswire/ -- S&T Bancorp, Inc. (S&T) (NASDAQ: STBA), the holding company for S&T Bank, announced net income of $33.5 million, or $0.87 per diluted share, for the third quarter of 2023 compared to net income of $34.5 million, or $0.89 per diluted share, for the second quarter of 2023 and net income of $37.2 million, or $0.95 per diluted share, for the third quarter of 2022.

Third Quarter of 2023 Highlights:

• Solid return metrics with return on average assets (ROA) of 1.42%, return on average equity (ROE) of 10.84% and return on average tangible equity (ROTE) (non-GAAP) of 15.78% compared to ROA of 1.51%, ROE of 11.23% and ROTE (non-GAAP) of 16.32% for the second quarter of 2023.
• Pre-provision net revenue to average assets (PPNR) (non-GAAP) was 1.99% compared to 2.30% for the second quarter of 2023.
• Net interest margin (NIM) (FTE) (non-GAAP) remains strong at 4.09% compared to 4.22% in the second quarter of 2023.
• Total portfolio loans increased $196.3 million, or 10.6% annualized, compared to June 30, 2023.
• Total deposits of $7.2 billion remain relatively unchanged compared to June 30, 2023.
• Nonperforming assets decreased $1.6 million to $16.4 million, or 0.22% of total loans plus other real estate owned, or OREO, compared to 0.25% at June 30, 2023.
• Net charge-offs of $3.7 million, or 0.20% of average loans (annualized), compared to net charge-offs of $11.0 million, or 0.60% of average loans (annualized), in the second quarter of 2023.

"Our third quarter performance was strong with solid return metrics," said Chris McComish, chief executive officer. "While recognizing there are challenges across the industry, we are very proud of the core earnings growth we have had in this rising interest rate environment. Our net interest margin remains strong at 4.09%. Deposit balances stabilized during the quarter and the shift in the mix of our deposits slowed considerably compared to earlier in the year. We believe our team's efforts around our customer-focused initiatives are paying off in this competitive environment."

Net Interest Income

Net interest income was $87.4 million for the third quarter of 2023 compared to $88.1 million for the second quarter of 2023. The decrease of $0.7 million in net interest income was driven by higher funding costs, partially offset by higher yields on interest-earning assets. Net interest margin on a fully taxable equivalent basis (NIM) (FTE) (non-GAAP) was 4.09% compared to 4.22% in the prior quarter. The yield on total average loans increased 14 basis points to 6.15% compared to 6.01% in the second quarter of 2023 due to higher interest rates. Average loan balances increased $126.5 million to $7.4 billion compared to $7.3 billion in the second quarter of 2023. Total interest-bearing deposit costs increased 33 basis points to 2.04% compared to 1.71% in the second quarter of 2023. Higher interest-bearing deposit costs primarily related to an increase in interest rates and a continued shift in the mix of deposits with higher balances in certificates of deposit, or CDs. Average CD balances increased $147.0 million compared to the second quarter of 2023. Total borrowing costs increased 25 basis points to 5.77% compared to 5.52% in the second quarter of 2023. Average borrowings increased $58.8 million to $675.3 million compared to $616.5 million in the second quarter of 2023 due to average loan growth that exceeded average deposit growth.

Asset Quality

Total nonperforming assets decreased $1.6 million to $16.4 million at September 30, 2023 compared to $18.0 million at June 30, 2023. Nonperforming assets to total loans plus OREO decreased 3 basis points to 0.22% at September 30, 2023 compared to 0.25% at June 30, 2023. Net loan charge-offs were $3.7 million for the third quarter of 2023 compared to net loan charge-offs of $11.0 million in the second quarter of 2023. The provision for credit losses was $5.5 million for the third quarter of 2023 compared to $10.5 million in the second quarter of 2023. The decrease in the provision for credit losses primarily related to higher net charge-offs in the second quarter compared to the third quarter of 2023. The allowance for credit losses was $108.2 million, or 1.44% of total portfolio loans, as of September 30, 2023 compared to $105.8 million, or 1.44%, at June 30, 2023.

Noninterest Income and Expense

Noninterest income decreased $2.0 million to $12.2 million in the third quarter of 2023 compared to $14.2 million in the second quarter of 2023. The decrease mainly related to lower other income from changes in valuation adjustments of $1.6 million and due to a gain on OREO of $0.6 million in the second quarter of 2023. Noninterest expense increased $3.2 million to $52.8 million compared to $49.6 million in the second quarter of 2023. Salaries and employee benefits increased $2.1 million mainly due to higher incentives compared to the second quarter of 2023.

Financial Condition

Total assets were $9.5 billion at September 30, 2023 compared to $9.3 billion at June 30, 2023. Total portfolio loans increased $196.3 million, or 10.6% annualized, compared to June 30, 2023. The consumer loan portfolio increased $112.8 million with growth in residential mortgages of $97.4 million compared to June 30, 2023. The commercial loan portfolio increased $83.5 million with growth in commercial real estate of $62.1 million and commercial construction of $25.4 million compared to June 30, 2023. Total deposits increased $81.7 million compared to June 30, 2023. CDs increased $154.7 million mainly due to an increase in brokered CDs of $75.0 million and a continued shift from other deposit types compared to June 30, 2023. Total borrowings increased $94.7 million to $718.7 million compared to $624.0 million at June 30, 2023 primarily related to loan growth.

S&T continues to maintain a strong regulatory capital position with all capital ratios above the well-capitalized thresholds of federal bank regulatory agencies.

Conference Call

S&T will host its third quarter 2023 earnings conference call live over the Internet at 1:00 p.m. ET on Thursday, October 19, 2023. To access the webcast, go to S&T Bancorp, Inc.'s Investor Relations webpage www.stbancorp.com. After the live presentation, the webcast will be archived at www.stbancorp.com for 12 months.

About S&T Bancorp, Inc. and S&T Bank

S&T Bancorp, Inc. is a $9.5 billion bank holding company that is headquartered in Indiana, Pennsylvania and trades on the NASDAQ Global Select Market under the symbol STBA. Its principal subsidiary, S&T Bank, was established in 1902 and operates in Pennsylvania and Ohio. S&T Bank was named by Forbes as a 2023 Best-in-State Bank. For more information visit stbancorp.com or stbank.com. Follow us on Facebook, Instagram and LinkedIn.

Forward-Looking Statements

This information contains or incorporates statements that we believe are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements generally relate to our financial condition, results of operations, plans, objectives, outlook for earnings, revenues, expenses, capital and liquidity levels and ratios, asset levels, asset quality, financial position and other matters regarding or affecting S&T and its future business and operations. Forward-looking statements are typically identified by words or phrases such as "will likely result," "expect," "anticipate," "estimate," "forecast," "project," "intend," "believe," "assume," "strategy," "trend," "plan," "outlook," "outcome," "continue," "remain," "potential," "opportunity," "comfortable," "current," "position," "maintain," "sustain," "seek," "achieve," and variations of such words and similar expressions, or future or conditional verbs such as will, would, should, could or may. Although we believe the assumptions upon which these forward-looking statements are based are reasonable, any of these assumptions could prove to be inaccurate and the forward-looking statements based on these assumptions could be incorrect. The matters discussed in these forward-looking statements are subject to various risks, uncertainties and other factors that could cause actual results and trends to differ materially from those made, projected, or implied in or by the forward-looking statements depending on a variety of uncertainties or other factors including, but not limited to: credit losses and the credit risk of our commercial and consumer loan products; changes in the level of charge-offs and changes in estimates of the adequacy of the allowance for credit losses, or ACL; cyber-security concerns; rapid technological developments and changes; operational risks or risk management failures by us or critical third parties, including fraud risk; our ability to manage our reputational risks; sensitivity to the interest rate environment, a rapid increase in interest rates or a change in the shape of the yield curve; a change in spreads on interest-earning assets and interest-bearing liabilities; the transition from LIBOR as a reference rate; regulatory supervision and oversight, including changes in regulatory capital requirements and our ability to address those requirements; unanticipated changes in our liquidity position; unanticipated changes in regulatory and governmental policies impacting interest rates and financial markets; changes in accounting policies, practices or guidance; legislation affecting the financial services industry as a whole, and S&T, in particular; developments affecting the industry and the soundness of financial institutions and further disruption to the economy and U.S. banking system; the outcome of pending and future litigation and governmental proceedings; increasing price and product/service competition; the ability to continue to introduce competitive new products and services on a timely, cost-effective basis; managing our internal growth and acquisitions; the possibility that the anticipated benefits from acquisitions cannot be fully realized in a timely manner or at all, or that integrating the acquired operations will be more difficult, disruptive or costly than anticipated; containing costs and expenses; reliance on significant customer relationships; an interruption or cessation of an important service by a third-party provider; our ability to attract and retain talented executives and employees; general economic or business conditions, including the strength of regional economic conditions in our market area; environmental, social and governance practices and disclosures, including climate change, hiring practices, the diversity of the work force, and racial and social justice issues; deterioration of the housing market and reduced demand for mortgages; deterioration in the overall macroeconomic conditions or the state of the banking industry that could warrant further analysis of the carrying value of goodwill and could result in an adjustment to its carrying value resulting in a non-cash charge to net income; the stability of our core deposit base and access to contingency funding; re-emergence of turbulence in significant portions of the global financial and real estate markets that could impact our performance, both directly, by affecting our revenues and the value of our assets and liabilities, and indirectly, by affecting the economy generally and access to capital in the amounts, at the times and on the terms required to support our future businesses.

Many of these factors, as well as other factors, are described in our Annual Report on Form 10-K for the year ended December 31, 2022, including Part I, Item 1A-"Risk Factors" and any of our subsequent filings with the SEC. Forward-looking statements are based on beliefs and assumptions using information available at the time the statements are made. We caution you not to unduly rely on forward-looking statements because the assumptions, beliefs, expectations and projections about future events may, and often do, differ materially from actual results. Any forward-looking statement speaks only as to the date on which it is made, and we undertake no obligation to update any forward-looking statement to reflect developments occurring after the statement is made.

Non-GAAP Financial Measures

In addition to traditional measures presented in accordance with GAAP, our management uses, and this information contains or references, certain non-GAAP financial measures, such as tangible book value, return on average tangible shareholder's equity, PPNR to average assets, efficiency ratio, tangible common equity to tangible assets and net interest margin on an FTE basis. We believe these non-GAAP financial measures provide information useful to investors in understanding our underlying operational performance and our business and performance trends as they facilitate comparisons with the performance of other companies in the financial services industry. Although we believe that these non-GAAP financial measures enhance investors' understanding of our business and performance, these non-GAAP financial measures should not be considered alternatives to GAAP or considered to be more important than financial results determined in accordance with GAAP, nor are they necessarily comparable with non-GAAP measures which may be presented by other companies. See Definitions and Reconciliation of GAAP to Non-GAAP Financial Measures for more information related to these financial measures.